UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended ~~September 30, 2020~~March 31, 2021

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

Commission File Number 1-7615

KIRBY CORPORATION

(Exact name of registrant as specified in its charter)

Nevada		74-1884980
(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) 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 Exchange Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	KEX	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ⌧ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧

As of ~~November~~May 6, ~~2020,~~2021, ~~60,039,000~~60,105,000 shares of the Registrant’s $0.10 par value per share common stock were outstanding.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED BALANCE SHEETS

(Unaudited)

	September 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
	($ in thousands)						($ in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	119,586		$	24,737		$	52,333		$	80,338
Accounts receivable:
Trade – less allowance for doubtful accounts		304,021			379,174			347,275			315,283
Other		257,656			104,175			171,749			284,899
Inventories – net		321,433			351,401			326,475			309,675
Prepaid expenses and other current assets		58,023			58,092			60,685			57,776
Total current assets		1,060,719			917,579			958,517			1,047,971

Property and equipment		5,629,361			5,324,090			5,585,574			5,615,400
Accumulated depreciation		(1,671,217	)		(1,546,980	)		(1,704,301	)		(1,698,330	)
Property and equipment – net		3,958,144			3,777,110			3,881,273			3,917,070

Operating lease right-of-use assets		178,714			159,641			172,198			174,317
Goodwill		657,800			953,826			657,800			657,800
Other intangibles, net		71,313			210,682			66,646			68,979
Other assets		54,430			60,259			51,652			58,037
Total assets	$	5,981,120		$	6,079,097		$	5,788,086		$	5,924,174

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Bank notes payable	$	155		$	16		$	434		$	40
Income taxes payable		459			665			489			474
Accounts payable		156,950			206,778			175,890			162,507
Accrued liabilities		228,764			236,350			198,487			224,855
Current portion of operating lease liabilities		32,545			27,324			32,722			32,750
Deferred revenues		31,192			42,982			45,421			45,406
Total current liabilities		450,065			514,115			453,443			466,032

Long-term debt, net – less current portion		1,578,189			1,369,751			1,348,904			1,468,546
Deferred income taxes		591,346			588,204			606,561			606,844
Operating lease liabilities – less current portion		167,884			139,457			161,133			163,496
Other long-term liabilities		115,269			95,978			129,301			131,703
Total long-term liabilities		2,452,688			2,193,390			2,245,899			2,370,589

Contingencies and commitments		—			—			—			—

Equity:
Kirby stockholders’ equity:
Common stock, $0.10 par value per share. Authorized 120,000,000 shares, issued 65,472,000 shares		6,547			6,547
Common stock, $0.10 par value per share. Authorized 120,000,000 shares, issued 65,472,000 shares								6,547			6,547
Additional paid-in capital		842,301			835,899			846,259			844,979
Accumulated other comprehensive income – net		(45,635	)		(37,799	)		(61,204	)		(61,452	)
Retained earnings		2,571,189			2,865,939			2,590,018			2,593,393
Treasury stock – at cost, 5,434,000 shares at September 30, 2020 and 5,513,000 at December 31, 2019		(299,139	)		(301,963	)
Treasury stock – at cost, 5,384,000 shares at March 31, 2021 and 5,434,000 at December 31, 2020								(296,353	)		(299,161	)
Total Kirby stockholders’ equity		3,075,263			3,368,623			3,085,267			3,084,306
Noncontrolling interests		3,104			2,969			3,477			3,247
Total equity		3,078,367			3,371,592			3,088,744			3,087,553
Total liabilities and equity	$	5,981,120		$	6,079,097		$	5,788,086		$	5,924,174

See accompanying notes to condensed financial statements.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF EARNINGS

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
	($ in thousands, except per share amounts)												($ in thousands, except per share amounts)
Revenues:
Marine transportation	$	320,602		$	412,665		$	1,104,846		$	1,185,072		$	300,951		$	403,257
Distribution and services		175,965			254,144			576,806			997,400			195,899			240,669
Total revenues		496,567			666,809			1,681,652			2,182,472			496,850			643,926

Costs and expenses:
Costs of sales and operating expenses		340,764			458,514			1,167,871			1,558,664			363,040			453,568
Selling, general and administrative		61,720			64,656			199,412			206,602			69,629			72,080
Taxes, other than on income		9,077			10,909			33,548			31,486			8,260			11,406
Depreciation and amortization		54,779			54,455			165,067			164,771			54,890			55,786
Impairments and other charges		0			0			561,274			0			0			561,274
(Gain) loss on disposition of assets		316			374			13			(4,901	)
Gain on disposition of assets														(2,133	)		(492	)
Total costs and expenses		466,656			588,908			2,127,185			1,956,622			493,686			1,153,622

Operating income (loss)		29,911			77,901			(445,533	)		225,850			3,164			(509,696	)
Other income		1,172			864			6,185			2,677			3,791			2,723
Interest expense		(11,809	)		(14,310	)		(37,316	)		(43,026	)		(10,966	)		(12,799	)

Earnings (loss) before taxes on income		19,274			64,455			(476,664	)		185,501
(Provision) benefit for taxes on income		8,419			(16,305	)		182,657			(45,454	)
Loss before taxes on income														(4,011	)		(519,772	)
Benefit for taxes on income														891			172,809

Net earnings (loss)		27,693			48,150			(294,007	)		140,047
Net loss														(3,120	)		(346,963	)
Less: Net earnings attributable to noncontrolling interests		(204	)		(163	)		(743	)		(477	)		(255	)		(278	)

Net earnings (loss) attributable to Kirby	$	27,489		$	47,987		$	(294,750	)	$	139,570
Net loss attributable to Kirby													$	(3,375	)	$	(347,241	)

Net earnings (loss) per share attributable to Kirby common stockholders:
Net loss per share attributable to Kirby common stockholders:
Basic	$	0.46		$	0.80		$	(4.92	)	$	2.33		$	(0.06	)	$	(5.80	)
Diluted	$	0.46		$	0.80		$	(4.92	)	$	2.32		$	(0.06	)	$	(5.80	)

See accompanying notes to condensed financial statements.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
	($ in thousands)												($ in thousands)

Net earnings (loss)	$	27,693		$	48,150		$	(294,007	)	$	140,047
Net loss													$	(3,120	)	$	(346,963	)
Other comprehensive income (loss), net of taxes:
Pension and postretirement benefits		(4,279	)		172			(6,674	)		6,640			745			82
Foreign currency translation adjustments		(239	)		(618	)		(1,162	)		(542	)		(497	)		(1,274	)
Total other comprehensive income (loss), net of taxes		(4,518	)		(446	)		(7,836	)		6,098			248			(1,192	)

Total comprehensive income (loss), net of taxes		23,175			47,704			(301,843	)		146,145
Total comprehensive loss, net of taxes														(2,872	)		(348,155	)
Net earnings attributable to noncontrolling interests		(204	)		(163	)		(743	)		(477	)		(255	)		(278	)

Comprehensive income (loss) attributable to Kirby	$	22,971		$	47,541		$	(302,586	)	$	145,668
Comprehensive loss attributable to Kirby													$	(3,127	)	$	(348,433	)

See accompanying notes to condensed financial statements.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine months ended September 30,						Three Months Ended March 31,
	2020			2019			2021			2020
	($ in thousands)						($ in thousands)
Cash flows from operating activities:
Net earnings (loss)	$	(294,007	)	$	140,047
Adjustments to reconcile net earnings (loss) to net cash provided by operations:
Net loss							$	(3,120	)	$	(346,963	)
Adjustments to reconcile net loss to net cash provided by operations:
Depreciation and amortization		165,067			164,771			54,890			55,786
Provision for deferred income taxes		5,382			40,502
Benefit for deferred income taxes								(533	)		(35,242	)
Impairments and other charges		561,274			0			0			561,274
Amortization of unearned share-based compensation		12,066			11,079			5,722			5,331
Amortization of major maintenance costs		21,857			17,295			8,360			7,103
Other		3,523			(5,073	)		(1,138	)		112
Increase (decrease) in cash flows resulting from changes in operating assets and liabilities, net		(115,399	)		18,978			38,377			(175,900	)
Net cash provided by operating activities		359,763			387,599			102,558			71,501

Cash flows from investing activities:
Capital expenditures		(129,371	)		(184,068	)		(14,052	)		(49,225	)
Acquisitions of businesses and marine equipment		(348,772	)		(257,540	)		0			(60,422	)
Proceeds from disposition of assets		6,538			34,490			4,754			3,993
Net cash used in investing activities		(471,605	)		(407,118	)		(9,298	)		(105,654	)

Cash flows from financing activities:
Borrowings (payments) on bank credit facilities, net		360,139			(417,377	)		(119,606	)		485,001
Borrowings on long-term debt		0			500,000
Payments on long-term debt		(150,000	)		(60,000	)		0			(150,000	)
Payments of debt issue costs		0			(2,397	)
Proceeds from exercise of stock options		353			3,563			411			353
Payments related to tax withholding for share-based compensation		(3,193	)		(2,031	)		(2,045	)		(3,165	)
Other		(608	)		(614	)
Net cash provided by financing activities		206,691			21,144
Increase in cash and cash equivalents		94,849			1,625
Return of investment to noncontrolling interest								(25	)		(202	)
Net cash provided by (used in) financing activities								(121,265	)		331,987
Increase (decrease) in cash and cash equivalents								(28,005	)		297,834

Cash and cash equivalents, beginning of year		24,737			7,800			80,338			24,737
Cash and cash equivalents, end of period	$	119,586		$	9,425		$	52,333		$	322,571

Supplemental disclosures of cash flow information:
Cash paid (received) during the period:
Interest paid	$	45,776		$	52,436		$	18,732		$	21,734
Income taxes paid (refunded)	$	(36,499	)	$	3,155
Income taxes refunded							$	(117,659	)	$	(160	)
Operating cash outflow from operating leases	$	32,507		$	29,424		$	10,688		$	9,738
Non-cash investing activity:
Capital expenditures included in accounts payable	$	11,441		$	6,410		$	(7,207	)	$	(2,707	)
Right-of-use assets obtained in exchange for lease obligations	$	42,470		$	9,736		$	6,219		$	4,677

See accompanying notes to condensed financial statements.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

	Common Stock				Additional Paid-in-		Accumulated Other Comprehensive			Retained		Treasury Stock						Noncontrolling						Common Stock				Additional Paid-in-			Accumulated Other Comprehensive			Retained			Treasury Stock						Noncontrolling
	Shares		Amount		Capital		Income			Earnings		Shares			Amount			Interests			Total			Shares		Amount		Capital			Income, Net			Earnings			Shares			Amount			Interests			Total
	(in thousands)																							(in thousands)
Balance at June 30, 2020		65,472	$	6,547	$	838,874	$	(41,117	)	$	2,543,700		(5,434	)	$	(299,124	)	$	3,104		$	3,051,984
Balance at December 31, 2020																									65,472	$	6,547	$	844,979		$	(61,452	)	$	2,593,393			(5,434	)	$	(299,161	)	$	3,247		$	3,087,553
Stock option exercises																									0		0		19			0			0			8			392			0			411
Issuance of stock for equity awards, net of forfeitures		0		0		13		0			0		0			(13	)		0			0			0		0		(4,461	)		0			0			81			4,461			0			0
Tax withholdings on equity award vesting		0		0		0		0			0		0			(2	)		0			(2	)		0		0		0			0			0			(39	)		(2,045	)		0			(2,045	)
Amortization of unearned share-based compensation		—		0		3,414		0			0		—			0			0			3,414			—		0		5,722			0			0			0			0			0			5,722
Total comprehensive income, net of taxes		—		0		0		(4,518	)		27,489		—			0			204			23,175
Total comprehensive loss, net of taxes																									—		0		0			248			(3,375	)		0			0			255			(2,872	)
Return of investment to noncontrolling interests		—		0		0		0			0		—			0			(204	)		(204	)		—		0		0			0			0			0			0			(25	)		(25	)
Balance at September 30, 2020		65,472	$	6,547	$	842,301	$	(45,635	)	$	2,571,189		(5,434	)	$	(299,139	)	$	3,104		$	3,078,367
Balance at March 31, 2021																									65,472	$	6,547	$	846,259		$	(61,204	)	$	2,590,018			(5,384	)	$	(296,353	)	$	3,477		$	3,088,744

	Common Stock				Additional Paid-in-		Accumulated Other Comprehensive			Retained		Treasury Stock						Noncontrolling						Common Stock				Additional Paid-in-			Accumulated Other Comprehensive			Retained			Treasury Stock						Noncontrolling
	Shares		Amount		Capital		Income			Earnings		Shares			Amount			Interests			Total			Shares		Amount		Capital			Income, Net			Earnings			Shares			Amount			Interests			Total
	(in thousands)																							(in thousands)
Balance at June 30, 2019		65,472	$	6,547	$	829,460	$	(26,967	)	$	2,815,175		(5,570	)	$	(305,061	)	$	3,018		$	3,322,172
Balance at December 31, 2019																									65,472	$	6,547	$	835,899		$	(37,799	)	$	2,865,939			(5,513	)	$	(301,963	)	$	2,969		$	3,371,592
Stock option exercises		0		0		237		0			0		26			1,425			0			1,662			0		0		26			0			0			15			327			0			353
Issuance of stock for equity awards, net of forfeitures		0		0		23		0			0		0			(23	)		0			0			0		0		(3,377	)		0			0			61			3,377			0			0
Tax withholdings on equity award vesting		0		0		0		0			0		0			(8	)		0			(8	)		0		0		0			0			0			(38	)		(3,165	)		0			(3,165	)
Amortization of unearned share-based compensation		—		0		3,172		0			0		—			0			0			3,172			—		0		5,331			0			0			—			0			0			5,331
Total comprehensive income, net of taxes		—		0		0		(446	)		47,987		—			0			163			47,704
Total comprehensive loss, net of taxes																									—		0		0			(1,192	)		(347,241	)		—			0			278			(348,155	)
Return of investment to noncontrolling interests		—		0		0		0			0		—			0			(204	)		(204	)		—		0		0			0			0			—			0			(202	)		(202	)
Balance at September 30, 2019		65,472	$	6,547	$	832,892	$	(27,413	)	$	2,863,162		(5,544	)	$	(303,667	)	$	2,977		$	3,374,498
Balance at March 31, 2020																									65,472	$	6,547	$	837,879		$	(38,991	)	$	2,518,698			(5,475	)	$	(301,424	)	$	3,045		$	3,025,754

See accompanying notes to condensed financial statements.

~~KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES~~

~~CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY~~

~~(Unaudited)~~

Common Stock
Additional
Paid-in-

Accumulated
Other
Comprehensive
Retained Treasury Stock Noncontrolling
Shares Amount Capital Income Earnings Shares Amount Interests Total

(in thousands)

Balance at December 31, 2019 65,472 $ 6,547 $ 835,899 $ (37,799 ) $ 2,865,939 (5,513 ) $ (301,963 ) $ 2,969 $ 3,371,592
Stock option exercises 0 0 26 0 0 15 327 0 353
Issuance of stock for equity awards, net of forfeitures 0 0 (5,690 ) 0 0 103 5,690 0 0
Tax withholdings on equity award vesting 0 0 0 0 0 (39 ) (3,193 ) 0 (3,193 )
Amortization of unearned share-based compensation — 0 12,066 0 0 — 0 0 12,066
Total comprehensive loss, net of taxes — 0 0 (7,836 ) (294,750 ) — 0 743 (301,843 )
Return of investment to noncontrolling interests — 0 0 0 0 — 0 (608 ) (608 )
Balance at September 30, 2020 65,472 $ 6,547 $ 842,301 $ (45,635 ) $ 2,571,189 (5,434 ) $ (299,139 ) $ 3,104 $ 3,078,367

Common Stock
Additional
Paid-in-

Accumulated
Other
Comprehensive
Retained Treasury Stock Noncontrolling
Shares Amount Capital Income Earnings Shares Amount Interests Total
(in thousands)
Balance at December 31, 2018 65,472 $ 6,547 $ 823,347 $ (33,511 ) $ 2,723,592 (5,608 ) $ (306,788 ) $ 3,114 $ 3,216,301
Stock option exercises 0 0 355 0 0 60 3,263 0 3,618
Issuance of stock for equity awards, net of forfeitures 0 0 (1,889 ) 0 0 34 1,889 0 0
Tax withholdings on equity award vesting 0 0 0 0 0 (30 ) (2,031 ) 0 (2,031 )
Amortization of unearned share-based compensation — 0 11,079 0 0 — 0 0 11,079
Total comprehensive income, net of taxes — 0 0 6,098 139,570 — 0 477 146,145
Return of investment to noncontrolling interests — 0 0 0 0 — 0 (614 ) (614 )
Balance at September 30, 2019 65,472 $ 6,547 $ 832,892 $ (27,413 ) $ 2,863,162 (5,544 ) $ (303,667 ) $ 2,977 $ 3,374,498

~~See accompanying notes to condensed financial statements.~~

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(1)	Basis for Preparation of the Condensed Financial Statements

The condensed financial statements included herein have been prepared by Kirby Corporation and its consolidated subsidiaries (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, ~~2019.~~2020. Certain reclassifications have been made to reflect the current presentation of financial information. ~~Such reclassifications have no impact on previously reported net earnings (loss), stockholders’ equity, or cash flows.~~

~~(2)~~

~~Accounting Standards Adoptions~~

Accounting Standard Adoption

In December 2019, the Financial Accounting Standards Board ~~(“FASB”)~~ issued Accounting Standards Update ~~(“ASU”)~~ 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”) which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740, Income Taxes. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating this guidance to determine the impact on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, “Compensation – Retirement Benefits - Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans” which amends the annual disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing certain requirements, providing clarification on existing requirements and adding new requirements including adding an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The guidance is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The amendments in this update are required to be applied on a retrospective basis to all periods presented. The Company is currently evaluating this guidance to determine the impact on its disclosures.

