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 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. The actual results of the future events described in such forward-looking statements in this Form 10-Q could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: adverse economic conditions, industry competition and other competitive factors, adverse weather conditions such as high water, low water, tropical storms, hurricanes, tsunamis, fog and ice, tornados, pandemics, marine accidents, lock delays or closures, fuel costs, interest rates, construction of new equipment by competitors, government and environmental laws and regulations, and the timing, magnitude and number of acquisitions made by the Company. For a more detailed discussion of factors that could cause actual results to differ from those presented in forward-looking statements, see Part II, Item 1A-Risk Factors of this Form 10-Q and the Form 10-Q for the quarter ended March 31, 2026, and Item 1A-Risk Factors found in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2025. Forward-looking statements are based on currently available information and the Company assumes no obligation to update any such statements. For purposes of Management’s Discussion, all net earnings per share attributable to Kirby common stockholders are “diluted earnings per share.”
Overview
The Company is the nation’s largest domestic tank barge operator transporting bulk liquid products throughout the Mississippi River System, on the Gulf Intracoastal Waterway, and coastwise along all three United States coasts. The Company transports petrochemicals, black oil, refined petroleum products and agricultural chemicals by tank barge. In addition, the Company participates in the transportation of dry-bulk commodities in United States coastwise trade. Through KDS, the Company provides equipment, after-market parts and services for power generation systems in applications that include behind the meter power systems and emergency backup systems, after-market and genuine replacement parts and services for engines, transmissions, reduction gears, electric motors, drives, and controls, specialized electrical distribution and controls systems, and related equipment used in power generation, marine, on-highway, oilfield services, and other industrial applications. The Company also rents equipment including generators, industrial compressors, high-capacity lift trucks, construction equipment, and refrigeration trailers for use in a variety of industrial markets. The Company also manufactures and remanufactures specialized equipment, including pressure pumping units and electric fracturing systems, electric power generation equipment, and specialized electrical distribution and control equipment for data centers, oilfield service, railroad, and other industrial customers.
The following table summarizes key operating results of the Company (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Total revenues |
|
$ |
922,399 |
|
|
$ |
855,455 |
|
|
$ |
1,766,498 |
|
|
$ |
1,641,114 |
|
Net earnings attributable to Kirby |
|
$ |
89,729 |
|
|
$ |
94,277 |
|
|
$ |
170,926 |
|
|
$ |
170,263 |
|
Net earnings per share attributable to Kirby common stockholders – diluted |
|
$ |
1.67 |
|
|
$ |
1.67 |
|
|
$ |
3.17 |
|
|
$ |
2.99 |
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
$ |
169,916 |
|
|
$ |
130,463 |
|
Capital expenditures |
|
|
|
|
|
|
|
$ |
119,764 |
|
|
$ |
150,160 |
|
Cash provided by operating activities for the 2026 first six months increased in comparison to the 2025 first six months primarily due to favorable working capital changes. The favorable working capital changes were driven by the timing of accounts payable and income tax payments, partially offset by the timing of accounts receivable collections. The 2025 first six months included $73.4 million of estimated federal income tax payments as compared to $35.0 million in the 2026 first six months. For the 2026 first six months, capital expenditures of $119.8 million included $80.6 million in KMT and $39.2 million in KDS and corporate, each more fully described under Cash Flow and Capital Expenditures below.
The Company projects that capital expenditures for 2026 will be in the $220 million to $260 million range. Approximately $170 million to $210 million is associated with marine maintenance capital and improvements to existing inland and coastal marine equipment, and facility improvements. Up to approximately $65 million is associated with growth capital spending in both segments.
The Company’s debt-to-capitalization ratio increased to 23.1% at June 30, 2026 compared to 21.4% at December 31, 2025, primarily due to an increase in debt outstanding. Total equity at June 30, 2026 increased as compared to December 31, 2025 primarily from net earnings attributable to Kirby of $170.9 million, partially offset by treasury stock purchases of $112.4 million. The Company’s debt outstanding as of June 30, 2026 and December 31, 2025 is detailed in Long-Term Financing below.
Marine Transportation
For the 2026 and 2025 second quarter and first six months, KMT generated 58% and 59%, respectively, of the Company’s revenues. 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, KMT is directly affected by the volumes produced by the Company’s petroleum, petrochemical, and refining customer base.
The following table summarizes the Company’s marine transportation fleet:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2026 |
|
|
2025 |
|
Inland tank barges: |
|
|
|
|
|
|
Owned |
|
|
1,102 |
|
|
|
1,073 |
|
Leased |
|
|
32 |
|
|
|
36 |
|
Total |
|
|
1,134 |
|
|
|
1,109 |
|
Barrel capacity (in millions) |
|
|
25.2 |
|
|
|
24.5 |
|
|
|
|
|
|
|
|
Active inland towboats (quarter average): |
|
|
|
|
|
|
Owned |
|
|
205 |
|
|
|
215 |
|
Chartered |
|
|
86 |
|
|
|
75 |
|
Total |
|
|
291 |
|
|
|
290 |
|
|
|
|
|
|
|
|
Coastal tank barges: |
|
|
|
|
|
|
Owned |
|
|
27 |
|
|
|
28 |
|
Leased |
|
|
- |
|
|
|
- |
|
Total |
|
|
27 |
|
|
|
28 |
|
Barrel capacity (in millions) |
|
|
2.9 |
|
|
|
2.9 |
|
|
|
|
|
|
|
|
Coastal tugboats: |
|
|
|
|
|
|
Owned |
|
|
23 |
|
|
|
23 |
|
Chartered |
|
|
1 |
|
|
|
1 |
|
Total |
|
|
24 |
|
|
|
24 |
|
|
|
|
|
|
|
|
Offshore dry-bulk cargo barges (owned) |
|
|
2 |
|
|
|
3 |
|
Offshore tugboats and docking tugboat (owned and chartered) |
|
|
3 |
|
|
|
4 |
|
The Company also operates shifting and fleeting facilities for dry cargo barges and tank barges on the Houston Ship Channel, in Freeport and Port Arthur, Texas, and Lake Charles, Louisiana, and its San Jac shipyard for building inland towboats and performing routine maintenance on marine vessels near the Houston Ship Channel. The Company also owns a two-thirds interest in Osprey Line, L.L.C., which transports project cargoes and cargo containers by barge on the United States inland waterway system.
