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, 2019

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)



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

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 LLC

The number of shares outstanding of the registrant’s Common Stock, $0.10 par value per share, on November 6, 2019 was 59,947,000.




PART I – FINANCIAL INFORMATION

Item 1.
Financial Statements

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED BALANCE SHEETS
(Unaudited)

 
September 30,
2019
   
December 31,
2018
 
   
($ in thousands)
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
 
$
9,425
   
$
7,800
 
Accounts receivable:
               
Trade – less allowance for doubtful accounts
   
382,465
     
417,644
 
Other
   
99,736
     
104,239
 
Inventories – net
   
410,261
     
507,441
 
Prepaid expenses and other current assets
   
56,646
     
59,365
 
Total current assets
   
958,533
     
1,096,489
 
                 
Property and equipment
   
5,311,754
     
5,011,824
 
Accumulated depreciation
   
(1,518,022
)
   
(1,472,022
)
Property and equipment – net
   
3,793,732
     
3,539,802
 
                 
Operating lease right-of-use assets
   
156,798
     
 
Goodwill
   
953,826
     
953,826
 
Other intangibles, net
   
210,173
     
224,197
 
Other assets
   
54,823
     
57,280
 
Total assets
 
$
6,127,885
   
$
5,871,594
 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Bank notes payable
 
$
15
   
$
19
 
Income taxes payable
   
1,196
     
2,794
 
Accounts payable
   
212,279
     
278,057
 
Accrued liabilities
   
225,402
     
246,789
 
Current portion of operating lease liabilities
   
29,001
     
 
Deferred revenues
   
49,098
     
80,123
 
Total current liabilities
   
516,991
     
607,782
 
                 
Long-term debt, net – less current portion
   
1,434,417
     
1,410,169
 
Deferred income taxes
   
585,507
     
542,785
 
Operating lease liabilities
   
135,017
     
 
Other long-term liabilities
   
81,455
     
94,557
 
Total long-term liabilities
   
2,236,396
     
2,047,511
 
                 
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
 
Additional paid-in capital
   
832,892
     
823,347
 
Accumulated other comprehensive income – net
   
(27,413
)
   
(33,511
)
Retained earnings
   
2,863,162
     
2,723,592
 
Treasury stock – at cost, 5,544,000 shares at September 30, 2019 and 5,608,000 at December 31, 2018
   
(303,667
)
   
(306,788
)
Total Kirby stockholders’ equity
   
3,371,521
     
3,213,187
 
Noncontrolling interests
   
2,977
     
3,114
 
Total equity
   
3,374,498
     
3,216,301
 
Total liabilities and equity
 
$
6,127,885
   
$
5,871,594
 

See accompanying notes to condensed financial statements.

1


KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF EARNINGS
(Unaudited)

 
Three months ended September 30,
   
Nine months ended September 30,
 
   
2019
   
2018
   
2019
   
2018
 
   
($ in thousands, except per share amounts)
 
Revenues:
                       
Marine transportation
 
$
412,665
   
$
382,040
   
$
1,185,072
   
$
1,100,606
 
Distribution and services
   
254,144
     
322,805
     
997,400
     
1,148,598
 
Total revenues
   
666,809
     
704,845
     
2,182,472
     
2,249,204
 
                                 
Costs and expenses:
                               
Costs of sales and operating expenses
   
458,514
     
498,421
     
1,558,664
     
1,640,366
 
Selling, general and administrative
   
64,656
     
70,032
     
206,602
     
239,416
 
Taxes, other than on income
   
10,909
     
10,523
     
31,486
     
29,610
 
Depreciation and amortization
   
54,455
     
57,930
     
164,771
     
167,640
 
(Gain) loss on disposition of assets
   
374
     
(18
)
   
(4,901
)
   
(2,358
)
Total costs and expenses
   
588,908
     
636,888
     
1,956,622
     
2,074,674
 
                                 
Operating income
   
77,901
     
67,957
     
225,850
     
174,530
 
Other income
   
864
     
1,454
     
2,677
     
4,586
 
Interest expense
   
(14,310
)
   
(12,345
)
   
(43,026
)
   
(34,665
)
                                 
