KIRBY CORP (KEX) FY 2021 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Statements contained in this Form 10-K 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-K 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, COVID-19 or other pandemics, marine accidents, lock delays, fuel costs, interest rates, construction of new equipment by competitors, government and environmental laws and regulations, and the timing, magnitude and number of acquisitions made by the Company. For a more detailed discussion of factors that could cause actual results to differ from those presented in forward-looking statements, see Item 1A-Risk Factors. 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 (loss) per share.” The weighted average number of common shares outstanding applicable to diluted earnings (loss) per share for 2021, 2020, and 2019 were 60,053,000, 59,912,000, and 59,909,000, respectively. Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2020 for management's discussion and analysis of financial condition and results of operations for 2020 compared to 2019.

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. Through its distribution and services segment, the Company provides after-market service and parts for engines, transmissions, reduction gears, and related equipment used in oilfield services, marine, power generation, on-highway, and other industrial applications. The Company also rents equipment including generators, industrial compressors, and high capacity lift trucks, and refrigeration trailers for use in a variety of industrial markets, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, manufactures cementing and pumping equipment as well as coil tubing and well intervention equipment, electric power generation equipment, specialized electrical distribution and control equipment, and high capacity energy storage/battery systems for oilfield service customers.

The following table summarizes key operating results of the Company (in thousands, except per share amounts):

The 2021 third quarter included $340,713,000 before taxes, $275,068,000 after taxes, or $4.58 per share, non-cash charges related to impairment of long-lived assets related to coastal marine transportation equipment and impairment of goodwill in the marine transportation segment. See Note 7, Impairments and Other Charges in the financial statements for additional information. The 2021 fourth quarter was also impacted by a one-time deferred tax provision of $5,656,000 or $0.09 per share related to a change in Louisiana tax law. See Note 9, Taxes on Income for additional information.

The 2020 first quarter included $561,274,000 before taxes, $433,341,000 after taxes, or $7.24 per share, non-cash charges related to inventory write-downs, impairment of long-lived assets, including intangible assets and property and equipment, and impairment of goodwill in the distribution and services segment. See Note 7, Impairments and Other Charges for additional information. In addition, the 2020 first quarter was favorably impacted by an income tax benefit of $50,824,000, or $0.85 per share related to net operating losses generated in 2018 and 2019 used to offset taxable income generated between 2013 and 2017. See Note 9, Taxes on Income for additional information.

The 2019 fourth quarter included $35,525,000 before taxes, $27,978,000 after taxes, or $0.47 per share, non-cash inventory write-downs and $4,757,000 before taxes, $3,747,000 after taxes, or $0.06 per share, severance and early retirement expense.

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Cash provided by operating activities in 2021 decreased primarily due to lower revenues and operating income in the marine transportation segment, partially offset by the receipt of a tax refund of $119,493,000, including accrued interest, for the Company's 2019 federal tax return. During 2021, capital expenditures of $98,015,000 included $84,353,000 in the marine transportation segment and $13,662,000 in the distribution and services segment and corporate, more fully described under cash flow and capital expenditures below.

The Company projects that capital expenditures for 2022 will be in the $170,000,000 to $190,000,000 range. The 2022 construction program will consist of approximately $5,000,000 for the construction of new inland towboats, $145,000,000 to $155,000,000 primarily for maintenance capital and improvements to existing marine equipment and facilities, and $20,000,000 to $30,000,000 for new machinery and equipment, facilities improvements, and information technology projects in the distribution and services segment and corporate. Included in the Company’s construction program is capital spending of approximately $11,000,000 for the construction of a diesel-electric towboat and repowering existing towboats expected to reduce emissions as compared to conventional engine systems of the Company’s marine fleet. The Company has applied for and been awards grants from various government entities totaling approximately $3,800,000 related to certain of these emission reduction projects which it expects to receive reimbursements for in 2023.

The Company’s debt-to-capitalization ratio decreased to 28.7% at December 31, 2021 from 32.2% at December 31, 2020, primarily due to repayments under the Revolving Credit Facility and Term Loan in 2021, partially offset by a decrease in total equity, primarily due to the net loss attributable to Kirby of $246,954,000. The Company’s debt outstanding as of December 31, 2021 and December 31, 2020 is detailed in Long-Term Financing below.

Marine Transportation

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

The Company also owns shifting operations and fleeting facilities for dry cargo barges and tank barges on the Houston Ship Channel and in Freeport and Port Arthur, Texas, and Lake Charles, Louisiana, and a shipyard for building towboats and performing routine maintenance near the Houston Ship Channel, as well as a two-thirds interest in Osprey Line, L.L.C., which transports project cargoes and cargo containers by barge.

During 2021, the Company retired 36 inland tank barges and returned five leased barges. The net result was a decrease of 41 inland tank barges and approximately 1,210,000 barrels of capacity.

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For 2021, 59% of the Company’s revenues were generated by its marine transportation segment. 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, fibers, paints, detergents, oil additives and paper, among others, as well as residual fuel oil, ship bunkers, asphalt, gasoline, diesel fuel, heating oil, crude oil, natural gas condensate and agricultural chemicals. Consequently, the Company’s marine transportation business is directly affected by the volumes produced by the Company’s petroleum, petrochemical and refining customer base.

The Company’s marine transportation segment’s revenues for 2021 decreased 6% compared to 2020 and operating income decreased 61%, compared to 2020. The decreases for 2021 were primarily due to reduced term and spot pricing in the inland market when compared to 2020. The decrease in revenues was partially offset by the increase in the price of diesel fuel and the addition of the Savage Inland Marine, LLC (“Savage”) fleet acquired on April 1, 2020. Revenues and operating income in 2021 were impacted by Hurricane Ida which shut down almost the entire Southeast Louisiana refinery and chemical complex and key waterways for an extended period of time during the third quarter. Winter Storm Uri also heavily impacted the 2021 first quarter with the shutdown of many Gulf Coast refineries and chemical plants for an extended period of time starting in mid-February. These emergency shutdowns resulted in significantly reduced liquids production and lower volumes for the Company’s inland marine transportation market during the 2021 first quarter. The 2021 and 2020 first quarters were also impacted by poor operating conditions including seasonal wind and fog along the Gulf Coast, flooding on the Mississippi River, and various lock closures along the Gulf Intracoastal Waterway, in addition to ice on the Illinois River during the 2021 first quarter and increased shipyard days on large capacity coastal vessels during the 2020 first quarter. For 2021 and 2020, the inland tank barge fleet contributed 76% and 78%, respectively, and the coastal fleet contributed 24% and 22%, respectively, of marine transportation revenues.