During the 2026 first six months, the Company purchased 28 inland tank barges, brought back into service six inland tank barges, and retired five inland tank barges, increasing its capacity by approximately 0.7 million barrels.
KMT revenues for the 2026 second quarter and first six months increased 9% and 7%, respectively, compared to the 2025 second quarter and first six months, primarily due to higher term pricing in the inland market and increased fuel rebills in the inland and coastal markets, partially offset by lower spot pricing in the inland market as compared to the 2025 second quarter and first six months. KMT operating income for the 2026 second quarter and first six months decreased 11% and 4%, respectively, compared to the 2025 second quarter and first six months, primarily due to higher fuel costs as a result of the Iran conflict. During the second quarter of 2026, rapidly rising fuel prices temporarily compressed operating income and operating margins in the inland market due to the inherent lag in the Company's contractual fuel escalation mechanisms. Because fuel-related pricing adjustments under term contracts generally become effective 30 to 120 days after fuel cost increases are incurred, the Company was unable to fully recover the impact of higher fuel costs during the quarter. The Company expects these costs to be substantially recovered in subsequent quarters as contractual fuel escalation provisions take effect. The 2026 and 2025 first quarters were impacted by poor operating conditions including seasonal wind and fog along the Gulf Coast, ice on the Illinois and Upper Mississippi Rivers and various lock closures. For both the 2026 second quarter and first six months, the inland tank barge fleet contributed 80% and the coastal fleet contributed 20% of KMT revenues. For the 2025
second quarter and first six months, the inland tank barge fleet contributed 81% and 82%, respectively, and the coastal fleet contributed 19% and 18%, respectively, of KMT revenues.
Inland tank barge utilization levels averaged in the low-90% range during both the 2026 first and second quarters and the low-to-mid-90% range during both the 2025 first and second quarters. The 2026 and 2025 first quarters were impacted by high winds and heavy fog along the Gulf Coast, ice on the Illinois and Upper Mississippi Rivers and various lock delays. Coastal tank barge utilization levels averaged in the mid-to-high-90% range during the 2026 first quarter and the high-90% range during the 2026 second quarter. Coastal tank barge utilization levels averaged in the mid-to-high-90% range during both the 2025 first and second quarters.
During both the 2026 second quarter and first six months, approximately 65% of KMT inland revenues were under term contracts and 35% were spot contract revenues. During both the 2025 second quarter and first six months, approximately 70% of KMT inland revenues were under term contracts and 30% were spot contract revenues. Inland time charters during both the 2026 second quarter and first six months represented approximately 57% of inland revenues under term contracts compared with 60% in the 2025 second quarter and first six months. During the 2026 second quarter and first six months, approximately 93% and 92%, respectively, of KMT coastal revenues were under term contracts and 7% and 8%, respectively, were under spot contracts. During both the 2025 second quarter and first six months, approximately 100% of KMT coastal revenues were under term contracts and none were under spot contracts. Coastal time charters represented approximately 100% of coastal revenues under term contracts during both the 2026 and 2025 second quarter and first six months. Term contracts have contract terms of 12 months or longer, while spot contracts have contract terms of less than 12 months.
The following table summarizes the average range of pricing changes in term and spot contracts renewed during 2026 compared to contracts renewed during the corresponding quarter of 2025:
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, 2026 |
|
June 30, 2026 |
Inland market: |
|
|
|
|
Term |
|
0% – 2% |
|
1% – 3% |
Spot |
|
(4)% – (6)% |
|
(2)% – (4)% |
Coastal market (a): |
|
|
|
|
Term |
|
19% – 21% |
|
(2)% – (4)% |
(a)Term contract pricing in the coastal market is contingent on various factors including geographic location, vessel capacity, vessel type, and product serviced.
Effective January 1, 2026, 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.
KMT operating margin was 16.4% and 17.2% for the 2026 second quarter and first six months, respectively, compared to 20.1% and 19.2% for the 2025 second quarter and first six months, respectively.
Distribution and Services
The Company, through KDS, provides equipment, after-market parts and services for power generation systems in applications that include behind the meter power systems and emergency backup systems, after-market and genuine replacement parts and services for engines, transmissions, reduction gears, electric motors, drives, and controls, specialized electrical distribution and controls systems, and related equipment used in power generation, marine, on-highway, oilfield services, and other industrial applications. The Company also rents equipment including generators, industrial compressors, high-capacity lift trucks, construction equipment, and refrigeration trailers for use in a variety of industrial markets. The Company also manufactures and remanufactures specialized equipment, including pressure pumping units and electric fracturing systems, electric power generation equipment, and specialized electrical distribution and control equipment for data centers, oilfield service, railroad, and other industrial customers.
For the 2026 second quarter and first six months, KDS generated 42% and 41%, respectively, of the Company’s revenues. The results of KDS are largely influenced by cycles of the power generation, marine, on-highway, oilfield service industry and oil and gas operator and producer markets, and other industrial markets.
KDS revenues for the 2026 second quarter and first six months increased 6% and 9%, respectively, compared with the 2025 second quarter and first six months. KDS operating income for the 2026 second quarter and first six months increased 8% and 6%, respectively, compared with the 2025 second quarter and first six months. In the commercial and industrial market, revenues and operating income increased compared to the 2025 second quarter and first six months due to higher business levels in marine repair. For the 2026 second quarter and first six months, the commercial and industrial market contributed 50% and 49%, respectively, of KDS revenues.
In the power generation market, revenues and operating income increased compared to the 2025 second quarter and first six months due to increased demand for backup, prime power and critical power applications. For the 2026 second quarter and first six months, the power generation market contributed 40% and 41%, respectively, of KDS revenues.
In the oil and gas market, revenues and operating income decreased compared to the 2025 second quarter and first six months, impacted by lower levels of conventional oilfield activity which resulted in decreased demand for new transmissions and parts, partially offset by deliveries of electric fracturing equipment. For both the 2026 second quarter and first six months, the oil and gas market contributed 10% of KDS revenues.