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 shall 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, ~~incorporating all tax impacts caused by the recognition of the impairment loss. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The~~ Company adopted ASU ~~2017-04~~2019-12 on January 1, ~~2020~~2021. There was no material impact on ~~a prospective basis. See Note 8, Impairments and Other Charges for further details.~~the Company’s financial statements or disclosures upon adoption of ASU 2019-12.

~~(3)~~

~~Acquisitions~~

~~During the nine months ended September 30, 2020, the Company purchased~~ 5 ~~newly constructed inland pressure barges for $33,150,000~~ ~~in cash.~~

~~On April 1, 2020, the Company completed the acquisition of the inland tank barge fleet of Savage Inland Marine, LLC (“Savage”) for $278,999,000~~ ~~in cash. Savage’s tank barge fleet consisted of~~ 92 ~~inland tank barges with approximately~~ ~~2.5~~ ~~million barrels of capacity and~~ 45 inland towboats. The Savage assets that were acquired primarily move petrochemicals, refined products, and crude oil on the Mississippi River, its tributaries, and the Gulf Intracoastal Waterway. The Company also acquired Savage’s ship bunkering business and barge fleeting business along the Gulf Coast. The Company considers Savage to be a natural extension of the current marine transportation segment, expanding the capabilities of the Company’s inland based marine transportation business and lowers the average age of its fleet.

On January 3, 2020, the Company completed the acquisition of substantially all the assets of Convoy Servicing Company and Agility Fleet Services, LLC (collectively “Convoy”) for $37,180,000 in cash. Convoy is an authorized dealer for Thermo King refrigeration systems for trucks, railroad cars and other land transportation markets for North and East Texas and Colorado.

~~The fair values of the assets acquired and liabilities assumed from the Savage and Convoy acquisitions recorded at the respective acquisition dates were as follows (in thousands):~~

Savage Convoy
Assets:
Accounts receivable $ 0 $ 5,677
Inventories 0 11,771
Prepaid expenses 1,067 177
Property and equipment 210,065 415
Operating lease right-of-use assets 27,085 3,713
Goodwill 81,635 10,309
Other intangibles 2,300 17,170
Total assets $ 322,152 $ 49,232
Liabilities:
Accounts payable and accrued liabilities $ 68 $ 8,339
Operating lease liabilities, including current portion 43,085 3,713
Total liabilities $ 43,153 $ 12,052
Net assets acquired $ 278,999 $ 37,180

~~The Company acquired customer relationships with an estimated value of $2,300,000~~ ~~from Savage with an amortization period of~~ ~~10 years. The fair values of the Savage acquisition have not been finalized and are provisional, pending completion of the tangible and intangible valuation studies. Acquisition related costs of $376,000, consisting primarily of legal and other professional fees, were expensed as incurred to selling, general and administrative expense.~~ ~~All goodwill recorded for the Savage acquisition will be deductible for tax purposes~~.

~~The Company acquired intangible assets from Convoy with a weighted average amortization period of~~ 11 ~~years, consisting of~~ ~~$9,000,000~~ ~~for customer relationships with an amortization period of~~ 10 ~~years,~~ ~~$8,000,000~~ ~~for distributorships with an amortization period of~~ 12 ~~years and~~ ~~$170,000~~ ~~for non-compete agreements with an amortization period of~~ ~~three years~~. ~~All goodwill recorded for the Convoy acquisition will be deductible for tax purposes~~.

Pro forma results of the acquisitions made in the 2020 first nine months have not been presented as the pro forma revenues and net earnings attributable to Kirby would not be materially different from the Company’s actual results.

~~(4)~~(2)

Revenues

The following table sets forth the Company’s revenues by major source (in thousands):

	Three months ended September 30,				Nine months ended September 30,				Three Months Ended March 31,
	2020		2019		2020		2019		2021		2020
Marine transportation segment:
Inland transportation	$	247,647	$	316,000	$	869,224	$	909,247	$	224,451	$	318,565
Coastal transportation		72,955		96,665		235,622		275,825		76,500		84,692
	$	320,602	$	412,665	$	1,104,846	$	1,185,072	$	300,951	$	403,257
Distribution and services segment:
Commercial and industrial									$	132,908	$	161,991
Oil and gas	$	48,741	$	118,096	$	158,043	$	540,061		62,991		78,678
Commercial and industrial		127,224		136,048		418,763		457,339
	$	175,965	$	254,144	$	576,806	$	997,400	$	195,899	$	240,669

~~Contract Assets and Liabilities.~~Contract liabilities represent advance consideration received from customers, and are recognized as revenue over time as the related performance obligation is satisfied. Revenues recognized induring the ~~2020~~three months ended March 31, 2021 and ~~2019 first nine months~~2020 that were included in the opening contract liability balances were ~~$37,153,000~~$30,753,000 and ~~$75,105,000,~~$32,386,000, respectively. The Company presents all contract liabilities within the deferred revenues financial statement caption on the balance sheets. The Company did 0t0t have any contract assets at ~~September 30, 2020~~March 31, 2021 or December 31, ~~2019.~~

2020. The Company applies the practical expedient that allows non-disclosure of information about remaining performance obligations that have original expected durations of one year or less.

~~(5)~~(3)

~~Segment~~

Segment Data

The Company’s operations are aggregated into 2 reportable business segments as follows:

Marine Transportation — 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— Provides after-market services and parts for engines, transmissions, reduction gears and related equipment used in oilfield service, marine, power generation, on-highway, and other industrial applications. The Company also rents equipment including generators, industrial compressors, railcar movers, and high capacity lift trucks 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.~~customers.

The Company’s 2 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, 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 and services segment from the marine transportation segment of ~~$6,768,000~~$4,903,000 and ~~$23,115,000~~$10,286,000 for the three months ~~and nine months~~ ended ~~September 30,~~March 31, 2021 and 2020, respectively, as well as the related intersegment profit of $490,000 and ~~$7,201,000 and $22,182,000~~$1,029,000 for the three months ending March 31, 2021 and ~~nine months ended September 30, 2019,~~2020, respectively, have been eliminated from the tables below. The related intersegment profit of $676,000 and $2,311,000 for the three months and nine months ending September 30, 2020, respectively, and $720,000 and $2,218,000 for the three months and nine months ended September 30, 2019, respectively, have also been eliminated from the tables below.

The following tables set forth the Company’s revenues and profit or loss by reportable segment and total assets (in thousands):

	Three months ended September 30,						Nine months ended September 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
Revenues:
Marine transportation	$	320,602		$	412,665		$	1,104,846		$	1,185,072		$	300,951		$	403,257
Distribution and services		175,965			254,144			576,806			997,400			195,899			240,669
	$	496,567		$	666,809		$	1,681,652		$	2,182,472		$	496,850		$	643,926
Segment profit (loss):
Marine transportation	$	32,391		$	72,697		$	134,482		$	161,364		$	1,940		$	50,716
Distribution and services		1,104			9,132			(9,325	)		69,869			2,911			3,718
Other		(14,221	)		(17,374	)		(601,821	)		(45,732	)		(8,862	)		(574,206	)
	$	19,274		$	64,455		$	(476,664	)	$	185,501		$	(4,011	)	$	(519,772	)

	September 30, 2020		December 31, 2019		March 31, 2021		December 31, 2020
Total assets:
Marine transportation	$	4,795,002	$	4,536,368	$	4,742,604	$	4,760,449
Distribution and services		814,550		1,422,394		833,794		805,831
Other		371,568		120,335		211,688		357,894
	$	5,981,120	$	6,079,097	$	5,788,086	$	5,924,174

The following table presents the details of “Other” segment loss (in ~~thousand~~s) thousands):

	Three months ended September 30,						Nine months ended September 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
General corporate expenses	$	(3,268	)	$	(3,554	)	$	(9,403	)	$	(10,284	)	$	(3,820	)	$	(3,348	)
Gain (loss) on disposition of assets		(316	)		(374	)		(13	)		4,901
Gain on disposition of assets														2,133			492
Impairments and other charges		0			0			(561,274	)		0			0			(561,274	)
Interest expense		(11,809	)		(14,310	)		(37,316	)		(43,026	)		(10,966	)		(12,799	)
Other income		1,172			864			6,185			2,677			3,791			2,723
	$	(14,221	)	$	(17,374	)	$	(601,821	)	$	(45,732	)	$	(8,862	)	$	(574,206	)

The following table presents the details of “Other” total assets (in thousands):

	March 31, 2021		December 31, 2020
General corporate assets	$	209,971	$	355,205
Investment in affiliates		1,717		2,689
	$	211,688	$	357,894

(4)	Long-Term Debt

The following table presents the carrying value and fair value of debt outstanding (in thousands):

	March 31, 2021					December 31, 2020
	Carrying Value			Fair Value		Carrying Value			Fair Value
Revolving Credit Facility (a)	$	130,000		$	130,000	$	250,000		$	250,000
Term Loan (a)		375,000			375,000		375,000			375,000
3.29% senior notes due February 27, 2023		350,000			360,344		350,000			364,538
4.2% senior notes due March 1, 2028		500,000			546,957		500,000			581,115
Credit line due June 30, 2021		0			0		0			0
Bank notes payable		434			434		40			40
		1,355,434			1,412,735		1,475,040			1,570,693
Unamortized debt discounts and issuance costs		(6,096	)		—		(6,454	)		—
	$	1,349,338		$	1,412,735	$	1,468,586		$	1,570,693

(a)

Variable interest rate of 1.5% at both March 31, 2021 and December 31, 2020.

The fair value of debt outstanding was determined using inputs characteristic of a Level 2 fair value measurement.

The following table presents borrowings and payments under the bank credit facilities (in thousands):

September 30,
2020

December 31,
2019

General corporate assets $ 369,084 $ 118,310
Investment in affiliates 2,484 2,025
$ 371,568 $ 120,335

~~(6)~~

~~Long-Term Debt~~

	Three Months Ended March 31,
	2021			2020
Borrowings on bank credit facilities	$	1,107		$	582,017
Payments on bank credit facilities		(120,713	)		(97,016	)
	$	(119,606	)	$	485,001

The Company has an amended and restated credit agreement (the “Credit Agreement”) with a group of commercial banks, with JPMorgan Chase Bank, N.A. as the administrative agent bank, allowing for an $850,000,000 unsecured revolving credit facility (“Revolving Credit Facility”) and an unsecured term loan (“Term Loan”) with a maturity date of March 27, 2024. The Term Loan is repayable in quarterly installments currently scheduled to commence September 30, 2023, with $343,750,000 due on March 27, 2024. The Term Loan is prepayable, in whole or in part, without penalty. AsOutstanding letters of ~~September 30, 2020, the Company had availability of $484,637,000~~credit under the Revolving Credit ~~Facility.~~Facility were $5,063,000 and available borrowing capacity was $714,937,000 as of March 31, 2021.

~~On February 27, 2020, upon maturity, the Company repaid in full $150,000,000~~Outstanding letters of ~~2.72% unsecured senior notes.~~

~~The following table presents the carrying value and fair value of debt outstanding (in thousands):~~

September 30, 2020 December 31, 2019
Carrying Value Fair Value Carrying Value Fair Value
Revolving Credit Facility (a) $ 360,000 $ 360,000 $ 0 $ 0
Term Loan (a) 375,000 375,000 375,000 375,000
2.72% senior notes due February 27, 2020 0 0 150,000 151,547
3.29% senior notes due February 27, 2023 350,000 362,820 350,000 353,216
4.2% senior notes due March 1, 2028 500,000 585,096 500,000 541,546
Bank notes payable 155 155 16 16
Unamortized debt discounts and issuance costs (b) (6,811 ) — (5,249 ) —
$ 1,578,344 $ 1,683,071 $ 1,369,767 $ 1,421,325

~~(a)Variable interest rates of~~ ~~1.5%~~ ~~and~~ ~~2.9%~~ at ~~September 30, 2020~~ ~~and~~ ~~December 31, 2019, respectively.~~

~~(b)Excludes $2,650,000~~ ~~attributable to the Revolving Credit Facility included in other assets at~~ ~~December 31, 2019~~.

~~The fair value of debt outstanding was determined using inputs characteristic of a Level 2 fair value measurement.~~

~~The following table presents borrowings and payments~~credit under the ~~bank~~$10,000,000 credit ~~facilities (in~~ ~~thousands):~~line were $1,299,000 and available borrowing capacity was $8,701,000 as of March 31, 2021.

Nine months ended September 30,
2020 2019
Borrowings on bank credit facilities
$ 582,212 $ 1,294,647
Payments on bank credit facilities
(222,073 ) (1,712,024 )
$ 360,139 $ (417,377 )

~~(7)~~(5)

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 ~~75%~~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):

	September 30, 2020			December 31, 2019			March 31,			December 31,
2020	$	10,643		$	33,374
							2021			2020
2021		38,059			25,911		$	30,948		$	40,224
2022		33,014			23,098			34,976			33,543
2023		27,500			19,162			29,465			28,012
2024		23,063			15,330			24,032			23,578
2025								21,606			21,261
Thereafter		117,351			92,991			97,885			96,491
Total lease payments		249,630			209,866			238,912			243,109
Less: imputed interest		(49,201	)		(43,085	)		(45,057	)		(46,863	)
Operating lease liabilities	$	200,429		$	166,781		$	193,855		$	196,246

The following table ~~sets forth~~summarizes lease costs (in thousands):

	Three months ended September 30,						Nine months ended September 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
Operating lease cost	$	11,553		$	9,490		$	32,467		$	29,461		$	10,392		$	9,041
Variable lease cost		485			386			1,081			1,417			709			152
Short-term lease cost		4,645			7,727			17,998			24,582			3,053			8,277
Sublease income		(418	)		(366	)		(792	)		(924	)		(274	)		(244	)
	$	16,265		$	17,237		$	50,754		$	54,536		$	13,880		$	17,226

The following table summarizes other supplemental information about the Company’s operating ~~leases :~~leases:

							March 31,			December 31,
	September 30, 2020			December 31, 2019			2021			2020
Weighted average discount rate		4.1	%		4.0	%		4.1	%		4.1	%
Weighted average remaining lease term	10 years			11 years			10 years			10 years

~~(8)~~(6)

Impairments and Other Charges

During the 2020 first quarter, Kirby’s market capitalization declined significantly compared to the 2019 fourth quarter. Over the same period, the overall United States stock market also declined significantly amid market volatility. In addition, as a result of uncertainty surrounding the outbreak of COVID-19 and a sharp decline in oil prices during the 2020 first quarter, many of the Company’s oil and gas customers responded by quickly cutting 2020 capital spending budgets and activity levels quickly declined. Lower activity levels ~~have~~ resulted in a decline in drilling activity, resulting in lower demand for new and remanufactured oilfield equipment and related parts and service in the distribution and services segment. As a result, the Company concluded that a triggering event had occurred and performed interim quantitative impairment tests as of March 31, 2020 for certain of the distribution and services segment’s long-lived assets and goodwill.

The Company determined the estimated fair value of such long-lived assets and reporting units using a discounted cash flow analysis and a market approach for comparable companies. This analysis included management’s judgment regarding short-term and long-term internal forecasts, updated for recent events, appropriate discount rates, and capital expenditures using inputs characteristic of a Level 3 fair value measurement.

In performing the impairment test of long-lived assets within the distribution and services segment, the Company determined that the carrying value of certain long-lived assets, including property and equipment as well as intangible assets associated with customer relationships, tradenames, and distributorships, were no longer recoverable, resulting in an impairment charge of $165,304,000 (including $148,909,000 impairment of intangible assets other than goodwill and $16,395,000 impairment of property and equipment) to reduce such long-lived assets to fair value during the three months ended March 31, 2020.

Based upon the results of the goodwill impairment test, the Company concluded that the carrying value of one reporting unit in the distribution and services segment exceeded its estimated fair value. For the three months ended March 31, 2020, the goodwill impairment charge of $387,970,000 was calculated as the amount that the carrying value of the reporting unit, including goodwill, and after recording impairments of long-lived assets identified above, exceeded its estimated fair value, incorporating all tax impacts caused by the recognition of the impairment loss.

In addition, the Company determined cost exceeded net realizable value for certain oilfield and pressure pumping related inventory, resulting in an $8,000,000 non-cash write-down during the three months ended March 31, 2020.