During 2021 and 2020, reduced demand as a result of the COVID-19 pandemic and the resulting economic slowdown contributed to lower barge utilization. Inland tank barge utilization levels averaged in the mid-70% range during the 2021 first quarter, the low to mid-80% range during the 2021 second quarter, the low 80% range during the 2021 third quarter, and the mid-to high 80% range during the 2021 fourth quarter. The 2021 first quarter was impacted by reduced volumes as a result of Winter Storm Uri, whereas the 2021 second quarter was favorably impacted by the Colonial Pipeline outage in May. Subsequently, the third quarter was negatively impacted by Hurricane Ida. For 2020, inland tank barge utilization levels averaged in the low to mid-90% range during the first quarter, the mid-80% range during the second quarter, the low 70% range during the third quarter, and the high 60% range during the fourth quarter. The 2020 first quarter experienced strong demand from petrochemicals, black oil, and refined petroleum products customers prior to the onset of COVID-19. In addition, extensive delay days due to poor operating conditions and lock maintenance projects in the 2020 first quarter slowed the transport of customer cargoes and contributed to strong barge utilization.

Coastal tank barge utilization levels averaged in the mid-70% range during the 2021 first quarter, the low to mid‑70% range during the 2021 second quarter, the mid-70% range during the 2021 third quarter, and the 90% range during the 2021 fourth quarter. The increase in coastal tank barge utilization during the 2021 fourth quarter was primarily due to the retirement of underutilized barges in the 2021 third quarter. In 2020, coastal tank barge utilization levels averaged in the low to mid-80% range during the first quarter and the mid-70% range during each of the second, third, and fourth quarters. Barge utilization in the coastal marine fleet continued to be impacted by the oversupply of tank barges in the coastal industry during 2021 and 2020.

During both 2021 and 2020, approximately 65% of the inland marine transportation revenues were under term contracts and 35% were spot contract revenues. These allocations provide the operations with a reasonably predictable revenue stream. Inland time charters, which insulate the Company from revenue fluctuations caused by weather and navigational delays and temporary market declines, represented 58% of the inland revenues under term contracts during 2021 compared to 66% during 2020. During 2021 and 2020, approximately 80% and 85%, respectively, of the coastal revenues were under term contracts and 20% and 15%, respectively, were spot contract revenues. Coastal time charters represented approximately 85% of coastal revenues under term contracts during 2021 compared to 90% during 2020. Term contracts have contract terms of 12 months or longer, while spot contracts have contract terms of less than 12 months.

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

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

Effective January 1, 2021, annual escalators for labor and the producer price index on a number of inland multi-year contracts resulted in rate increases on those contracts of approximately 3%, excluding fuel.

The 2021 marine transportation operating margin was 4.8% compared to 11.7% for 2020.

Distribution and Services

The Company, through its distribution and services segment, sells genuine replacement parts, provides service mechanics to overhaul and repair engines, transmissions, reduction gears and related oilfield services equipment, rebuilds component parts or entire diesel engines, transmissions and reduction gears, and related equipment used in oilfield services, marine, power generation, on-highway and other industrial applications. The Company also rents equipment including generators, industrial compressors, and high capacity lift trucks, and refrigeration trailers for use in a variety of industrial markets, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, manufactures cementing and pumping equipment as well as coil tubing and well intervention equipment, electric power generation equipment, specialized electrical distribution and control equipment, and high capacity energy storage/battery systems for oilfield service customers. The Company sells and manufactures various products, including those used in hydraulic fracturing and refrigeration systems, used in oil and gas and industrial applications that, as compared to conventional products, reduce emissions. These products made up approximately 10% of distribution and services segment revenues in 2021.

During 2021, the distribution and services segment generated 41% of the Company’s revenues, of which 88% was generated from service and parts and 12% from manufacturing. The results of the distribution and services segment are largely influenced by cycles of the oilfield service industry and oil and gas operator and producer markets, marine, power generation, on-highway and other industrial markets.

Distribution and services revenues for 2021 increased 20% compared to 2020 and operating income increased 326% compared to 2020. In the commercial and industrial market, the increases in 2021 compared to 2020 were primarily attributable to improved economic activity across the U.S. which resulted in higher business levels in the power generation and on-highway businesses. Increased product sales in Thermo King also contributed favorably to the 2021 results. The marine repair business was down slightly compared to 2020 due to reduced service activity. The commercial and industrial market 2021 results were also impacted by Winter Storm Uri with reduced activity levels at many locations across the Southern U.S. during the first quarter. For 2021 and 2020, the commercial and industrial market contributed 63% and 74%, respectively, of the distribution and services revenues.

In the oil and gas market, revenues improved compared to 2020 due to higher oilfield activity which resulted in increased demand for new and overhauled engines, transmissions, parts, and service. The manufacturing business also experienced increases in orders and deliveries of new and remanufactured pressure pumping equipment as well as power generation equipment for electric fracturing. For 2021 and 2020, the oil and gas market contributed 37% and 26%, respectively, of the distribution and services revenues.

The distribution and services operating margin for 2021 was 3.0% compared to (1.6)% for 2020.

Outlook

Although there are still some uncertainties surrounding the COVID-19 Omicron variant which is currently impacting the Company's operations, the Company expects both the marine transportation and distribution and services segments to deliver improved financial results in 2022.

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The inland marine transportation market is expected to have favorable market conditions in 2022 with improved demand driven by continued economic growth, increased volumes from new petrochemical plants, and minimal new barge construction across the industry. Barge utilization is expected to range between the high 80% range and low 90% range, with an improving spot market, which currently represents approximately 35% of inland revenues. Term contracts renewed lower during the first three quarters of 2021, but rebounded in the fourth quarter and should reset higher during 2022 to reflect improved market conditions. Overall for 2022, inland revenues are expected to improve year-on-year with steady growth throughout the year as business improves and contracts renew. However, growth in the first quarter is expected to be modest due to the impact of winter weather and the COVID-19 Omicron variant which is causing crewing challenges, lost revenue, and incremental costs. Operating margins are expected to improve in 2022, with the first quarter being the lowest.