KDS operating margin was 9.9% and 8.4% for the 2026 second quarter and first six months, respectively, compared to 9.8% and 8.6% for the 2025 second quarter and first six months, respectively.
Outlook
Overall, the Company expects to deliver improved financial results in 2026. In KMT, barge utilization and customer demand remain favorable. In KDS, growth in the power generation market is expected to offset softness in oil and gas markets, and the continuing trucking recession impacting the on-highway service and repair business. The Company remains mindful of the ever-changing economic landscape related to the possible impact of high interest rates, tariffs, geopolitical tensions and possible recessionary headwinds as it moves through 2026.
In 2026, the inland marine transportation market is expected to experience positive market dynamics due to limited new barge construction. The Company expects barge utilization rates to remain steady for the year with continued improvement in pricing as the year progresses. The Company also continues to see inflationary pressures and there remains an acute mariner shortage in the industry which continues to drive up labor costs. These pressures, along with the increasing cost of equipment, should continue to put upward pressure on spot and term contract prices. The coastal marine transportation market is also expected to see favorable market conditions in 2026. The coastal marine transportation market should experience steady customer demand, keeping barge utilization at high levels with improving rates as the availability of equipment remains limited across the industry. There are no coastal barges currently under construction. The Company does expect more shipyard days in the coastal marine transportation market as compared to 2025.
The Company did experience some near-term cost headwinds in its inland marine transportation operations during the 2026 second quarter from rising fuel costs. Term and affreightment contracts contain fuel escalation clauses or provides for the customer to pay for fuel. Cost escalators and rate recovery mechanisms in the Company’s term contracts, while effective over time in allowing the Company to recover changes in fuel costs, create a delay that will lag near-term fuel cost increases. As a result, periods of rapidly rising fuel prices may temporarily compress margins and operating income until escalation adjustments are fully realized. The Company did experience that lag during the 2026 second quarter but this should be ultimately realized in subsequent quarters as there is generally a 30 to 120 day delay before term contracts are adjusted for fuel costs. Fuel escalation clauses in term contracts and their effectiveness are discussed in more detail in Liquidity below and Item 1A – Risk Factors found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
The Company expects stable growth in KDS in 2026 as near-term volatility from supply issues, customers deferring maintenance, and lower overall levels of activity in the oil and gas market are offset by increased orders in the power generation market. In commercial and industrial, the demand outlook in marine repair remains steady while on-highway service and repair remains soft but has shown some recent modest improvement. In power generation, the Company anticipates continued strong growth in orders as data center demand and the increasing need for prime behind the meter and backup power continues to be strong. In oil and gas, the Company expects revenues to be down as the transition from conventional diesel hydraulic fracturing to electric hydraulic fracturing continues to take place. The Company anticipates extended lead times and supply delays for certain original equipment manufacturer (“OEM”) products, especially in the power generation market, to continue throughout 2026. The Company was impacted in the 2026 second quarter by delayed OEM engine deliveries as certain impacted projects shifted from the 2026 second quarter into the 2026 second half.
Acquisitions
On March 17, 2026, the Company purchased 23 inland tank barges with a total capacity of 653,000 barrels, including five specialty barges, and three high horsepower towboats from an undisclosed seller for $95.8 million. The Company paid $81.4 million in cash in March 2026 with the remaining $14.4 million paid in the 2026 second quarter upon delivery of remaining vessels. The 23 tank barges, including five specialty barges, transport petrochemicals and refined products on the Mississippi River System and Gulf Intracoastal Waterway. The average age of the 23 barges was 19 years.
On October 14, 2025, the Company purchased certain assets from an undisclosed seller in support of the KDS segment for $9.3 million in cash. The assets consisted of inventory and an authorized distributorship for EMD Power Products (“EMD”) for certain geographic regions including Mexico, Central America, the northern part of South America and the Caribbean islands.
On August 7, 2025, the Company purchased two inland tank barges and one towboat from an undisclosed seller for $9.2 million in cash.
On March 27, 2025, the Company purchased 14 inland tank barges with a total capacity of 364,000 barrels, including four specialty barges, and four high horsepower towboats from an undisclosed seller for $97.3 million in cash. The 14 tank barges, including four specialty barges, transport petrochemicals and refined products on the Mississippi River System and Gulf Intracoastal Waterway. The average age of the 14 barges was 16 years.
Financing of these purchases was through borrowings under the Company’s Revolving Credit Facility and cash provided by operating activities.
