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~~

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~September 30, 2017~~

☐	~~Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934~~

March 31, 2023

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~~

Nevada

74-1884980

(I.R.S. Employer Identification No.)

(State or other jurisdiction of incorporation or organization)

	~~(IRS Employer Identification No.)~~

55 Waugh Drive, Suite 1000 Houston, TX		77007
(Address of principal executive offices)		(Zip Code)

~~(713)~~

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	☐ 	~~(Do not check if a smaller reporting company)~~	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 ☒

~~The number~~

As of May 5, 2023, 60.0 million shares ~~outstanding~~ of the ~~registrant’s Common Stock, $.10~~Registrant’s $0.10 par value per share ~~on November 7, 2017 was 59,697,000.~~

common stock were outstanding.

PART I – FINANCIAL INFORMATION

~~Item 1.~~

~~Financial Statements~~

Item 1. Financial Statements

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED BALANCE SHEETS

(Unaudited)

~~ASSETS~~

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, 2023			December 31, 2022
	($ 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.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED ~~BALANCE SHEETS~~

STATEMENTS OF EARNINGS

(Unaudited)

~~LIABILITIES AND STOCKHOLDERS’ EQUITY~~

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.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF ~~EARNINGS~~

COMPREHENSIVE INCOME

(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.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF ~~COMPREHENSIVE INCOME~~

CASH FLOWS
(Unaudited)

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.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF ~~CASH FLOWS~~

STOCKHOLDERS’ EQUITY

(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 $ —


								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, 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.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

~~(Unaudited)~~

~~(1)~~

~~BASIS FOR PREPARATION OF THE CONDENSED FINANCIAL STATEMENTS~~

(1)Basis for Preparation of the Condensed Financial Statements

The condensed financial statements included herein have been prepared by Kirby Corporation ~~(the~~and 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)~~

~~ACCOUNTING STANDARDS ADOPTIONS~~

~~In March 2017,~~2022. Certain reclassifications have been made to reflect the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU 2017-07”) which requires employers to include only the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating expenses. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. The standard allows only the service cost component to be eligible for capitalization when applicable. ASU 2017-07 is effective for annual and interim periods beginning after December 15, 2017 with early adoption permitted. This standard shall be applied retrospectively for thecurrent presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively for the capitalization of the service cost benefit in assets. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial ~~statements.~~information.

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”) which simplifies the subsequent measurement of goodwill by eliminating Step 2 in the goodwill impairment test that required an entity to perform procedures to determine the fair value of its assets and liabilities at the testing date. An entity instead will perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU 2017-04 will be applied prospectively and is effective for annual and interim goodwill impairment tests conducted in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment testing dates after January 1, 2017. The Company is currently evaluating the impact, if any, that the adoption of this standard will have on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”) to create consistency in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements.

(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.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) to increase transparency and comparability among organizations by requiring recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. A modified retrospective approach is required. The Company has formed a project team to evaluate the impact that the adoption of this standard will have on its consolidated financial statements and disclosures. The project team has completed training on the new standard and has started lease review and documentation, but31, 2022, the Company ~~has not yet determined the effect of ASU 2016-02 on its ongoing financial reporting.~~

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”) which requires that deferred tax liabilities and assets be classified as noncurrent on the balance sheet. The current requirement that deferred tax liabilities andpaid $3.9 million in cash to purchase assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by this guidance. The guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company adopted the provisions of ASU 2015-17 on January 1, 2017 on a retrospective basis. The December 31, 2016 current deferred tax assets of $13,604,000 have been reclassifiedgearbox repair company in ~~the consolidated balance sheet from current deferred income taxes asset to noncurrent deferred income taxes liability.~~

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” (“ASU 2015-11”) which applies to inventory that is measured using first-in, first-out (“FIFO”) or average cost. Under the guidance, an entity should measure inventory that is within the scope of this update at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. ASU 2015-11 is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim period or annual reporting period. The Company adopted the provisions of ASU 2015-11 on January 1, 2017 and, based on a lower of cost and net realizable value inventory analysis as of December 31, 2016, no adjustments to inventory value were required. The analysis reflected the inventory values are proper within the guidance of ASU 2015-11.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in United States Generally Accepted Accounting Principles when it becomes effective. In July 2015, the FASB voted to delay the effective date of ASU 2014-09 by one year, making it effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted as of the original effective date. ASU 2014-09 permits the use of either the retrospective, modified retrospective or prospective with a cumulative catch-up approach. The Company has formed a project team to evaluate the standard and determine the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The project team has completed training on the new standard and has started contract review and documentation. The Company has not yet selected a transition method nor has it determined the effect of ASU 2014-09 on its ongoing financial reporting.

~~(3)~~

~~ACQUISITIONS~~

On September 13, 2017, the Company completed the acquisition of substantially all of the assets of Stewart & Stevenson LLC (“S&S”), a global manufacturer and distributor of products and services for the oil and gas, marine, construction, power generation, transportation, mining and agricultural industries. The acquired business, which the Company operates through a newly formed subsidiary renamed Stewart & Stevenson LLC after the closing of the acquisition, was founded in 1902 and serves domestic and global markets with equipment, rental solutions, parts and service through a strategic network of sales and service centers in domestic and international locations.

The total value of the transaction was $758,245,000, before post-closing adjustments and excluding transaction fees, consisting of cash consideration of $377,967,000, the assumption of $13,724,000 of debt and $366,554,000 through the issuance of 5,696,259 shares of Company common stock valued at $64.35 per share, the Company’s closing share price on September 13, 2017. On June 26, 2017, in advance of the purchase of S&S, the Company entered into an amendment of its revolving credit facility that increased the borrowing limit from $550,000,000 to $850,000,000 and extended the maturity date to June 26, 2022. The debt assumed consists of $12,135,000 of term debt and $1,589,000 of short-term secured loans related to the Company’s South American operations. The term debt has a maturity date of September 15, 2032 and carries an interest rate of 4.0%. The term debt has quarterly interest payments plus quarterly principal payments 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.

S&S, headquartered in Houston, Texas with 42 branches across 12 states, is a distributor in certain geographic areas for Allison Transmission, MTU Detroit Diesel, Electro-Motive Diesel, Deutz and several other manufacturers. S&S’ principal customers are oilfield service companies, oil and gas operators and producers, and companies in the marine, construction, power generation, transportation, mining and agricultural industries.

~~The Company considers S&S to be a natural extension of the current distribution and services segment, expanding its geographic footprint and capabilities of~~ the distribution and services ~~business.~~

~~Total consideration transferred was as follows (in thousands):~~

Cash consideration paid $ 377,967
Stock consideration through issuance of Company common stock 366,554
Fair value of consideration transferred $ 744,521

~~The fair values of the assets~~segment. Assets acquired ~~and liabilities assumed recorded at the acquisition date were as follows (in thousands):~~

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

The analysis of the S&S fair values is substantially complete but all fair values have not been finalized pending obtaining the information necessary to complete the analysis. As additional information becomes known concerning the assets acquired and liabilities assumed, the Company may make adjustments to the opening balance sheet of S&S up to a one year period following the acquisition date.

As a result of the acquisition, the Company recorded $317,861,000 of goodwill and $160,822,000 of net intangibles. The net intangibles have a weighted average amortization period of approximately 16.8 years. The Company expects substantially all of the goodwill will be deductible for tax purposes. Acquisition related costs of $1,471,000, consistingconsisted primarily ~~of legal, audit and other professional fees plus other expenses, were expensed as incurred to selling general and administrative expense in the first nine months of 2017.~~

On July 10, 2017, the Company completed the purchase of certain inland marine assets from an undisclosed competitor for $68,000,000 in cash. The assets purchased consisted of nine specialty pressure tank barges, four 30,000 barrel tank barges and three 1320 horsepower inland towboats. The average age of the 13 inland tank barges was five years. The 13 tank barges transport petrochemicals and refined petroleum products on the Mississippi River System and the Gulf Intracoastal Waterway. As a result of the acquisition, the Company recorded $67,970,000 of property and ~~$30,000 of intangibles with a weighted average amortization period of two years.~~equipment.

(3)Revenues

~~During July 2017, the Company purchased four inland tank barges for $1,450,000 as well as a barge fleeting and marine fueling operation business in Freeport, Texas for $3,900,000.~~

Pro forma results of the acquisitions made in the 2017 first nine months have not been presented as the pro forma revenues, earnings before taxes on income, net earnings and net earnings per share would not be materially different from the Company’s actual results.