~~The following table summarizes the changes in goodwill (in thousands):~~

Marine
Transportation

Distribution and
Services
Total
Balance at December 31, 2019 (gross) $ 424,149 $ 549,846 $ 973,995
Accumulated impairment and amortization (18,574 ) (1,595 ) (20,169 )
Balance at December 31, 2019 405,575 548,251 953,826
Impairment 0 (387,970 ) (387,970 )
Savage acquisition 81,635 0 81,635
Convoy acquisition 0 10,309 10,309
Balance at September 30, 2020 (gross) 505,784 560,155 1,065,939
Accumulated impairment and amortization (18,574 ) (389,565 ) (408,139 )
Balance at September 30, 2020 $ 487,210 $ 170,590 $ 657,800

~~(9)~~(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,
	2021		2020
Compensation cost	$	5,722	$	5,331
Income tax benefit	$	1,272	$	1,262

On March 1, 2021, subject to stockholder approval, the Board of Directors approved amendments to the Company’s 2005 Stock and Incentive Plan (the “Plan”) to, among other things, add 1,400,000 shares of availability. The amendment to the Plan was subsequently approved at the Annual Meeting of Stockholders on April 27, 2021. At March 31, 2021, there were 825,447 shares available for future grants under the Plan. After reflecting stockholder approval of the amendment to the Plan on April 27, 2021, as of such date there were 2,225,447 shares available for future grants under the Plan.

During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, the Company granted ~~153,460~~309,506 restricted stock units (“RSUs”) ~~and 114,600 stock options~~ to selected officers and other key employees under ~~its employee stock award plan. The RSUs~~the Plan, the majority of which vest ratably over five ~~years and the stock options become exercisable ratably over three years and expire after seven~~ years.

During ~~the nine months ended September 30, 2020,~~May 2021, the Company granted ~~39,913~~27,120 shares of restricted stock to nonemployee directors of the Company under the director stock award plan. The restricted stock vests six months after the date of grant except that restricted stock granted in lieu of cash director fees vests in equal quarterly increments through March 31, ~~2021.~~2022.

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Compensation cost $ 3,414 $ 3,172 $ 12,066 $ 11,079
Income tax benefit $ 1,181 $ 813 $ 3,332 $ 2,722

~~(10)~~(8)

Taxes on Income

On March 27,2020, the United States Congress passed and the President signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law to address the ~~COVID-19~~COVID-19 pandemic. One provision of the CARES Act ~~allows~~allowed net operating losses generated in 2018 through 2020 to be carried back up to five ~~years.~~years. Pursuant to this provision of the CARES Act, the Company recorded a net federal current benefit for taxes on income for the ~~nine~~three months ended ~~September 30,~~ March 31,2020 due to carrying back net operating losses generated between 2018 and 2020 used to offset taxable income generated between 2013 and ~~2017. This caused a reduction in the effective tax rate during the nine months ended September 30, 2020 as net~~2017. Net operating losses carried back to tax years 2013 through 2017 ~~are~~ were applied at a federal tax rate of 35% applicable to those tax years, compared to a 21% tax rate effective at ~~September 30,~~ March 31,2020. Net operating losses generated in 2018 and 2019 were used to offset taxable income generated between 2013 and 2017 taxed at 35% resulting in a tax benefit of ~~$58,746,000~~$50,824,000 during the three months ended March 31,2020.

At March 31, 2021 and December 31, 2020, the Company had a ~~decrease~~federal income tax receivable of $70,528,000 and $188,177,000, respectively, included in Accounts Receivable – Other on the ~~Company’s deferred tax asset related to federal net operating losses of $89,358,000.~~balance sheets. During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, the Company received a tax refund of ~~$30,606,000~~$119,493,000, including accrued interest, for its ~~2018~~2019 federal tax return related to net operating losses being carried back to offset taxable income generated ~~during 2013.~~ ~~At September 30, 2020, the Company had a federal income tax receivable of $159,557,000~~ ~~included in Accounts Receivable – Other on the balance sheet.~~between 2014 and 2017.

1310

~~Earnings (loss)~~

Loss before taxes on income and details of the ~~provision (benefit)~~benefit for taxes on income were as follows (in ~~thousands)~~ thousands):

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Earnings (loss) before taxes on income:
United States $ 19,246 $ 64,550 $ (476,382 ) $ 186,205
Foreign 28 (95 ) (282 ) (704 )
$ 19,274 $ 64,455 $ (476,664 ) $ 185,501
Provision (benefit) for taxes on income:

Federal:
Current $ (33,690 ) $ 0 $ (189,994 ) $ 0
Deferred 23,350 14,495 16,056 40,502
State and local:
Current 1,257 1,675 1,875 4,820
Deferred 620 0 (10,674 ) 0
Foreign - current 44 135 80 132
$ (8,419 ) $ 16,305 $ (182,657 ) $ 45,454

	Three Months Ended March 31,
	2021			2020
Loss before taxes on income:
United States	$	(3,619	)	$	(519,489	)
Foreign		(392	)		(283	)
	$	(4,011	)	$	(519,772	)
Provision (benefit) for taxes on income:
U.S. Federal:
Current	$	0		$	(137,696	)
Deferred		(603	)		(23,443	)
U.S. State and local:
Current		(358	)		82
Deferred		70			(11,799	)
Foreign - current		0			47
	$	(891	)	$	(172,809	)

~~(11)~~(9)

~~Earnings~~

Earnings Per Share

The following table presents the components of basic and diluted ~~earnings (loss)~~loss per share (in thousands, except per share amounts):

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Net earnings (loss) attributable to Kirby $ 27,489 $ 47,987 $ (294,750 ) $ 139,570
Undistributed earnings allocated to restricted shares (57 ) (128 ) 0 (369 )
Income (loss) available to Kirby common stockholders – basic 27,432 47,859 (294,750 ) 139,201
Undistributed earnings allocated to restricted shares 57 128 0 369
Undistributed earnings reallocated to restricted shares (57 ) (128 ) 0 (368 )
Income (loss) available to Kirby common stockholders – diluted $ 27,432 $ 47,859 $ (294,750 ) $ 139,202

Shares outstanding:
Weighted average common stock issued and outstanding 60,038 59,908 60,015 59,891
Weighted average unvested restricted stock (123 ) (159 ) (112 ) (158 )
Weighted average common stock outstanding – basic 59,915 59,749 59,903 59,733
Dilutive effect of stock options and restricted stock units 16 157 0 146
Weighted average common stock outstanding – diluted 59,931 59,906 59,903 59,879

Net earnings (loss) per share attributable to Kirby common stockholders:
Basic $ 0.46 $ 0.80 $ (4.92 ) $ 2.33
Diluted $ 0.46 $ 0.80 $ (4.92 ) $ 2.32

	Three Months Ended March 31,
	2021			2020
Loss attributable to Kirby common stockholders – basic and diluted	$	(3,375	)	$	(347,241	)

Shares outstanding:
Weighted average common stock issued and outstanding		60,074			59,983
Weighted average unvested restricted stock		(58	)		(100	)
Weighted average common stock outstanding – basic and diluted		60,016			59,883

Net loss per share attributable to Kirby common stockholders:
Basic	$	(0.06	)	$	(5.80	)
Diluted	$	(0.06	)	$	(5.80	)

Certain outstanding options to purchase approximately ~~681,000~~572,000 and ~~297,000~~681,000 shares of common stock were excluded in the computation of diluted earnings per share as of ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, as such stock options would have been antidilutive. Certain outstanding RSUs to convert to ~~162,000~~7,000 and ~~5,000~~344,000 shares of common stock were also excluded in the computation of diluted earnings per share as of ~~September 30,~~March 31, 2021 and 2020, ~~and 2019~~, respectively, as such RSUs would have been antidilutive.

~~(12)~~(10)

Inventories

The following table presents the details of inventories – net (in thousands):

	September 30, 2020		December 31, 2019		March 31, 2021		December 31, 2020
Finished goods	$	269,604	$	291,214	$	259,319	$	255,491
Work in process		51,829		60,187		67,156		54,184
	$	321,433	$	351,401	$	326,475	$	309,675

~~(13)~~(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’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 the Kirby pension plan during ~~2020.~~2021.

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~~ ~~$797,000~~ ~~and $958,000~~ ~~to the Higman pension plan in the nine months ended September 30,2020 for the 2019 and 2020 plan years, respectively.~~ ~~In addition, the Company made its final anticipated 2020~~a contribution of ~~$480,000~~$479,000 to the Higman pension plan during ~~October 2020 for~~ the ~~2020 plan year.~~three months ended March 31, 2021. The Company does not expect to make any additional contributions during 2021.

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% 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 were as follows (in ~~thousand~~s) thousands):

	Pension Benefits										Pension Benefits
	Pension Plan						SERP				Pension Plans						SERP
	Three months ended September 30,						Three months ended September 30,				Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2020		2019		2021			2020			2021		2020
Components of net periodic benefit cost:
Service cost	$	1,917		$	1,841		$	0	$	0	$	1,927		$	1,917		$	0	$	0
Interest cost		3,919			4,123			10		13		3,584			3,890			8		10
Expected return on plan assets		(5,960	)		(5,239	)		0		0		(6,574	)		(6,188	)		0		0
Amortization of actuarial loss		994			359			8		7		1,098			232			10		9
Net periodic benefit cost	$	870		$	1,084		$	18	$	20	$	35		$	(149	)	$	18	$	19

Pension Benefits
Pension Plan SERP

Nine months ended
September 30,

Nine months ended
September 30,

2020 2019 2020 2019
Components of net periodic benefit cost:
Service cost $ 5,753 $ 5,523 $ 0 $ 0
Interest cost 11,758 12,370 30 39
Expected return on plan assets (17,883 ) (15,717 ) 0 0
Amortization of actuarial loss 1,651 1,078 26 21
Net periodic benefit cost $ 1,279 $ 3,254 $ 56 $ 60

The components of net periodic benefit cost for the Company’s postretirement benefit plan were as follows (in ~~thousand~~s) thousands):

	Other Postretirement Benefits												Other Postretirement Benefits
	Postretirement Welfare Plan												Postretirement Welfare Plan
	Three months ended September 30,						Nine months ended September 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
Components of net periodic benefit cost:
Service cost	$	0		$	0		$	0		$	0
Interest cost		6			7			17			23		$	4		$	6
Amortization of actuarial gain		(131	)		(135	)		(392	)		(405	)		(113	)		(131	)
Net periodic benefit cost	$	(125	)	$	(128	)	$	(375	)	$	(382	)	$	(109	)	$	(125	)

~~(14)~~(12)

Other Comprehensive Income

The Company’s changes in other comprehensive income (loss) were as follows (in thousands):

Three months ended September 30,
2020 2019

Gross
Amount

Income Tax
(Provision)
Benefit

Net
Amount

Gross
Amount

Income Tax
Provision

Net
Amount

Pension and postretirement benefits (a):

Amortization of net actuarial loss $ 871 $ (219 ) $ 652 $ 231 $ (59 ) $ 172
Actuarial losses (6,592 ) 1,661 (4,931 ) 0 0 0
Foreign currency translation (239 ) 0 (239 ) (618 ) 0 (618 )
Total $ (5,960 ) $ 1,442 $ (4,518 ) $ (387 ) $ (59 ) $ (446 )

	Nine months ended September 30,																		Three Months Ended March 31,
	2020									2019									2021									2020
	Gross Amount			Income Tax (Provision) Benefit			Net Amount			Gross Amount			Income Tax Provision			Net Amount			Gross Amount			Income Tax Provision			Net Amount			Gross Amount			Income Tax Provision			Net Amount
Pension and postretirement benefits (a):
Amortization of net actuarial loss	$	1,285		$	(324	)	$	961		$	694		$	(177	)	$	517		$	995		$	(250	)	$	745		$	110		$	(28	)	$	82
Actuarial gains (losses)		(10,201	)		2,566			(7,635	)		8,167			(2,044	)		6,123
Foreign currency translation		(1,162	)		0			(1,162	)		(542	)		0			(542	)		(497	)		0			(497	)		(1,274	)		0			(1,274	)
Total	$	(10,078	)	$	2,242		$	(7,836	)	$	8,319		$	(2,221	)	$	6,098		$	498		$	(250	)	$	248		$	(1,164	)	$	(28	)	$	(1,192	)

(a)

Actuarial ~~gains~~ gains/(losses) are amortized into other ~~income.~~income (expense). (See Note ~~13,~~11, Retirement Plans)

~~(15)~~(13)

Contingencies and Commitments

On May 10, 2019, 2 tank barges and a towboat, the M/V Voyager, owned and operated by Kirby Inland Marine, LP (“Kirby Inland Marine”), a wholly owned subsidiary of the Company, were struck by the LPG tanker, the Genesis River, in the Houston Ship Channel. The bow of the Genesis River penetrated the Kirby 30015T and capsized the MMI 3014. The collision penetrated the hull of the Kirby 30015T causing its cargo, reformate, to be discharged into the water. The United States Coast Guard (“USCG”) and the National Transportation Safety Board (“NTSB”) designated the owner and pilot of the Genesis River as well as the subsidiary of the Company as parties of interest in their investigation into the cause of the incident. On June 19, 2019, the Company filed a limitation action in the U.S. District Court of the Southern District of Texas - Galveston Division seeking limitation of liability and asserting that the Genesis River and her owner/manager are at fault for damages including removal costs and claims under the Oil Pollution Act of 1990 and maritime law. Multiple claimants have filed claims in the limitation seeking damages under the Oil Pollution Act of 1990.The court bifurcated the matter into 2 trials, the first to determine liability amongst the parties and the second to assess damages. The liability trial was conducted during the week of February 2, 2021 and the parties are waiting for the court to render its decision. The NTSB recently issued a report dated March 10, 2021 of its investigation of the incident. The NTSB determined that the probable cause of the collision was the Genesis River pilot’s decision to transit at sea speed, out of maneuvering mode, which increased the hydrodynamic effects of the channel banks, reduced his ability to maintain control of the vessel after meeting another deep-draft vessel, and resulted in the Genesis River’s sheering across the channel toward the tow. Among the NTSB’s conclusions, it found that the actions of the M/V Voyager relief captain to attempt to avoid the collision by crossing the channel were reasonable, given the information available to him at the time he had to make the decision to maneuver. The Company has various insurance policies covering liabilities including pollution, marine and general liability and believes that it has satisfactory insurance coverage for the potential liabilities arising from the incident. The Company believes its accrual of such estimated liability is adequate for the incident and does not expect the incident to have a material adverse effect on its business or financial condition.

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 USCG and the 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 investigated the cause of the incident. On October 10, 2018, the Heiltsuk First Nation filed a civil action in the British Columbia Supreme Court against a subsidiary of the Company, the master and 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. The Company believes its accrual of such estimated liability is adequate for the incident and does not expect the incident to have a material adverse effect on its business or financial condition.

1713

On March 22, 2014, 2 tank barges and a towboat, the M/V Miss Susan, owned by Kirby Inland Marine, 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 1 of its cargo tanks. 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 adequate insurance coverage for pollution, marine and other potential liabilities arising from the incident. The Company believes its accrual of such estimated liability is adequate for the incident and does not expect the incident to have a material adverse effect on its business or financial condition.

In addition, the Company is involved in various legal and other proceedings which are incidental to the conduct of its business, none of which in the opinion of management will have a material effect on the Company’s financial condition, results of operations, or cash flows. Management believes its accrual of such estimated liability is adequate and believes that it has adequate insurance coverage or has meritorious defenses for these other claims and contingencies.

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 $~~22,954,000~~23,522,000 at ~~September 30, 2020,~~March 31, 2021, including $~~11,181,000~~13,878,000 in letters of credit and $~~11,773,000~~9,644,000 in performance bonds. All of these instruments have an expiration date within ~~two~~three years. The Company does not believe demand for payment under these instruments is likely and expects no material cash outlays to occur regarding these instruments.

Item 2.

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

Statements contained in this Form 10-Q that are not historical facts, including, but not limited to, any projections contained herein, are forward-looking ~~statements. These~~ statements ~~reflect management’s reasonable judgment with respect to future events. Forward-looking~~and involve a number of risks and uncertainties. Such statements involve risks and uncertainties. Such statements can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” or “continue,” or the negative thereof or other variations thereon or comparable terminology. ~~Actual~~The actual results of the future events described in such forward-looking statements in this Form 10-Q could differ materially from those ~~anticipated~~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 ~~a result of various factors including cyclical~~high water, low water, tropical storms, hurricanes, tsunamis, fog and ice, tornados, COVID-19 or other ~~downturns in demand, significant pricing competition, unanticipated additions to industry capacity, changes in the Jones Act or in United States maritime policy and practice,~~pandemics, marine accidents, lock delays, fuel costs, interest rates, ~~weather conditions~~construction of new equipment by competitors, government and environmental laws and regulations, and the timing, magnitude and number of acquisitions made by the ~~Company, and the impact~~Company. For a more detailed discussion of ~~the COVID-19 pandemic and the related response of governments on global and regional market conditions. Forward-looking~~factors that could cause actual results to differ from those presented in forward-looking statements, ~~are based on currently available information and Kirby assumes no obligation to update any such statements. A list of additional risk factors can be~~see Item 1A-Risk Factors found in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020. Forward-looking statements are based on currently available information and ~~Item 1A — Risk Factors below.~~the Company assumes no obligation to update any such statements.

For purposes of ~~the~~ Management’s Discussion, all net ~~earnings (loss)~~loss per share attributable to Kirby common stockholders are “diluted ~~earnings (loss)~~loss per share.” The weighted average number of common shares applicable to diluted ~~earnings (loss)~~loss per share for the three months ended March 31, 2021 and 2020 were ~~as follows (in thousands):~~60,016,000 and 59,883,000, respectively.

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Weighted average common stock outstanding - diluted 59,931 59,906 59,903 59,879

The increase in the weighted average number of common shares for the 2020 third quarter and first nine months compared with the 2019 third quarter and first nine months primarily reflected the issuance of restricted stock, the issuance of common stock for the vesting of RSUs and the exercise of stock options, partially offset by the exclusion of antidilutive stock options and RSUs outstanding during the 2020 first nine months.