Results of Operations
The following table sets forth the Company’s KMT and KDS revenues and the percentage of each to total revenues (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2026 |
|
|
% |
|
|
2025 |
|
|
% |
|
|
2026 |
|
|
% |
|
|
2025 |
|
|
% |
|
Marine transportation |
|
$ |
536,974 |
|
|
|
58 |
% |
|
$ |
492,562 |
|
|
|
58 |
% |
|
$ |
1,034,157 |
|
|
|
59 |
% |
|
$ |
968,711 |
|
|
|
59 |
% |
Distribution and services |
|
|
385,425 |
|
|
|
42 |
|
|
|
362,893 |
|
|
|
42 |
|
|
|
732,341 |
|
|
|
41 |
|
|
|
672,403 |
|
|
|
41 |
|
|
|
$ |
922,399 |
|
|
|
100 |
% |
|
$ |
855,455 |
|
|
|
100 |
% |
|
$ |
1,766,498 |
|
|
|
100 |
% |
|
$ |
1,641,114 |
|
|
|
100 |
% |
Marine Transportation
The following table sets forth KMT revenues, costs and expenses, operating income, and operating margin (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2026 |
|
|
2025 |
|
|
% Change |
|
|
2026 |
|
|
2025 |
|
|
% Change |
|
Marine transportation revenues |
|
$ |
536,974 |
|
|
$ |
492,562 |
|
|
|
9 |
% |
|
$ |
1,034,157 |
|
|
$ |
968,711 |
|
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of sales and operating expenses |
|
|
348,465 |
|
|
|
298,789 |
|
|
|
17 |
|
|
|
649,289 |
|
|
|
589,776 |
|
|
|
10 |
|
Selling, general and administrative |
|
|
35,463 |
|
|
|
33,415 |
|
|
|
6 |
|
|
|
79,264 |
|
|
|
73,869 |
|
|
|
7 |
|
Taxes, other than on income |
|
|
7,652 |
|
|
|
8,124 |
|
|
|
(6 |
) |
|
|
15,219 |
|
|
|
14,576 |
|
|
|
4 |
|
Depreciation and amortization |
|
|
57,592 |
|
|
|
53,182 |
|
|
|
8 |
|
|
|
112,928 |
|
|
|
104,854 |
|
|
|
8 |
|
|
|
|
449,172 |
|
|
|
393,510 |
|
|
|
14 |
|
|
|
856,700 |
|
|
|
783,075 |
|
|
|
9 |
|
Operating income |
|
$ |
87,802 |
|
|
$ |
99,052 |
|
|
|
(11 |
)% |
|
$ |
177,457 |
|
|
$ |
185,636 |
|
|
|
(4 |
)% |
Operating margins |
|
|
16.4 |
% |
|
|
20.1 |
% |
|
|
|
|
|
17.2 |
% |
|
|
19.2 |
% |
|
|
|
Marine Transportation Revenues
The following table shows the marine transportation markets serviced by the Company, KMT revenue distribution, products moved and the drivers of the demand for the products the Company transports:
|
|
|
|
|
|
|
|
|
Markets
Serviced |
|
2026 Second Quarter
Revenue
Distribution |
|
2026 Six Months
Revenue
Distribution |
|
Products Moved |
|
Drivers |
Petrochemicals |
|
49% |
|
48% |
|
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 |
|
21% |
|
22% |
|
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 |
KMT revenues for the 2026 second quarter and first six months increased 9% and 7%, respectively, compared to the 2025 second quarter and first six months, primarily due to higher term pricing in the inland market and increased fuel rebills in the inland and coastal markets, partially offset by lower spot pricing in the inland market as compared to the 2025 second quarter and first six months. KMT operating income for the 2026 second quarter and first six months decreased 11% and 4%, respectively, compared to the 2025 second quarter and first six months, primarily due to higher fuel costs as a result of the Iran conflict. During the second quarter of 2026, rapidly rising fuel prices temporarily compressed operating income and operating margins in the inland market due to the inherent lag in the Company's contractual fuel escalation mechanisms. Because fuel-related pricing adjustments under term contracts generally become effective 30 to 120 days after fuel cost increases are incurred, the Company was unable to fully recover the impact of higher fuel costs during the quarter. The Company expects these costs to be substantially recovered in subsequent quarters as contractual fuel escalation provisions take effect. The 2026 and 2025 first quarters were impacted by poor operating conditions including seasonal wind and fog along the Gulf Coast, ice on the Illinois and Upper Mississippi Rivers and various lock closures. For both the 2026 second quarter and first six months, the inland tank barge fleet contributed 80% and the coastal fleet contributed 20% of KMT revenues. For the 2025 second quarter and first six months, the inland tank barge fleet contributed 81% and 82%, respectively, and the coastal fleet contributed 19% and 18%, respectively, of KMT revenues.
Inland tank barge utilization levels averaged in the low-90% range during both the 2026 first and second quarters and the low-to-mid-90% range during both the 2025 first and second quarters. The 2026 and 2025 first quarters were impacted by high winds and heavy fog along the Gulf Coast, ice on the Illinois and Upper Mississippi Rivers and various lock delays. Coastal tank barge utilization levels averaged in the mid-to-high-90% range during the 2026 first quarter and the high-90% range during the 2026 second quarter. Coastal tank barge utilization levels averaged in the mid-to-high-90% range during both the 2025 first and second quarters.
The petrochemical market, which is the Company’s largest market, contributed 49% and 48% of KMT revenues for the 2026 second quarter and first six months, respectively, reflecting steady rates, volumes and utilization from Gulf Coast petrochemical plants as compared to the 2025 second quarter and first six months.
The black oil market, which contributed 27% of KMT revenues for both the 2026 second quarter and first six months reflected stable demand as refinery utilization and production levels of refined petroleum products and fuel oils increased. During the 2026 first six months, the Company transported crude oil and natural gas condensate produced from major U.S. shale basins along the Gulf Intracoastal Waterway with inland vessels and in the Gulf of America with coastal equipment. Additionally, the Company transported volumes of Utica natural gas condensate downriver from the Mid-Atlantic to the Gulf Coast.
The refined petroleum products market, which contributed 21% and 22% of KMT revenues for the 2026 second quarter and first six months, respectively, reflected stable volumes in the inland market with steady refinery utilization and product levels as compared to the 2025 second quarter and first six months.
The agricultural chemical market, which contributed 3% of KMT revenues for both the 2026 second quarter and first six months reflected stable demand for transportation of both domestically produced and imported products as compared to the 2025 second quarter and first six months.
For the 2026 second quarter, inland operations incurred 2,567 delay days, 23% fewer than the 3,320 delay days that occurred during the 2025 second quarter. For the 2026 first six months, inland operations incurred 5,831 delay days, 21% fewer than the 7,349 delay days that occurred during the 2025 first six 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. Delay days reflected poor operating conditions due to heavy wind and fog along the Gulf Coast and lock delays during the 2026 and 2025 first quarters.
During both the 2026 second quarter and first six months, approximately 65% of KMT inland revenues were under term contracts and 35% were spot contract revenues. During both the 2025 second quarter and first six months, approximately 70% of KMT inland revenues were under term contracts and 30% were spot contract revenues. Inland time charters during both the 2026 second quarter and first six months represented approximately 57% of inland revenues under term contracts compared with 60% in the 2025 second quarter and first six months. During the 2026 second quarter and first six months, approximately 93% and 92%, respectively, of KMT coastal revenues were under term contracts and 7% and 8%, respectively, were under spot contracts. During both the 2025 second quarter and first six months, approximately 100% of KMT coastal revenues were under term contracts and none were under spot contracts. Coastal time charters represented approximately 100% of coastal revenues under term contracts during both the 2026 and 2025 second quarter and first six months. Term contracts have contract terms of 12 months or longer, while spot contracts have contract terms of less than 12 months.