~~(4)~~

~~INVENTORIES~~

The following table ~~presents~~sets forth the ~~details of inventories as of September 30, 2017 and December 31, 2016~~Company’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

~~(5)~~

~~FAIR VALUE MEASUREMENTS~~

~~The estimated fair value of total debt outstanding at September 30, 2017~~

Contract liabilities represent advance consideration received from customers, and ~~December~~are recognized as revenue over time as the related performance obligation is satisfied. Revenues recognized during the three months ended March 31, ~~2016 was $1,025,773,000~~2023 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. Cash~~opening 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.~~

Certain assets are measured at fair value on a nonrecurring basis. These assets are adjusted to fair value when there is evidence of impairment. During the nine months ended September 30, 2017, there was no indication that the Company’s long-lived assets were impaired, and accordingly, measurement at fair value was not required.

~~(6)~~

~~STOCK AWARD PLANS~~

The Company has share-based compensation plans which are described below. The compensation cost that has been charged against earnings for the Company’s stock award plans and the income tax benefit recognized in the statement of earnings for stock awards 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
Compensation cost $ 3,067 $ 3,296 $ 8,991 $ 8,841
Income tax benefit $ 1,234 $ 1,236 $ 3,386 $ 3,315

The Company has an employee stock award plan for selected officers and other key employees which provides for the issuance of stock options, restricted stock and performance awards. The exercise price for each option equals the fair market value per share of the Company’s common stock on the date of grant. Substantially all stock options outstanding under the plan have terms of seven years and vest ratably over three years. No performance awards payable in stock have been awarded under the plan. At September 30, 2017, 1,775,522 shares were available for future grants under the employee plan and no outstanding stock options under the employee plan were issued with stock appreciation rights.

~~The following is a summary of the stock option activity under the employee plan described above for the nine months ended September 30, 2017:~~

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

~~The following table summarizes information about the Company’s outstanding and exercisable stock options under the employee plan at September 30, 2017:~~

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

~~The following is a summary of the restricted stock award activity under the employee plan described above for the nine months ended September 30, 2017:~~

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

The Company has a stock award plan for nonemployee directors of the Company which provides for the issuance of stock options and restricted stock. The director plan provides for automatic grants of restricted stock to nonemployee directors after each annual meeting of stockholders. In addition, the director plan allows for the issuance of stock options or restricted stock in lieu of cash for all or part of the annual director fee at the option of the director. The exercise prices for all options granted under the plan are equal to the fair market value per share of the Company’s common stock on the date of grant. The terms of the options are ten years. The restricted stock issued after each annual meeting of stockholders vests six months after the date of grant. Options granted and restricted stock issued in lieu of cash director fees vest in equal quarterly increments during the year to which they relate. At September 30, 2017, 510,071 shares were available for future grants under the director plan. The director stock award plan is intended as an incentive to attract and retain qualified independent directors.

~~The following is a summary of the stock option activity under the director plan described above for the nine months ended September 30, 2017:~~

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

~~The following table summarizes information about the Company’s outstanding and exercisable stock options under the director plan at September 30, 2017:~~

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

~~The following is a summary of the restricted stock award activity under the director plan described above for the nine months ended September 30, 2017:~~

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

The total intrinsic value of all stock options exercised under all of the Company’s plans was $1,585,000 and $266,000 for the nine months ended September 30, 2017 and 2016, respectively. The actual tax benefit realized for tax deductions from stock option exercises was $597,000 and $100,000 for the nine months ended September 30, 2017 and 2016, respectively.

The total intrinsic value of all the restricted stock vestings under all of the Company’s plans was $7,046,000 and $5,587,000 for the nine months ended September 30, 2017 and 2016, respectively. The actual tax benefit realized for tax deductions from restricted stock vestings was $2,654,000 and $2,095,000 for the nine months ended September 30, 2017 and 2016, respectively.

As of September 30, 2017, there was $3,744,000 of unrecognized compensation cost related to nonvested stock options and $19,777,000 related to restricted stock. The stock options are expected to be recognized over a weighted average period of approximately 1.6 years and restricted stock over approximately 3.2 years. The total fair value of options vested was $2,511,000 and $2,495,000 during the nine months ended September 30, 2017 and 2016, respectively. The fair value of the restricted stock vested was $7,046,000 and $5,587,000 for the nine months ended September 30, 2017 and 2016, respectively.

The weighted average per share fair value of stock options granted during the nine months ended September 30, 2017 and 2016 was $20.72 and $17.30, respectively. The fair value of the stock options granted during the nine months ended September 30, 2017 and 2016 was $2,616,000 and $3,231,000,$28.6 million, respectively. The Company ~~currently uses treasury stock shares for restricted stock grants and stock option exercises.~~presents all contract liabilities within the deferred revenues financial statement caption on the balance sheets. The ~~fair value~~Company did not have any contract assets at March 31, 2023 or December 31, 2022. The Company applies the practical expedient that allows non-disclosure of each stock option was determined using the Black-Scholes option pricing model. The key input variables used in valuing the options during the nine months ended September 30, 2017 and 2016 were as follows:information about remaining performance obligations that have original expected durations of one year or less.

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

~~(7)~~

~~OTHER COMPREHENSIVE INCOME~~

~~The Company’s changes in other comprehensive income for the three months and nine months ended September 30, 2017 and 2016 were as follows (in thousands):~~

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 )

~~(a)~~

~~Actuarial gains/(losses) are amortized into costs of sales and operating expenses or selling, general and administrative expenses as appropriate. (See Note 11 – Retirement Plans)~~

~~(8)~~

~~SEGMENT DATA~~

(4)Segment Data

The Company’s operations are aggregated into two reportable business segments as follows:

Marine Transportation Segment (“KMT”) — Provides marine transportation ~~principally~~ by United States ~~flag~~flagged vessels principally of liquid cargoes throughout the United States inland waterway system, along all three United States coasts, ~~in Alaska and Hawaii~~ and, to a lesser extent, in United States coastal transportation of dry-bulk cargoes. The principal products transported include petrochemicals, black oil, refined petroleum products, and agricultural chemicals.

Distribution and Services Segment (“KDS”) — Provides after-market ~~service~~services and genuine replacement 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, pumps,~~industrial compressors, high capacity lift trucks, and ~~compressors~~refrigeration trailers for use in a variety of industrial markets, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, electric power generation equipment, specialized electrical distribution and control equipment, and high capacity energy storage/battery systems for ~~the land-based~~ oilfield service and ~~oil and gas operator and producer markets.~~

railroad customers.

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 distribution~~KDS 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 sets~~tables 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, 2023		December 31, 2022
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, 2023		December 31, 2022
General corporate assets	$	178,619	$	225,265
Investment in affiliates		2,355		2,171
	$	180,974	$	227,436

(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

(a)

Variable interest rate of 6.3% at March 31, 2023.

(b)

Excludes $1.8 million attributable to the 2027 Revolving Credit Facility included in other assets at December 31, 2022.

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 ~~September~~March 31, 2023.

The 2027 Term Loan is repayable in quarterly installments, with no repayments until June 30, ~~2017~~2025, in increasing percentages of the original principal amount of the loan, with the remaining unpaid balance of approximately $43.8 million payable upon maturity, assuming no prepayment. The 2027 Term Loan is prepayable, in whole or in part, without penalty. The 2027 Credit Agreement provides for a variable interest rate based on the 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.

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, 2023			December 31, 2022
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, 2023			December 31, 2022
Weighted average discount rate		4.2	%		4.1	%
Weighted average remaining lease term	9 years			9 years

(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):~~

2022, the Company had a federal income tax receivable of $70.4 million included in Accounts Receivable – Other on the balance sheets. During the first quarter of 2023, the Internal Revenue Service (“IRS”) communicated to the Company that it has completed its examination of the Company’s federal income tax returns for the years 2013 through 2020. In April 2023, the Company received its tax refund of $70.4 million plus accrued interest.

September 30,
2017

December 31,
2016

General corporate assets $ 49,092 $ 50,054
Investment in affiliates 1,851 2,622
$ 50,943 $ 52,676

~~(9)~~

~~TAXES ON INCOME~~

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

ASU 2016-09 requires that excess tax benefits and tax deficiencies related to share-based compensation be recognized as income tax expense or benefit in the income statement as discrete items in the reporting period in which they occur. This requirement was applied on a prospective basis to the tax effects of exercised or vested stock awards occurring on or after January 1, 2017. This resulted in an increase in the provision for taxes on income of $1,060,000 for the three months ended September 30, 2017 and a decrease of $178,000 for the nine months ended September 30, 2017.


	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

~~(10)~~

~~EARNINGS PER SHARE~~

(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 ~~548,000~~0.3 million and ~~520,000~~0.4 million shares of common stock were excluded in the computation of diluted earnings per share as of ~~September 30, 2017~~March 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, 2023		December 31, 2022
Finished goods	$	377,192	$	358,702
Work in process		98,026		103,146
	$	475,218	$	461,848

~~(11)~~

~~RETIREMENT PLANS~~

(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 ~~its~~the Kirby pension plan during ~~2017.~~

2023.