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, 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, 2020, the Company operated a fleet of 1,084 inland tank barges with 24.5 million barrels of capacity, and an average of 265 inland towboats. The Company’s coastal fleet consisted of 47 tank barges with 4.3 million barrels of capacity and 44 coastal tugboats. The Company also owns and operates four offshore dry-bulk cargo barges, four offshore tugboats and one docking tugboat transporting dry-bulk commodities in United States coastal trade. Through its distribution and services segment, the Company provides after-market service and parts for engines, transmissions, reduction gears and related equipment used in oilfield services, marine, power generation, on-highway, and other industrial applications. The Company also rents equipment including generators, industrial compressors, railcar movers, and high capacity lift trucks 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.

~~For~~The following table summarizes key operating results of the ~~2020 third quarter, net earnings attributable to Kirby were $27,489,000, or $0.46~~Company (in thousands, except per share on revenues of $496,567,000, compared with 2019 third quarter net earnings attributable to Kirby of $47,987,000, or $0.80 per share, on revenues of $666,809,000. For the 2020 first nine months, net loss attributable to Kirby was $294,750,000, or $4.92 per share, on revenues of $1,681,652,000, compared with 2019 first nine months net earnings attributable to Kirby of $139,570,000, or $2.32 per share, on revenues of $2,182,472,000. amounts):

	Three Months Ended March 31,
	2021			2020
Total revenues	$	496,850		$	643,926
Net loss attributable to Kirby	$	(3,375	)	$	(347,241	)
Net loss per share attributable to Kirby common stockholders – diluted	$	(0.06	)	$	(5.80	)
Net cash provided by operating activities	$	102,558		$	71,501
Capital expenditures	$	14,052		$	49,225

The 2020 first quarter included ~~$561,274,000~~$561,274,000 before taxes, $433,341,000 after taxes, or $7.24 per share, non-cash charges related to inventory write-downs, impairment of long-lived assets, including intangible assets and property and equipment, and impairment of goodwill in the distribution and services segment. See Note 8,6, Impairments and Other Charges in the financial statements for additional information. In addition, the 2020 first quarter was favorably impacted by an income tax benefit of $50,824,000, or $0.85 per share related to net operating losses generated in 2018 and 2019 used to offset taxable income generated between 2013 and 2017. See Note ~~10,~~8, Taxes on Income in the financial statements for additional ~~information.~~information

Cash provided by operating activities increased primarily due to the receipt of a tax refund of $119,493,000, including accrued interest, for the Company’s 2019 federal tax return. For the 2021 first quarter, capital expenditures of $14,052,000 included $10,990,000 in the marine transportation segment and $3,062,000 in distribution and services and corporate, more fully described under cash flow and capital expenditures below.

The Company projects that capital expenditures for 2021 will be in the $125,000,000 to $145,000,000 range. The 2021 construction program will consist of approximately $15,000,000 for the construction of new inland towboats, $95,000,000 to $110,000,000 primarily for capital upgrades and improvements to existing marine equipment and facilities, and $15,000,000 to $20,000,000 for new machinery and equipment, facilities improvements, and information technology projects in the distribution and services segment and corporate.

The Company’s debt-to-capitalization ratio decreased to 30.4% at March 31, 2021 from 32.2% at December 31, 2020, primarily due to repayments under the Revolving Credit Facility in the 2021 first quarter and an increase in total equity, primarily due to the amortization of unearned share-based compensation for the 2021 first quarter of $5,722,000, partially offset by net loss attributable to Kirby of $3,375,000 and tax withholdings of $2,045,000 on restricted stock and RSU vestings. The Company’s debt outstanding as of March 31, 2021 and December 31, 2020 is detailed in Long-Term Financing below.

Marine Transportation

For the ~~2020 third~~2021 first quarter, ~~and first nine months,~~ the Company’s marine transportation segment generated ~~65% and 66%, respectively,~~61% of the Company’s revenue. 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 is directly affected by the volumes produced by the Company’s petroleum, petrochemical and refining customer base.

1915

The Company’s marine transportation segment’s revenues for the 2020 third quarter and first nine months decreased 22% and 7%, respectively, and operating income decreased 55% and 17%, respectively, compared with the 2019 third quarter and first nine months revenues and operating income. The decreases were primarily due to reduced barge utilization in the inland and coastal markets and decreased spot contract pricing in the inland market, each as a result of a reduction in demand due to the COVID-19 pandemic, lower fuel rebills, retirements of three large coastal barges, and planned shipyard activity in the coastal market. These reductions were partially offset by the acquisition of the Savage fleet acquired on April 1, 2020 and the Cenac Marine Services, LLC (“Cenac”) fleet acquired on March 14, 2019. The 2020 third quarter was impacted by hurricanes and tropical storms along the East and Gulf Coasts and the closure of the Illinois river. For the year to date periods, the 2020 first quarter and 2019 first six months were each impacted by poor operating conditions and high delay days due to heavy fog and wind along the Gulf Coast, high water on the Mississippi River System, and closures of key waterways as a result of lock maintenance projects, as well as increased shipyard days on large capacity coastal vessels. The 2019 first six months was also impacted by prolonged periods of ice on the Illinois River and a fire at a chemical storage facility on the Houston Ship Channel. For the 2020 third quarter and first nine months, the inland tank barge fleet contributed 77% and 79%, respectively, and the coastal fleet contributed 23% and 21%, respectively, of marine transportation revenues. For both the 2019 third quarter and first nine months, the inland tank barge fleet contributed 77%, and the coastal fleet contributed 23% of marine transportation revenues.

During the 2020 second and third quarters, reduced demand as a result of the COVID-19 pandemic and the resulting economic slowdown contributed to lower barge utilization. Inland tank barge utilization levels averaged in the low to mid-90% range during the 2020 first quarter, the mid-80% range during the 2020 second quarter, and the low 70% range during the 2020 third quarter. In 2019, inland tank barge utilization levels averaged in the mid-90% range during both the 2019 first and second quarters and the low 90% range during the 2019 third quarter. The 2020 first quarter and 2019 first nine months each experienced strong demand from petrochemicals, black oil, and refined petroleum products customers. Extensive delay days due to poor operating conditions and lock maintenance projects in the 2020 first quarter and 2019 first six months slowed the transport of customer cargoes and contributed to strong barge utilization during those periods.

Coastal tank barge utilization levels averaged in the low to mid-80% range during the 2020 first quarter and the mid-70% range during both the 2020 second and third quarters. In 2019, coastal tank barge utilization levels averaged in the low 80% range during the 2019 first quarter and the mid-80% range during both the 2019 second and third quarters. Barge utilization in the coastal marine fleet continued to be impacted by the oversupply of smaller tank barges in the coastal industry during each of the 2020 and 2019 first nine months.

During the 2020 third quarter and first nine months, approximately 70% and 65%, respectively, of marine transportation’s inland revenues were under term contracts, which have contract terms of 12 months or longer, and 30% and 35%, respectively, were spot contract revenues, which have contract terms of less than 12 months. During both the 2019 third quarter and first nine months, approximately 65% of marine transportation’s inland revenues were under term contracts, and 35% were spot contract revenues. Inland time charters during both the 2020 third quarter and first nine months represented 67%, of the inland revenues under term contracts compared with 61% and 62%, respectively, in the 2019 third quarter and first nine months. Rates on inland term contracts renewed in the 2020 first quarter increased in the 1% to 3% average range compared with term contracts renewed in the 2019 first quarter. Rates on inland term contracts renewed in the 2020 second quarter were flat compared with term contracts renewed in the 2019 second quarter. Rates on inland term contracts renewed in the 2020 third quarter decreased in the 1% to 3% average range compared with term contracts renewed in the 2019 third quarter. Spot contract rates in the 2020 first quarter increased in the 4% to 6% average range compared to the 2019 first quarter. Spot contract rates in the 2020 second quarter decreased in the 5% to 10% average range compared to the 2019 second quarter. Spot contract rates in the 2020 third quarter decreased approximately 10% compared to the 2019 third quarter. There was no material rate increase on January 1, 2020 related to annual escalators for labor and the producer price index on a number of inland multi-year contracts.

During both the 2020 third quarter and first nine months, approximately 85% of coastal revenues were under term contracts, and 15% were under spot contract revenues. During both the 2019 third quarter and first nine months, approximately 80% of the coastal revenues were under term contracts and 20% were spot contract revenues. Coastal time charters during both the 2020 third quarter and first nine months represented approximately 90% of coastal revenues under term contracts compared with 85% during both the 2019 third quarter and first nine months. Spot and term contract pricing in the coastal market are contingent on various factors including geographic location, vessel capacity, vessel type, and product serviced. Rates on coastal term contracts renewed in the 2020 first quarter increased in the 10% to 15% average range compared with term contracts renewed in the 2019 first quarter. Rates on coastal term contracts renewed in the 2020 second quarter were flat compared with term contracts renewed in the 2019 second quarter. Rates on coastal term contracts renewed in the 2020 third quarter decreased in the 4% to 6% average range compared with term contracts renewed in the 2019 third quarter. Spot market rates in the 2020 first quarter improved in the 10% to 15% average range compared to the 2019 first quarter. Spot market rates in both the 2020 second and third quarters were flat compared to the 2019 second and third quarters.

The marine transportation segment operating margin was 10.1% for the 2020 third quarter compared with 17.6% for the 2019 third quarter and 12.2% for the 2020 first nine months compared to 13.6% for the 2019 first nine months.

~~Distribution and Services~~

For the 2020 third quarter and first nine months, the distribution and services segment generated 35% and 34%, respectively, of the Company’s revenue, of which 89% and 92%, respectively, was generated from service and parts and 11% and 8%, respectively, from manufacturing. The results of the distribution and services segment are largely influenced by 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 2020 third quarter and first nine months decreased 31% and 42%, respectively, and operating income decreased 88% and 113%, respectively, compared with the 2019 third quarter and first nine months, revenues and operating income. The decreases were primarily attributable to reduced activity in the oilfield as a result of oil price volatility throughout 2019 and the 2020 first nine months, the extensive downturn in oil and gas exploration due to low oil prices, caused in part by the COVID-19 pandemic, an oversupply of pressure pumping equipment in North America, and reduced spending and enhanced cash flow discipline for the Company’s major oilfield customers. As a result, customer demand and incremental orders for new and remanufactured pressure pumping equipment and sales of new and overhauled transmissions and related parts and service declined during the 2020 third quarter and first nine months. For the 2020 third quarter and first nine months, the oil and gas market contributed 28% and 27%, respectively, of the distribution and services revenues. For the 2019 third quarter and first nine months, the oil and gas market contributed 46% and 54%, respectively, of the distribution and services revenues.

The commercial and industrial market revenues decreased compared to the 2019 third quarter and first nine months, primarily due to reductions in on-highway and power generation service demand as a result of the COVID‑19 pandemic and the resulting economic slowdown and nationwide, state, and local stay-at-home orders, partially offset by contributions from the Convoy acquisition. Demand in the marine business was also down due to reduced major overhaul activity and new engine sales. For the 2020 third quarter and first nine months, the commercial and industrial market contributed 72% and 73%, respectively, of the distribution and services revenues. For the 2019 third quarter and first nine months, the commercial and industrial market contributed 54% and 46%, respectively, of the distribution and services revenues.

The distribution and services segment operating margin for the 2020 third quarter was 0.6% compared with 3.6% for the 2019 third quarter and (1.6)% for the 2020 first nine months compared to 7.0% for the 2019 first nine months. The 2020 first nine months results were adversely impacted by the bankruptcy of a large oil and gas customer, resulting in a $3,339,000 bad debt expense charge and severance expenses of $1,354,000 as a result of continued workforce reductions.

~~Cash Flows and Capital Expenditures~~

The Company continued to generate favorable operating cash flows during the 2020 first nine months with net cash provided by operating activities of $359,763,000 compared with $387,599,000 for the 2019 first nine months, a 7% decrease. The decline was driven by decreased revenues and operating income in both the marine transportation and distribution and services segments. Decreases in the marine transportation segment was driven by decreased barge utilization in the inland and coastal markets and decreased spot contract pricing in the inland market, each as a result of a reduction in demand due to the COVID-19 pandemic, partially offset by the Savage acquisition in April 2020 and the Cenac acquisition in March 2019. The decline was also partially offset by changes in certain operating assets and liabilities primarily related to reduced incentive compensation payouts in the 2020 first quarter and a larger decrease in trade accounts receivable compared to the 2019 first nine months, driven by reduced business activity levels in both the marine transportation and distribution and services segments. In addition, during the nine months ended September 30, 2020, the Company received a tax refund of $30,606,000 for its 2018 tax return related to net operating losses being carried back to offset taxable income generated during 2013. During the 2020 and 2019 first nine months, the Company generated cash of $6,538,000 and $34,490,000, respectively, from proceeds from the disposition of assets, and $353,000 and $3,563,000, respectively, from proceeds from the exercise of stock options.

For the 2020 first nine months, cash generated and borrowings under the Company’s Revolving Credit Facility were used for capital expenditures of $129,371,000 (including a decrease in accrued capital expenditures of $11,441,000), including $6,054,000 for inland towboat construction and $123,317,000 primarily for upgrading existing marine equipment and marine transportation and distribution and services facilities. The Company also used $348,772,000 for acquisitions of businesses and marine equipment, more fully described under Acquisitions below.

The Company’s debt-to-capitalization ratio increased to 33.9% at September 30, 2020 from 28.9% at December 31, 2019, primarily due to borrowings under the Revolving Credit Facility to purchase the Savage fleet in the 2020 second quarter and the Convoy acquisition in the 2020 first quarter as well as the decrease in total equity, primarily from the net loss attributable to Kirby for the 2020 first nine months of $294,750,000. The Company’s debt outstanding as of September 30, 2020 and December 31, 2019 is detailed in Long-Term Financing below.

During the 2020 first nine months, the Company acquired 92 inland tank barges from Savage with a total capacity of approximately 2.5 million barrels, purchased five newly constructed inland pressure barges, retired 74 inland tank barges, transferred one tank barge to coastal, returned one leased inland tank barge, and brought back into service 10 inland tank barges. The net result was an increase of 31 inland tank barges and approximately 1.1 million barrels of capacity during the 2020 first nine months.

Given the current uncertainty surrounding the impact of the COVID-19 pandemic, the Company projects that capital expenditures for 2020 will be approximately $150,000,000. The current 2020 construction program consists of $5,000,000 in progress payments on the construction of one inland towboat placed in service during the 2020 second quarter and five inland towboats to be placed in service in 2021. Approximately $130,000,000 is primarily capital upgrades and improvements to existing marine equipment and facilities. The balance of $15,000,000 will be primarily related to information technology projects in the distribution and services segment and corporate. Funding for future capital expenditures is expected to be provided through operating cash flows and borrowings under the Company’s Revolving Credit Facility.

~~Outlook~~

While there remains significant uncertainty around the full impact of the COVID-19 pandemic, in the inland marine transportation market, the Company expects a slow recovery until economic activity rebounds more significantly. The reopening of the Illinois River in October is expected to contribute to sequential improvement in barge utilization rates in the 2020 fourth quarter. Additionally, increased delays from seasonal winter weather are expected to have an adverse impact on operating efficiencies. Overall, the Company expects inland revenues and operating income to be flat to down slightly in the 2020 fourth quarter when compared to the third quarter.

As of September 30, 2020, the Company estimated there were approximately 4,000 inland tank barges in the industry fleet, of which approximately 350 were over 30 years old and approximately 260 of those over 40 years old. The Company estimates that approximately 130 to 150 tank barges have been ordered for delivery throughout 2020 and many older tank barges, including approximately 80 expected by the Company, will be retired. Historically, 75 to 150 older inland tank barges are retired from service each year industry-wide. The extent of the retirements is dependent on market conditions, petrochemical and refinery production levels, and crude oil and natural gas condensate movements, all of which can have a direct effect on industry-wide tank barge utilization, as well as term and spot contract rates. Given current market conditions as a result of the COVID-19 pandemic, the Company believes that industry retirements could be in the higher end of the historical range during 2020.

In the coastal marine transportation market, the spot market is expected to remain challenging in the near term until demand for refined products and black oil materially improves. However, compared to the 2020 third quarter, reduced delays associated with recent hurricanes and tropical storms on the East and Gulf Coasts are expected to modestly benefit the fourth quarter’s results. Overall, the Company expects coastal revenues to be flat sequentially, with operating margins in the negative low single digits.

As of September 30, 2020, the Company estimated there were approximately 280 tank barges operating in the 195,000 barrels or less coastal industry fleet, the sector of the market in which the Company operates, and approximately 20 of those were over 25 years old. The Company is aware of one announced coastal tank barge and tugboat unit in the 195,000 barrels or less category delivered during the 2020 second quarter in addition to one under construction by a competitor for delivery in 2021.

The results of the distribution and services segment are largely influenced by the cycles of the land-based oilfield service and oil and gas operator and producer markets, marine, power generation, on-highway and other industrial markets. Activity in oil and gas is slowly recovering from 2020 second quarter lows. In the 2020 fourth quarter, the Company expects to benefit from gradual improvement in the economy, but a weak oil and gas market, potential customer budget exhaustion, and some seasonality will likely result in sequential reductions in revenues and operating income. Further, the oil and gas market activity is expected to be impacted as customers continue to rationalize excess pressure pumping capacity resulting in limited deliveries of new pressure pumping units. Also, many oil and gas companies are expected to slow drilling and completions activity in the fourth quarter, further reducing demands for parts and service.