As of December 31, 2021, the Company estimated there were approximately 4,000 inland tank barges in the industry fleet, of which approximately 385 were 30 years old or older and approximately 280 of those were 40 years old or older. The Company estimates that approximately 5 to 10 new tank barges have currently been ordered for delivery in 2022 and expects a number of older tank barges will be retired, dependent on 2022 market conditions. Historically, 75 to 150 older inland tank barges are retired from service each year industry-wide. The extent of the retirements is dependent on petrochemical and refinery production levels, and crude oil and natural gas condensate movements, both of which can have a direct effect on industry-wide tank barge utilization, as well as term and spot contract rates.

In the coastal marine transportation market, customer demand is expected to modestly improve in 2022 as refined products and black oil transportation volumes continue to recover from the impact of the pandemic. However, pricing is expected to remain challenged due to underutilized barge capacity across the industry. The Company's coastal barge utilization is expected to be in the 90% range in 2022, driven primarily by modest improvement in the spot market and the Company's retirement of underutilized tank barges during the 2021 third quarter. Coastal revenues in 2022 are expected to decrease modestly compared to 2021, with the impact of the Company's exit from the Hawaii market and anticipated reductions in coal shipments being partially offset by modest improvement in spot market utilization. The 2022 first quarter is expected to be impacted by lost revenue and crewing issues related to the Omicron variant, and subsequent quarters are expected to be impacted by planned shipyard maintenance and ballast water treatment installations on certain vessels. Coastal operating margins during 2022 are expected to be similar to 2021 or slightly improved.

As of December 31, 2021, the Company estimated there were approximately 270 coastal tank barges operating in the 195,000 barrels or less industry fleet, the sector of the market in which the Company operates, and approximately 20 of those were over 25 years old. The Company is not aware of any new coastal tank barges that have been ordered.

The results of the distribution and services segment are largely influenced by the cycles of the oilfield service industry and oil and gas operator and producer markets, marine, power generation, on-highway and other industrial markets. Economic growth and strong oilfield fundamentals in 2022 are expected to improve activity levels and contribute to a sizeable year-over-year increase in revenues. In the commercial and industrial market, improving economic conditions and growth in key markets are expected to yield 2022 revenue growth with increased activity in power generation, marine repair, and on-highway.

In the distribution and services oil and gas market, higher commodity prices and increasing well completions activity are expected to improve demand for products and services in the distribution business. In manufacturing, a heightened customer focus on sustainability and the Company's current backlog for environmentally friendly pressure pumping and power generation equipment for electric fracturing is expected to result in significant revenue growth. However, due to ongoing supply chain issues, new equipment deliveries are expected to ramp slowly with the 2022 first quarter being the lowest of the year. Overall, operating margins in distribution and services are expected to improve as the year progresses. Operating margins for the 2022 first quarter are expected to be the lowest of the year due to the timing of projects and ongoing supply chain delays.

While the Company's outlook is dependent on developments regarding the COVID-19 pandemic and related supply chain constraints, the Company has maintained business continuity and expects to continue to do so.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company evaluates its estimates and assumptions on an ongoing basis based on a combination of historical information and various other assumptions that are believed to be reasonable under the particular circumstances. Actual results may differ from these estimates based on different assumptions or conditions. The Company believes the critical accounting policies that most impact the consolidated financial statements are described below. It is also suggested that the Company’s significant accounting policies, as described in the Company’s financial statements in Note 1, Summary of Significant Accounting Policies, be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Accounts Receivable. The Company extends credit to its customers in the normal course of business. The Company regularly reviews its accounts and estimates the amount of uncollectible receivables each period and establishes an allowance for uncollectible amounts. The amount of the allowance is based on the age of unpaid amounts, information about the current financial strength of customers, and other relevant information. Estimates of uncollectible amounts are revised each period, and changes are recorded in the period they become known. Historically, credit risk with respect to these trade receivables has generally been considered minimal because of the financial strength of the Company’s customers; however, a United States or global recession or other adverse economic condition could impact the collectability of certain customers’ trade receivables which could have a material effect on the Company’s results of operations.

Property, Maintenance and Repairs. Property is recorded at cost; improvements and betterments are capitalized as incurred. Depreciation is recorded using the straight-line method over the estimated useful lives of the individual assets. When property items are retired, sold, or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts with any gain or loss on the disposition included in the statement of earnings. Maintenance and repairs on vessels built for use on the inland waterways are charged to operating expense as incurred and includes the costs incurred in USCG inspections unless the shipyard extends the life or improves the operating capacity of the vessel which results in the costs being capitalized. The Company’s ocean-going vessels are subject to regulatory drydocking requirements after certain periods of time to be inspected, have planned major maintenance performed and be recertified by the ABS. These recertifications generally occur twice in a five-year period. The Company defers the drydocking expenditures incurred on its ocean-going vessels due to regulatory marine inspections by the ABS and amortizes the costs of the shipyard over the period between drydockings, generally 30 or 60 months, depending on the type of major maintenance performed. Drydocking expenditures that extend the life or improve the operating capability of the vessel result in the costs being capitalized. Routine repairs and maintenance on ocean-going vessels are expensed as incurred. Interest is capitalized on the construction of new ocean-going vessels.

The Company performs an impairment assessment whenever events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable. If a triggering event is identified, the Company compares the carrying amount of the asset group to the estimated undiscounted future cash flows expected to result from the use of the asset group. If the carrying amount of the asset group exceeds the estimated undiscounted future cash flows, the Company measures the amount of the impairment by comparing the carrying amount of the asset group to its estimated fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. There are many assumptions and estimates underlying the determination of an impairment event or loss, if any. The assumptions and estimates include, but are not limited to, estimated fair market value of the assets and estimated future cash flows expected to be generated by these assets, which are based on additional assumptions such as asset utilization, length of service the asset will be used, and estimated salvage values. Although the Company believes its assumptions and estimates are reasonable, deviations from the assumptions and estimates could produce a materially different result.