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.

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 Amount			Income Tax Benefit		Net Amount			Gross Amount		Income Tax Provision			Net Amount
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)

~~(12) CONTINGENCIES~~

(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 investigating~~investigated the cause of the incident. ~~The~~On 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 ~~provincial~~master and ~~federal~~pilot 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.

On March 22, 2014, two tank barges and a towboat (the M/V Miss Susan), owned by Kirby Inland Marine, LP, a wholly owned subsidiary of the Company, were involved in a collision with the M/S Summer Wind on the Houston Ship Channel near Texas City, Texas. The lead tank barge was damaged in the collision resulting in a discharge of intermediate fuel oil from one of its cargo tanks. The USCG and the NTSB named the Company and the Captain of the M/V Miss Susan, as well as the owner and the pilot of the M/S Summer Wind, as parties of interest in their investigation as to the cause of the incident. Sea Galaxy Ltd is the owner of the M/S Summer Wind. The Company is participating in the natural resource damage assessment and restoration process with federal and state government natural resource trustees. The Company believes ~~it has~~its accrual of such estimated liability is adequate ~~insurance coverage for pollution, marine and other potential liabilities arising from the incident. The Company believes it has accrued adequate reserves~~ for the incident and does not expect the incident to have a material adverse effect on its business or financial condition.

~~The~~

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 ~~business~~financial condition, results of operations, or ~~financial condition.~~cash flows. Management believes ~~that it has recorded~~its 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 with~~regarding these instruments.

~~(13)~~

~~SUBSEQUENT EVENT~~

~~On October 20, 2017, San Jac Marine, LLC (“San Jac”), a subsidiary~~

Item 2.Management’s Discussion and Analysis of ~~the Company, purchased certain assets~~Financial 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.

~~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, 2016, as well as the following additional risk factor:

~~The Company may be unable to make attractive acquisitions or successfully integrate acquired businesses, and any inability to do so may disrupt the Company’s business and hinder its ability to grow.~~ The Company has made asset and business acquisitions in the past and may continue to make acquisitions of assets or businesses in the future that complement or expand the Company’s current business. The Company may not be able to identify attractive acquisition opportunities. Even if attractive acquisition opportunities are identified, the Company may not be able to complete the acquisition or do so on commercially acceptable terms. The success of any completed acquisition depends on the Company’s ability to integrate the acquired assets or business effectively into the Company’s existing operations. The process of integrating acquired assets or businesses may involve difficulties that require a disproportionate amount of the Company’s managerial and financial resources to resolve. The value of acquired assets or businesses may be negatively impacted by a variety of circumstances unknown to the Company prior to the acquisition. In addition, possible future acquisitions may be larger and for purchase prices significantly higher than those paid for earlier acquisitions. No assurance can be given that the Company will be able to identify additional suitable acquisition opportunities, negotiate acceptable terms, obtain financing for acquisitions on acceptable terms or successfully acquire identified targets. The Company’s failure to achieve consolidation savings, to integrate successfully the acquired businesses and assets into the Company’s existing operations, or to minimize any unforeseen operational difficulties could have a material adverse effect on the Company’s business, financial condition, and results of operations. In addition, agreements governing the Company’s indebtedness from time to time may impose certain limitations on the Company’s ability to undertake acquisitions or make investments or may limit the Company’s ability to incur certain indebtedness and liens, which could limit the Company’s ability to make acquisitions.

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Operations

Statements contained in this Form 10-Q that are not historical facts, including, but not limited to, any projections contained herein, are forward-looking statements and involve a number of risks and uncertainties. Such statements involve risks and uncertainties. Such statements can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” ~~“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-K~~10‑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.

For purposes of ~~the~~ Management’s Discussion, all net earnings per share attributable to Kirby common stockholders are “diluted earnings per share.” ~~The weighted average number of common shares applicable to diluted earnings per share 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

Weighted average number of common stock - diluted 54,803 53,501 54,021 53,503

The increase in the weighted average number of common shares for the 2017 third quarter and first nine months compared with the 2016 third quarter and first nine months primarily reflected the issuance of 5,696,259 shares of Company common stock associated with the S&S acquisition on September 13, 2017, and the issuance of restricted stock and the exercise of stock options.

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, pumps~~industrial compressors, high capacity lift trucks, and ~~compressors~~refrigeration trailers for use in a variety of industrial markets, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, manufactures cementing and pumping equipment as well as coil tubing and well intervention equipment, electric power generation equipment, specialized electrical distribution and control equipment, and high capacity energy storage/battery systems for ~~the land-based~~ oilfield service and ~~oil~~railroad 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 operator~~shareholder engagement and ~~producer markets.~~

$2.7 million before taxes, $2.2 million after taxes, or $0.04 per share of other income associated with the interest on the refund from the Internal Revenue Service (“IRS”).

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 third~~2023 first quarter, ~~net earnings attributable~~capital 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 ~~revenues~~some coastal vessels, and facility improvements. The balance of ~~$541,274,000, compared with 2016 third quarter~~up 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.

Marine Transportation

For the ~~2017~~2023 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.

~~Marine Transportation~~

~~For the 2017 third~~ quarter, ~~and first nine months, the Company’s marine transportation segment~~KMT generated ~~59% and 66%, respectively,~~55% of the Company’s ~~revenue.~~revenues compared to 58% for the 2022 first quarter. The segment’s customers include many of the major petrochemical and refining companies that operate in the United States. Products transported include intermediate materials used to produce many of the end products used widely by businesses and consumers — plastics, fiber, paints, detergents, oil additives and paper, among others, as well as residual fuel oil, ship bunkers, asphalt, gasoline, diesel fuel, heating oil, crude oil, natural gas condensate, and agricultural chemicals. Consequently, ~~the Company’s marine transportation business~~KMT is directly affected by the volumes produced by the Company’s petroleum, petrochemical, and refining customer base.

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


	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 third~~2023 first quarter increased 16% and ~~first nine months decreased 11% when~~operating 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.

2022 first quarter. The ~~segment’s operating income~~increases for the ~~2017 third~~2023 first quarter ~~and first nine months decreased 35% and 46%, respectively, compared with the 2016 third quarter and first nine months. The decreases in operating income~~ were primarily due to ~~lower inland~~higher term and spot ~~contract~~ pricing ~~lower coastal spot contract pricing, lower coastal equipment~~and increased tank barge utilization and a continued increase in coastal equipment operating in the spot market which adds increased idle time and voyage costs, partially offset by savings in the coastal market from the release of chartered tugboats, idling owned barges and tugboats and reducing headcount accordingly, and by a reduction in the average number of inland towboats operated.

~~The 2017 third quarter and nine months revenue and operating income decreases were also due to the loss of revenue and additional operating expenses~~ in the inland and coastal ~~marine transportation markets associated with Hurricanes Harvey~~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 ~~Irma. Initial net lost revenues~~increased operating costs. The 2023 and ~~costs associated with the hurricanes~~2022 first quarters were ~~approximately $0.07 per share for the third quarter. However, as the third quarter concluded, recoveries from marine customers for delays, pent-up demand for liquid barge movements as~~impacted by poor operating conditions including seasonal wind and fog along the Gulf Coast, ~~petrochemical~~flooding on the Mississippi River, and ~~refinery complex returned to normal operations and a stronger pricing environment for customers’ products partially mitigated~~various lock closures along the ~~negative impact of the hurricanes by approximately $0.04 per share. The 2016 first nine months marine transportation operating income included $3,792,000 of severance charges incurred~~Gulf Intracoastal Waterway resulting in ~~the 2016 first quarter.~~higher delay days. For the ~~2017 and 2016 third quarters,~~2023 first quarter, the inland tank barge fleet contributed ~~72% and 66%, respectively,~~82% and the coastal fleet contributed ~~28% and 34%, respectively,~~18% of ~~marine transportation~~KMT revenues. For the ~~2017 and 2016~~2022 first ~~nine months,~~quarter, the inland tank barge fleet contributed ~~71% and 67%, respectively,~~78% and the coastal fleet contributed ~~29% and 33%, respectively,~~22% of ~~marine transportation~~KMT revenues.

Operating conditions for the Company’s inland marine transportation markets during the 2017 third quarter deteriorated significantly after Hurricane Harvey made land-fall on the Gulf Coast at the end of August. Unrelated and coinciding infrastructure repairs on the upper Mississippi River further decreased operating efficiency in September. The effect was an increase in inland

Inland tank barge utilization levels ~~after Hurricane Harvey from~~averaged 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 2017~~2022 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 for~~2022 first quarter was impacted by the ~~2016 third quarter. For~~COVID-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 compared~~Company’s mariners led to ~~demand for the comparable 2016 periods.~~

crewing challenges.