In the distribution and services commercial and industrial market, demand for parts and new engines in marine and on-highway is expected to increase as economic activity improves and customers complete projects. These gains, however, will be partially offset by seasonal activity reductions associated with the dry cargo harvest in marine and reduced utilization of the power generation rental fleet following the hurricane season. Overall, compared to the 2020 third quarter, segment revenues are expected to modestly decline in the 2020 fourth quarter with operating margins in the negative low to mid-single digits.

While the COVID-19 pandemic has adversely impacted the Company’s business, to date, it has not materially adversely impacted its ability to conduct its operations in either business segment. The Company has maintained business continuity and expects to continue to do so.

~~Acquisitions~~

~~During the nine months ended September 30, 2020, the Company purchased five newly constructed inland pressure barges for $33,150,000 in cash.~~

On April 1, 2020, the Company completed the acquisition of the inland tank barge fleet of Savage for $278,999,000 in cash. Savage’s tank barge fleet consisted of 92 inland tank barges with approximately 2.5 million barrels of capacity and 45 inland towboats. The Savage assets that were acquired primarily move petrochemicals, refined products, and crude oil on the Mississippi River, its tributaries, and the Gulf Intracoastal Waterway. The Company also acquired Savage’s ship bunkering business and barge fleeting business along the Gulf Coast.

On January 3, 2020, the Company completed the acquisition of substantially all the assets of Convoy for $37,180,000 in cash. Convoy is an authorized dealer for Thermo King refrigeration systems for trucks, railroad cars and other land transportation markets for North and East Texas and Colorado.

~~Financing of the acquisitions was through borrowings under the Company’s Revolving Credit Facility.~~

~~Results of Operations~~

For the 2020 third quarter, net earnings attributable to Kirby were $27,489,000, or $0.46 per share, on revenues of $496,567,000, compared with 2019 third quarter net earnings attributable to Kirby of $47,987,000, or $0.80 per share, on revenues of $666,809,000. For the 2020 first nine months, net loss attributable to Kirby was $294,750,000, or $4.92 per share, on revenues of $1,681,652,000, compared with 2019 first nine months net earnings attributable to Kirby of $139,570,000, or $2.32 per share, on revenues of $2,182,472,000. The 2020 first quarter included ~~$561,274,000 before taxes, $433,341,000 after taxes, or $7.24~~ per share, non-cash charges related to inventory write-downs, impairment of long-lived assets, including intangible assets and property and equipment, and impairment of goodwill in the distribution and services segment. See Note 8, Impairments and Other Charges for additional information. In addition, the 2020 first quarter was favorably impacted by an income tax benefit of $50,824,000, or $0.85 per share related to net operating losses generated in 2018 and 2019 used to offset taxable income generated between 2013 and 2017. See Note 10, Taxes on Income for additional information.

~~The~~ following table ~~sets forth~~summarizes the Company’s marine transportation ~~and distribution and services revenues and the percentage of each to total revenues for the comparable periods (dollars in thousands):~~fleet:

Three months ended September 30, Nine months ended September 30,
2020 % 2019 % 2020 % 2019 %
Marine transportation $ 320,602 65 % $ 412,665 62 % $ 1,104,846 66 % $ 1,185,072 54 %
Distribution and services 175,965 35 254,144 38 576,806 34 997,400 46
$ 496,567 100 % $ 666,809 100 % $ 1,681,652 100 % $ 2,182,472 100 %

	March 31,
	2021		2020
Inland tank barges:
Owned		1,008		1,041
Leased		49		24
Total		1,057		1,065
Barrel capacity (in millions)		23.7		23.7

Inland towboats (quarter average):
Owned		216		234
Chartered		25		77
Total		241		311

Costal tank barges:
Owned		43		47
Leased		1		2
Total		44		49
Barrel capacity (in millions)		4.2		4.7

Coastal tugboats:
Owned		39		42
Chartered		3		5
Total		42		47

Offshore dry-bulk cargo barges (owned)		4		4
Offshore tugboats and docking tugboat (owned and chartered)		5		5

~~Marine Transportation~~

The Company, through its marine transportation segment, provides 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, 2020, the Company operated 1,084 inland tank barges, of which 38 were leased, with a total capacity of 24.5 million barrels, and an average of 265 inland towboats, of which 36 were chartered. This compares with 1,065 inland tank barges operated as of September 30, 2019, of which 24 were leased, with a total capacity of 23.7 million barrels, and an average of 304 inland towboats, of which 73 were chartered.

The Company’s coastal tank barge fleet as of September 30, 2020, consisted of 47 tank barges, of which two were leased, with 4.3 million barrels of capacity, and 44 tugboats, of which four were chartered. This compares with 49 coastal tank barges operated as of September 30, 2019, of which two were leased, with 4.7 million barrels of capacity, and 48 tugboats, of which five were chartered. The Company owns and operates four offshore dry-bulk cargo barge and tugboat units 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, a shipyard for building towboats and performing routine maintenance near the Houston Ship Channel, as well as a two-thirds interest in Osprey Line, L.L.C., which transports project cargoes and cargo containers by barge.

During the 2021 first quarter, the Company retired seven inland tank barges and returned two leased barges. The net result was a decrease of nine inland tank barges and approximately 354,000 barrels of capacity during the 2021 first quarter.

The ~~following table sets forth the~~ Company’s marine transportation segment’s revenues ~~costs~~for the 2021 first quarter decreased 25% and ~~expenses,~~ operating income ~~and operating margins (dollars in thousands):~~

Three months ended September 30, Nine months ended September 30,
2020 2019 % Change 2020 2019 % Change
Marine transportation revenues $ 320,602 $ 412,665 (22 )% $ 1,104,846 $ 1,185,072 (7 )%

Costs and expenses:
Costs of sales and operating expenses 207,038 257,869 (20 ) 717,923 771,596 (7 )
Selling, general and administrative 26,554 28,424 (7 ) 85,294 90,896 (6 )
Taxes, other than on income 7,307 9,230 (21 ) 27,852 26,355 6
Depreciation and amortization 47,312 44,445 6 139,295 134,861 3
288,211 339,968 (15 ) 970,364 1,023,708 (5 )
Operating income $ 32,391 $ 72,697 (55 )% $ 134,482 $ 161,364 (17 )%
Operating margins 10.1 % 17.6 % 12.2 % 13.6 %

~~Marine Transportation Revenues~~

The following table shows the marine transportation markets serviced by the Company, the marine transportation revenue distribution, products moved and the drivers of the demand for the products the Company transports:

Markets
Serviced

2020 Third
Quarter
Revenue
Distribution

2020 Nine
Months
Revenue
Distribution
Products Moved Drivers
Petrochemicals 51% 51% Benzene, Styrene, Methanol, Acrylonitrile, Xylene, Naphtha, Caustic Soda, Butadiene, Propylene Consumer non-durables – 70%, Consumer durables – 30%

Black Oil 27% 27% 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 19% 19% Gasoline, No. 2 Oil, Jet Fuel, Heating Oil, Diesel Fuel, Ethanol Vehicle Usage, Air Travel, Weather Conditions, Refinery Utilization

Agricultural Chemicals 3% 3% Anhydrous Ammonia, Nitrogen – Based Liquid Fertilizer, Industrial Ammonia Corn, Cotton and Wheat Production, Chemical Feedstock Usage

~~Marine transportation revenues for the 2020 third quarter and first nine months~~ decreased ~~22% and 7%, respectively,~~96% compared with the ~~2019 third~~2020 first quarter revenues and ~~first nine months.~~operating income. The ~~decrease was~~decreases were primarily due to reduced barge utilization in the inland and coastal markets as well as reduced term and ~~decreased~~ spot ~~contract~~ pricing in the inland market, each as a result of a reduction in demand due to the COVID-19 pandemic, lower fuel rebills, retirements of three large coastal barges, and planned shipyard activity in the coastal market. These reductions were partially offset by the ~~acquisition~~addition of the Savage Inland Marine, LLC (“Savage”) fleet acquired on April 1, ~~2020 and the Cenac fleet acquired on March 14, 2019.~~2020. The ~~2020 third~~2021 first quarter was also heavily impacted by ~~hurricanes~~Winter Storm Uri which shutdown many Gulf Coast refineries and ~~tropical storms along~~chemical plants for an extended period of time starting in mid-February. These emergency shutdowns resulted in significantly reduced liquids production and lower volumes for the ~~East~~Company’s inland marine transportation market during the quarter. The 2021 and ~~Gulf Coasts and the closure of the Illinois River. For the year to date periods, the~~ 2020 first ~~quarter and 2019 first six months~~quarters were ~~each~~also impacted by poor operating conditions including seasonal wind and ~~high delay days due to heavy~~ fog ~~and wind~~ along the Gulf Coast, ~~high water~~flooding on the Mississippi River, ~~System,~~ and various lock closures ~~of key waterways as a result of lock maintenance projects, as well as~~along the Gulf Intracoastal Waterway, in addition to ice on the Illinois River during the 2021 first quarter and increased shipyard days on large capacity coastal ~~vessels. The 2019~~vessels during the 2020 first ~~six months was also impacted by prolonged periods of ice on the Illinois River and a fire at a chemical storage facility on the Houston Ship Channel.~~quarter. For the 2021 and 2020 ~~third quarter and~~ first ~~nine months,~~quarters, the inland tank barge fleet contributed ~~77%~~75% and 79%, respectively, and the coastal fleet contributed ~~23%~~25% and 21%, respectively, of marine transportation revenues. ~~For both the 2019 third quarter and first nine months, the inland~~

Inland tank barge ~~fleet contributed 77%, and~~utilization levels averaged in the ~~coastal fleet contributed 23% of marine transportation revenues. The Savage fleet was quickly integrated into~~mid-70% range during the ~~Company’s own fleet and the former Savage equipment began operating under Company contracts soon after the acquisition closed, with former Savage barges working~~2021 first quarter compared with the ~~Company’s existing towboats and vice versa resulting in differences in vessel utilization and pricing among individual assets and the consolidated fleet. Due~~low to this quick integration, it is not practical to provide a specific amount of revenues for the Savage fleet but the acquisition in April 2020 was one of the factors that offset decreases in marine transportation revenues inmid-90% range during the 2020 ~~third~~first quarter. The 2021 first quarter ~~and first nine months as compared~~continued to ~~2019.~~

~~During the 2020 second and third quarters,~~be impacted by reduced demand as a result of the COVID-19 pandemic and the resulting economic slowdown ~~contributed to lower barge utilization. Inland tank barge utilization levels averaged in~~as well as the low to mid-90% range during the 2020 first quarter, the mid-80% range during the 2020 second quarter, and the low 70% range during the 2020 third quarter. In 2019, inland tank barge utilization levels averaged in the mid-90% range during both the 2019 first and second quarters and the low 90% range during the 2019 third quarter.impact of reduced volumes as a result of Winter Storm Uri. The 2020 first quarter ~~and 2019 first nine months each~~ experienced strong demand from petrochemicals, black oil, and refined petroleum products customers. ~~Extensive~~In addition, extensive delay days due to poor operating conditions and lock maintenance projects in the 2020 first quarter ~~and 2019 first six months~~ slowed the transport of customer cargoes and contributed to strong ~~barge utilization during those periods.~~utilization.

Coastal tank barge utilization levels averaged in the mid-70% range during the 2021 first quarter compared with the low to mid-80% range ~~during~~in the 2020 first quarter and the mid-70% range during both the 2020 second and third quarters. In 2019, coastal tank barge utilization levels averaged in the low 80% range during the 2019 first quarter and the mid-80% range during both the 2019 second and third quarters. Barge utilizationquarter. Utilization in the coastal marine fleet continued to be impacted by the oversupply of smaller tank barges in the coastal industry ~~during each of the 2020~~in 2021 and ~~2019 first nine months.~~

The petrochemical market, the Company’s largest market, contributed 51% of marine transportation revenues for both the 2020 third quarter and first nine months, reflecting reduced volumes from Gulf Coast petrochemical plants for both domestic consumption and to terminals for export destinations as a result of the COVID-19 pandemic. Also, during the 2020 third quarter, the petrochemical complex along the Gulf Coast was impacted by hurricanes and tropical storms, further reducing barge volumes and closing critical waterways for extended periods of time. During the quarter, U.S. chemical plant capacity utilization was relatively stable in the low to mid-70% range.

The black oil market, which contributed 27% of marine transportation revenues for both the 2020 third quarter and first nine months, reflected reduced demand as refinery production levels and the export of refined petroleum products and fuel oils declined as a result of the COVID-19 pandemic. During the quarter, U.S. refinery utilization ranged between 78% and 82% through mid-August before declining to 72% in early September as a result of hurricanes and tropical storms along the Gulf Coast. Refinery utilization modestly improved back to 75% by the end of the September. During the quarter, the Company continued to transport crude oil and natural gas condensate produced from the Permian Basin as well as reduced volumes from the Eagle Ford shale formation in Texas, both along the Gulf Intracoastal Waterway with inland vessels and in the Gulf of Mexico with coastal equipment. Additionally, the Company transported volumes of Utica natural gas condensate downriver from the Mid-Atlantic to the Gulf Coast and Canadian and Bakken crude downriver from the Midwest to the Gulf Coast.

The refined petroleum products market, which contributed 19% of marine transportation revenues for both the 2020 third quarter and first nine months reflected lower volumes in both the inland and coastal markets as a result of reduced demand related to the COVID-19 pandemic and the impact from hurricanes and tropical storms along the Gulf Coast during the quarter. During the quarter, U.S. refinery utilization ranged between 78% and 82% through mid-August before declining to 72% in early September as a result of the hurricanes. Refinery utilization modestly improved back to 75% by the end of the September.

The agricultural chemical market, which contributed 3% of marine transportation revenues for both the 2020 third quarter and first nine months saw modest reductions in demand for transportation of both domestically produced and imported products during the quarter, primarily due to reduced demand associated with the COVID-19 pandemic.

For the 2020 third quarter, the inland operations incurred 1,335 delay days, 42% fewer than the 2,284 delay days that occurred during the 2019 third quarter. For the first nine months of 2020, the inland operations incurred 8,640 delay days, 16% fewer than the 10,228 delay days that occurred during the 2019 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. Reduced delay days during the 2020 third quarter and first nine months are primarily due to lower barge utilization, despite significant delays associated with hurricane activity along the Gulf Coast during the third quarter. In addition, delay days for the 2020 first quarter and 2019 first six months reflected poor operating conditions due to heavy fog and wind along the Gulf Coast, high water conditions on the Mississippi River System, and closures of key waterways as a result of lock maintenance projects. The 2019 first six months was also impacted by prolonged periods of ice on the Illinois River and a fire at a chemical storage facility on the Houston Ship Channel.2020.

During the 2021 and 2020 ~~third quarter~~first quarters, approximately 65% and ~~first nine months, approximately 70% and 65%~~60%, respectively, of marine transportation’s inland revenues were under term contracts and ~~30%~~35% and ~~35%~~40%, respectively, ~~were spot contract revenues. During both the 2019 third quarter and first nine months, approximately 65% of marine transportation’s inland revenues were under term contracts, and 35%~~ were spot contract revenues. Inland time charters during ~~both~~ the ~~2020 third~~2021 first quarter ~~and first nine months~~ represented ~~67%~~61% of the inland revenues under term contracts compared with ~~61% and 62%, respectively, in the 2019 third quarter and first nine months. Rates on inland term contracts renewed~~65% in the 2020 first ~~quarter increased in~~quarter. During the ~~1% to 3%~~2021 and 2020 first quarters, approximately 80% and 85%, respectively, of the coastal revenues were under term contracts and 20% and 15%, respectively, were spot contract revenues. Coastal time charters represented approximately 85% and 90% of coastal revenues under term contracts during the 2021 and 2020 first quarters, respectively. 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 ~~compared with~~of pricing changes in term and spot contracts renewed ~~in the 2019 first quarter. Rates on inland term~~during 2021 compared to contracts renewed induring the ~~2020 second~~corresponding quarter were flat compared with term contracts renewed in the 2019 second quarter. Rates on inland term contracts renewed in the 2020 third quarter decreased in the 1% to 3% average range compared with term contracts renewed in the 2019 third quarter. Spot contract rates in the 2020 first quarter increased in the 4% to 6% average range compared to the 2019 first quarter. Spot contract rates in the 2020 second quarter decreased in the 5% to 10% average range compared to the 2019 second quarter. Spot contract rates in the 2020 third quarter decreased approximately 10% compared to the 2019 third quarter. There was no material rateof 2020:

	Three Months Ended
	March 31, 2021
Inland market:
Term decrease		(7)% – (9	)%
Spot decrease		(25)% – (30	)%

Coastal market (a):
Term increase (decrease)		No change
Spot increase (decrease)		No change

(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, ~~2020 related to~~2021, annual escalators for labor and the producer price index on a number of inland multi-year ~~contracts.~~

~~During both the 2020 third quarter and first nine months,~~contracts resulted in rate increases on those contracts of approximately 85% of coastal revenues were under term contracts, and 15% were under spot contract revenues. During both the 2019 third quarter and first nine months, approximately 80% of the coastal revenues were under term contracts and 20% were spot contract revenues. Coastal time charters during both the 2020 third quarter and first nine months represented approximately 90% of coastal revenues under term contracts compared with 85% during both the 2019 third quarter and first nine months. Spot and term contract pricing in the coastal market are contingent on various factors including geographic location, vessel capacity, vessel type, and product serviced. Rates on coastal term contracts renewed in the 2020 first quarter increased in the 10% to 15% average range compared with term contracts renewed in the 2019 first quarter. Rates on coastal term contracts renewed in the 2020 second quarter were flat compared with term contracts renewed in the 2019 second quarter. Rates on coastal term contracts renewed in the 2020 third quarter decreased in the 4% to 6% average range compared with term contracts renewed in the 2019 third quarter. Spot market rates in the 2020 first quarter improved in the 10% to 15% average range compared to the 2019 first quarter. Spot market rates in both the 2020 second and third quarters were flat compared to the 2019 second and third quarters.