The following table summarizes the average range of pricing changes in term and spot contracts renewed during 2026 compared to contracts renewed during the corresponding quarter of 2025:
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, 2026 |
|
June 30, 2026 |
Inland market: |
|
|
|
|
Term |
|
0% – 2% |
|
1% – 3% |
Spot |
|
(4)% – (6)% |
|
(2)% – (4)% |
Coastal market (a): |
|
|
|
|
Term |
|
19% – 21% |
|
(2)% – (4)% |
(a)Term contract pricing in the coastal market is contingent on various factors including geographic location, vessel capacity, vessel type, and product serviced.
Effective January 1, 2026, 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 2026 second quarter and first six months increased 14% and 9%, respectively, compared to the 2025 second quarter and first six months. Costs of sales and operating expenses for the 2026 second quarter and first six months increased 17% and 10%, respectively, compared with the 2025 second quarter and first six months. The results for the 2026 second quarter and first six months were driven by higher fuel costs and inflationary cost pressures including wage increases that went into effect on July 1, 2025.
The inland marine transportation fleet operated an average of 291 towboats during the 2026 second quarter, of which an average of 86 were chartered, compared to 290 during the 2025 second quarter, of which an average of 75 were chartered. The Company charters in or releases chartered towboats in an effort to balance horsepower needs with current requirements, taking into account variability in demand or anticipated demand, addition or removal of tank barges from the fleet, chartered towboat availability, and weather or water conditions. The Company has historically used chartered towboats for approximately one-fourth of its horsepower requirements.
During the 2026 second quarter, inland operations consumed 13.0 million gallons of diesel fuel compared to 12.8 million gallons consumed during the 2025 second quarter. The average price per gallon of diesel fuel consumed during the 2026 second quarter was $4.23 per gallon compared with $2.35 per gallon for the 2025 second quarter. During the 2026 first six months, inland operations consumed 25.5 million gallons of diesel fuel compared to 24.5 million gallons consumed during the 2025 first six months. The average price per gallon of diesel fuel consumed during the 2026 first six months was $3.26 per gallon compared with $2.45 per gallon for the 2025 first six months. Fuel escalation and de-escalation clauses are typically included in term contracts and are designed to rebate fuel costs when prices decline and recover additional fuel costs when fuel prices rise; however, there is generally a 30 to 120 day delay before contracts are adjusted. Spot contracts do not have escalators for fuel.
Selling, general and administrative expenses for the 2026 second quarter and first six months increased 6% and 7%, respectively, compared to the 2025 second quarter and first six months. The increase in selling, general and administrative expenses for the 2026 second quarter and first six months as compared to the 2025 second quarter and first six months was primarily due to continued inflationary cost pressures, including salary and wage increases that went into effect on July 1, 2025.
Depreciation and amortization for the 2026 second quarter and first six months increased 8% compared to the 2025 second quarter and first six months. The increase was primarily due to capital additions during 2025 and the first six months of 2026, as well as equipment acquisitions.
Marine Transportation Operating Income and Operating Margin
KMT operating income for the 2026 second quarter and first six months decreased 11% and 4%, respectively, compared with the 2025 second quarter and first six months. The 2026 second quarter operating margin was 16.4% compared with 20.1% for the 2025 second quarter. The 2026 first six months operating margin was 17.2% compared with 19.2% for the 2025 first six months. The decrease in operating income as compared to the 2025 second quarter and first six months was primarily due to higher fuel costs due to the Iran conflict. During the second quarter of 2026, rapidly rising fuel prices temporarily compressed operating income and operating margins in the inland market due to the inherent lag in the Company's contractual fuel escalation mechanisms. Because fuel-related pricing adjustments under term contracts generally become effective 30 to 120 days after fuel cost increases are incurred, the Company was unable to fully recover the impact of higher fuel costs during the quarter. The Company expects these costs to be substantially recovered in subsequent quarters as contractual fuel escalation provisions take effect.
Distribution and Services
The following table sets forth KDS revenues, costs and expenses, operating income, and operating margin (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2026 |
|
|
2025 |
|
|
% Change |
|
|
2026 |
|
|
2025 |
|
|
% Change |
|
Distribution and services revenues |
|
$ |
385,425 |
|
|
$ |
362,893 |
|
|
|
6 |
% |
|
$ |
732,341 |
|
|
$ |
672,403 |
|
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of sales and operating expenses |
|
|
282,714 |
|
|
|
264,331 |
|
|
|
7 |
|
|
|
539,998 |
|
|
|
486,559 |
|
|
|
11 |
|
Selling, general and administrative |
|
|
51,431 |
|
|
|
50,054 |
|
|
|
3 |
|
|
|
104,502 |
|
|
|
102,073 |
|
|
|
2 |
|
Taxes, other than on income |
|
|
2,406 |
|
|
|
2,391 |
|
|
|
1 |
|
|
|
4,667 |
|
|
|
4,744 |
|
|
|
(2 |
) |
Depreciation and amortization |
|
|
10,723 |
|
|
|
10,682 |
|
|
|
— |
|
|
|
21,677 |
|
|
|
21,001 |
|
|
|
3 |
|
|
|
|
347,274 |
|
|
|
327,458 |
|
|
|
6 |
|
|
|
670,844 |
|
|
|
614,377 |
|
|
|
9 |
|
Operating income |
|
$ |
38,151 |
|
|
$ |
35,435 |
|
|
|
8 |
% |
|
$ |
61,497 |
|
|
$ |
58,026 |
|
|
|
6 |
% |
Operating margins |
|
|
9.9 |
% |
|
|
9.8 |
% |
|
|
|
|
|
8.4 |
% |
|
|
8.6 |
% |
|
|
|
Distribution and Services Revenues
The following table shows the markets serviced by KDS, the revenue distribution, and the customers for each market:
|
|
|
|
|
|
|
Markets Serviced |
|
2026 Second Quarter
Revenue
Distribution |
|
2026 Six Months
Revenue
Distribution |
|
Customers |
Commercial and Industrial |
|
50% |
|
49% |
|
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, Pumping Stations, Mining |
Power Generation |
|
40% |
|
41% |
|
Power Generation & Standby Power Generation Equipment, Power Generation Rentals & Related Service, Data Centers |
Oil and Gas |
|
10% |
|
10% |
|
Oilfield Services, Oil and Gas Operators and Producers |
KDS revenues for the 2026 second quarter and first six months increased 6% and 9%, respectively, compared with the 2025 second quarter and first six months. KDS operating income for the 2026 second quarter and first six months increased 8% and 6%, respectively, compared with the 2025 second quarter and first six months.