Earnings before taxes on income
   
64,455
     
57,066
     
185,501
     
144,451
 
Provision for taxes on income
   
(16,305
)
   
(15,116
)
   
(45,454
)
   
(41,042
)
                                 
Net earnings
   
48,150
     
41,950
     
140,047
     
103,409
 
Less: Net earnings attributable to noncontrolling interests
   
(163
)
   
(134
)
   
(477
)
   
(520
)
                                 
Net earnings attributable to Kirby
 
$
47,987
   
$
41,816
   
$
139,570
   
$
102,889
 
                                 
Net earnings per share attributable to Kirby common stockholders:
                               
Basic
 
$
0.80
   
$
0.70
   
$
2.33
   
$
1.72
 
Diluted
 
$
0.80
   
$
0.70
   
$
2.32
   
$
1.72
 

See accompanying notes to condensed financial statements.

2


KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 
Three months ended September 30,
   
Nine months ended September 30,
 
   
2019
   
2018
   
2019
   
2018
 
   
($ in thousands)
 
                   
Net earnings
 
$
48,150
   
$
41,950
   
$
140,047
   
$
103,409
 
Other comprehensive income (loss), net of taxes:
                               
Pension and postretirement benefits
   
172
     
438
     
6,640
     
855
 
Foreign currency translation adjustments
   
(618
)
   
(60
)
   
(542
)
   
(69
)
Reclassification to retained earnings of stranded tax effects from tax reform
   
     
     
     
(7,925
)
Total other comprehensive income (loss), net of taxes
   
(446
)
   
378
     
6,098
     
(7,139
)
                                 
Total comprehensive income, net of taxes
   
47,704
     
42,328
     
146,145
     
96,270
 
Net earnings attributable to noncontrolling interests
   
(163
)
   
(134
)
   
(477
)
   
(520
)
                                 
Comprehensive income attributable to Kirby
 
$
47,541
   
$
42,194
   
$
145,668
   
$
95,750
 

See accompanying notes to condensed financial statements.

3


KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

 
Nine months ended September 30,
 
   
2019
   
2018
 
   
($ in thousands)
 
Cash flows from operating activities:
           
Net earnings
 
$
140,047
   
$
103,409
 
Adjustments to reconcile net earnings to net cash provided by operations:
               
Depreciation and amortization
   
164,771
     
167,640
 
Provision for deferred income taxes
   
40,502
     
36,838
 
Amortization of unearned share-based compensation
   
11,079
     
16,649
 
Amortization of leases
   
(410
)
   
 
Amortization of major maintenance costs
   
17,295
     
15,600
 
Amortization of debt issuance costs
   
1,212
     
898
 
Other
   
(5,875
)
   
(2,023
)
Increase (decrease) in cash flows resulting from changes in operating assets and liabilities, net
   
18,978
     
(66,707
)
Net cash provided by operating activities
   
387,599
     
272,304
 
                 
Cash flows from investing activities:
               
Capital expenditures
   
(184,068
)
   
(231,752
)
Acquisitions of businesses and marine equipment, net of cash acquired
   
(257,540
)
   
(499,227
)
Proceeds from disposition of assets
   
34,490
     
27,806
 
Net cash used in investing activities
   
(407,118
)
   
(703,173
)
                 
Cash flows from financing activities:
               
Payments on bank credit facilities
   
(417,377
)
   
(88,392
)
Borrowings on long-term debt
   
500,000
     
499,295
 
Payments on long-term debt
   
(60,000
)
   
 
Payments of debt issue costs
   
(2,397
)
   
(4,276
)
Proceeds from exercise of stock options
   
3,563
     
13,264
 
Payments related to tax withholding for share-based compensation
   
(2,031
)
   
(4,821
)
Other
   
(614
)
   
(686
)
Net cash provided by financing activities
   
21,144
     
414,384
 
Increase (decrease) in cash and cash equivalents
   
1,625
     
(16,485
)
                 
Cash and cash equivalents, beginning of year
   
7,800
     
20,102
 
Cash and cash equivalents, end of period
 
$
9,425
   
$
3,617
 
                 
Supplemental disclosures of cash flow information:
               
Cash paid during the period:
               
Interest paid
 
$
52,436
   
$
37,175
 
Income taxes paid
 
$
3,155
   
$
495
 
Operating cash outflow from operating leases
 
$
29,424
   
$
 
Non-cash investing activity:
               
Capital expenditures included in accounts payable
 
$
6,410
   
$
(5,554
)
Cash acquired in acquisition
 
$
   
$
2,313
 
Right-of-use assets obtained in exchange for lease obligations
 
$
9,736
   
$
 

See accompanying notes to condensed financial statements.