~~Marine Transportation Costs and Expenses~~

~~Costs and expenses for the 2020 third quarter and first nine months decreased 15% and 5%~~3%, respectively, compared with the 2019 third quarter and first nine months. Costs of sales and operating expenses for the 2020 third quarter and first nine months decreased 20% and 7%, respectively, compared with the 2019 third quarter and first nine months, primarily due to cost reductions across the segment, including a reduction in towboats during the second and third quarters and a reduction in maintenance expenses, partially offset by the addition of the Savage fleet in April 2020 and the Cenac fleet in March 2019.excluding fuel.

The ~~inland~~ marine transportation fleet operated an average of 265 towboats during the 2020 third quarter, of which an average of 36 were chartered, compared with 304 during the 2019 third quarter, of which an average of 73 were chartered. The decrease was primarily due to the chartered towboats released during the 2020 second and third quarters, partially offset by the addition of inland towboats with the Savage acquisition in April 2020. Generally, 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, 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-fourth of its horsepower requirements.

During the 2020 third quarter, the inland operations consumed 10.2 million gallons of diesel fuel compared to 13.2 million gallons consumed during the 2019 third quarter. The average price per gallon of diesel fuel consumed during the 2020 third quarter was $1.27 per gallon compared with $2.00 per gallon for the 2019 third quarter. During the 2020 first nine months, the inland operations consumed 36.3 million gallons of diesel fuel compared to 37.2 million gallons consumed during the 2019 first nine months. The average price per gallon of diesel fuel consumed during the 2020 first nine months was $1.47 per gallon compared with $2.06 per gallon for the 2019 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 contracts are adjusted. Spot contracts do not have escalators for fuel.

Selling, general and administrative expenses for the 2020 third quarter and first nine months decreased 7% and 6%, respectively, compared with the 2019 third quarter and first nine months. The decrease is primarily due to aggressive cost reduction initiatives throughout the organization as a result of the uncertainty surrounding the COVID-19 pandemic.

Taxes, other than on income, for the 2020 third quarter and first nine months decreased 21% and increased 6%, respectively, compared with the 2019 third quarter and first nine months. The decrease for the 2020 third quarter is due primarily to lower property taxes on marine equipment and lower waterway use taxes due to reduced activity as well as lower state franchise taxes. The increase during the 2020 first nine months is primarily due to higher property taxes on marine transportation equipment, including the Savage and Cenac fleets.

~~Marine Transportation Operating Income and Operating Margins~~

Marine transportation operating income for the 2020 third quarter and first nine months decreased 55% and 17%, respectively, compared with the 2019 third quarter and first nine months. The 2020 third quartersegment operating margin was ~~10.1%~~0.6% for the 2021 first quarter compared with ~~17.6% for the 2019 third quarter and 12.2%~~12.6% for the 2020 first nine months compared to 13.6% for the 2019 first nine months. The decreases in operating income and operating margin were primarily due to reduced barge utilization in the inland and coastal markets and reduced spot contract pricing in the inland market, each as a result of a reduction in demand due to the COVID-19 pandemic, partially offset by aggressive cost reductions throughout the organization, including chartered towboats released during the 2020 second and third quarters.quarter.

Distribution and Services

The Company, through its distribution and services segment, sells genuine replacement parts, provides service mechanics to overhaul and repair engines, transmissions, reduction gears and related oilfield services equipment, rebuilds component parts or entire diesel engines, transmissions and reduction gears and related equipment used in oilfield services, marine, power generation, on-highway and other industrial applications. The Company also rents equipment including generators, industrial compressors, 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.

For the 2021 first quarter, the distribution and services segment generated 39% of the Company’s revenue, of which 89% was generated from service and parts and 11% from manufacturing. The results of the distribution and services segment are largely influenced by the economic cycles of the 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 2021 first quarter decreased 19% and operating income decreased 22% compared with the 2020 first quarter revenue and operating income. In the commercial and industrial market, the decreases were primarily attributable to reduced economic activity as a result of the COVID-19 pandemic resulting in lower business levels in the on-highway and power generation businesses. The marine repair business was also down compared to the 2020 first quarter due to reduced major engine overhaul activity. The commercial and industrial market was also impacted by Winter Storm Uri with reduced activity levels at many locations across the Southern U.S. For the 2021 first quarter, the commercial and industrial market contributed 68% of the distribution and services revenues.

In the oil and gas market, revenues and operating income decreased compared to the 2020 first quarter due to reduced oilfield activity which resulted in lower customer demand for new and overhauled engines, transmissions, parts, and service. The manufacturing business also experienced reduced deliveries of new and remanufactured pressure pumping equipment. The oil and gas market was also impacted by Winter Storm Uri with reduced activity levels at many locations across Texas and Oklahoma. For the 2021 first quarter, the oil and gas market contributed 32% of the distribution and services revenues.

The distribution and services segment operating margin for both the 2021 and 2020 first quarters was 1.5%.

Outlook

While there remains uncertainty around the full impact of the COVID-19 pandemic, the Company expects a modest improvement during the 2021 second quarter as activity continues to build with more meaningful improvements in utilization levels in the second half of 2021. In the 2021 second quarter, the Company expects market conditions and barge utilization in the inland market to improve which should help boost spot market pricing in the coming months as pricing typically improves with barge utilization. In distribution and services, the Company anticipates increased activity across much of the segment, yielding higher revenues and improved operating margins. Overall, the Company anticipates a return to profitability during the 2021 second quarter.

In the inland marine transportation market, barge utilization in April has improved to over 80% and is expected to increase further as the economy recovers and refineries and chemical plants return to full operations following Winter Storm Uri. In the second half of 2021, the Company anticipates barge utilization to improve into the high 80% to low 90% range which should lead to a more positive pricing environment in the coming months. In the 2021 second quarter, inland revenues and operating margin are expected to sequentially improve primarily due to increasing barge utilization and more favorable weather conditions. However, certain costs, including maintenance, horsepower, and labor are expected to increase in the second quarter as operations ramp up to meet demand. During the balance of 2021 and into 2022, term contracts that renewed lower during 2020 and the 2021 first quarter will gradually reset. Anticipated improvements in the spot market, which currently represents approximately 35% of inland revenue, will contribute to more meaningful increases in revenues and operating margins in the second half of the year.

As of March 31, 2021, the Company estimated there were approximately 4,000 inland tank barges in the industry fleet, of which approximately 350 were over 30 years old and approximately 260 of those over 40 years old. The Company estimates that approximately 35 to 40 new tank barges have been ordered for delivery in 2021 and many older tank barges, including an expected 25 by the Company, will be retired, dependent on 2021 market conditions. Historically, 75 to 150 older inland tank barges are retired from service each year industry-wide. The extent of the retirements is 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.

In the coastal marine transportation market, weak market conditions and limited spot demand are expected to continue in the second quarter. The Company expects coastal barge utilization to remain in the mid-70% range with revenues and operating margins similar to the 2021 first quarter. In the second half of 2021, coastal barge utilization and operating results are expected to improve as demand for refined products grows and potential infrastructure spending increases demand for asphalt.

As of March 31, 2021, the Company estimated there were approximately 280 tank barges operating in the 195,000 barrels or less coastal industry fleet, the sector of the market in which the Company operates, and approximately 20 of those were over 25 years old. The Company is aware of one announced small specialized coastal ATB in the 195,000 barrels or less category that was delivered in the 2021 first quarter with no further coastal barges currently under construction.

The results of the distribution and services segment are largely influenced by the cycles of the land-based oilfield service and oil and gas operator and producer markets, marine, power generation, on-highway and other industrial markets. An improving economy and increased activity in the oilfield are expected to contribute to sequential improvement in revenue and operating income in the 2021 second quarter and full year. In the commercial and industrial market, revenues are expected to benefit from improving economic conditions as well as from growth in the on-highway market, due in part to the Company’s new online parts sales platform which was launched in 2020. However, these gains are expected to be partially offset by lower sales of new marine engines which remained strong throughout 2020.

In the distribution and services oil and gas market, higher commodity prices and increasing well completions activity are expected to contribute to improved demand for new transmissions, service, and parts. Additionally, a heightened focus on sustainability across the energy sector and industrial complex is expected to result in additional deliveries of environmentally friendly equipment throughout the remainder of the year. Overall, full year distribution and services revenues are expected to significantly increase with positive operating margins in the low to mid-single digits for the full year.

Results of Operations

The following table sets forth the Company’s marine transportation and distribution and services revenues and the percentage of each to total revenues for the comparable periods (dollars in thousands):

	Three Months Ended March 31,
	2021		%			2020		%
Marine transportation	$	300,951		61	%	$	403,257		63	%
Distribution and services		195,899		39			240,669		37
	$	496,850		100	%	$	643,926		100	%

Marine Transportation

The following table sets forth the Company’s marine transportation segment’s revenues, costs and expenses, operating income, and operating margin (dollars in thousands):

	Three Months Ended March 31,
	2021			2020			% Change
Marine transportation revenues	$	300,951		$	403,257			(25	)%

Costs and expenses:
Costs of sales and operating expenses		214,125			265,895			(19	)
Selling, general and administrative		30,578			31,924			(4	)
Taxes, other than on income		6,729			9,423			(29	)
Depreciation and amortization		47,579			45,299			5
		299,011			352,541			(15	)
Operating income	$	1,940		$	50,716			(96	)%
Operating margin		0.6	%		12.6	%

Marine Transportation Revenues

Markets Serviced	2021 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	20%	Gasoline, No. 2 Oil, Jet Fuel, Heating Oil, Diesel Fuel, Ethanol	Vehicle Usage, Air Travel, Weather Conditions, Refinery Utilization

Agricultural Chemicals	4%	Anhydrous Ammonia, Nitrogen-Based Liquid Fertilizer, Industrial Ammonia	Corn, Cotton and Wheat Production, Chemical Feedstock Usage

The Company’s marine transportation segment’s revenues for the 2021 first quarter decreased 25% and operating income decreased 96% compared with the 2020 first quarter revenues and operating income. The decreases were primarily due to reduced barge utilization in the inland and coastal markets as well as reduced term and spot pricing in the inland market, partially offset by the addition of the Savage fleet acquired on April 1, 2020. The 2021 first quarter was also heavily impacted by Winter Storm Uri which shutdown many Gulf Coast refineries and chemical plants for an extended period of time starting in mid-February. These emergency shutdowns resulted in significantly reduced liquids production and lower volumes for the Company’s inland marine transportation market during the quarter. The 2021 and 2020 first quarters were also impacted by poor operating conditions including seasonal wind and fog along the Gulf Coast, flooding on the Mississippi River, and various lock closures along the Gulf Intracoastal Waterway, in addition to ice on the Illinois River during the 2021 first quarter and increased shipyard days on large capacity coastal vessels during the 2020 first quarter. For the 2021 and 2020 first quarters, the inland tank barge fleet contributed 75% and 79%, respectively, and the coastal fleet contributed 25% and 21%, respectively, of marine transportation revenues.

Inland tank barge utilization levels averaged in the mid-70% range during the 2021 first quarter compared with the low to mid-90% range during the 2020 first quarter. The 2021 first quarter continued to be impacted by reduced demand as a result of the COVID-19 pandemic and the resulting economic slowdown as well as the impact of reduced volumes as a result of Winter Storm Uri. The 2020 first quarter experienced strong demand from petrochemicals, black oil, and refined petroleum products customers. In addition, extensive delay days due to poor operating conditions and lock maintenance projects in the 2020 first quarter slowed the transport of customer cargoes and contributed to strong utilization.

Coastal tank barge utilization levels averaged in the mid-70% range during the 2021 first quarter compared with the low to mid-80% range in the 2020 first quarter. Utilization in the coastal marine fleet continued to be impacted by the oversupply of smaller tank barges in the coastal industry in 2021 and 2020.

The petrochemical market, the Company’s largest market, contributed 50% of marine transportation revenues for the 2021 first quarter, reflecting reduced volumes from Gulf Coast petrochemical plants for both domestic consumption and to terminals for export destinations as a result of the COVID-19 pandemic. During the 2021 first quarter, as much as 80% of U.S. chemical plant capacity was offline at the peak of Winter Storm Uri, contributing to significantly reduced volumes and revenues.

The black oil market, which contributed 26% of marine transportation revenues for the 2021 first quarter, reflected reduced demand as refinery production levels and the export of refined petroleum products and fuel oils declined as a result of the COVID-19 pandemic. During the 2021 first quarter, U.S. refinery utilization dropped to near 40% during the peak of Winter Storm Uri, contributing to significantly reduced volumes and revenues. During the 2021 first quarter, the Company continued to transport crude oil and natural gas condensate produced from the Permian Basin as well as reduced volumes from 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 20% of marine transportation revenues for the 2021 first quarter reflected lower volumes in both the inland and coastal markets as a result of reduced demand related to the COVID-19 pandemic. In addition, during the 2021 first quarter, U.S. refinery utilization dropped to near 40% during the peak of Winter Storm Uri, contributing to significantly reduced volumes and revenues.

The agricultural chemical market, which contributed 4% of marine transportation revenues for the 2021 first quarter, saw modest reductions in demand for transportation of both domestically produced and imported products during the quarter, primarily due to reduced demand associated with the COVID-19 pandemic.

For the 2021 first quarter, the inland operations incurred 2,854 delay days, 36% fewer than the 4,490 delay days that occurred during the 2020 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 for the 2021 and 2020 first quarters reflected poor operating conditions due to heavy wind and fog along the Gulf Coast, high water conditions on the Mississippi River System, and closures of key waterways as a result of lock maintenance projects. The decrease in delay days in the 2021 first quarter also reflects reduced volumes and barge utilization compared to the 2020 first quarter.

During the 2021 and 2020 first quarters, approximately 65% and 60%, respectively, of marine transportation’s inland revenues were under term contracts and 35% and 40%, respectively, were spot contract revenues. Inland time charters during the 2021 first quarter represented 61% of the inland revenues under term contracts compared with 65% in the 2020 first quarter. During the 2021 and 2020 first quarters, approximately 80% and 85%, respectively, of the coastal revenues were under term contracts and 20% and 15%, respectively, were spot contract revenues. Coastal time charters represented approximately 85% and 90% of coastal revenues under term contracts during the 2021 and 2020 first quarters, respectively.

The following table summarizes the average range of pricing changes in term and spot contracts renewed during 2021 compared to contracts renewed during the corresponding quarter of 2020:

	Three Months Ended
	March 31, 2021
Inland market:
Term decrease		(7)% – (9	)%
Spot decrease		(25)% – (30	)%

Coastal market (a):
Term increase (decrease)		No change
Spot increase (decrease)		No change

(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, 2021, 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 3%, excluding fuel.

Marine Transportation Costs and Expenses

Costs and expenses for the 2021 first quarter decreased 15% compared with the 2020 first quarter. Costs of sales and operating expenses for the 2021 first quarter decreased 19% compared with the 2020 first quarter, primarily due to cost reductions across the segment, including a reduction in towboats during the 2020 last nine months and the 2021 first quarter and a reduction in maintenance expenses, partially offset by the addition of the Savage fleet in April 2020.

The inland marine transportation fleet operated an average of 241 towboats during the 2021 first quarter, of which an average of 25 were chartered, compared with 311 during the 2020 first quarter, of which an average of 77 were chartered. The decrease was primarily due to chartered towboats released during the 2020 last nine months and the 2021 first quarter, partially offset by the addition of inland towboats with the Savage acquisition in April 2020. Generally, as demand or anticipated demand increases or decreases, as new tank barges are added to or removed from the fleet, as chartered towboat availability changes, or as weather or water conditions dictate, the Company charters in or releases chartered towboats in an effort to balance horsepower needs with current requirements. The Company has historically used chartered towboats for approximately one-fourth of its horsepower requirements.

During the 2021 first quarter, the inland operations consumed 10.8 million gallons of diesel fuel compared to 12.6 million gallons consumed during the 2020 first quarter. The average price per gallon of diesel fuel consumed during the 2021 first quarter was $1.65 per gallon compared with $2.00 per gallon for the 2020 first quarter. 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 contracts are adjusted. Spot contracts do not have escalators for fuel.

Selling, general and administrative expenses for the 2021 first quarter decreased 4% compared with the 2020 first quarter. The decrease is primarily due to cost reduction initiatives throughout the organization as a result of reduced business activity levels due to the COVID-19 pandemic.

Taxes, other than on income, for the 2021 first quarter decreased 29% compared with the 2020 first quarter, primarily due to lower waterway use taxes and property taxes on marine transportation equipment.