Goodwill. The excess of the purchase price over the fair value of identifiable net assets acquired in transactions accounted for as a purchase is included in goodwill. Management monitors the recoverability of goodwill on an annual basis, or whenever events or circumstances indicate that interim impairment testing is necessary. The amount of goodwill impairment, if any, is typically measured based on projected discounted future operating cash flows using an appropriate discount rate and valued based on the excess of a reporting unit’s carrying amount over its fair value, incorporating all tax impacts caused by the recognition of the impairment loss. The assessment of the recoverability of goodwill will be impacted if estimated future operating cash flows are not achieved. There are many assumptions and estimates underlying the determination of an impairment event or loss, if any. Although the Company believes its assumptions and estimates are reasonable, deviations from the assumptions and estimates could produce a materially different result.

Accrued Insurance. The Company is subject to property damage and casualty risks associated with operating vessels carrying large volumes of bulk liquid and dry cargo in a marine environment. The Company maintains insurance coverage against these risks subject to a deductible, below which the Company is liable. In addition to expensing claims below the deductible amount as incurred, the Company also maintains a reserve for losses that may have occurred but have not been reported to the Company, or are not yet fully developed. The Company uses historic experience and actuarial analysis by outside consultants to estimate an appropriate level of accrued liabilities. If the actual number of claims and magnitude were substantially greater than assumed, the required level of accrued liabilities for claims incurred but not reported or fully developed could be materially understated. The Company records receivables from its insurers for incurred claims above the Company’s deductible. If the solvency of the insurers became impaired, there could be an adverse impact on the accrued receivables and the availability of insurance.

Acquisitions

During 2021, the Company purchased four inland tank barges from a leasing company for $7,470,000 in cash. The Company had been leasing the barges prior to the purchase.

On October 4, 2021, the Company paid $1,645,000 in cash to purchase assets of an energy storage systems manufacturer based in Texas which have been key to the development of new power generation solutions for electric fracturing equipment.

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During 2020, the Company purchased six newly constructed inland pressure barges for $39,350,000 in cash.

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

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

During the year ended December 31, 2019, the Company purchased, from various counterparties, a barge fleeting operation in Lake Charles, Louisiana and nine inland tank barges from leasing companies for an aggregate of $17,991,000 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 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.

Financing of these purchases and acquisitions 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 marine transportation and distribution and services revenues and the percentage of each to total revenues for the comparable periods (dollars in thousands):

Marine Transportation

The following table sets forth a year over year comparison of the Company’s marine transportation segment’s revenues, costs and expenses, operating income and operating margins (dollars in thousands):

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

2021 Compared to 2020

Marine Transportation Revenues

Marine transportation revenues for 2021 decreased 6% compared to 2020. The decrease for 2021 was primarily due to reduced term and spot pricing in the inland market when compared to 2020. The decrease was partially offset by the increase in the price of diesel fuel and the addition of the Savage fleet acquired on April 1, 2020. Revenues in 2021 were impacted by Hurricane Ida which shut down almost the entire Southeast Louisiana refinery and chemical complex and key waterways for an extended period of time during the third quarter. Winter Storm Uri also heavily impacted the 2021 first quarter with the shutdown of many Gulf Coast refineries and chemical plants for an extended period of time starting in mid-February. These emergency shutdowns resulted in significantly reduced liquids production and lower volumes for the Company’s inland marine transportation market during the 2021 first quarter. The 2021 and 2020 first quarters were also impacted by poor operating conditions including seasonal wind and fog along the Gulf Coast, flooding on the Mississippi River, and various lock closures along the Gulf Intracoastal Waterway, in addition to ice on the Illinois River during the 2021 first quarter and increased shipyard days on large capacity coastal vessels during the 2020 first quarter. For 2021 and 2020, the inland tank barge fleet contributed 76% and 78%, respectively, and the coastal fleet contributed 24% and 22%, respectively, of marine transportation revenues.

During 2021 and 2020, reduced demand as a result of the COVID-19 pandemic and the resulting economic slowdown contributed to lower barge utilization. Inland tank barge utilization levels averaged in the mid-70% range during the 2021 first quarter, the low to mid-80% range during the 2021 second quarter, the low 80% range during the 2021 third quarter, and the mid-to high 80% range during the 2021 fourth quarter. The 2021 first quarter was impacted by reduced volumes as a result of Winter Storm Uri, whereas the 2021 second quarter was favorably impacted by the Colonial Pipeline outage in May. Subsequently, the third quarter was negatively impacted by Hurricane Ida. For 2020, inland tank barge utilization levels averaged in the low to mid-90% range during the first quarter, the mid-80% range during the second quarter, the low 70% range during the third quarter, and the high 60% range during the fourth quarter. The 2020 first quarter experienced strong demand from petrochemicals, black oil, and refined petroleum products customers prior to the onset of COVID-19. In addition, extensive delay days due to poor operating conditions and lock maintenance projects in the 2020 first quarter slowed the transport of customer cargoes and contributed to strong barge utilization.

Coastal tank barge utilization levels averaged in the mid-70% range during the 2021 first quarter, the low to mid‑70% range during the 2021 second quarter, the mid-70% range during the 2021 third quarter, and the 90% range during the 2021 fourth quarter. The increase in coastal tank barge utilization during the 2021 fourth quarter was primarily due to the retirement of underutilized barges in the 2021 third quarter. In 2020, coastal tank barge utilization levels averaged in the low to mid-80% range during the first quarter and the mid-70% range during each of the second, third, and fourth quarters. Barge utilization in the coastal marine fleet continued to be impacted by the oversupply of tank barges in the coastal industry during 2021 and 2020.

The petrochemical market, the Company’s largest market, contributed 50% of marine transportation revenues for 2021, reflecting reduced volumes from Gulf Coast petrochemical plants for both domestic consumption and to terminals for export destinations as a result of the COVID-19 pandemic. During the 2021 first quarter, as much as 80% of U.S. chemical plant capacity was offline at the peak of Winter Storm Uri, contributing to significantly reduced volumes and revenues; however, volumes and revenues sequentially improved in the 2021 second quarter as chemical plants resumed full operations by May. During the 2021 third quarter, volumes declined again as numerous Louisiana chemical plants were shut down for an extended period of time as a result of Hurricane Ida.