In the commercial and industrial market, revenues and operating income increased compared to the 2025 second quarter and first six months due to higher business levels in marine repair. In the power generation market, revenues and operating income increased compared to the 2025 second quarter and first six months due to increased demand for backup, prime power and critical power applications. In the oil and gas market, revenues and operating income decreased compared to the 2025 second quarter and first six months, impacted by lower levels of conventional oilfield activity which resulted in decreased demand for new transmissions and parts, partially offset by deliveries of electric fracturing equipment.
Distribution and Services Costs and Expenses
Costs and expenses for the 2026 second quarter and first six months increased 6% and 9%, respectively, compared with the 2025 second quarter and first six months. Costs of sales and operating expenses for the 2026 second quarter and first six months increased 7% and 11%, respectively, compared with the 2025 second quarter and first six months. The increase for the 2026 second quarter and first six months reflected higher deliveries of power generation equipment, partially offset by lower on-highway and conventional oilfield activity.
Selling, general and administrative expenses for the 2026 second quarter and first six months increased 3% and 2%, respectively, compared to the 2025 second quarter and first six months, reflecting higher business activity levels and inflationary cost pressures, including salary and wage increases that went into effect July 1, 2025.
Depreciation and amortization for the 2026 first six months increased 3% compared to the 2025 first six months. The increase was primarily due to capital additions during 2025 and the first six months of 2026, including additions to the equipment rental fleet.
Distribution and Services Operating Income and Operating Margin
KDS operating income for the 2026 second quarter and first six months increased 8% and 6%, respectively, compared with the 2025 second quarter and first six months. The 2026 second quarter operating margin was 9.9% compared to 9.8% for the 2025 second quarter. The 2026 first six months operating margin was 8.4% compared to 8.6% for the 2025 first six months. The results reflect increased demand in power generation from data centers and prime power customers and higher marine repair activity and deliveries of electric fracturing equipment, partially offset by lower conventional oilfield activity.
General Corporate Expenses
General corporate expenses for the 2026 first six months increased compared to the 2025 first six months, driven primarily by increases in insurance costs, professional fees, and incentive compensation.
Gain on Disposition of Assets
The Company reported a net gain on disposition of assets of $0.7 million and $1.7 million for the 2026 and 2025 second quarter, respectively. The Company reported a net gain on disposition of assets of $2.2 million and $1.8 million for the 2026 and 2025 first six months, respectively. The net gains were primarily from sales of marine transportation equipment and the sale of a KDS facility in the 2026 first quarter.
Other Income and Expenses
The following table sets forth other income, noncontrolling interests, and interest expense (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2026 |
|
|
2025 |
|
|
% Change |
|
|
2026 |
|
|
2025 |
|
|
% Change |
|
Other income |
|
$ |
7,027 |
|
|
$ |
4,812 |
|
|
|
46 |
% |
|
$ |
14,308 |
|
|
$ |
10,146 |
|
|
|
41 |
% |
Noncontrolling interests |
|
$ |
(69 |
) |
|
$ |
(101 |
) |
|
|
(32 |
)% |
|
$ |
(198 |
) |
|
$ |
(385 |
) |
|
|
49 |
% |
Interest expense |
|
$ |
(10,977 |
) |
|
$ |
(12,730 |
) |
|
|
(14 |
)% |
|
$ |
(21,227 |
) |
|
$ |
(23,267 |
) |
|
|
(9 |
)% |
Other Income
Other income for the 2026 and 2025 second quarters includes income of $6.0 million and $4.3 million, 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 2026 and 2025 first six months includes income of $12.2 million and $9.1 million, respectively, for all components of net benefit costs except the service cost component related to the Company’s defined benefit plans.
Interest Expense
The following table sets forth average debt and average interest rate (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Average debt |
|
$ |
1,028,991 |
|
|
$ |
1,147,306 |
|
|
$ |
981,178 |
|
|
$ |
1,048,395 |
|
Average interest rate |
|
|
4.3 |
% |
|
|
4.6 |
% |
|
|
4.4 |
% |
|
|
4.5 |
% |
Interest expense for the 2026 second quarter and first six months decreased 14% and 9%, respectively, compared with the 2025 second quarter and first six months, primarily due to lower average debt outstanding and a lower average interest rate in the 2026 second quarter and first six months. Interest expense excludes capitalized interest for the 2026 second quarter and first six months of $0.2 million and $0.4 million, respectively. Interest expense excludes capitalized interest for both the 2025 second quarter and first six months of $0.5 million.