4


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 June 30, 2019
   
65,472
   
$
6,547
   
$
829,460
   
$
(26,967
)
 
$
2,815,175
     
(5,570
)
 
$
(305,061
)
 
$
3,018
   
$
3,322,172
 
Stock option exercises
   
     
     
237
     
     
     
26
     
1,425
     
     
1,662
 
Issuance of stock for equity awards, net of forfeitures
   
     
     
23
     
     
     
     
(23
)
   
     
 
Tax withholdings on equity award vesting
   
     
     
     
     
     
     
(8
)
   
     
(8
)
Amortization of unearned share-based compensation
   
     
     
3,172
     
     
     
     
     
     
3,172
 
Total comprehensive income, net of taxes
   
     
     
     
(446
)
   
47,987
     
     
     
163
     
47,704
 
Return of investment to noncontrolling interests
   
     
     
     
     
     
     
     
(204
)
   
(204
)
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
 


 
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 June 30, 2018
   
65,472
   
$
6,547
   
$
817,609
   
$
(39,922
)
 
$
2,706,213
     
(5,598
)
 
$
(306,097
)
 
$
3,341
   
$
3,187,691
 
Stock option exercises
   
     
     
50
     
     
     
4
     
226
     
     
276
 
Issuance of stock for equity awards, net of forfeitures
   
     
     
48
     
     
     
(1
)
   
(48
)
   
     
 
Tax withholdings on equity award vesting
   
     
     
     
     
     
     
(7
)
   
     
(7
)
Amortization of unearned share-based compensation
   
     
     
3,098
     
     
     
     
     
     
3,098
 
Total comprehensive income, net of taxes
   
     
     
     
378
     
41,816
     
     
     
134
     
42,328
 
Return of investment to noncontrolling interests
   
     
     
     
     
     
     
     
(238
)
   
(238
)
Balance at September 30, 2018
   
65,472
   
$
6,547
   
$
820,805
   
$
(39,544
)
 
$
2,748,029
     
(5,595
)
 
$
(305,926
)
 
$
3,237
   
$
3,233,148
 

See accompanying notes to condensed financial statements.

5


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, 2018
   
65,472
   
$
6,547
   
$
823,347
   
$
(33,511
)
 
$
2,723,592
     
(5,608
)
 
$
(306,788
)
 
$
3,114
   
$
3,216,301
 
Stock option exercises
   
     
     
355
     
     
     
60
     
3,263
     
     
3,618
 
Issuance of stock for equity awards, net of forfeitures
   
     
     
(1,889
)
   
     
     
34
     
1,889
     
     
 
Tax withholdings on equity award vesting
   
     
     
     
     
     
(30
)
   
(2,031
)
   
     
(2,031
)
Amortization of unearned share-based compensation
   
     
     
11,079
     
     
     
     
     
     
11,079
 
Total comprehensive income, net of taxes
   
     
     
     
6,098
     
139,570
     
     
     
477
     
146,145
 
Return of investment to noncontrolling interests
   
     
     
     
     
     
     
     
(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
 


 
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, 2017
   
65,472
   
$
6,547
   
$
802,961
   
$
(32,405
)
 
$
2,646,937
     
(5,783
)
 
$
(313,220
)
 
$
3,403
   
$
3,114,223
 
Adoption of new accounting standards
   
     
     
     
     
(1,797
)
   
     
     
     
(1,797
)
Stock option exercises
   
     
     
2,161
     
     
     
232
     
11,149
     
     
13,310
 
Issuance of stock for equity awards, net of forfeitures
   
     
     
(966
)
   
     
     
17
     
966
     
     
 
Tax withholdings on equity award vesting
   
     
     
     
     
     
(61
)
   
(4,821
)
   