Coastal tank barge utilization levels ~~declined~~averaged 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 2017~~2023 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 ~~2017~~low-90% range during the 2022 first ~~and second quarters and the 2016 third~~ quarter. ~~Demand for the transportation of refined petroleum products and crude oil~~The 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.~~

continued improvements in market and customer demand.

During the ~~2017 third~~2023 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 transportation~~KMT 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.

During the ~~2017 and 2016 third quarters and~~2022 first ~~nine months,~~quarter, approximately 80% of the coastal revenues were under term contracts and 20% were spot contract revenues. Coastal time charters represented approximately ~~85%~~90% of coastal revenues under term contracts during both the ~~2017 third quarter~~2023 and 2022 first ~~nine~~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 spot contracts renewed during 2023 compared ~~with 90%~~to contracts renewed during the ~~2016 third~~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%

(a)

Spot and ~~first nine months.~~

~~Rates on inland~~ term ~~contracts renewed~~contract pricing in the ~~2017 third quarter~~coastal market are contingent on various factors including geographic location, vessel capacity, vessel type, and first nine months continued to deteriorate due to excess industry capacity, decreasing in the 4% to 8% average range compared with term contracts renewed in the third quarter and first nine months of 2016. Spot contract rates, which include the cost of fuel, were relatively flat when compared with the 2017 first and second quarters, but below term contract rates. product serviced.

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.

There were no coastal term contracts renewed in the 2017 third quarter as customers elected to source their needs in the spot market. Rates on coastal term contracts renewed in the 2017 first six months were down slightly compared to term contracts renewed in the 2016 comparable periods, although most contracts failed to renew and customers elected to source their needs in the spot market. Spot contract rates, which include the cost of fuel, remained meaningfully below term contract rates during the first nine months of 2017, the degree to which varies based on geography, vessel capacity, vessel type and product service.

~~The marine transportation~~

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 2017~~2023 first ~~nine months compared with 17.7% for the 2016 first nine months.~~

~~Distribution and Services~~

For the 2017 third quarter and first nine months, the distribution and services segment generated 41% and 34%, respectively, of the Company’s revenue. For the 2017 third quarter and first nine months, 46% and 44% of the distribution and services segment revenue was generated from overhauls and service, 33% and 36% from direct parts sales and 21% and 20% from manufacturing, respectively. The results of the distribution and services segment are largely influenced by the economic cycles of the land-based oilfield service and oil and gas operator and producer markets, marine, power generation, on-highway and other industrial markets.

Distribution and services revenues for the 2017 third quarter and first nine months increased 194% and 134%, respectively, when compared with the third quarter and first nine months of 2016. Operating income for the 2017 third quarter and first nine months was $21,974,000 and $52,063,000, respectively, compared with operating income in the 2016 third quarter and first nine months of $4,634,000 and $1,860,000, respectively. The higher revenues and operating income in the 2017 third quarter and first nine months compared to the 2016 third quarter and first nine months were primarily attributable to the increased demand in the land-based market for the remanufacture of 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 and operating income 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 market was relatively stable with major generator set upgrades and parts sales for both domestic and international power generation customers. The distribution and services results for the 2016 first nine months included $1,436,000 of severance charges incurred in the 2016 first quarter in response to the reduced activity in both the land-based and marine markets.

The distribution and services operating margin for the 2017 third quarter was 9.9% compared with 6.1% for the 2016 third quarter. For the 2017 first nine months, the operating margin was 10.2% compared with 0.8% for the first nine months of 2016.

~~Cash Flow and Capital Expenditures~~

The Company continued to generate strong operating cash flow during the 2017 first nine months, with net cash provided by operating activities of $259,455,000 compared with $338,246,000 net cash provided by operating activities for the 2016 first nine months. The 23% decrease was primarily from a $39,640,000 decrease in cash flows from changes in operating assets and liabilities, $27,540,000 of lower net earnings, and a $13,481,000 decrease in the provision for deferred income taxes. During the 2017 first nine months, the Company generated cash of $29,743,000 from proceeds from the disposition of assets compared to $15,136,000 for the first nine months of 2016. In the 2017 second quarter, the Company executed a sale leaseback transaction related to a constructed 4900 horsepower coastal tugboat. The Company received cash proceeds of $18,314,000 for the coastal tugboat and executed a ten year lease with the buyer. The Company also generated cash during the 2017 and 2016 first nine months of $2,076,000 and $321,000, respectively, from proceeds from the exercise of stock options.

For the 2017 first nine months, cash generated and borrowings under the Company’s Revolving Credit Facility were used for capital expenditures of $133,437,000, including $8,449,000 for inland tank barge and towboat construction, $8,786,000 for progress payments on the construction of a 155,000 barrel coastal ATB placed in service in the 2017 third quarter, $15,404,000 for progress payments on the construction of two 4900 horsepower coastal tugboats, one completed in the 2017 second quarter and the second to be completed in the 2017 fourth quarter, $16,357,000 for progress payments on six 5000 horsepower coastal ATB tugboats, $698,000 in final costs for the construction of a 35,000 barrel coastal petrochemical tank barge, and $83,743,000 primarily for upgrading existing marine equipment and marine transportation and distribution and services facilities, and $451,219,000 for acquisitions of businesses and marine equipment.

The Company’s debt-to-capitalization ratio increased to 26.4% at September 30, 2017 from 23.1% at December 31, 2016, primarily due to borrowings under the Company’s Revolving Credit Facility used to purchase the assets of S&S, less the increase in total equity from net earnings attributable to Kirby for the 2017 first nine months of $81,868,000, stock issued with a fair value of $366,554,000 in connection with the acquisition of the assets of S&S, exercise of stock options and the amortization of unearned equity compensation, partially offset by an $8,486,000 decrease in retained earnings due to the adoption of ASU 2016-09. As of September 30, 2017, the Company had $524,410,000 outstanding under its Revolving Credit Facility and $500,000,000 of senior notes outstanding, offset by $3,641,000 in unamortized debt issuance costs. In addition, as a result of the S&S acquisition, the Company assumed debt of $13,724,000 and, after making principal payments of $1,065,000, the Company had a balance of $12,659,000 outstanding as of September 30, 2017, of which $2,400,000 was classified as current portion of long-term debt.

During the 2017 first nine months, the Company took delivery of four new inland tank barges with a total capacity of approximately 115,000 barrels, acquired nine specialty pressure tank barges and four 30,000 barrel tank barges with a total capacity of 253,000 barrels, retired 47 inland tank barges, reducing its capacity by approximately 913,000 barrels, brought one inland tank barge back into service with a capacity of 20,000 barrels and temporarily chartered one inland tank barge with a total capacity of approximately 11,000 barrels. The net result was a reduction of 28 inland tank barges and approximately 514,000 barrels of capacity during the first nine months of 2017.

The Company projects that capital expenditures for 2017 will be in the $175,000,000 to $185,000,000 range. The 2017 construction program will consist of five inland tank barges with a total capacity of 144,000 barrels and progress payments on 16 inland towboats of which one was delivered in the 2017 third quarter and 15 will be delivered in 2018 and 2019, progress payments on the construction of a 155,000 barrel coastal ATB placed in service in the 2017 third quarter, progress payments on the construction of two 4900 horsepower coastal tugboats and six 5000 horsepower coastal ATB tugboats and final costs on the construction of a 35,000 barrel coastal petrochemical tank barge. Based on current commitments, steel prices and projected delivery schedules, the Company’s 2017 payments on new inland tank barges and the towboats will be approximately $17,000,000, 2017 progress payments on the construction of the 155,000 barrel coastal ATB will be approximately $9,000,000, 2017 progress payments on the construction of the two 4900 horsepower coastal tugboats will be approximately $17,000,000, progress payments on the construction of the six 5000 horsepower coastal ATB tugboats will be approximately $26,000,000, and final costs on the construction of the 35,000 barrel coastal petrochemical tank barge will be approximately $1,000,000. The balance of approximately $105,000,000 to $115,000,000 is primarily capital upgrades and improvements to existing marine equipment and marine transportation and distribution and services facilities.

~~Outlook~~

Reduced crude oil volumes to be moved by tank barge due to additional pipelines, coupled with the large number of tank barges built during the last several years, many of which were for the movement of crude oil and natural gas condensate, have resulted in excess industry-wide tank barge capacity and lower equipment utilization for both the inland and coastal marine transportation markets. This extra capacity placed inland and coastal tank barge rates under pressure. As a result, the inland market for the fourth quarter of 2017 will be impacted by the pricing declines experienced throughout 2016 and the 2017 first nine months. The Company anticipates inland utilization to range from the mid-80% to mid-90% range for the fourth quarter of 2017. While supply and demand in the inland tank barge industry is moving toward balance, the Company does not expect an improvement in pricing this year. However, future inland tank barge demand for petrochemical and refined petroleum products volumes from increased production from current facilities, plant expansions or the opening of new facilities should benefit the inland marine transportation markets.