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The black oil market, which contributed 26% of marine transportation revenues for 2021, reflected reduced demand as refinery production levels and the export of refined petroleum products and fuel oils declined as a result of the COVID-19 pandemic. During the 2021 first quarter, U.S. refinery utilization dropped to near 40% during the peak of Winter Storm Uri, contributing to significantly reduced volumes and revenues. Although refinery utilization increased back to near 90% in the 2021 second quarter contributing to sequentially increased volumes and revenues, volumes declined again during the 2021 third quarter as Louisiana refineries were shut down for an extended period of time as a result of Hurricane Ida. During 2021, the Company continued to transport crude oil and natural gas condensate produced from the Permian Basin as well as reduced volumes from the Eagle Ford shale formation in Texas, both along the Gulf Intracoastal Waterway with inland vessels and in the Gulf of Mexico with coastal equipment. Additionally, the Company transported volumes of Utica natural gas condensate downriver from the Mid-Atlantic to the Gulf Coast and Canadian and Bakken crude downriver from the Midwest to the Gulf Coast.

The refined petroleum products market, which contributed 20% of marine transportation revenues for 2021, reflected lower volumes in both the inland and coastal markets as a result of reduced demand related to the COVID-19 pandemic. In addition, during the 2021 first quarter, U.S. refinery utilization dropped to near 40% during the peak of Winter Storm Uri, contributing to significantly reduced volumes and revenues. Although refinery utilization increased back to near 90% in the 2021 second quarter contributing to sequentially increased volumes and revenues, volumes declined again during the 2021 third quarter as Louisiana refineries were shut down for an extended period of time as a result of Hurricane Ida.

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

For 2021, the inland operations incurred 9,605 delay days, 8% fewer than the 10,408 delay days that occurred during 2020. Delay days measure the lost time incurred by a tow (towboat and one or more tank barges) during transit when the tow is stopped due to weather, lock conditions, or other navigational factors. Delay days for 2021 and 2020 were impacted by hurricanes and tropical storms, poor operating conditions due to heavy wind and fog along the Gulf Coast, high water conditions on the Mississippi River System, and closures of key waterways, including the Gulf Intracoastal Waterway, due in part to lock maintenance projects.

During both 2021 and 2020, approximately 65% of the inland marine transportation revenues were under term contracts and 35% were spot contract revenues. These allocations provide the operations with a reasonably predictable revenue stream. Inland time charters, which insulate the Company from revenue fluctuations caused by weather and navigational delays and temporary market declines, represented 58% of the inland revenues under term contracts during 2021 compared to 66% during 2020. During 2021 and 2020, approximately 80% and 85%, respectively, of the coastal revenues were under term contracts and 20% and 15%, respectively, were spot contract revenues. Coastal time charters represented approximately 85% of coastal revenues under term contracts during 2021 compared to 90% during 2020.

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

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

Effective January 1, 2021, annual escalators for labor and the producer price index on a number of inland multi-year contracts resulted in rate increases on those contracts of approximately 3%, excluding fuel.

Marine Transportation Costs and Expenses

Total costs and expenses for 2021 increased 2% compared to 2020. Costs of sales and operating expenses for 2021 increased 2% compared to 2020 primarily due to increased fuel costs, partially offset by cost reductions across the segment, including a reduction in towboats operated during 2021.

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The inland marine transportation fleet operated an average of 250 towboats during 2021, of which an average of 35 were chartered, compared to 287 during 2020, of which an average of 52 were chartered. The decrease was primarily due to reduced horsepower requirements as a result of a smaller barge fleet, crewing issues associated with the COVID-19 Delta and Omicron variants, and reduced activity as a result of the impacts of Winter Storm Uri and Hurricane Ida. Generally, variability in demand or anticipated demand, as tank barges are added to or removed from the fleet, as chartered towboat availability changes, or as weather or water conditions dictate, the Company charters in or releases chartered towboats in an effort to balance horsepower needs with current requirements. The Company has historically used chartered towboats for approximately one-fourth of its horsepower requirements.

During 2021, the inland operations consumed 46.8 million gallons of diesel fuel compared to 47.5 million gallons consumed during 2020. The average price per gallon of diesel fuel consumed during 2021 was $2.13 per gallon compared to $1.41 per gallon for 2020. 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 90 day delay before contracts are adjusted. Spot contracts do not have escalators for fuel.

Selling, general and administrative expenses for 2021 increased 7% compared to 2020. The increase is primarily due to higher incentive compensation accruals, medical costs, legal costs, and professional fees.

Taxes, other than on income, for 2021 decreased 14% compared to 2020. The decrease is primarily due to lower property taxes on marine transportation equipment.

Depreciation and amortization for 2021 decreased slightly compared to 2020. The decrease was primarily due to retirements of marine equipment, partially offset by the full year impact of the Savage fleet which was acquired in April 2020.

Marine Transportation Operating Income and Operating Margins

Marine transportation operating income for 2021 decreased 61% compared to 2020. The operating margin was 4.8% for 2021 compared to 11.7% for 2020. The decreases in operating income and operating margin were primarily due to decreased term and spot contract pricing in the inland market, as a result of a reduction in demand due to the COVID-19 pandemic and reduced volumes as a result of Hurricane Ida and Winter Storm Uri. Operating margin for 2021 was also impacted by the increased cost of diesel fuel.

Distribution and Services

The following table sets forth a year over year comparison of the Company’s distribution and services segment’s revenues, costs and expenses, operating income (loss) and operating margins (dollars in thousands):

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

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2021 Compared to 2020

Distribution and Services Revenues

Distribution and services revenues for 2021 increased 20% compared to 2020. In the commercial and industrial market, the increase was primarily attributable to improved economic activity across the U.S. which resulted in higher business levels in the power generation and on-highway businesses. Increased product sales in Thermo King also contributed favorably to the 2021 results. The marine repair business was down slightly compared to 2020 due to reduced service activity. The commercial and industrial market 2021 results were also impacted by Winter Storm Uri with reduced activity levels at many locations across the Southern U.S. during the first quarter. For 2021 and 2020, the commercial and industrial market contributed 63% and 74%, respectively, of the distribution and services revenues.

The oil and gas market revenues increase compared to 2020 primarily due to higher oilfield activity which resulted in increased demand for new and overhauled engines, transmissions, parts, and service. The manufacturing business also experienced increases in orders and deliveries of new and remanufactured pressure pumping equipment as well as power generation equipment for electric fracturing. For 2021 and 2020, the oil and gas market contributed 37% and 26%, respectively, of the distribution and services revenues.