     
(4,821
)
Amortization of unearned share-based compensation
   
     
     
16,649
     
     
     
     
     
     
16,649
 
Total comprehensive income, net of taxes
   
     
     
     
(7,139
)
   
102,889
     
     
     
520
     
96,270
 
Return of investment to noncontrolling interests
   
     
     
     
     
     
     
     
(686
)
   
(686
)
Balance at September 30, 2018
   
65,472
   
$
6,547
   
$
820,805
   
$
(39,544
)
 
$
2,748,029
     
(5,595
)
 
$
(305,926
)
 
$
3,237
   
$
3,233,148
 

See accompanying notes to condensed financial statements.

6



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 (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, 2018.

(2)  ACCOUNTING STANDARDS ADOPTIONS


In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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, and interim periods within those fiscal years, beginning 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 will perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU 2017-04 will be applied prospectively and is effective for annual and interim goodwill impairment tests conducted in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment testing dates after January 1, 2017. The Company is currently evaluating the impact, if any, that the adoption of this standard will have on its consolidated financial statements.


In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) to increase transparency and comparability among organizations by requiring recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. The Company adopted ASU 2016-02 on January 1, 2019 under the optional transition method that allows for a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption and will not restate prior periods.  The Company also elected certain practical expedients permitted under the transition guidance which allowed the Company to carryforward its historical lease classification and for the non-recognition of short-term leases. Adoption of ASU 2016-02 resulted in the recognition of operating lease right-of-use assets for operating leases of $168,149,000 and lease liabilities for operating leases of $175,778,000 on the Company’s Condensed Balance Sheets as of January 1, 2019, with no material impact to the Condensed Statements of Earnings or Cash Flows. The Company did not have any financing leases as of January 1, 2019.  See Note 3, Leases for additional information.

(3)  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, the allocation 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 the 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% 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).
7



Future minimum lease payments under operating leases that have initial noncancelable lease terms in excess of one year at September 30, 2019  were as follows (in thousands):

2019
 
$
9,503
 
2020
   
33,200
 
2021
   
25,550
 
2022
   
22,573
 
2023
   
18,684
 
Thereafter
   
95,939
 
Total lease payments
   
205,449
 
Less: imputed interest
   
(41,431
)
Operating lease liabilities
 
$
164,018
 


As of December 31, 2018, future total rentals on the Company’s noncancelable operating leases were $278,602,000 in the aggregate, which consisted of the following: $97,091,000 in 2019; $30,062,000 in 2020; $21,818,000 in 2021; $20,263,000 in 2022; $17,429,000 in 2023; and $91,939,000 thereafter.


The following table summarizes lease cost for the three and nine months ended September 30, 2019 (in thousands):


 
Three months ended
September 30, 2019
   
Nine months ended
September 30, 2019
 
Operating lease cost
 
$
9,490
   
$
29,461
 
Variable lease cost
   
386
     
1,417
 
Short-term lease cost
   
7,727
     
24,582
 
Sublease income
   
(366
)
   
(924
)
Total lease cost
 
$
17,237
   
$
54,536
 


The following table summarizes other supplemental information about the Company’s operating leases as of September 30, 2019:

Weighted average discount rate
   
4.0
%
Weighted average remaining lease term
 
10 years
 


8

(4)  REVENUES


The following table sets forth the Company’s revenues by major source for the three months and nine months ended September 30, 2019 and 2018 (in thousands):


 
Three months ended September 30,
   
Nine months ended September 30,
 
   
2019
   
2018
   
2019
   
2018
 
Marine transportation segment:
                       
Inland transportation
 
$
316,000
   
$
288,573
   
$
909,247
   
$
827,848
 
Coastal transportation
   
96,665
     
93,467
     
275,825
     
272,758
 
   
$
412,665
   
$
382,040
   
$
1,185,072
   
$
1,100,606
 
Distribution and services segment:
                               
Oil and gas
 
$
118,096
   
$
201,475
   
$
540,061
   
$
780,825
 
Commercial and industrial
   
136,048
     
121,330
     
457,339
     
367,773
 
   
$
254,144
   
$
322,805
   
$
997,400
   
$
1,148,598
 


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. The amount of revenue recognized during the 2019 first nine months that was included in the opening contract liability balance was $75,105,000. The Company has recognized all contract liabilities within the deferred revenues financial statement caption on the balance sheet.  The Company did not have any contract assets at September 30, 2019 or December 31, 2018.