In the coastal marine transportation market, a decline in crude oil and natural gas condensate transportation volumes has increased available capacity and has resulted in some reluctance among certain customers to extend term contracts, which has led to an increase in the number of coastal vessels operating in the spot market. In addition, the Company and the industry have added new coastal tank barge capacity during 2015 and 2016, with additional new capacity coming on-line in 2017 through 2019. While much of this new capacity is replacement capacity for older vessels anticipated to be retired, the Company maintains a cautious outlook as the industry absorbs the new capacity. While the Company does expect the supply of tank barges and capacity in the coastal industry fleet to eventually balance with demand, the Company does not anticipate that balance occurring in 2017 without an improvement in demand. As a result, throughout the 2017 first nine months, the Company released chartered tugboats, idled owned barges and tugboats and reduced headcount accordingly. The Company expects tank barge utilization for the coastal markets to be in the low-to-mid 60% range for the fourth quarter of 2017.

As of September 30, 2017, the Company estimated there were approximately 3,850 inland tank barges in the industry fleet, of which approximately 500 were over 30 years old and approximately 250 of those over 40 years old. Given the age profile of the industry inland tank barge fleet and current market conditions, the expectation is that many older tank barges will be removed from service during 2017. The Company estimates that approximately 40 tank barges were ordered during 2016 for delivery throughout 2017, five of which are for the Company, and many older tank barges, including an expected 51 by the Company, will be retired, dependent on 2017 market conditions. Historically, 75 to 150 older inland tank barges are retired from service each year industry-wide, with the extent of the retirements dependent on petrochemical and refinery production levels, and crude oil and natural gas condensate movements, both of which can have a direct effect on industry-wide tank barge utilization, as well as term and spot contract rates.

As of September 30, 2017, the Company estimated there were approximately 295 tank barges operating in the 195,000 barrel or less coastal industry fleet, the sector of the market in which the Company operates, and approximately 35 of those were over 30 years old. The Company took delivery of a new 155,000 barrel coastal ATB in the 2017 third quarter. The Company is aware of nine announced coastal tank barge and tugboat units in the 195,000 barrel or less category under construction by competitors for delivery in the 2017 fourth quarter, 2018 and 2019.

In the land-based distribution and services market, the Company is experiencing a healthy rebound in service demand, particularly with pressure pumping unit remanufacturing and transmission overhauls. The United States land rig count has improved from the lows of 2016, oil prices have traded in the $40 to $55 per barrel range during 2017, and service intensity in the well completion business has increased. The condition of the industry’s pressure pumping fleet remains poor. Based on these positive conditions, the Company anticipates that for the fourth quarter of 2017 the demand for pressure pumping unit remanufacturing will remain strong and that increased demand is anticipated to generate orders for the manufacture of pressure pumping units and ancillary oilfield service support equipment. The Company also anticipates the demand for rental of standby power generators, elevated as a result of hurricane related demand in Texas and Florida during late August and September, will return to normal levels in the fourth quarter.

For the marine market, the Company anticipates continued weakness in the Gulf of Mexico oilfield services market, as well as the inland and coastal tank barge markets and inland dry cargo barge market, throughout the fourth quarter of 2017. The power generation market should remain stable, benefiting from engine-generator set upgrades and parts sales for both domestic and international customers.

~~Acquisitions~~

On October 20, 2017, San Jac, a subsidiary of the Company, purchased certain assets 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. Financing of the asset acquisition was through borrowings under the Company’s revolving credit facility.

On September 13, 2017, the Company completed the acquisition of substantially all of the assets of S&S, a global manufacturer and distributor of products and services for the oil and gas, marine, construction, power generation, transportation, mining and agricultural industries. The acquired business, which the Company operates through a newly formed subsidiary renamed Stewart & Stevenson LLC after the closing of the acquisition, was founded in 1902 and serves domestic and global markets with equipment, rental solutions, parts and service through a strategic network of sales and service centers in domestic and international locations.

The total value of the transaction was $758,245,000, before post-closing adjustments and excluding transaction fees, consisting of cash consideration of $377,967,000, the assumption of $13,724,000 of debt and $366,554,000 through the issuance of 5,696,259 shares of Company common stock valued at $64.35 per share, the Company’s closing share price on September 13, 2017. The debt assumed consists of $12,135,000 of term debt and $1,589,000 of short-term secured loans related to the Company’s South American operations. The term debt has a maturity date of September 15, 2032 and carries an interest rate of 4.0%. The term debt has quarterly interest payments plus quarterly principal payments 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. Financing of the acquisition was through a combination of the Company’s revolving credit facility and the issuance of Company common stock.

On July 10, 2017, the Company completed the purchase of certain inland marine assets from an undisclosed competitor for $68,000,000 in cash. The assets purchased consisted of nine specialty pressure tank barges, four 30,000 barrel tank barges and three 1320 horsepower inland towboats. The average age of the 13 inland tank barges was five years. The 13 tank barges transport petrochemicals and refined petroleum products on the Mississippi River System and the Gulf Intracoastal Waterway. Financing of the equipment acquisition was through borrowings under the Company’s revolving credit facility.

During July 2017, the Company purchased four inland tank barges for $1,450,000 as well as a barge fleeting and marine fueling operation business in Freeport, Texas for $3,900,000. Financing of the acquisitions was through the Company’s operating cash flows.

~~Results of Operations~~

For the 2017 third quarter, net earnings attributable to Kirby were $28,607,000, or $0.52 per share, on revenues of $541,274,000, compared with 2016 third quarter net earnings attributable to Kirby of $32,010,000, or $0.59 per share, on revenues of $434,708,000. For the 2017 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 2017 third quarter and first nine months results included a contribution of $0.03 and $0.02, respectively, per share from the S&S business, acquired on September 13, 2017. The S&S contribution was negatively impacted by acquisition related costs of $707,000, or $0.01 per share, in the 2017 second quarter, and $764,000, or $0.01 per share, in the 2017 third quarter. The 2017 third quarter and first nine months also included an estimated net $0.03 per share negative impact of Hurricane Harvey, which made landfall along the Gulf Coast in late August 2017, impacting the marine transportation and distribution and services operations, and Hurricane Irma, which disrupted the coastal marine transportation and distribution and services operations along the East Coast. The 2016 first nine months results included $5,605,000 before taxes, or $0.06 per share, of severance charges incurred in the 2016 first quarter. The severance charges were a reduction in force across the marine transportation and distribution and services businesses and corporate staff in order to reduce costs in light of challenging market conditions.

The following table sets forth the Company’s marine transportation and distribution and services revenues for the 2017 third quarter compared with the third quarter of 2016, the first nine months of 2017 compared with the first nine months of 2016 and the percentage of each to total revenues for the comparable periods (dollars in thousands):

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 %

~~Marine Transportation~~

The Company, through its marine transportation segment, is a provider of marine transportation services, operating tank barges and towing vessels transporting bulk liquid products throughout the Mississippi River System, on the Gulf Intracoastal Waterway, coastwise along all three United States coasts and in Alaska and Hawaii. The Company transports petrochemicals, black oil, refined petroleum products and agricultural chemicals by tank barge. As of September 30, 2017, the Company operated 848 inland tank barges, including 31 leased barges, with a total capacity of 17.4 million barrels. This compares with 881 inland tank barges operated as of September 30, 2016, including 35 leased barges, with a total capacity of 17.9 million barrels. The Company operated an average of 215 inland towboats during the 2017 third quarter, of which an average of 59 were chartered, compared with 227 during the 2016 third quarter, of which an average of 69 were chartered. The Company’s coastal tank barge fleet as of September 30, 2017 consisted of 67 tank barges, seven of which were leased, with 6.2 million barrels of capacity, and 70 tugboats, five of which were chartered. This compares with 68 coastal tank barges operated as of September 30, 2016, seven of which were leased, with 6.0 million barrels of capacity, and 80 tugboats, six of which were chartered. The Company owns and operates five offshore dry-bulk cargo barges and five offshore tugboats engaged in the offshore transportation of dry-bulk cargoes. The Company also owns shifting operations and fleeting facilities for dry cargo barges and tank barges on the Houston Ship Channel and in Freeport, Texas, as well as a two-thirds interest in Osprey Line, L.L.C., which transports project cargoes and cargo containers by barge.

The following table sets forth the Company’s marine transportation segment’s revenues, costs and expenses, operating income and operating margins 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

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 %

~~Marine Transportation Revenues~~

The following table shows the marine transportation markets serviced by the Company, the marine transportation revenue distribution for the 2017 third quarter and first nine months, products moved and the drivers of the demand for the products the Company transports:

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

For the 2017 and 2016 third quarters and first nine months, the inland tank barge fleet contributed 72% and 66%, respectively, and the coastal fleet 28% and 34%, respectively, of marine transportation revenues. Marine transportation revenues for the 2017 third quarter and first nine months decreased 11% when compared with the 2016 third quarter and first nine months, 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.