Depreciation and amortization for the 2021 first quarter increased 5% compared to the 2020 first quarter. The increase is primarily due to the acquisition of the Savage fleet in April 2020.

Marine Transportation Operating Income and Operating Margin

Marine transportation operating income for the 2021 first quarter decreased 96% compared with the 2020 first quarter. The 2021 first quarter operating margin was 0.6% compared with 12.6% for the 2020 first quarter. The decreases in operating income and operating margin were primarily due to reduced barge utilization in the inland and coastal markets as well as decreased term and spot contract pricing in the inland market, each as a result of a reduction in demand due to the COVID-19 pandemic as well as the impact of reduced volumes as a result of Winter Storm Uri, partially offset by cost reductions throughout the organization, including chartered towboats released during the 2020 last nine months and the 2021 first quarter.

Distribution and Services

The following table sets forth the Company’s distribution and services segment’s revenues, costs and expenses, operating income, ~~(loss)~~ and operating ~~margins~~margin (dollars in thousands):

	Three months ended September 30,									Nine months ended September 30,									Three Months Ended March 31,
	2020			2019			% Change			2020			2019			% Change			2021			2020			% Change
Distribution and services revenues	$	175,965		$	254,144			(31	)%	$	576,806		$	997,400			(42	)%
Distribution and services																			$	195,899		$	240,669			(19	)%

Costs and expenses:
Costs of sales and operating expenses		133,726			200,645			(33	)		449,948			787,068			(43	)		149,127			187,673			(21	)
Selling, general and administrative		33,098			33,608			(2	)		108,295			108,194			—			36,488			37,972			(4	)
Taxes, other than on income		1,754			1,674			5			5,636			5,102			10			1,492			1,970			(24	)
Depreciation and amortization		6,283			9,085			(31	)		22,252			27,167			(18	)		5,881			9,336			(37	)
		174,861			245,012			(29	)		586,131			927,531			(37	)		192,988			236,951			(19	)
Operating income (loss)	$	1,104		$	9,132			(88	)%	$	(9,325	)	$	69,869			(113	)%
Operating margins		0.6	%		3.6	%					(1.6	)%		7.0	%
Operating income																			$	2,911		$	3,718			(22	)%
Operating margin																				1.5	%		1.5	%

Distribution and Services Revenues

The following table shows the markets serviced by the Company’s distribution and services segment, the revenue distribution, and the customers for each market:

Markets Serviced
2020 Third
Quarter
Revenue
Distribution

2020 Nine Months
Revenue Distribution
Customers
Oil and Gas 28% 27% Oilfield Services, Oil and Gas Operators and Producers

Commercial and Industrial 72% 73% 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

Markets Serviced	2021 First Quarter Revenue Distribution	Customers
Commercial and Industrial	68%	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

Oil and Gas	32%	Oilfield Services, Oil and Gas Operators and Producers

Distribution and services revenues for the ~~2020 third~~2021 first quarter decreased 19% and ~~first nine months~~operating income decreased ~~31% and 42%, respectively,~~22% compared with the ~~2019 third~~2020 first quarter revenue and ~~first nine months. The decrease was~~operating income. In the commercial and industrial market, the decreases were primarily attributable to reduced economic activity ~~in the oilfield~~ as a result of ~~oil price volatility throughout 2019~~the COVID-19 pandemic resulting in lower business levels in the on-highway and power generation businesses. The marine repair business was also down compared to the 2020 first ~~nine months,~~quarter due to reduced major engine overhaul activity. The commercial and industrial market was also impacted by Winter Storm Uri with reduced activity levels at many locations across the ~~extensive downturn in~~Southern U.S. For the 2021 first quarter, the commercial and industrial market contributed 68% of distribution and services revenues.

In the oil and gas ~~exploration~~market, revenues and operating income decreased compared to the 2020 first quarter due to ~~low oil prices, caused~~reduced oilfield activity which resulted in part by the COVID-19 pandemic, an oversupply of pressure pumping equipment in North America, and reduced spending and enhanced cash flow discipline for the Company’s major oilfield customers. As a result,lower customer demand for new and ~~incremental orders for~~overhauled engines, transmissions, parts, and service. The manufacturing business also experienced reduced deliveries of new and remanufactured pressure pumping ~~equipment~~equipment. The oil and ~~sales of new~~gas market was also impacted by Winter Storm Uri with reduced activity levels at many locations across Texas and ~~overhauled transmissions and related parts and service declined during the 2020 third quarter and first nine months.~~Oklahoma. For the ~~2020 third~~2021 first quarter, ~~and first nine months,~~ the oil and gas market contributed ~~28% and 27%, respectively,~~32% of ~~the distribution and services revenues. For the 2019 third quarter and first nine months, the oil and gas market contributed 46% and 54%, respectively, of the distribution and services revenues.~~

2923

Distribution and Services Costs and Expenses

Costs and expenses for the ~~2020 third~~2021 first quarter ~~and first nine months~~ decreased ~~29% and 37%, respectively,~~19% compared with the ~~2019 third quarter and~~2020 first ~~nine months.~~quarter. Costs of sales and operating expenses for the ~~2020 third~~2021 first quarter ~~and first nine months~~ decreased ~~33% and 43%~~21%, ~~respectively,~~ compared with the ~~2019 third~~2020 first quarter, ~~and first nine months,~~ reflecting lower demand for new and overhauled transmissions and related parts and service and reduced demand for new pressure pumping equipment in the oil and gas market.

Selling, general and administrative expenses for the ~~2020 third~~2021 first quarter decreased 2%4% compared to the ~~2019 third quarter and were flat for the~~ 2020 first ~~nine months compared to the 2019 first nine months.~~quarter. The decrease ~~in the 2020 third quarter~~ was primarily due to cost reduction initiatives throughout the organization as a result of ~~the uncertainty surrounding~~reduced business activity levels due to the COVID-19 pandemic, partially offset by the Convoy acquisition. For the 2020 first nine months, cost reductions were also offset by a bad debt expense charge of $3,339,000 as a result of the bankruptcy of a large oil and gas customer and $1,354,000 of severance expense as a result of continued workforce reductions, each recorded during the 2020 second quarter.pandemic.

Depreciation and amortization for the 2021 first quarter decreased 37% compared to the 2020 ~~third quarter and~~ first ~~nine months decreased 31% and 18%, respectively, compared with the 2019 third quarter and first nine months.~~quarter. The decrease was primarily due to lower amortization of intangible assets other than goodwill, which were impaired during the 2020 first quarter.

Distribution and Services Operating Income ~~(Loss)~~ and Operating ~~Margins~~Margin

Operating income for the distribution and services segment for the ~~2020 third~~2021 first quarter ~~and first nine months~~ decreased ~~88% and 113%, respectively,~~22% compared with the ~~2019 third quarter and~~2020 first ~~nine months.~~quarter. The operating margin for both the ~~2020 third quarter was 0.6% compared with 3.6% for the 2019 third quarter~~2021 and ~~(1.6)% for the~~ 2020 first ~~nine months compared to 7.0% for the 2019 first nine months.~~quarters was 1.5%. The results ~~primarily reflected a decrease~~reflect lower business levels in ~~margins in~~both the commercial and industrial ~~market~~ and ~~losses in the~~ oil and gas ~~market.~~markets, partially offset by lower costs and expenses.

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

The Company reported a net ~~loss~~gain on disposition of assets of ~~$316,000~~$2,133,000 for the ~~2020 third~~2021 first quarter compared ~~to $374,000 for the 2019 third quarter. The Company reported a net loss on disposition of assets of $13,000~~with $492,000 for the 2020 first ~~nine months compared to a net gain of $4,901,000 for the 2019 first nine months.~~quarter. The net gains ~~and losses~~ were primarily from sales of marine equipment. ~~The 2019 first nine months also included sales of distribution and services’ properties.~~

Other Income and Expenses

The following table sets forth impairments and other charges, other income, noncontrolling interests, and interest expense (dollars in thousands):

	Three months ended September 30,									Nine months ended September 30,									Three Months Ended March 31,
	2020			2019			% Change			2020			2019			% Change			2021			2020			% Change
Impairments and other charges	$	—		$	—			—	%	$	(561,274	)	$	—			N/A		$	—		$	(561,274	)		(100	)%
Other income	$	1,172		$	864			36	%	$	6,185		$	2,677			131	%	$	3,791		$	2,723			39	%
Noncontrolling interests	$	(204	)	$	(163	)		25	%	$	(743	)	$	(477	)		56	%	$	(255	)	$	(278	)		(8	)%
Interest expense	$	(11,809	)	$	(14,310	)		(17	)%	$	(37,316	)	$	(43,026	)		(13	)%	$	(10,966	)	$	(12,799	)		(14	)%

Impairments and Other Charges

Impairments and other charges in the 2020 first quarter includes ~~$561,274,000~~$561,274,000 before taxes, $433,341,000 after taxes, or $7.24 per share,, non-cash charges related to inventory write-downs, impairment of long-lived assets, including intangible assets and property and equipment, and impairment of goodwill in the distribution and services segment. See Note 8,6, Impairments and Other Charges in the financial statements for additional information.

Other Income

Other income for the 2021 and 2020 ~~and 2019 third~~first quarters includes income of ~~$1,154,000~~$1,983,000 and ~~$865,000, respectively, and the 2020 and 2019 first nine months includes income of $4,793,000 and $2,591,000,~~$2,172,000, respectively, for all components of net benefit costs except the service cost component related to the Company’s defined benefit plans. Other income for the 2021 first quarter also includes interest income from the Company’s 2019 federal income tax refund received in February 2021.

Interest Expense

The following table sets forth average debt and average interest rate ~~and capitalized interest excluded from interest expense~~ (dollars in thousands):

	Three months ended September 30,						Nine months ended September 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
Average debt	$	1,609,367		$	1,513,607		$	1,583,846		$	1,538,097		$	1,417,127		$	1,442,032
Average interest rate		2.9	%		3.7	%		3.1	%		3.8	%		3.1	%		3.5	%
Capitalized interest	$	—		$	137		$	—		$	962

Interest expense for the ~~2020 third~~2021 first quarter ~~and first nine months~~ decreased ~~17% and 13%, respectively,~~14% compared with the ~~2019 third~~2020 first quarter ~~and first nine months,~~ primarily due to a lower average interest rate ~~partially offset by higher~~and lower average debt outstanding as a result of ~~borrowings to finance~~debt repayments since the ~~Convoy acquisition in January~~ 2020 ~~and~~first quarter. There was no capitalized interest excluded from interest expense during the ~~Savage acquisition in April 2020.~~2021 or 2020 first quarters.

~~(Provision)~~ Benefit for Taxes on Income

During the 2020 first ~~nine months of 2020,~~quarter, pursuant to provisions of the CARES Act, net operating losses generated during 2018 through 2020 were used to offset taxable income generated between 2013 through 2017. ~~This caused a reduction in the effective tax rate during the nine months ended September 30, 2020 as net~~Net operating losses carried back to tax years 2013 through 2017 were applied at the higher federal statutory tax rate of 35% compared to the statutory rate of 21% ~~currently~~ in effect at ~~September 30,~~March 31, 2020. The ~~2020 third quarter~~Company generated an effective tax rate benefit in the 2020 first quarter as a result of such ~~carrybacks and resulted in a lower effective tax rate for 2020.~~carrybacks.

Financial Condition, Capital Resources and Liquidity

Balance Sheet

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

	September 30, 2020		December 31, 2019		% Change			March 31, 2021		December 31, 2020		% Change
Assets:
Current assets	$	1,060,719	$	917,579		16	%	$	958,517	$	1,047,971		(9	)%
Property and equipment, net		3,958,144		3,777,110		5			3,881,273		3,917,070		(1	)
Operating lease right-of-use assets		178,714		159,641		12			172,198		174,317		(1	)
Goodwill		657,800		953,826		(31	)		657,800		657,800		—
Other intangibles, net		71,313		210,682		(66	)		66,646		68,979		(3	)
Other assets		54,430		60,259		(10	)		51,652		58,037		(11	)
	$	5,981,120	$	6,079,097		(2	)%	$	5,788,086	$	5,924,174		(2	)%
Liabilities and stockholders’ equity:
Current liabilities	$	450,065	$	514,115		(12	)%	$	453,443	$	466,032		(3	)%
Long-term debt, net – less current portion		1,578,189		1,369,751		15			1,348,904		1,468,546		(8	)
Deferred income taxes		591,346		588,204		1			606,561		606,844		—
Operating lease liabilities – less current portion		167,884		139,457		20			161,133		163,496		(1	)
Other long-term liabilities		115,269		95,978		20			129,301		131,703		(2	)
Total equity		3,078,367		3,371,592		(9	)		3,088,744		3,087,553		—
	$	5,981,120	$	6,079,097		(2	)%	$	5,788,086	$	5,924,174		(2	)%

Current assets as of ~~September 30, 2020 increased 16%~~March 31, 2021 decreased 9% compared with December 31, ~~2019.~~2020. Trade accounts receivable ~~decreased 20% driven by decreased~~increased 10% primarily due to increased business activity ~~in the distribution~~ and ~~services segment, primarily related to the oil and gas market and reduced~~increased barge utilization in the marine transportation segment, ~~partially offset by trade accounts receivable acquired from Convoy.~~primarily in March 2021, compared to the 2020 fourth quarter. Other accounts receivable ~~increased 147%~~decreased 40%, primarily due to the receipt of a tax refund of $119,493,000, including accrued interest, for the Company’s 2019 federal ~~income taxes receivable of $159,557,000 recorded for net operating losses generated during~~ tax ~~years 2019 and 2020 offset against taxable income during tax years 2014 through 2017 under provisions of the CARES Act.~~return. Inventories, net ~~decreased~~increased by 9%5% primarily due to ~~reduced business activity levels~~higher work in process related to equipment expected to be completed and shipped in the ~~oil~~second and ~~gas market and write downs~~third quarters of ~~oilfield and pressure pumping related inventory, partially offset by inventory acquired from Convoy.~~2021.

Property and equipment, net of accumulated depreciation, at ~~September 30, 2020 increased 5%~~March 31, 2021 decreased slightly compared with December 31, ~~2019.~~2020. The ~~increase~~decrease reflected ~~$117,930,000~~$52,846,000 of depreciation expense and $4,210,000 of property disposals during the 2021 first quarter, partially offset by $14,052,000 of capital expenditures (net of ~~a decrease~~an increase in accrued capital ~~expenditures)~~expenditures of $7,207,000) for the ~~2020~~2021 first ~~nine months,~~quarter, more fully described under Cash Flows and Capital Expenditures above, and $244,344,000 of acquisitions, primarily including the five newly constructed inland pressure barges purchased in the 2020 first nine months and the aggregate fair value of the property and equipment acquired in the Savage and Convoy acquisitions, partially offset by $157,602,000 of depreciation expense, $16,395,000 of impairment charges, and $7,243,000 of property disposals during the 2020 first nine months.below.

~~Operating lease right-of-use assets as of September 30, 2020 increased 12% compared with December 31, 2019, primarily due to leases acquired as part of the Savage and Convoy acquisitions.~~

Goodwill as of September 30, 2020 decreased 31% compared with December 31, 2019, primarily due to a goodwill impairment in the distribution and services segment, partially offset by goodwill recorded as part of the Savage and Convoy acquisitions.

Other intangibles, net, as of ~~September 30, 2020~~March 31, 2021 decreased ~~66%~~3% compared with December 31, ~~2019,~~2020, primarily due to ~~impairments~~amortization during the 2021 first quarter.

Other assets as of ~~customer relationship, tradename, and distributorship assets in the distribution and services segment as well as~~March 31, 2021 decreased 11% compared with December 31, 2020, primarily due to amortization of ~~intangibles, partially offset by intangible assets recorded as part of~~drydock expenditures during the ~~Convoy and Savage acquisitions.~~2021 first quarter.

Current liabilities as of ~~September 30, 2020~~March 31, 2021 decreased ~~12%~~3% compared with December 31, ~~2019.~~2020. Accounts payable ~~decreased 24%~~increased 8%, primarily due to ~~decreased shipyard maintenance accruals on coastal equipment and reduced activity levels~~an increase in ~~both~~accrued capital expenditures compared to the ~~marine transportation and distribution and services segments, partially offset by accounts payable assumed in the Convoy acquisition.~~2020 fourth quarter. Accrued liabilities decreased ~~3%,~~12% primarily ~~due to~~from payment during the ~~2020~~2021 first quarter of employee incentive compensation bonuses and property taxes, each accrued during 2019 and lower accrued incentive compensation during the 2020 first nine months as well as lower accrued interest. Deferred revenues decreased 27%, primarily reflecting reduced business activity levels in the distribution and services oil and gas market.2020.

Long-term debt, net – less current portion, as of ~~September 30, 2020 increased 15%~~March 31, 2021 decreased 8% compared with December 31, ~~2019,~~2020, primarily reflecting ~~additional borrowings~~repayments of ~~$360,000,000~~$120,000,000 under the Revolving Credit ~~Facility, partially offset by the repayment of $150,000,000 of 2.72% unsecured senior notes upon maturity.~~Facility. Net debt ~~discounts~~discount and deferred issuance costs were ~~$6,811,000~~$6,096,000 at ~~September 30, 2020~~March 31, 2021 and ~~$5,249,000 (excluding $2,650,000 attributable to the Revolving Credit Facility included in other assets on the balance sheet)~~$6,454,000 at December 31, ~~2019.~~

~~Deferred income taxes as of September 30, 2020 increased 1% compared with December 31, 2019, primarily reflecting the 2020 first nine months deferred tax provision of $5,382,000.~~

Operating lease liabilities – less current portion, as of September 30, 2020 increased 20% compared with December 31, 2019, primarily due to leases acquired as part of the Savage and Convoy acquisitions.2020.