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)  ACQUISITIONS


During the nine months ended September 30, 2019, the Company purchased nine inland tank barges from leasing companies for $13,040,000 in cash.  The Company had been leasing the barges prior to the purchases.


On March 14, 2019, the Company completed the acquisition of the marine transportation fleet of Cenac Marine Services, LLC (“Cenac”) for $244,500,000 in cash.  Cenac’s fleet consisted of 63 inland 30,000 barrel tank barges with approximately 1,833,000 barrels of capacity, 34 inland towboats and two offshore tugboats.  Cenac transported petrochemicals, refined products and black oil, including crude oil, residual fuels, feedstocks and lubricants on the lower Mississippi River, its tributaries, and the Gulf Intracoastal Waterway for major oil companies and refiners.  The average age of the inland tank barges was approximately five years  and the inland towboats had an average age of approximately seven years.


The Company considers Cenac to be a natural extension of the current marine transportation segment, expanding the capabilities of the Company’s inland based marine transportation business and lowering the average age of its inland tank barge and towboat fleet.


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

Assets:
     
Prepaid expenses
 
$
1,138
 
Property and equipment
   
247,122
 
Other intangibles
   
340
 
Total assets
 
$
248,600
 
         
Other long-term liabilities
   
4,100
 
Net assets acquired
 
$
244,500
 

9



The Company acquired intangible assets with an amortization period of two years and incurred long-term intangible liabilities related to unfavorable contracts with a weighted average amortization period of approximately 1.3 years. Acquisition related costs of $442,000, consisting primarily of legal and other professional fees, were expensed as incurred to selling, general and administrative expense in the 2019 first nine months.


Pro forma results of the acquisitions made in the 2019 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.

(6)  INVENTORIES


The following table presents the details of inventories as of September 30, 2019 and December 31, 2018 (in thousands):


 
September 30,
2019
   
December 31,
2018
 
             
Finished goods
 
$
338,230
   
$
406,364
 
Work in process
   
72,031
     
101,077
 
   
$
410,261
   
$
507,441
 


(7)  LONG-TERM DEBT


On March 27, 2019, the Company entered into 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, that extended the term of the Company’s existing $850,000,000 revolving credit facility (“Revolving Credit Facility”) to March 27, 2024 and added a five-year term loan (“Term Loan”) facility in an amount of $500,000,000.  The Credit Agreement provides for a variable interest rate based on the London interbank offered rate (“LIBOR”) or a base rate calculated with reference to the agent bank’s prime rate, among other factors (the “Alternate Base Rate”).  The interest rate varies with the Company’s credit rating and is currently 112.5 basis points over LIBOR or 12.5 basis points over the Alternate Base Rate.  The Term Loan is repayable in quarterly installments originally scheduled to commence  June 30, 2020, in increasing percentages of the original principal amount of the loan, with the remaining unpaid balance payable of 65% of the initial amount due on March 27, 2024. During the 2019 third quarter, the Company repaid $60,000,000 and during October 2019, the Company paid an additional $55,000,000 under the Term Loan prior to the scheduled installments.  As a result, no repayments are required until June 30, 2023. The Credit Agreement contains certain financial covenants including an interest coverage ratio and a debt-to-capitalization ratio. In addition to financial covenants, the Credit Agreement contains covenants that, subject to exceptions, restrict debt incurrence, mergers and acquisitions, sales of assets, dividends and investments, liquidations and dissolutions, capital leases, transactions with affiliates and changes in lines of business. The Credit Agreement specifies certain events of default, upon the occurrence of which the maturity of the outstanding loans may be accelerated, including the failure to pay principal or interest, violation of covenants and default on other indebtedness, among other events. Borrowings under the Credit Agreement may be used for general corporate purposes including acquisitions. As of September 30, 2019, the Company was in compliance with all Credit Agreement covenants and had no outstanding borrowings under the Revolving Credit Facility and $440,000,000 outstanding under the Term Loan. 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 $5,258,000 as of September 30, 2019.