The 2017 third quarter and nine months revenue decrease was also due to the loss of revenue in the inland and coastal marine transportation markets associated with Hurricanes Harvey and Irma. Operating conditions for the Company’s inland marine transportation markets deteriorated significantly after Hurricane Harvey made land-fall on the Gulf Coast at the end of August. Unrelated and coinciding infrastructure repairs on the upper Mississippi River further decreased operating efficiency in September. The effect was an increase in inland tank barge utilization levels after Hurricane Harvey from the mid-80% to the mid-90% range during the balance of third quarter compared to ~~the mid-80% to high 80% range during the 2017 second quarter, the high 80% to low 90% range during the 2017 first quarter and the low-to-mid 80% range~~4.8% for the ~~2016 third~~2022 first quarter. As the third quarter concluded, recoveries from marine customers for delays, pent-up demand for liquid barge movements as the Gulf Coast petrochemical and refinery complex returned to normal operations and a stronger pricing environment for customers’ products partially mitigated the negative impact of the hurricanes. The decline in utilization from the 2017 first quarter to the 2017 second quarter was mainly due to better weather conditions along the Gulf Coast, which enhanced operating efficiency and thereby lowered tank barge utilization, and also due to seasonally weak demand for the transportation of agricultural chemicals.

Coastal tank barge utilization levels declined to the low 60% to mid-60% range from the high 60% to mid-70% range during the 2017 second quarter, the mid-70% to low 80% range during the 2017 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 in the coastal industry and weak demand for the transportation of refined petroleum products and crude oil.

The petrochemical market, the Company’s largest market, contributed 56% of marine transportation revenues for the 2017 third quarter and 55% for the first nine months, reflecting continued stable volumes from Gulf Coast petrochemical plants for both domestic consumption and to terminals for export destinations and the addition of the nine specialty pressure tank barges and four 30,000 barrel tank barges purchased in July 2017. Low priced domestic natural gas, a basic feedstock for the United States petrochemical industry, provides the industry with a competitive advantage relative to naphtha-based foreign petrochemical producers.

The black oil market, which contributed 22% of marine transportation revenues for the 2017 third quarter and 24% for the first nine months, reflected higher fleet utilization in the inland market compared to demand in the 2016 third quarter. The Company continued to transport crude oil and natural gas condensate produced from the Eagle Ford and Permian Basin shale formations in Texas both along the Gulf Intracoastal Waterway with inland vessels and in the Gulf of Mexico with coastal equipment, and continued to transport Utica natural gas condensate downriver from the Mid-Atlantic to the Gulf Coast, however at much reduced levels compared with the 2016 third quarter and first nine months. Demand for the transportation of black oil products in the coastal market in the 2017 third quarter was lower when compared to the 2016 third quarter due to the continued industry-wide oversupply of tank barges in the coastal industry.

The refined petroleum products market, which contributed 18% of marine transportation revenues for the 2017 third quarter and first nine months, reflected weaker demand in both the inland and coastal markets, primarily a result of the oversupply of tank barge capacity, as well as weak heating oil demand in the 2017 first quarter due to the unseasonably warm weather in the Northeast.

The agricultural chemical market, which contributed 4% of marine transportation revenues for the 2017 third quarter and 3% for the first nine months, saw typical seasonal demand for transportation of both domestically produced and imported products during the first and third quarters and a typical seasonal decline in demand in the second quarter.

For the third quarter of 2017, the inland operations incurred 1,965 delay days, 112% more than the 929 delay days that occurred during the 2016 third quarter and 44% more than the 1,367 delay days that occurred during the 2017 second quarter. For the first nine months of 2017, 5,599 delay days occurred, 8% more than the 5,200 delay days that occurred during the 2016 first nine months. Delay days measure the lost time incurred by a tow (towboat and one or more tank barges) during transit when the tow is stopped due to weather, lock conditions or other navigational factors. The increase in delay days for the 2017 third quarter compared to the 2016 third quarter and the 2017 second quarter reflected lost time incurred during and after Hurricane Harvey in late August and September and during the unrelated and coinciding upper Mississippi River infrastructure repairs in September.

During the 2017 third quarter and first nine months, approximately 75% of marine transportation 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.

During the 2017 and 2016 third quarters and first nine months, approximately 80% of the coastal revenues were under term contracts and 20% were spot contract revenues. Coastal time charters represented approximately 85% of coastal revenues under term contracts during the 2017 third quarter and first nine months compared with 90% during the 2016 third quarter and first nine months.

Rates on inland term contracts renewed in the 2017 third quarter and first nine months continued to deteriorate due to excess industry capacity, decreasing in the 4% to 8% average range compared with term contracts renewed in the third quarter and first nine months of 2016. Spot contract rates, which include the cost of fuel, were relatively flat when compared with the 2017 first and second quarters, but below term contract rates. Effective January 1, 2017, 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%, excluding fuel.

~~Marine Transportation Costs and Expenses~~

Costs and expenses for the 2017 third quarter and first nine months decreased 7% and 3%, respectively, when compared with the 2016 third quarter and first nine months. Costs of sales and operating expenses for the 2017 third quarter and first nine months decreased 10% and 4%, respectively, compared with the third quarter and first nine months of 2016, primarily due to fewer inland towboats operated and lower business activity levels, partially offset by higher fuel costs and costs and expenses associated with Hurricanes Harvey and Irma.

The inland marine transportation fleet operated an average of 215 towboats during the 2017 third quarter, of which an average of 59 were chartered, compared with 227 during the 2016 third quarter, of which an average of 69 were chartered. During the 2017 first nine months, the inland operations operated an average of 224 towboats, of which an average of 68 towboats were chartered, compared with 236 towboats operated during the 2016 first nine months, of which an average of 78 were chartered. As demand, or anticipated demand, increases or decreases, as new tank barges are added to the fleet, as chartered towboat availability changes, or as weather or water conditions dictate, such as the high wind and heavy fog conditions that occurred in the 2017 first quarter, the Company charters in or releases chartered towboats in an effort to balance horsepower needs with current requirements. The Company has historically used chartered towboats for approximately one-third of its horsepower requirements.

During the 2017 third quarter, the inland operations consumed 9.5 million gallons of diesel fuel compared to 9.8 million gallons consumed during the 2016 third quarter. The average price per gallon of diesel fuel consumed during the 2017 third quarter was $1.61 per gallon compared with $1.59 per gallon for the 2016 third quarter. For the 2017 first nine months, the inland operations consumed 30.0 million gallons of diesel fuel compared to 29.8 million gallons consumed during the 2016 first nine months. The average price per gallon of diesel fuel consumed during the 2017 first nine months was $1.71 compared with $1.40 for the 2016 first nine months. Fuel escalation and de-escalation clauses on term contracts are designed to rebate fuel costs when prices decline and recover additional fuel costs when fuel prices rise; however, there is generally a 30 to 90 day delay before the contracts are adjusted. Spot contracts do not have escalators for fuel.

Selling, general and administrative expenses for the 2017 third quarter increased 3% compared with the 2016 third quarter, primarily due to salary increases effective August 1, 2016 and April 1, 2017, higher incentive compensation accruals and higher professional fees. For the 2017 first nine months, selling, general and administrative expenses decreased 4% compared with the 2016 first nine months, primarily a reflection of $3,792,000 of severance charges incurred in the 2016 first quarter and the resulting cost savings in the 2017 first nine months from the reduction in force in early 2016, partially offset by salary increases effective August 1, 2016 and April 1, 2017.

Taxes, other than on income for the 2017 third quarter and first nine months increased 16% and 20%, respectively, compared with the 2016 third quarter and first nine months, mainly due to higher property taxes on marine transportation equipment and new state franchise taxes effective January 1, 2017.

~~Marine Transportation Operating Income and Operating Margins~~

Marine transportation operating income for the 2017 third quarter and first nine months decreased 35% and 46%, respectively, compared with the 2016 third quarter and first nine months. The operating margin was 11.3% for the 2017 third quarter compared with 15.4% for the 2016 third quarter. The operating margin for the 2017 first nine months was 10.8% compared with 17.7% for the 2016 first nine months. The results primarily reflected lower inland term and spot contract pricing, lower coastal spot contract pricing, lower coastal equipment utilization and a continued increase in coastal equipment vessels operating in the spot market which adds increased idle time and voyage costs, partially offset by savings in the coastal market from the release of chartered tugboats, idling owned barges and tugboats and reducing headcount accordingly, and by a reduction in the average number of inland towboats operated. The 2017 third quarter and nine months operating income decreases were also due to the loss of revenue and additional operating expenses in the inland and coastal marine transportation markets associated with Hurricanes Harvey and Irma. As the third quarter concluded, recoveries from marine customers for delays, pent-up demand for liquid barge movements as the Gulf Coast petrochemical and refinery complex returned to normal operations and a stronger pricing environment for customers’ products partially mitigated the negative impact of the hurricanes.