Distribution and Services Costs and Expenses

Total costs and expenses for 2021 increased 15% compared to 2020 reflecting the 21% increase in costs of sales and operating expenses, reflecting higher demand in the on-highway and power generation businesses in the commercial and industrial markets in 2021. The increase also reflects higher demand for new and overhauled transmissions and related parts and service and increased demand for new pressure pumping equipment in the oil and gas market.

Selling, general and administrative expenses for 2021 increased slightly compared to 2020. The increase was primarily due to increased incentive compensation accruals during 2021, medical costs, and warranty costs, partially offset by a bad debt expense charge of $3,339,000 as a result of the bankruptcy of a large oil and gas customer, and $1,354,000 of severance expense as a result of continued workforce reductions, each recorded during the 2020 second quarter.

Depreciation and amortization for 2021 decreased 27% compared to 2020. The decrease was primarily due to lower amortization of intangible assets other than goodwill, which had been impaired during the 2020 first quarter and certain equipment and leasehold improvements acquired from Stewart & Stevenson LLC that became fully depreciated during 2020 and 2021.

Distribution and Services Operating Income (Loss) and Operating Margins

Operating income for the distribution and services segment for 2021 increased 326% compared to 2020. The operating margin was 3.0% for 2021 compared to (1.6)% for 2020. The results reflect increased business levels in both the commercial and industrial and oil and gas markets and a return to profitability, partially offset by higher costs and expenses due to increased activity levels.

General Corporate Expenses

General corporate expenses for 2021, 2020, and 2019 were $13,803,000, $11,050,000 and $13,643,000, respectively. General corporate expenses were higher in 2021 than 2020 primarily due to higher incentive compensation accruals and costs related to Hurricane Ida.

Gain on Disposition of Assets

The Company reported net gains on disposition of assets of $5,761,000, $118,000, and $8,152,000 in 2021, 2020, and 2019, respectively. The net gains were predominantly from the sales or retirements of marine equipment and distribution and services facilities.

Other Income and Expenses

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

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Impairments and Other Charges

For 2021, impairments and other charges includes $340,713,000 before taxes, $275,068,000 after taxes, or $4.58 per share, non-cash charges related to impairment of long-lived assets related to coastal marine transportation equipment and impairment of goodwill in the marine transportation segment.

For 2020, impairments and other charges includes $561,274,000 before taxes, $433,341,000 after taxes, or $7.24 per share, non-cash charges related to inventory write-downs, impairment of long-lived assets, including intangible assets and property and equipment, and impairment of goodwill in the distribution and services segment.

See Note 7, Impairments and Other Charges for additional information.

Other Income

Other income for 2021, 2020, and 2019 includes income of $8,175,000, $6,186,000 and $3,454,000, 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, average interest rate, and capitalized interest excluded from interest expense (dollars in thousands):

Interest expense for 2021 decreased 13% compared to 2020, primarily due to lower average debt outstanding as a result of debt repayments since the 2020 first quarter.

(Provision) Benefit for Taxes on Income

On November 13, 2021, the voters of the state of Louisiana approved a constitutional amendment that removed the corporate tax deduction for federal income taxes paid and lowered the corporate income tax rate from 8% to 7.5% effective January 1, 2022. The result of the amendment was an increase in the effective Louisiana state income tax rate, net of deduction for federal income tax, from 6.3% to 7.5%. As a result of the amendment, the Company recognized a one-time deferred tax provision of $5,656,000 during the fourth quarter of 2021 due to remeasuring the Company’s Louisiana and U.S. deferred tax assets and liabilities based on the new effective Louisiana state income tax rate.

During 2020, pursuant to provisions of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), net operating losses generated during 2018 through 2020 were used to offset taxable income generated between 2013 through 2017. Net operating losses carried back to tax years 2013 through 2017 were applied at the higher federal statutory tax rate of 35% compared to the statutory rate of 21% in effect at December 31, 2020. The Company generated an effective tax rate benefit in 2020 as a result of such carrybacks.

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Financial Condition, Capital Resources and Liquidity

Balance Sheet

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

2021 Compared to 2020

Current assets as of December 31, 2021 decreased 4% compared to December 31, 2020. Trade accounts receivable increased 33% primarily due to increased business activity in both the marine transportation and distribution and services segments during the 2021 fourth quarter, compared to the 2020 fourth quarter. Other accounts receivable decreased 47%, primarily due to the receipt of a tax refund of $119,493,000 including accrued interest in 2021, for the Company's 2019 federal tax return. Inventories increased by 7% primarily due to a buildup in the distribution and services segment for projects that will deliver in 2022. Prepaid expenses and other current assets increased 21%, primarily due to the increase in the price of diesel fuel and the reclassification of certain coastal marine transportation equipment to held for sale.

Property and equipment, net of accumulated depreciation, at December 31, 2021 decreased 6% compared to December 31, 2020. The decrease reflected $205,960,000 of depreciation expense, $142,014,000 of property disposals, including the sale of the Hawaii marine transportation equipment, and retirement of underutilized equipment that was reclassified to held for sale, and $15,430,000 of impairment charges related to coastal marine transportation equipment held and used, partially offset by $116,648,000 of capital additions (including an increase in accrued capital expenditures) and $8,201,000 primarily related to the acquisition of four inland tank barges during 2021, more fully described under Cash Flows and Capital Expenditures below.

Operating lease right-of-use assets as of December 31, 2021 decreased 4% compared to December 31, 2020, primarily due to lease amortization expense and impairment charges, partially offset by new leases acquired.

Goodwill as of December 31, 2021 decreased 33% compared to December 31, 2020, due to a goodwill impairment in the marine transportation segment.

Other intangibles, net, as of December 31, 2021 decreased 13% compared to December 31, 2020, primarily due to amortization.

Other assets as of December 31, 2021 decreased 13% compared to December 31, 2020, primarily due to amortization of drydock expenditures.

Current liabilities as of December 31, 2021 increased 17% compared to December 31, 2020. Accounts payable increased 23%, primarily due to higher business activity levels and an increase in accrued capital expenditures. Accrued liabilities increased 5%, primarily due to higher accrued incentive compensation during 2021 and higher warranty reserves. Deferred revenues increased 60%, primarily due to deposits on equipment expected to be shipped in 2022 in the distribution and services segment.

