Kirby Corp (KEX) Exchange: NYSE

Kirby Corporation, based in Houston, Texas, is the nation’s largest domestic tank barge operator 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. Kirby transports petrochemicals, black oil, refined petroleum products and agricultural chemicals by tank barge. In addition, Kirby participates in the transportation of dry-bulk commodities in United States coastwise trade. Through the distribution and services segment, Kirby 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. Kirby also rents equipment including generators, industrial compressors, railcar movers, and high capacity lift trucks for use in a variety of industrial markets, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, for land-based oilfield service customers. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS Third Quarter Nine Months 2021 2020 2021 2020 (unaudited, $ in thousands, except per share amounts) Revenues: Marine transportation $ 338,514 $ 320,602 $ 972,352 $ 1,104,846 Distribution and services 260,406 175,965 683,042 576,806 Total revenues 598,920 496,567 1,655,394 1,681,652 Costs and expenses: Costs of sales and operating expenses 446,519 340,764 1,219,038 1,167,871 Selling, general and administrative 66,065 61,720 198,434 199,412 Taxes, other than on income 9,917 9,077 28,541 33,548 Depreciation and amortization 53,462 54,779 163,484 165,067 Impairments and other charges 340,713 — 340,713 561,274 (Gain) loss on disposition of assets (830 ) 316 (5,082 ) 13 Total costs and expenses 915,846 466,656 1,945,128 2,127,185 Operating income (loss) (316,926 ) 29,911 (289,734 ) (445,533 ) Other income 1,832 1,172 8,146 6,185 Interest expense (10,500 ) (11,809 ) (32,172 ) (37,316 ) Earnings (loss) before taxes on income (325,594 ) 19,274 (313,760 ) (476,664 ) Benefit for taxes on income 60,442 8,419 55,840 182,657 Net earnings (loss) (265,152 ) 27,693 (257,920 ) (294,007 ) Net (earnings) loss attributable to noncontrolling interests 422 (204 ) 5 (743 ) Net earnings (loss) attributable to Kirby $ (264,730 ) $ 27,489 $ (257,915 ) $ (294,750 ) Net earnings (loss) per share attributable to Kirby common stockholders: Basic $ (4.41 ) $ 0.46 $ (4.30 ) $ (4.92 ) Diluted $ (4.41 ) $ 0.46 $ (4.30 ) $ (4.92 ) Common stock outstanding (in thousands): Basic 60,062 59,915 60,044 59,903 Diluted 60,062 59,931 60,044 59,903 CONDENSED CONSOLIDATED FINANCIAL INFORMATION Third Quarter Nine Months 2021 2020 2021 2020 (unaudited, $ in thousands) Adjusted EBITDA: (1) Net earnings (loss) attributable to Kirby $ (264,730 ) $ 27,489 $ (257,915 ) $ (294,750 ) Interest expense 10,500 11,809 32,172 37,316 Benefit for taxes on income (60,442 ) (8,419 ) (55,840 ) (182,657 ) Impairment of long-lived assets 121,661 — 121,661 165,304 Impairment of goodwill 219,052 — 219,052 387,970 Depreciation and amortization 53,462 54,779 163,484 165,067 $ 79,503 $ 85,658 $ 222,614 $ 278,250 Capital expenditures $ 33,599 $ 36,541 $ 71,968 $ 129,371 Acquisitions of businesses and marine equipment $ — $ 6,525 $ 7,470 $ 348,772 September 30, 2021 December 31, 2020 (unaudited, $ in thousands) Cash and cash equivalents $ 54,377 $ 80,338 Long-term debt, including current portion $ 1,208,176 $ 1,468,586 Total equity $ 2,846,224 $ 3,087,553 Debt to capitalization ratio 29.8 % 32.2 % MARINE TRANSPORTATION STATEMENTS OF EARNINGS Third Quarter Nine Months 2021 2020 2021 2020 (unaudited, $ in thousands) Marine transportation revenues $ 338,514 $ 320,602 $ 972,352 $ 1,104,846 Costs and expenses: Costs of sales and operating expenses 237,233 207,038 681,317 717,923 Selling, general and administrative 29,464 26,554 88,314 85,294 Taxes, other than on income 8,422 7,307 23,828 27,852 Depreciation and amortization 46,480 47,312 141,560 139,295 Total costs and expenses 321,599 288,211 935,019 970,364 Operating income $ 16,915 $ 32,391 $ 37,333 $ 134,482 Operating margin 5.0 % 10.1 % 3.8 % 12.2 % DISTRIBUTION AND SERVICES STATEMENTS OF EARNINGS Third Quarter Nine Months 2021 2020 2021 2020 (unaudited, $ in thousands) Distribution and services revenues $ 260,406 $ 175,965 $ 683,042 $ 576,806 Costs and expenses: Costs of sales and operating expenses 207,877 133,726 537,100 449,948 Selling, general and administrative 35,002 33,098 104,477 108,295 Taxes, other than on income 1,470 1,754 4,620 5,636 Depreciation and amortization 5,018 6,283 16,739 22,252 Total costs and expenses 249,367 174,861 662,936 586,131 Operating income (loss) $ 11,039 $ 1,104 $ 20,106 $ (9,325 ) Operating margin 4.2 % 0.6 % 2.9 % (1.6 )% OTHER COSTS AND EXPENSES Third Quarter Nine Months 2021 2020 2021 2020 (unaudited, $ in thousands) General corporate expenses $ 4,997 $ 3,268 $ 11,542 $ 9,403 Impairment of long-lived assets $ 121,661 $ — $ 121,661 $ 165,304 Impairment of goodwill $ 219,052 $ — $ 219,052 $ 387,970 Inventory write-downs $ — $ — $ — $ 8,000 (Gain) loss on disposition of assets $ (830 ) $ 316 $ (5,082 ) $ 13 ONE TIME CHARGES AND BENEFITS The 2021 third quarter and first nine months and 2020 first nine months GAAP results include certain one-time charges. The following is a reconciliation of GAAP earnings to non-GAAP earnings, excluding the one-time items for earnings before tax (pre-tax), net earnings attributable to Kirby (after-tax), and diluted earnings per share (per share): Third Quarter 2021 First Nine Months 2021 Pre-Tax After-Tax Per Share Pre-Tax After-Tax Per Share (unaudited, $ in millions except per share amounts) GAAP loss $ (325.6 ) $ (264.7 ) $ (4.41 ) $ (313.8 ) $ (257.9 ) $ (4.30 ) Impairments and other charges 340.7 275.0 4.58 340.7 275.0 4.58 Earnings, excluding one-time items (2) $ 15.1 $ 10.3 $ 0.17 $ 26.9 $ 17.1 $ 0.28 First Nine Months 2020 Pre-Tax After-Tax Per Share (unaudited, $ in millions except per share amounts) GAAP loss $ (476.7 ) $ (294.8 ) $ (4.92 ) Impairments and other charges 561.3 433.3 7.24 Income tax benefit on 2018 and 2019 net operating loss carrybacks — (50.8 ) (0.85 ) Earnings, excluding one-time items (2) $ 84.6 $ 87.7 $ 1.47 RECONCILIATION OF FREE CASH FLOW The following is a reconciliation of GAAP net cash provided by operating activities to non-GAAP free cash flow (2) : Third Quarter Nine Months 2021 2020 (3) 2021 2020 (3) (unaudited, $ in millions) Net cash provided by operating activities $ 82.6 $ 117.7 $ 280.4 $ 359.8 Less: Capital expenditures (33.6 ) (36.6 ) (72.0 ) (129.4 ) Free cash flow (2) $ 49.0 $ 81.1 $ 208.4 $ 230.4 FY 2021 Projection FY 2020 (3) Low High Actual (unaudited, $ in millions) Net cash provided by operating activities $ 380.0 $ 410.0 $ 444.9 Less: Capital expenditures (130.0 ) (120.0 ) (148.2 ) Free cash flow (2) $ 250.0 $ 290.0 $ 296.7 MARINE TRANSPORTATION PERFORMANCE MEASUREMENTS Third Quarter Nine Months 2021 2020 2021 2020 Inland Performance Measurements: Ton Miles (in millions) (4) 3,393 2,794 9,852 10,101 Revenue/Ton Mile (cents/tm) (5) 7.5 8.9 7.4 8.6 Towboats operated (average) (6) 243 265 248 300 Delay Days (7) 1,499 1,335 7,275 8,640 Average cost per gallon of fuel consumed $ 2.24 $ 1.27 $ 1.99 $ 1.47 Barges (active): Inland tank barges 1,036 1,084 Coastal tank barges 35 47 Offshore dry-cargo barges 4 4 Barrel capacities (in millions): Inland tank barges 23.2 24.5 Coastal tank barges 3.4 4.3 (1) Kirby has historically evaluated its operating performance using numerous measures, one of which is Adjusted EBITDA, a non-GAAP financial measure. Kirby defines Adjusted EBITDA as net earnings attributable to Kirby before interest expense, taxes on income, depreciation and amortization, impairment of long-lived assets, and impairment of goodwill. Adjusted EBITDA is presented because of its wide acceptance as a financial indicator. Adjusted EBITDA is one of the performance measures used in Kirby’s incentive bonus plan. Adjusted EBITDA is also used by rating agencies in determining Kirby’s credit rating and by analysts publishing research reports on Kirby, as well as by investors and investment bankers generally in valuing companies. Adjusted EBITDA is not a calculation based on generally accepted accounting principles and should not be considered as an alternative to, but should only be considered in conjunction with, Kirby’s GAAP financial information. (2) Kirby uses certain non-GAAP financial measures to review performance excluding certain one-time items including: earnings before taxes on income, excluding one-time items; net earnings attributable to Kirby, excluding one-time items; and diluted earnings per share, excluding one-time items. Management believes the exclusion of certain one-time items from these financial measures enables it and investors to assess and understand operating performance, especially when comparing those results with previous and subsequent periods or forecasting performance for future periods, primarily because management views the excluded items to be outside of the company's normal operating results. Kirby also uses free cash flow, which is defined as net cash provided by operating activities less capital expenditures, to assess and forecast cash flow and to provide additional disclosures on the Company’s liquidity as a result of uncertainty surrounding the impact of the COVID-19 pandemic on global and regional market conditions. Free cash flow does not imply the amount of residual cash flow available for discretionary expenditures as it excludes mandatory debt service requirements and other non-discretionary expenditures. These non-GAAP financial measures are not calculations based on generally accepted accounting principles and should not be considered as an alternative to, but should only be considered in conjunction with Kirby’s GAAP financial information. (3) See Kirby’s 2020 10-K and 2020 third quarter 10-Q for amounts provided by (used in) investing and financing activities. (4) Ton miles indicate fleet productivity by measuring the distance (in miles) a loaded tank barge is moved. Example: A typical 30,000 barrel tank barge loaded with 3,300 tons of liquid cargo is moved 100 miles, thus generating 330,000 ton miles. (5) Inland marine transportation revenues divided by ton miles. Example: Third quarter 2021 inland marine transportation revenues of $255,791,000 divided by 3,393,000,000 inland marine transportation ton miles = 7.5 cents. (6) Towboats operated are the average number of owned and chartered towboats operated during the period. (7) Delay days measures the lost time incurred by a tow (towboat and one or more tank barges) during transit. The measure includes transit delays caused by weather, lock congestion and other navigational factors.