Distribution and Services

~~The Company, through its distribution and services segment,~~

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, pumps~~industrial compressors, high capacity lift trucks, and ~~compressors~~refrigeration 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, ~~operator~~marine, power generation, on-highway, and ~~producer~~other 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.

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 ~~distribution~~KMT and ~~services segment’s~~KDS 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	%

Marine Transportation

The following table sets forth KMT revenues, costs and expenses, operating income, and operating ~~margins~~margin (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 ~~three~~products the Company transports:


Markets Serviced	2023 First Quarter Revenue Distribution	Products Moved	Drivers
Petrochemicals	50%	Benzene, Styrene, Methanol, Acrylonitrile, Xylene, Naphtha, Caustic Soda, Butadiene, Propylene	Consumer non-durables – 70%, Consumer durables – 30%
Black Oil	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.

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, 2017~~spot 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%

(a)

Spot and term contract pricing in the coastal market are contingent on various factors including geographic location, vessel capacity, vessel type, and product serviced.

Effective January 1, 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 months~~2022 first quarter. The increases during the 2023 first quarter primarily reflect improved business activity levels, inflationary cost pressures and ~~nine months ended September~~increased 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.

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 ~~2016~~to 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

~~Distribution and services~~


Markets Serviced	2023 First Quarter Revenue Distribution	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 third~~2023 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 for~~distribution business. Although the ~~remanufacture~~manufacturing business was heavily impacted by supply chain delays, the business continued to experience increased orders and deliveries of new environmentally friendly

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.~~

contributed 44% of KDS revenues.

Distribution and Services Costs and Expenses

Costs and expenses for the ~~2017 third~~2023 first quarter ~~and first nine months~~ increased ~~182% and 112%, respectively,~~29% compared with the ~~2016 third quarter and~~2022 first ~~nine months.~~quarter. Costs of sales and operating expenses for the ~~2017 third~~2023 first quarter ~~and first nine months~~ increased ~~212% and 138%, respectively,~~32% compared with the ~~2016 third~~2022 first quarter, reflecting higher demand in the marine and ~~first nine months, reflecting the~~on-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 ~~manufacturing~~oil 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.

activity levels.

Selling, general and administrative expenses for the ~~2017 third~~2023 first quarter ~~and~~increased 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 ~~increased~~continued 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.

annual compensation increases.

Distribution and Services Operating Income and Operating ~~Margins~~

~~Operating~~Margin

KDS operating income for the ~~distribution and services segment for the 2017 third~~2023 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.

~~General Corporate Expenses~~

~~General corporate expenses for the 2017 third quarter and first nine months~~ increased ~~19% and 9%, respectively,~~108% compared with the ~~corresponding 2016 periods, primarily due~~2022 first quarter. The 2023 first quarter operating margin was 6.7% compared to ~~acquisition costs of $764,000~~4.3% for the 2022 first quarter. The results reflect increased business levels in both the ~~2017 third quarter~~commercial and ~~$1,471,000 in the 2017 first nine months, both related to the S&S acquisition. The 2016 first nine months included a severance charge of $377,000 incurred in the 2016 first quarter.~~

industrial and oil and gas markets.

Gain ~~(Loss)~~ on Disposition of Assets

The Company reported a net ~~loss~~gain on disposition of assets of ~~$159,000~~$2.2 million for the ~~2017 third~~2023 first quarter ~~compared with a net gain of $122,000~~and $4.8 million for the ~~2016 third~~2022 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 ~~predominantly~~primarily from ~~the sale or retirement~~sales of marine transportation equipment.

Other Income ~~(Expense)~~

and Expenses

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 %

~~Interest Expense~~

~~Interest expense~~


	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 third~~2023 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, compared~~also 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 and~~2022 first quarter, primarily due to a higher average interest rate ~~(excluding~~and 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 additional~~interest excluded from interest expense ~~of $187,000 in~~during 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.~~

quarter.

Financial Condition, Capital Resources and Liquidity

Balance ~~Sheet~~

Total assets as of September 30, 2017 were $5,200,415,000 compared with $4,289,895,000 as of December 31, 2016. The September 30, 2017 total assets reflected the S&S acquisition in September 2017 for $758,245,000 and the purchase in July 2017 of tank barges and towboats from an undisclosed competitor for $68,000,000, both more fully described under Acquisitions above. Sheets

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


	March 31, 2023		December 31, 2022		% 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, 2017~~March 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 %

~~Current assets as of September 30, 2017 increased 41% compared with December 31, 2016.~~2022. Trade accounts receivable increased ~~46%~~9%, primarily ~~reflecting the S&S acquisition, as well as an increase in~~due to increased business activity levels in ~~the land-based market, partially offset~~both KMT and KDS. Inventories increased by ~~decreased business activity levels in the marine transportation segment. Other accounts receivable decreased 18%, primarily~~3% due to ~~a decrease in insurance claim receivables. Inventory in the distribution and services segment increased 74% reflecting the inventory acquired with the S&S acquisition~~higher activity and the ~~building~~impact of ~~inventories~~supply chain delays in ~~the land-based market to meet current business activity levels, partially offset by lower inventory levels associated with the continued weak marine market.~~KDS resulting in buildup for projects that will be delivered later in 2023. Prepaid expenses and other current assets ~~increased 4%~~decreased 13% primarily due to ~~an increase in prepaid~~amortization of insurance premiums and the ~~S&S acquisition.~~

sale of assets held for sale.

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 value~~below.

Operating lease right-of-use assets as of ~~the property and equipment~~March 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 ~~2017~~2023 first ~~nine months.~~

~~Goodwill~~quarter, partially offset by lease amortization expense.

Other intangibles, net, as of ~~September 30, 2017 increased 54%~~March 31, 2023 decreased 4% compared with December 31, ~~2016, predominantly reflecting~~2022, primarily due to amortization during the ~~goodwill recorded in the S&S acquisition and in the barge fleeting and marine fueling operation business acquisition.~~

2023 first quarter.

Other assets ~~at September 30, 2017~~as 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-dock~~drydock expenditures ~~on ocean-going vessels~~incurred during the ~~2017~~2023 first ~~nine months, net~~quarter partially offset by amortization of ~~amortization~~.

drydock expenditures.

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 attributable~~decreased 15% primarily due to the ~~S&S acquisition, partially offset by a reduction~~payment 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 billings~~2023 in ~~the land-based market and the coastal marine transportation market.~~

KDS.

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’s~~3.46% 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.

Facility.

Deferred income taxes as of ~~September 30, 2017~~March 31, 2023 increased 7%2% compared with December 31, ~~2016. The increase~~2022, primarily ~~reflects~~reflecting 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 ~~$8,486,000~~March 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.

2023 first quarter.

Other long-term liabilities as of ~~September 30, 2017~~March 31, 2023 decreased ~~17%~~38% compared with December 31, ~~2016.~~2022, primarily due to a decrease in pension liabilities and amortization of intangible liabilities.

Total equity as of March 31, 2023 increased 1% compared with December 31, 2022. The ~~decrease~~increase 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.

~~Total equity as of September 30, 2017 increased 19% compared with December 31, 2016. The increase was the result of $81,868,000 of~~ net earnings attributable to Kirby ~~for the first nine months~~ of ~~2017, an increase in accumulated other comprehensive income (“OCI”)~~$40.7 million, amortization of ~~$15,229,000,~~share-based compensation of $5.8 million, and stock ~~issued with a fair value~~option exercises of ~~$366,554,000 in connection with the S&S acquisition and a $6,925,000 decrease in treasury stock,~~$0.1 million, partially offset by ~~an $8,486,000 decrease in retained earnings due~~treasury stock purchases of $3.2 million and tax withholdings of $3.6 million on RSU vestings.

Long-Term Financing

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


	March 31, 2023			December 31, 2022
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

(a)

Variable interest rate of 6.3% at March 31, 2023.

(b)

Excludes $1.8 million attributable to the adoption of ASU 2016-09. The increase in accumulated OCI primarily resulted from the decrease in unrecognized losses related to the Company’s defined benefit plans driven by the pension plan amendment on April 12, 2017. The decrease in treasury stock was due to the issuance of restricted stock and the exercise of stock options in connection with stock award plans.

~~Long-Term Financing~~

~~On June 26, 2017, the Company entered into an amendment of its~~2027 Revolving Credit Facility included in other assets at December 31, 2022.