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Long-term debt, net – less current portion, as of December 31, 2021 decreased 21% compared to December 31, 2020, primarily reflecting repayments of $250,000,000 and $60,000,000 under the Revolving Credit Facility and Term Loan, respectively. Net debt discounts and deferred issuance costs were $3,567,000 (excluding $1,403,000 attributable to the Revolving Credit Facility included in other assets on the balance sheet) at December 31, 2021 and $6,454,000 at December 31, 2020.

Deferred income taxes as of December 31, 2021 decreased 5% compared to December 31, 2020, primarily reflecting the 2021 deferred tax benefit of $44,419,000.

Operating lease liabilities – less current portion, as of December 31, 2021 decreased 2% compared to December 31, 2020, primarily due to lease payments made, partially offset by new leases acquired and liability accretion.

Other long-term liabilities as of December 31, 2021 decreased 46% compared to December 31, 2020, primarily due to amortization of intangible liabilities, a decrease in pension liabilities due to an improved funded position, and the payment of accrued payroll taxes deferred under provisions of the CARES Act.

Total equity as of December 31, 2021 decreased 6% compared to December 31, 2020, primarily due to a net loss attributable to Kirby of $246,954,000 for 2021 and tax withholdings of $2,856,000 on restricted stock and RSU vestings, partially offset by an increase in additional paid-in capital due to amortization of unearned share-based compensation of $15,713,000.

Retirement Plans

The Company sponsors a defined benefit plan for its inland vessel personnel and shore based tankermen. The plan benefits are based on an employee’s years of service and compensation. The plan assets consist primarily of equity and fixed income securities. The Company’s pension plan funding strategy is to make annual contributions in amounts equal to or greater than amounts necessary to meet minimum government funding requirements. No pension contributions were made in 2021, 2020 or 2019. The fair value of plan assets was $394,395,000 and $357,801,000 at December 31, 2021 and December 31, 2020, respectively.

On April 12, 2017, the Company amended its pension plan to cease all benefit accruals for periods after May 31, 2017 for certain participants. Participants grandfathered and not impacted were those, as of the close of business on May 31, 2017, who either (a) had completed 15 years of pension service or (b) had attained age 50 and completed 10 years of pension service. Participants non-grandfathered are eligible to receive discretionary 401(k) plan contributions.

On February 14, 2018, with the acquisition of Higman, the Company assumed Higman’s pension plan for its inland vessel personnel and office staff. On March 27, 2018, the Company amended the Higman pension plan to close it to all new entrants and cease all benefit accruals for periods after May 15, 2018 for all participants. The Company made contributions to the Higman pension plan of $479,000 in 2021, $797,000 in 2020 for the 2019 plan year, $1,438,000 in 2020 for the 2020 plan year, $1,615,000 in 2019 for the 2018 plan year, and $1,449,000 in 2019 for the 2019 plan year. The fair value of plan assets was $36,426,000 and $37,336,000 at December 31, 2021 and December 31, 2020, respectively.

The Company’s investment strategy focuses on total return on invested assets (capital appreciation plus dividend and interest income). The primary objective in the investment management of assets is to achieve long-term growth of principal while avoiding excessive risk. Risk is managed through diversification of investments within and among asset classes, as well as by choosing securities that have an established trading and underlying operating history.

The Company makes various assumptions when determining defined benefit plan costs including, but not limited to, the current discount rate and the expected long-term return on plan assets. Discount rates are determined annually and are based on a yield curve that consists of a hypothetical portfolio of high quality corporate bonds with maturities matching the projected benefit cash flows. The Company used discount rates of 3.0% for the Kirby pension plan and 3.1% for the Higman pension plan in 2021 and 2.8% for the Kirby pension plan and 2.9% for the Higman pension plan in 2020. The Company estimates that every 0.1% decrease in the discount rate results in an increase in the accumulated benefit obligation (“ABO”) of approximately $8,100,000. The Company assumed that plan assets would generate a long-term rate of return of 6.75% in both 2021 and 2020. The Company developed its expected long-term rate of return assumption by evaluating input from investment consultants and comparing historical returns for various asset classes with its actual and targeted plan investments. The Company believes that long-term asset allocation, on average, will approximate the targeted allocation.

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Long-Term Financing

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

(a)
Variable interest rate of 1.5% at both December 31, 2021 and 2020.

(b)
Excludes $1,403,000 attributable to the Revolving Credit Facility included in other assets at December 31, 2021.

The Company has an amended and restated credit agreement (“Credit Agreement”) with a group of commercial banks, with JPMorgan Chase Bank, N.A. as the administrative agent bank, allowing for an $850,000,000 revolving credit facility (“Revolving Credit Facility”) and an unsecured term loan (“Term Loan”) with a maturity date of March 27, 2024. The Term Loan is due on March 27, 2024 and is prepayable, in whole or in part, without penalty. During 2021 and 2019, the Company repaid $60,000,000 and $125,000,000, respectively, under the Term Loan prior to the originally scheduled installments. No prepayments were made in 2020. 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 $5,063,000 and available borrowing capacity was $844,937,000 as of December 31, 2021.

On February 3, 2022, the Company entered into a note purchase agreement for the issuance of $300,000,000 of unsecured senior notes with a group of institutional investors, consisting of $60,000,000 of 3.46% series A notes ("Series A Notes") and $240,000,000 of 3.51% series B notes ("Series B Notes"), each due January 19, 2033 (collectively, the "2033 Notes"). The Series A Notes are scheduled to be issued on October 20, 2022, and the Series B Notes are scheduled to be issued on January 19, 2023. No principal payments will be required until maturity. Beginning in 2023, interest payments of $5,250,000 will be due semi-annually on January 19 and July 19 of each year, with the exception of the first payment on January 19, 2023, which will be $525,000. The 2033 Notes will be unsecured and rank equally in right of payment with the Company's other unsecured senior indebtedness. The 2033 Notes contain certain covenants on the part of the Company, including an interest coverage covenant, a debt-to-capitalization covenant, and covenants relating to liens, asset sales and mergers, among others. The 2033 Notes also specify certain events of default, upon the occurrence of which the maturity of the notes may be accelerated, including failure to pay principal and interest, violation of covenants or default on other indebtedness, among others. The Company intends to use the proceeds from the issuance of the 2033 Notes and cash provided by operations to repay the 3.29% senior unsecured notes due February 27, 2023.