Financial Condition, Capital Resources and Liquidity
Balance Sheets
The following table sets forth the significant components of the balance sheets (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2026 |
|
|
December 31,
2025 |
|
|
% Change |
|
Assets: |
|
|
|
|
|
|
|
|
|
Current assets |
|
$ |
1,239,593 |
|
|
$ |
1,077,855 |
|
|
|
15 |
% |
Property and equipment, net |
|
|
4,177,456 |
|
|
|
4,098,058 |
|
|
|
2 |
|
Operating lease right-of-use assets |
|
|
168,927 |
|
|
|
193,276 |
|
|
|
(13 |
) |
Goodwill |
|
|
438,748 |
|
|
|
438,748 |
|
|
|
— |
|
Other intangibles, net |
|
|
26,342 |
|
|
|
30,165 |
|
|
|
(13 |
) |
Other assets |
|
|
169,201 |
|
|
|
169,943 |
|
|
|
— |
|
|
|
$ |
6,220,267 |
|
|
$ |
6,008,045 |
|
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity: |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
736,053 |
|
|
$ |
706,524 |
|
|
|
4 |
% |
Long-term debt, net – less current portion |
|
|
1,031,398 |
|
|
|
911,924 |
|
|
|
13 |
|
Deferred income taxes |
|
|
842,577 |
|
|
|
826,373 |
|
|
|
2 |
|
Operating lease liabilities – less current portion |
|
|
151,073 |
|
|
|
169,854 |
|
|
|
(11 |
) |
Other long-term liabilities |
|
|
14,172 |
|
|
|
10,577 |
|
|
|
34 |
|
Total equity |
|
|
3,444,994 |
|
|
|
3,382,793 |
|
|
|
2 |
|
|
|
$ |
6,220,267 |
|
|
$ |
6,008,045 |
|
|
|
4 |
% |
Current assets as of June 30, 2026 increased 15% compared with December 31, 2025. Trade accounts receivable increased 36% primarily due to higher business activity levels in both KMT and KDS. Inventories – net increased 5% primarily due to the impact of higher business activity levels and supply delays in KDS resulting in the buildup of inventory for mainly power generation projects that are scheduled to be delivered later in 2026 and into 2027. Prepaid expenses and other current assets increased 4% primarily due to higher prepaid fuel as a result of an increase in the price of diesel fuel.
Property and equipment, net of accumulated depreciation, at June 30, 2026 increased 2% compared with December 31, 2025. The increase reflected $123.4 million of capital additions (including an increase in accrued capital expenditures of $3.6 million) and $95.8 million of equipment acquisitions in the 2026 first six months, partially offset by $134.7 million of depreciation expense and $5.1 million of property disposals more fully described under Cash Flow and Capital Expenditures below.
Operating lease right-of-use assets as of June 30, 2026 decreased 13% compared with December 31, 2025, primarily due to lease amortization expense, partially offset by new leases acquired in the 2026 first six months.
Other intangibles, net, as of June 30, 2026 decreased 13% compared with December 31, 2025, due to amortization during the 2026 first six months.
Current liabilities as of June 30, 2026 increased 4% compared with December 31, 2025. Accounts payable increased 14% primarily due to higher business activity levels and the timing of inventory purchases and shipyard payments. Accrued liabilities decreased 9% primarily from payment during the 2026 first six months of employee incentive compensation accrued during 2025. Deferred revenues increased 14%, primarily due to deposits on equipment expected to be shipped later in 2026 and into 2027 in KDS.
Long-term debt, net – less current portion, as of June 30, 2026 increased 13% compared with December 31, 2025, primarily reflecting increased borrowings under the 2031 Revolving Credit Facility.
Operating lease liabilities – less current portion, as of June 30, 2026 decreased 11% compared with December 31, 2025, primarily due to lease payments made, partially offset by new leases acquired and liability accretion.
Total equity as of June 30, 2026 increased 2% compared with December 31, 2025. Net earnings attributable to Kirby of $170.9 million, amortization of share-based compensation of $12.4 million, and stock option exercises of $4.3 million were partially offset by treasury stock purchases of $112.4 million and tax withholdings of $6.7 million on RSU vestings.
Long-Term Financing
The following table summarizes the Company’s outstanding debt (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
2026 |
|
|
December 31,
2025 |
|
Long-term debt, including current portion: |
|
|
|
|
|
|
Revolving Credit Facility due March 26, 2031 (a) |
|
$ |
235,000 |
|
|
$ |
45,000 |
|
Term Loan due July 29, 2027 (b) |
|
|
— |
|
|
|
70,000 |
|
4.2% senior notes due March 1, 2028 |
|
|
500,000 |
|
|
|
500,000 |
|
3.46% senior notes due January 19, 2033 |
|
|
60,000 |
|
|
|
60,000 |
|
3.51% senior notes due January 19, 2033 |
|
|
240,000 |
|
|
|
240,000 |
|
Credit line due June 30, 2028 |
|
|
— |
|
|
|
— |
|
Bank notes payable |
|
|
5,950 |
|
|
|
7,357 |
|
|
|
|
1,040,950 |
|
|
|
922,357 |
|
Unamortized debt discounts and issuance costs |
|
|
(3,602 |
) |
|
|
(3,076 |
) |
|
|
$ |
1,037,348 |
|
|
$ |
919,281 |
|
(a)Variable interest rate of 4.6% at June 30, 2026 and 5.0% at December 31, 2025.
(b)Variable interest rate of 5.0% at December 31, 2025.
On March 26, 2026, the Company entered into the 2031 Credit Agreement with JPMorgan, as administrative agent, and certain lenders and issuing banks party thereto. The 2031 Credit Agreement amends and restates in its entirety the 2027 Credit Agreement, extending the Maturity Date, increasing the revolving credit facility commitments to $750 million, and removing the term loan credit facility. Under the 2031 Credit Agreement, the Company has the option, subject to customary conditions and consent of the participating lenders, to increase the size of the revolving credit facility commitments and to add term loan commitments up to an aggregate additional $500 million.
Borrowings under the 2031 Credit Agreement bear interest at a rate per annum equal to, at the Company’s option, either a SOFR or a base rate, plus an interest rate margin which ranges from 87.5 to 150 basis points for SOFR loans and 0 to 50 basis points for base rate loans based on the Company’s credit rating. The commitment fee on the unused available credit ranges from 7 to 20 basis points based on the Company’s credit rating. The Maturity Date may be extended for up to two additional one-year periods with the consent of the Company and lenders holding at least 50 percent of the commitments under the 2031 Credit Agreement. The 2031 Credit Agreement contains customary provisions regarding permitted uses, events of default, and covenants substantively similar to those in the 2027 Credit Agreement, including the maintenance of an interest coverage ratio of no less than 2.5 to 1.0 and a debt to capitalization of no more than or equal to 60 percent (with all calculations based on definitions contained in the 2031 Credit Agreement). Outstanding letters of credit under the 2031 Revolving Credit Facility were $6,000 and available borrowing capacity was $515.0 million as of June 30, 2026.