At the beginning of 2022, the Company had in place its 2024 Credit Agreement with a ~~syndicate~~group of commercial banks, with JPMorgan Chase Bank, N.A. as the administrative agent bank, that ~~increases the borrowing limit from $550,000,000 to $850,000,000~~allowed for an $850 million 2024 Revolving Credit Facility and ~~extends the~~a 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 commitments~~quarterly installments, with no repayments until June 30, 2025, in increasing percentages of the ~~banks~~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 ~~the form of revolving credit loans~~whole 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 with~~based on the ~~Company’s senior debt rating and is currently 1.00% over LIBOR~~Secured Overnight Financing Rate (“SOFR”) or ~~equal to an Alternate Base Rate~~a base rate calculated with reference to the ~~agent bank’s~~ prime rate quoted by The Wall Street Journal, the Federal Reserve Bank of New York Rate plus 0.5%, or the adjusted SOFR rate for a one month interest period plus 1.0%, among other ~~factors.~~factors (the “Alternate Base Rate”). The ~~commitment fee~~interest 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 ~~Revolving~~2027 Credit ~~Facility~~Agreement contains certain ~~restrictive~~ financial covenants including an interest coverage ratio and a debt-to-capitalization ratio. In addition to financial covenants, the ~~Revolving~~2027 Credit ~~Facility~~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 ~~Revolving~~2027 Credit ~~Facility~~Agreement may be used for general corporate purposes ~~the purchase of existing or new equipment, the purchase of the Company’s common stock, or for business~~including 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~~

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 $500,000,000~~$300 million of unsecured senior notes ~~(“Senior Notes Series A” and “Senior Notes Series B”)~~ with a group of institutional investors, consisting of ~~$150,000,000~~$60 million of ~~2.72% Senior Notes~~ 3.46% series A notes (“Series A ~~due February 27, 2020~~Notes”) and ~~$350,000,000~~$240 million of ~~3.29% Senior Notes~~ 3.51% series B notes (“Series B Notes”), each due ~~February 27,~~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 ~~are~~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 ~~Senior~~2033 Notes ~~Series A~~are unsecured and ~~Series B~~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 ~~Senior~~2033 Notes ~~Series A and Series B~~ 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. AsThe 3.29% unsecured senior notes due February 27, 2023 (the “2023 Notes”) were repaid using a combination of ~~September 30, 2017,~~ the ~~Company was in compliance with all Senior~~proceeds from the issuance of the 2033 Notes ~~Series A~~ and ~~Series B covenants and had $150,000,000 of Senior Notes Series A outstanding and $350,000,000 of Senior Notes Series B outstanding.~~

availability under the 2027 Revolving Credit Facility.

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.~~

~~On September 13, 2017, as a result~~March 31, 2023.

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 $12,135,000~~generated 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, 2032~~assets, 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 payments~~stock 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.

~~The Company also had $899,000 of short-term secured loans outstanding, as of September 30, 2017, related to its South American operations.~~

~~Capital Expenditures Reflected on the Balance Sheet~~

~~Capital expenditures for the 2017 first nine months were $124,520,000,~~$73.2 million, including ~~$8,449,000~~$4.4 million for inland ~~tank barge~~specialized equipment construction and towboat construction, $8,786,000 for progress payments on the construction of a 155,000 barrel coastal ATB placed in service in the 2017 third quarter, $15,404,000 for progress payments on the construction of two 4900 horsepower coastal tugboats, one completed in the 2017 second quarter and the second to be completed in the 2017 fourth quarter, $16,357,000 for progress payments on six 5000 horsepower coastal ATB tugboats, $698,000 in final costs for the construction of a 35,000 barrel coastal petrochemical tank barge, and $74,826,000$68.8 million primarily for upgrading existing marine equipment and ~~marine transportation~~KMT and ~~distribution and services~~KDS facilities. Financing of the construction of the inland tank barges and the towboat, the coastal ATB, the coastal tugboats and the coastal petrochemical tank barge was through operating cash flows and available credit under the Company’s Revolving Credit Facility.

~~Funding for future capital expenditures is expected to be provided through operating cash flows and available credit under the Company’s Revolving Credit Facility.~~

Treasury Stock Purchases

~~The~~

During the 2023 first quarter, the Company ~~did not purchase any treasury~~purchased 46,850 shares of its common stock ~~during the first nine months~~for $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 ~~1,411,000~~6.0 million shares available under its existing repurchase authorization. Historically, treasury stock purchases have been financed through operating cash flows and ~~borrowing~~borrowings 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

The Company generated net cash provided by operating activities of $259,455,000 for the 2017 first nine months compared with $338,246,000 for the 2016 first nine months. The 2017 first nine months experienced a net decrease in cash flows from changes in operating assets and liabilities of $28,592,000 compared with a net increase in the 2016 first nine months of $11,048,000.

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 ~~flow~~flows provided by operating activities, as of May 5, 2023 the Company also had ~~available as~~cash 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.~~

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 ~~Revolving~~2027 Credit ~~Facility.~~

Agreement.

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’s~~Facility'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 B~~4.2% senior unsecured notes do not mature until ~~February 27, 2020 and February 27, 2023, respectively,~~March 1, 2028 and require no prepayments.

The 2033 Notes do not mature until January 19, 2033

and require no prepayments. The 2027 Term Loan 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 ~~flow~~flows 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 Analysis~~Note 5, Long-Term Debt, of the Notes to Condensed Financial ~~Condition and Results of Operations under~~Statements (Unaudited) as well as Note 5, Long-Term ~~Financing.~~

Debt, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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 ~~three~~two years. The Company does not believe demand for payment under these instruments is likely and expects no material cash outlays to occur in connection with these instruments.

~~All marine transportation~~

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. ~~Spot~~The Company’s spot contract rates generally reflect current fuel prices at the time the contract is signed but do not have escalators for fuel.

~~During~~

While inflationary pressures have increased, the ~~last three years, inflation~~Company has ~~had a relatively minor effect on~~certain mechanisms designed to help mitigate the ~~financial results~~impacts of ~~the Company. The marine transportation segment~~rising costs. For example, KMT has long-term contracts which generally contain cost escalation clauses whereby certain costs, including fuel as noted above, can be largely passed through to its customers. Spot contract rates include the cost of fuel and are subject to market volatility. In KDS, the cost of major components for large manufacturing orders is secured with suppliers at the time a customer order is finalized, which limits exposure to inflation. The repair portion of ~~the distribution and services segment~~KDS is based on prevailing current market rates.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures about Market Risk~~

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, ~~and~~while the previous bank credit facilities also included Europe. A ~~10% change~~1% increase in variable interest rates would impact the ~~2017~~2023 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 than~~approximately 1%.

~~Item 4.~~

~~Controls and Procedures~~

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, 2017~~March 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.

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	–	Restated Articles of Incorporation of the Company with all amendments to date (incorporated by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014).
3.2	–	Bylaws of the Company with all amendments to date (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on October 28, 2022).
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†	–	Annual Incentive Plan Guidelines for 2023 (incorporated by referenced to Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2022).
10.2†	–	Amended and Restated Annual Incentive Plan 2023 Plan Year Guidelines (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on March 24, 2023).
10.3	–	Cooperation Agreement dated February 3, 2023 by and among the Company and JCP Investment Management, LLC and certain of its affiliates and associates (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 3, 2023).
10.4†*	–	Amendment to Change of Control Agreement by and between Kirby Corporation and David W. Grzebinski dated March 6, 2023.
10.5†*	–	Amendment to Change of Control Agreement by and between Kirby Corporation and Raj Kumar dated March 6, 2023.
10.6†*	–	Amendment to Change of Control Agreement by and between Kirby Corporation and Christian G. O’Neil dated March 6, 2023.
31.1*	–	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)

~~Item 6.~~	~~Exhibits~~
31.2*	–	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)
32*	–	Certification Pursuant to 18 U.S.C. Section 1350
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)

10.1†*
– 2005 Stock and Incentive Plan
31.1
– Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)
31.2
– Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)
32
– 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.

These exhibits are furnished herewith. In accordance with Rule 406T of Regulation S-T, these exhibits are not deemed to be filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are not deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

†	~~Management contract, compensatory plan or arrangement.~~

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)~~ KIRBY CORPORATION
			(Registrant)
	~~By:~~		~~/s/ David W. Grzebinski~~
	By:	~~David W. Grzebinski~~ /s/ Raj Kumar
		~~President, Chief Executive Officer and~~ Raj Kumar
		Executive Vice President and
		Chief Financial Officer

Dated: ~~November~~May 8, ~~2017~~2023

	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

	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

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

	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

	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	)

	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

	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	)

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

10.1†*	–	2005 Stock and Incentive Plan
31.1	–	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)
31.2	–	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)
32	–	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