Other long-term liabilities as of ~~September 30, 2020 increased 20%~~March 31, 2021 decreased 2% compared with December 31, ~~2019,~~2020. The decrease was primarily due to ~~accrued payroll taxes deferred under provisions of the CARES Act and an increase in pension liabilities, partially offset by~~ amortization of intangible liabilities and a decrease in pension liabilities.

Total equity as of ~~September 30, 2020 decreased 9%~~March 31, 2021 increased slightly compared with December 31, ~~2019.~~2020. The ~~decrease~~increase was primarily the result of ~~a net loss attributable to Kirby of $294,750,000 for the 2020 first nine months and tax withholdings of $3,193,000 on restricted stock and RSU vestings, partially offset by an increase in~~ additional paid-in capital due to amortization of unearned share-based compensation of ~~$12,066,000.~~$5,722,000, partially offset by a net loss attributable to Kirby of $3,375,000 for the 2021 first quarter and tax withholdings of $2,045,000 on restricted stock and RSU vestings.

Long-Term Financing

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

	September 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
Long-term debt, including current portion:
Revolving Credit Facility due March 27, 2024 (a)	$	360,000		$	—		$	130,000		$	250,000
Term Loan due March 27, 2024 (a)		375,000			375,000			375,000			375,000
2.72% senior notes due February 27, 2020		—			150,000
3.29% senior notes due February 27, 2023		350,000			350,000			350,000			350,000
4.2% senior notes due March 1, 2028		500,000			500,000			500,000			500,000
Credit line due June 30, 2021		—			—			—			—
Bank notes payable		155			16			434			40
		1,585,155			1,375,016			1,355,434			1,475,040
Unamortized debt discounts and issuance costs (b)		(6,811	)		(5,249	)
Unamortized debt discount and issuance costs								(6,096	)		(6,454	)
	$	1,578,344		$	1,369,767		$	1,349,338		$	1,468,586

(a)

Variable interest ~~rates~~rate of 1.5% ~~and 2.9%~~ at ~~September 30, 2020~~both March 31, 2021 and December 31, ~~2019, respectively.~~2020.

~~(b)~~

~~Excludes $2,650,000 attributable to the Revolving Credit Facility included in other assets at December 31, 2019.~~

The Company has a Credit Agreement with a group of commercial banks, with JPMorgan Chase Bank, N.A. as the administrative agent bank, allowing for an $850,000,000 Revolving Credit Facility and a Term Loan with a maturity date of March 27, 2024. The Term Loan is repayable in quarterly installments currently scheduled to commence September 30, 2023, with $343,750,000 due on March 27, 2024. The Term Loan is prepayable, in whole or in part, without penalty. The Revolving Credit Facility includes a $25,000,000 commitment which may be used for standby letters of credit. Outstanding letters of credit under the Revolving Credit Facility were ~~$5,363,000~~$5,063,000 and available borrowing capacity was ~~$484,637,000~~$714,937,000 as of ~~September 30, 2020.~~

~~On February 27, 2020, upon maturity, the Company repaid in full $150,000,000 of 2.72% unsecured senior notes.~~March 31, 2021.

Outstanding letters of credit under the $10,000,000 credit line were ~~$1,007,000~~$1,299,000 and available borrowing capacity was ~~$8,993,000~~$8,701,000 as of ~~September 30, 2020.~~March 31, 2021.

As of ~~September 30, 2020,~~March 31, 2021, the Company was in compliance with all covenants under its debt instruments. For additional information about the Company’s debt instruments, see ~~“Long-Term Financing” in Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations and~~ Note 8,5, Long-Term Debt, in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Cash Flow and Capital Expenditures

The Company generated favorable operating cash flows during the 2021 first quarter with net cash provided by operating activities of $102,558,000 compared with $71,501,000 for the 2020 first quarter, a 43% increase. The increase was primarily due to the receipt of a tax refund of $119,493,000, including accrued interest, for the Company’s 2019 federal tax return, reduced incentive compensation payouts in the 2021 first quarter compared to the 2020 first quarter, and the Savage acquisition in April 2020, partially offset by decreased revenues and operating income, primarily in the marine transportation segment. Decreases in marine transportation segment revenues and operating income were driven by decreased barge utilization in the inland and coastal markets and decreased term and spot contract pricing in the inland market, each as a result of a reduction in demand due to the COVID-19 pandemic. The increase in cash flows was also partially offset by and an increase in inventories in the 2021 first quarter compared to a decrease in inventories in the 2020 first quarter. During the 2021 and 2020 first quarters, the Company generated cash of $4,754,000 and $3,993,000, respectively, from proceeds from the disposition of assets, and $411,000 and $353,000, respectively, from proceeds from the exercise of stock options.

For the 2021 first quarter, cash generated was used for capital expenditures of $14,052,000 (net of an increase in accrued capital expenditures of $7,207,000), including $1,169,000 for inland towboat construction and $12,883,000 primarily for upgrading existing marine equipment and marine transportation and distribution and services facilities.

Treasury Stock Purchases

The Company did not purchase any treasury stock during the ~~2020~~2021 first ~~nine months.~~quarter. As of ~~November~~May 6, ~~2020,~~2021, the Company had approximately 1,400,000 shares available under its existing repurchase authorization. Historically, treasury stock purchases have been financed through operating cash flows and borrowings under the Company’s Revolving Credit Facility. The Company is authorized to purchase its common stock on the New York Stock Exchange and in privately negotiated transactions. When purchasing its common stock, the Company is subject to price, trading volume, and other market considerations. Shares purchased may be used for reissuance upon the exercise of stock options or the granting of other forms of incentive compensation, in future acquisitions for stock, or for other appropriate corporate purposes.

Liquidity

The Company generated net cash provided by operating activities of $359,763,000 and $387,599,000 for the 2020 and 2019 first nine months, respectively. The decline was driven by decreased revenues and operating income in both the marine transportation and distribution and services segments. Decreases in the marine transportation segment were driven by decreased barge utilization in the inland and coastal markets and decreased spot contract pricing in the inland market, each as a result of a reduction in demand due to the COVID-19 pandemic, partially offset by the Savage acquisition in April 2020 and the Cenac acquisition in March 2019. The decline was also partially offset by changes in certain operating assets and liabilities primarily related to reduced incentive compensation payouts in the 2020 first quarter and a larger decrease in trade accounts receivable compared to the 2019 first nine months, driven by reduced business activity levels in both the marine transportation and distribution and services segments. In addition, during the nine months ended September 30, 2020, the Company received a tax refund of $30,606,000 for its 2018 tax return related to net operating losses being carried back to offset taxable income generated during 2013.

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 flows provided by operating activities, as of ~~November~~May 6, ~~2020,~~2021, the Company also had cash equivalents of ~~$65,542,000,~~$64,675,000, availability of ~~$554,637,000~~$724,937,000 under its Revolving Credit Facility, and ~~$8,993,000~~$8,701,000 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 Credit 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 Revolving Credit Facility’s commitment is in the amount of $850,000,000 and expires March 27, 2024. As of ~~September 30, 2020,~~March 31, 2021, the Company had ~~$484,637,000~~$714,937,000 available under the Revolving Credit Facility. The 3.29% senior unsecured notes do not mature until February 27, 2023 and require no prepayments. The 4.2% senior unsecured notes do not mature until March 1, 2028 and require no prepayments. The outstanding balance of the Term Loan is subject to quarterly installments, currently scheduled to commence September 30, 2023, with $343,750,000 due on March 27, 2024. The Term Loan is prepayable, in whole or in part, without penalty.

There are numerous factors that may negatively impact the Company’s cash flows in ~~2020.~~2021. For a list of significant risks and uncertainties that could impact cash flows, see ~~Item 1A — Risk Factors below~~Note 13, Contingencies and ~~Note 15, Contingencies,~~Commitments, in the financial statements, and Item 1A — Risk Factors and Note ~~15,~~14, Contingencies and Commitments, in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. 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 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations under~~Note 5, Long-Term ~~Financing~~Debt in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

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 ~~$22,954,000~~$23,522,000 at ~~September 30, 2020,~~March 31, 2021, including ~~$11,181,000~~$13,878,000 in letters of credit and ~~$11,773,000~~$9,644,000 in performance bonds. All of these instruments have an expiration date within ~~two~~three 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 term contracts contain fuel escalation clauses, or the customer pays for the fuel. However, there is generally a 30 to 90 day delay before contracts are adjusted depending on the specific contract. In general, the fuel escalation clauses are effective over the long-term in allowing the Company to recover changes in fuel costs due to fuel price changes. However, the short-term effectiveness of the fuel escalation clauses can be affected by a number of factors including, but not limited to, specific terms of the fuel escalation formulas, fuel price volatility, navigating conditions, tow sizes, trip routing, and the location of loading and discharge ports that may result in the Company over or under recovering its fuel costs. Spot contract rates generally reflect current fuel prices at the time the contract is signed but do not have escalators for fuel.

During the last three years, inflation has had a relatively minor effect on the financial results of the Company. The marine transportation segment has long-term contracts which generally contain cost escalation clauses whereby certain costs, including fuel as noted above, can be passed through to its customers. Spot contract rates include the cost of fuel and are subject to market volatility. The repair portion of the distribution and services segment is based on prevailing current market rates.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to risk from changes in interest rates on certain of its outstanding debt. The outstanding loan balances under the Company’s bank credit facilities bear interest at variable rates based on prevailing short-term interest rates in the United States and Europe. A ~~10% change~~1% increase in variable interest rates would impact the ~~2020~~2021 interest expense by ~~$206,000~~$6,250,000 based on balances outstanding at December 31, ~~2019,~~2020, and would change the fair value of the Company’s debt by ~~less than 1%~~approximately 3%.

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��~~Act”)), as of ~~September 30, 2020,~~March 31, 2021, 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, 2020,~~March 31, 2021, the disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) is accumulated and communicated to the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control Over Financial Reporting. During the third quarter of 2020, Company has completed the testing and evaluation of the operating effectiveness of the policies and procedures implemented during the quarter, including those related to the recognition of goodwill impairments, and the previously identified material weakness has been remediated. T~~There~~here were no ~~other~~ changes in the Company’s internal control over financial reporting during the quarter ended ~~September 30, 2020~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

~~The discussion of the legal proceedings related to the M/V Voyager~~See Note 13, Contingencies and ~~the legal proceedings related to the tug Nathan E. Stewart and barge DBL 55 in Note 15, Contingencies,~~Commitments, of the Notes to Unaudited Consolidated Financial ~~Statements in this Quarterly Report are incorporated by reference into this Item 1.~~Statements.

Item 1A.

Risk Factors

Widespread health developments and economic uncertainty resulting from the recent global COVID-19 pandemic could materially and adversely affect our business, financial condition and results of operations.

In December 2019, COVID-19 surfaced in Wuhan, China. In response to the resulting pandemic, various countries, including the United States, either mandated or recommended business closures, travel restrictions or limitations, social distancing, and/or self-quarantine, among other actions. Additionally, various state and local governments in locations where the Company operates took similar actions. The full impact and duration of the outbreak is still unknown and the situation continues to evolve. Many governments are in various stages of removing or easing these actions. In some cases, governments have reinstated actions or slowed reopenings and they may impose new actions in an effort to reduce or manage current or anticipated levels of infection. The full extent and duration of these impacts is unknown at this time, but there has been and continues to be a negative impact on the global and United States economies, including the oil and gas industry, which has reduced demand for the Company’s products and services.

~~These impacts could place limitations on the Company’s ability to execute on its business plan and materially and adversely affect its business, financial condition and results of operations.~~ The Company continues to ~~monitor the situation, actively implemented policies and procedures~~be subject to address the situation, including its pandemic response plan and business continuity plan, and took steps to reduce costs. As the pandemic continues to further unfold, the Company may adjust its current policies and procedures as government mandates or recommendations change or as more information and guidance become available. The impact of the COVID-19 pandemic may also exacerbate other risks discussed in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, any of which could have a material effect on the Company. This situation is changing rapidly and additional impacts may arise that the Company is not aware of currently.

~~There have been no other material changes that the Company is aware of from~~ 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, ~~2019 and previously updated in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30,~~ 2020.

Item 6.

Exhibits

~~EXHIBIT INDEX~~

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, as amended to March 17, 2020 (incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014).
3.3	–	Amendment to Bylaws of Kirby Corporation dated March 18, 2020 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on March 19, 2020).
4.1	–	See Exhibits 3.1, 3.2, and 3.3 hereof for provisions of our Restated Articles of Incorporation of the Company with all amendments to date, the Bylaws of the Company, as amended to March 17, 2020, and Amendment to Bylaws of the Company dated March 18, 2020 (incorporated by reference to Exhibit 3.1 and 3.2, respectively, 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 March 19, 2020).
10.1†	–	Incentive and Retention Award Agreement of David W. Grzebinski dated February 25, 2021 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 26, 2021).
10.2†	–	Incentive and Retention Award Agreement of Christian G. O’Neil dated February 25, 2021 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 26, 2021).
10.3†	–	Incentive and Retention Award Agreement of Joseph H. Reniers dated February 25, 2021 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 26, 2021).
10.4†	–	2005 Stock and Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on April 29, 2021).
10.5†	–	2000 Nonemployee Director Stock Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on April 29, 2021).
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	–	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)

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, as amended to March 17, 2020 (incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014)
3.3
– Amendment to Bylaws of Kirby Corporation dated March 18, 2020 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on March 19, 2020)
4.1 – See Exhibits 3.1, 3.2, and 3.3 hereof for provisions of our Restated Articles of Incorporation of the Company with all amendments to date, the Bylaws of the Company, as amended to March 17, 2020, and Amendment to Bylaws of the Company dated March 18, 2020 (incorporated by reference to Exhibit 3.1 and 3.2, respectively, 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 March 19, 2020 ).
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 – 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)

†	Management contract, compensatory plan or arrangement.

3729

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	KIRBY CORPORATION
	(Registrant)

	By:	/s/ WILLIAM G. HARVEY
		William G. Harvey
		Executive Vice President and
		Chief Financial Officer

Dated: ~~November 9, 2020~~May 7, 2021

3830

	Savage		Convoy
Assets:
Accounts receivable	$	0	$	5,677
Inventories		0		11,771
Prepaid expenses		1,067		177
Property and equipment		210,065		415
Operating lease right-of-use assets		27,085		3,713
Goodwill		81,635		10,309
Other intangibles		2,300		17,170
Total assets	$	322,152	$	49,232
Liabilities:
Accounts payable and accrued liabilities	$	68	$	8,339
Operating lease liabilities, including current portion		43,085		3,713
Total liabilities	$	43,153	$	12,052
Net assets acquired	$	278,999	$	37,180

	Marine Transportation			Distribution and Services			Total
Balance at December 31, 2019 (gross)	$	424,149		$	549,846		$	973,995
Accumulated impairment and amortization		(18,574	)		(1,595	)		(20,169	)
Balance at December 31, 2019		405,575			548,251			953,826
Impairment		0			(387,970	)		(387,970	)
Savage acquisition		81,635			0			81,635
Convoy acquisition		0			10,309			10,309
Balance at September 30, 2020 (gross)		505,784			560,155			1,065,939
Accumulated impairment and amortization		(18,574	)		(389,565	)		(408,139	)
Balance at September 30, 2020	$	487,210		$	170,590		$	657,800

Markets Serviced	2020 Third Quarter Revenue Distribution	2020 Nine Months Revenue Distribution	Products Moved	Drivers
Petrochemicals	51%	51%	Benzene, Styrene, Methanol, Acrylonitrile, Xylene, Naphtha, Caustic Soda, Butadiene, Propylene	Consumer non-durables – 70%, Consumer durables – 30%

Black Oil	27%	27%	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	19%	19%	Gasoline, No. 2 Oil, Jet Fuel, Heating Oil, Diesel Fuel, Ethanol	Vehicle Usage, Air Travel, Weather Conditions, Refinery Utilization

Agricultural Chemicals	3%	3%	Anhydrous Ammonia, Nitrogen – Based Liquid Fertilizer, Industrial Ammonia	Corn, Cotton and Wheat Production, Chemical Feedstock Usage

Markets Serviced	2020 Third Quarter Revenue Distribution	2020 Nine Months Revenue Distribution	Customers
Oil and Gas	28%	27%	Oilfield Services, Oil and Gas Operators and Producers

Commercial and Industrial	72%	73%	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

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, as amended to March 17, 2020 (incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014)
3.3	–	Amendment to Bylaws of Kirby Corporation dated March 18, 2020 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on March 19, 2020)
4.1	–	See Exhibits 3.1, 3.2, and 3.3 hereof for provisions of our Restated Articles of Incorporation of the Company with all amendments to date, the Bylaws of the Company, as amended to March 17, 2020, and Amendment to Bylaws of the Company dated March 18, 2020 (incorporated by reference to Exhibit 3.1 and 3.2, respectively, 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 March 19, 2020 ).
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	–	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)