The estimated fair value of total debt outstanding at September 30, 2019 and December 31, 2018 was $1,487,826,000 and $1,411,628,000, respectively, which differs from the carrying amounts of $1,434,432,000 and $1,410,188,000, respectively, included in the consolidated financial statements. The fair value of debt outstanding was determined using a Level 2 fair value measurement.

10


(8)  STOCK AWARD PLANS



The Company has share-based compensation plans which are described below. The compensation cost that has been charged against earnings for the Company’s stock award plans and the income tax benefit recognized in the statements of earnings for stock awards for the three months and nine months ended September 30, 2019 and 2018 were as follows (in thousands):


 
Three months ended September 30,
   
Nine months ended September 30,
 
   
2019
   
2018
   
2019
   
2018
 
Compensation cost
 
$
3,172
   
$
3,098
   
$
11,079
   
$
16,649
 
Income tax benefit
 
$
813
   
$
709
   
$
2,722
   
$
4,747
 


The Company has an employee stock award plan for selected officers and other key employees which provides for the issuance of stock options, restricted stock awards and performance awards. On February 19, 2018, the employee stock award plan was amended to also allow for the granting of restricted stock units (“RSUs”) to selected officers and other key employees. The amendment included a provision for the continued vesting of unvested stock options and RSUs for employees who meet certain years of service and age requirements at the time of their retirement. The vesting change resulted in shorter expense accrual periods on stock options and RSUs granted after February 19, 2018 to employees who are nearing retirement and meet the service and age requirements.


The exercise price for each option equals the fair market value per share of the Company’s common stock on the date of grant. Substantially all stock options outstanding under the plan have terms of seven years and vest ratably over three years. No performance awards payable in stock have been awarded under the plan. At September 30, 2019, 1,350,831 shares were available for future grants under the employee plan and no outstanding stock options under the employee plan were issued with stock appreciation rights.


The following is a summary of the stock option activity under the employee plan described above for the nine months ended September 30, 2019:


 
Outstanding
Non-
Qualified or
Nonincentive
Stock
Options
   
Weighted
Average
Exercise
Price
 
Outstanding at December 31, 2018
   
464,702
   
$
69.85
 
Granted
   
114,429
   
$
74.57
 
Exercised
   
(52,896
)
 
$
64.01
 
Canceled or expired
   
(16,498
)
 
$
72.56
 
Outstanding at September 30, 2019
   
509,737
   
$
71.43
 


The following table summarizes information about the Company’s outstanding and exercisable stock options under the employee plan at September 30, 2019:

 
 
Options Outstanding
 
Options Exercisable
Range of Exercise
Prices
 
Number
Outstanding
 
 
Weighted
Average
Remaining
Contractual
Life in Years
 
 
Weighted
Average
Exercise Price
 
Aggregate
Intrinsic Value
 
Number
Exercisable
 
 
Weighted
Average
Exercise Price
 
Aggregate
Intrinsic Value
$51.23
 
 
74,254
 
 
 
3.3
 
 
$
51.23
 
 
 
 
74,254
 
 
$
51.23
 
  
$64.65 - $68.50
   
100,757
     
4.7
   
$
67.34
       
45,433
   
$
68.43
   
$70.65 - $75.50
 
 
290,740
 
 
 
4.9
 
 
$
74.53
 
 
 
 
109,622
 
 
$
74.47
 
  
$84.90 - $101.46
 
 
43,986
 
 
 
2.1
 
 
$
94.38
 
 
 
 
37,281
 
 
$
96.08
 
  
$51.23 - $101.46
 
 
509,737
 
 
 
4.4
 
 
$
71.43
 
$6,007,000
 
 
266,590
 
 
$
69.99
 
$3,763,000

11



The following is a summary of the restricted stock award activity under the employee plan described above for the nine months ended September 30, 2019:


 
Unvested
Restricted
Stock
Award
Shares
   
Weighted
Average
Grant Date
Fair
Value
Per Share
 
Unvested balance at December 31, 2018
   
214,216
   
$
64.73
 
Vested
   
(62,723
)
 
$
68.29
 
Forfeited
   
(12,630
)
 
$
63.33
 
Unvested balance at