The Company has a $20 million Credit Line with Bank of America for short-term liquidity needs and letters of credit, with a maturity date of June 30, 2028. Outstanding letters of credit under the Credit Line were $8.0 million and available borrowing capacity was $12.0 million as of June 30, 2026.
As of June 30, 2026, the Company was in compliance with all covenants under its debt instruments. For additional information about the Company’s debt instruments, see Note 5, Long-Term Debt, of the Notes to Condensed Financial Statements (Unaudited) as well as Note 5, Long-Term Debt, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
Cash Flow and Capital Expenditures
The Company generated positive operating cash flows during the 2026 first six months with net cash provided by operating activities of $169.9 million compared with $130.5 million for the 2025 first six months, a 30% increase. The increase in operating cash flows was mainly due to the timing of accounts payable and income tax payments, partially offset by the timing of accounts receivable collections. During the 2026 and 2025 first six months, the Company generated cash of $6.7 million and $11.6 million, respectively, from proceeds from the disposition of assets, and $4.3 million and $0.3 million, respectively, from proceeds from the exercise of stock options.
For the 2026 first six months, cash generated was used for capital expenditures of $119.8 million, including $104.2 million associated with marine maintenance capital and improvements to existing inland and coastal marine equipment and facility improvements, as well as $15.6 million for growth spending in both segments. The growth spending is related to inland equipment construction and equipment for use in a variety of KDS markets including power generation, electric fracturing operations, and other industrial applications. In addition, the Company used cash of $95.8 million for marine equipment acquisitions in the 2026 first six months.
Treasury Stock Purchases
During the 2026 first six months, the Company purchased 0.8 million shares of its common stock for $112.4 million, at an average price of $132.69 per share. Subsequent to June 30, 2026 and through August 4, 2026, the Company purchased an additional 0.3 million shares of its common stock for $38.6 million, at an average price of $138.27 per share. As of August 4, 2026, the Company had approximately 6.1 million shares available under its existing purchase authorizations. Historically, treasury stock purchases have been financed through operating cash flows and borrowings under the Company’s Revolving Credit Facility. The Company is authorized to purchase its common stock on the New York Stock Exchange and in privately negotiated transactions. When purchasing its common stock, the Company is subject to price, trading volume, and other market considerations. Shares purchased may be used for reissuance upon the exercise of stock options or the granting of other forms of incentive compensation, in future acquisitions for stock, or for other appropriate corporate purposes. For more information about stock purchases in the 2026 second quarter, see Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Liquidity
Funds generated from operations are available for acquisitions, capital expenditure projects, common stock purchases, repayments of borrowings, and for other corporate and operating requirements. In addition to net cash flows provided by operating activities, as of August 4, 2026 the Company also had cash and cash equivalents of $46.5 million, availability of $540.0 million under its 2031 Revolving Credit Facility, and $12.0 million available under its Credit Line.
Neither the Company, nor any of its subsidiaries, is obligated on any debt instrument, swap agreement, or any other financial instrument or commercial contract which has a rating trigger, except for the pricing grid on its 2031 Credit Agreement.
The Company expects to continue to be able to fund expenditures for acquisitions, capital construction projects, common stock purchases, repayment of borrowings, and for other operating requirements both in the short term and in the long term from a combination of available cash and cash equivalents, funds generated from operating activities, and available financing arrangements.
The 2031 Revolving Credit Facility’s commitment is in the amount of $750 million and matures March 26, 2031, with $235.0 million currently outstanding at June 30, 2026. The $500 million 4.2% senior unsecured notes do not mature until March 1, 2028 and require no prepayments. The $60 million of 3.46% series A notes and $240 million of 3.51% series B notes do not mature until January 19, 2033 and require no prepayments.
There are numerous factors that may negatively impact the Company’s cash flows in 2026. For a list of significant risks and uncertainties that could impact cash flows, see Note 13, Contingencies and Commitments, of the Notes to Condensed Financial Statements (Unaudited), Part II, Item 1A-Risk Factors of this Form 10-Q and the Form 10-Q for the quarter ended March 31, 2026, and Item 1A-Risk Factors and Note 14, Contingencies and Commitments, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. 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 Note 5, Long-Term Debt, of the Notes to Condensed Financial Statements (Unaudited) as well as Note 5, Long-Term Debt, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
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 $31.1 million at June 30, 2026, including $12.6 million in letters of credit and $18.5 million in performance bonds. All of these instruments have an expiration date within approximately two years. The Company does not believe demand for payment under these instruments is likely and expects no material cash outlays to occur in connection with these instruments.
KMT term contracts typically contain fuel escalation clauses, or the customer pays for the fuel. However, there is generally a 30 to 120 day delay before contracts are adjusted depending on the specific terms of the contract. In general, the fuel escalation clauses are effective over the long-term in allowing the Company to recover changes in fuel costs due to fuel price changes. However, the short-term effectiveness of the fuel escalation clauses can be affected by a number of factors including, but not limited to, specific terms of the fuel escalation formulas, fuel price volatility, navigating conditions, tow sizes, trip routing, and the location of loading and discharge ports that may result in the Company over or under recovering its fuel costs. The Company’s spot contract rates generally reflect current fuel prices at the time the contract is signed but do not have escalators for fuel.
The Company has certain mechanisms designed to help mitigate the impacts of rising costs. For example, KMT has long-term contracts which generally contain cost escalation clauses whereby certain costs, including fuel as noted above, can be largely passed through to its customers. Spot contract rates include the cost of fuel and are subject to market volatility. In KDS, the cost of major components for large manufacturing orders is secured with suppliers at the time a customer order is finalized, which somewhat limits exposure to inflation. To the extent possible, the Company also seeks to include contractual language to address recovery of increased costs related to tariffs in KDS. The repair portion of KDS is based on prevailing current market rates.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
For quantitative and qualitative disclosures about market risk, see Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the Company’s Annual Report on Form 10-K. The Company’s exposure to market risk has not changed materially since December 31, 2025.
Item 4. Controls and Procedures
Disclosure Controls and Procedures. The Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)), as of June 30, 2026, 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 June 30, 2026, 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. There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.