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

Outstanding letters of credit under the $10,000,000 credit line were $1,299,000 and available borrowing capacity was $8,701,000 as of December 31, 2021.

As of December 31, 2021, 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.

Cash Flow and Capital Expenditures

The Company generated net cash provided by operating activities of $321,576,000, $444,940,000, and $511,813,000 for the years ended December 31, 2021, 2020, and 2019, respectively. During 2021, the 28% decrease was primarily due to lower revenues and operating income in the marine transportation segment, partially offset by a tax refund of $119,493,000, including accrued interest, for the Company’s 2019 federal tax return, increased revenues and operating income in the distribution and services segment, reduced incentive compensation payouts, and the full year impact of revenues from the Savage fleet which was acquired in April 2020. Decreases in marine transportation revenues and operating income were driven by decreased term and spot contract pricing in the inland market, each as a result of a reduction in demand due to the COVID-19 pandemic. Marine transportation results in 2021 were also negatively impacted by Winter Storm Uri and Hurricane Ida. The decrease in cash flows was also partially due to an increase in inventories in 2021 compared to a decrease in 2020.

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During 2021, 2020, and 2019, the Company generated cash of $51,342,000, $17,310,000, and $57,657,000, respectively, from proceeds from the disposition of assets, and $629,000, $353,000, and $5,743,000, respectively, from proceeds from the exercise of stock options.

For 2021, cash generated was used for capital expenditures of $98,015,000 (net of an increase in accrued capital expenditures of $18,633,000), including $6,202,000 for inland towboat construction and $91,813,000 primarily for upgrading existing marine equipment and marine transportation and distribution and services facilities. The Company also used $9,115,000 for acquisitions of businesses and marine equipment, more fully described under Acquisitions above.

For 2020, cash generated and borrowings under the Company’s Revolving Credit Facility were used for capital expenditures of $148,185,000, (including a decrease in accrued capital expenditures of $13,280,000) including $7,506,000 for inland towboat construction and $140,679,000 primarily for upgrading existing marine equipment and marine transportation and distribution and services facilities. The Company also used $354,972,000 for acquisitions of businesses and marine equipment, more fully described under Acquisitions above.

Treasury Stock Purchases

The Company did not purchase any treasury stock during 2021, 2020, or 2019. As of February 17, 2022, the Company had approximately 1,400,000 shares available under its existing repurchase 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.

Liquidity and Capital Resources

Funds generated from operations are available for acquisitions, capital expenditure projects, common stock repurchases, repayments of borrowings and for other corporate and operating requirements. In addition to net cash flow provided by operating activities, as of February 17, 2022, the Company had cash equivalents of $22,333,000, availability of $844,937,000 under its Revolving Credit Facility and $8,701,000 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 pricing grids on its Credit Agreement.

The Company expects to continue to be able to fund expenditures for acquisitions, capital construction projects, common stock repurchases, 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 Revolving Credit Facility’s commitment is in the amount of $850,000,000 and expires March 27, 2024. As of December 31, 2021, the Company had $844,937,000 available under the Revolving Credit Facility. The 3.29% senior unsecured notes do not mature until February 27, 2023, and require no prepayments. The Company intends to use the proceeds from the issuance of the 2033 Notes in October 2022 and January 2023 and cash provided by operations to repay the 3.29% senior unsecured notes upon maturity. The 4.2% senior unsecured notes do not mature until March 1, 2028 and require no prepayments. The Term Loan is due March 27, 2024 and is prepayable, in whole or in part, without penalty.

There are numerous factors that may negatively impact the Company’s cash flow in 2022. For a list of significant risks and uncertainties that could impact cash flows, see Note 14, Contingencies and Commitments in the financial statements, and Item 1A — Risk Factors. Amounts available under the Company’s existing financing arrangements are subject to the Company continuing to meet the covenants of the credit facilities as described in Note 5, Long-Term Debt in the financial statements.

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 $19,357,000 at December 31, 2021, including $12,055,000 in letters of credit and $7,302,000 in performance bonds. All of these instruments have an expiration date within 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.

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The Company’s marine transportation term contracts typically contain fuel escalation clauses, or the customer pays for the fuel. However, there is generally a 30 to 90 day delay before contracts are adjusted depending on the specific contract. In general, the fuel escalation clauses are effective over the long-term in allowing the Company to recover changes in fuel costs due to fuel price changes. However, the short-term effectiveness of the fuel escalation clauses can be affected by a number of factors including, but not limited to, specific terms of the fuel escalation formulas, fuel price volatility, navigating conditions, tow sizes, trip routing, and the location of loading and discharge ports that may result in the Company over or under recovering its fuel costs. 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 currently leases various facilities and equipment under cancelable and noncancelable operating leases. Future minimum lease payments under operating leases that have initial noncancelable lease terms in excess of one year are detailed in Note 6, Leases. Lease payments for towing vessels exclude non-lease components. The Company estimates that non-lease components comprise approximately 70% of charter rental costs, related to towboat crew costs, maintenance and insurance.

The Company’s pension plan funding strategy is to make annual contributions in amounts equal to or greater than amounts necessary to meet minimum government funding requirements. The ABO is based on a variety of demographic and economic assumptions, and the pension plan assets’ returns are subject to various risks, including market and interest rate risk, making an accurate prediction of the pension plan contribution difficult resulting in the Company electing to only make an expected pension contribution forecast of one year. As of December 31, 2021, the Company’s pension plan funding was 92% of the pension plans’ ABO, including the Higman pension plan. The Company expects to make additional pension contributions of $145,000 in 2022.

While inflationary pressures have increased in 2021, during the last three years, inflation has had a relatively minor effect on the financial results of the Company. The marine transportation segment has long-term contracts which generally contain cost escalation clauses whereby certain costs, including fuel as noted above, can be passed through to its customers. Spot contract rates include the cost of fuel and are subject to market volatility. In the distribution and services segment, the cost of major components for large manufacturing orders is secured with suppliers at the time a customer order is finalized, which limits exposure to inflation. The repair portion of the distribution and services segment is based on prevailing current market rates.

Accounting Standards

For a discussion of recently issued accounting standards, see Note 1, Summary of Significant Accounting Policies.