Kirby Corporation 2013 Annual Report 2013 QUARTERLY REVIEW (In thousands, except per share amounts) (Unaudited) First Quarter 2013 ________ 2012 ________ Change ______ Revenues Net earnings* $ 558,785 $ 566,935 $ 56,578 $ 50,944 Earnings per share* $ 1.00 $ .91 EBITDA $ 139,946 $ 124,748 (1)% 11% 10% 12% Second Quarter 2013 ________ 2012 ________ Change ______ Revenues Net earnings* $ 563,908 $ 511,848 $ 63,093 $ 47,551 Earnings per share* $ 1.11 $ .85 EBITDA $ 148,925 $ 118,041 10% 33% 31% 26% Third Quarter Revenues Net earnings* 2013 ________ 2012 ________ Change ______ $ 551,105 $ 521,324 $ 69,123 $ 53,055 Earnings per share* $ 1.21 $ .95 EBITDA $ 159,464 $ 127,634 6% 30% 27% 25% Fourth Quarter 2013 ________ 2012 ________ Change ______ Revenues Net earnings* $ 568,397 $ 512,551 $ 64,267 $ 57,888 Earnings per share* $ 1.13 $ 1.03 EBITDA $ 149,414 $ 136,454 11% 11% 10% 9% * Net earnings represent net earnings attributable to Kirby and earnings per share represents diluted earnings per share attributable to Kirby common stockholders. Marine transportation inland fleet demand strong with utilization in the 90% to 95% range and favorable pricing trends Marine transportation coastal fleet demand improved with utilization in the 90% range and favorable pricing trends Diesel engine services land-based demand weak, while marine and power generation demand stable Included a $.05 per share credit to the fair value of United’s contingent earnout liability compared with a $.05 per share charge for the 2012 first quarter Marine transportation inland fleet demand strong with utilization in the 90% to 95% range and favorable pricing trends Included an estimated $.03 per share negative impact from high water on inland waterways and lock closure delays Marine transportation coastal fleet demand strong with utilization in the 90% range and favorable pricing trends Diesel engine services land-based demand weak, while marine and power generation demand stable Included a $.07 per share credit to the fair value of United’s contingent earnout liability Marine transportation inland fleet demand strong with utilization in the 90% to 95% range and favorable pricing trends Marine transportation coastal fleet demand strong with utilization in the 90% range and favorable pricing trends Diesel engine services land-based demand weak, while marine and power generation demand stable Included a $.08 per share credit eliminating United’s contingent earnout liability Marine transportation inland fleet demand strong with utilization in the 90% to 95% range and favorable pricing trends Marine transportation coastal fleet demand strong with utilization in the 90% range and favorable pricing trends Diesel engine services land-based demand weak, while marine and power generation demand stable 2012 fourth quarter included a $.09 per share credit to the fair value of United’s contingent earnout liability Statements made in this Annual Report with respect to the future are forward-looking statements. These statements reflect Management’s reasonable judgment with respect to future events. Forward-looking statements involve risks and uncertainties. Actual results could differ materially from those anticipated as a result of various factors. Forward-looking statements are based on currently available information and Kirby assumes no obligation to update any such statements. A list of these factors can be found in Kirby’s Annual Report on Form 10-K for the year ended December 31, 2013, included in this Annual Report and filed with the Securities and Exchange Commission. On the Cover: The DBL 78, a Kirby Offshore Marine 80,000 barrel coastal double hull tank barge, and the M/V Java Sea, a 4800 horsepower coastal tugboat, transit along the coast of Washington State. FINANCIAL HIGHLIGHTS (In thousands, except per share amounts) Revenues: Marine transportation Diesel engine services Net earnings attributable to Kirby Net earnings per share attributable to Kirby common stockholders (diluted) EBITDA–Earnings before interest, taxes, depreciation and amortization:* For the years ended December 31, 2013 _________ 2012 _________ 2011 _________ 2010 _________ 2009 _________ $ 1,713,167 $ 1,408,893 $ 1,194,607 $ 915,046 $ 881,298 529,028 _________ $ 2,242,195 _________ _________ $ 253,061 _________ _________ 703,765 _________ $ 2,112,658 _________ _________ $ 209,438 _________ _________ 655,810 _________ $ 1,850,417 _________ _________ $ 183,026 _________ _________ 194,511 _________ $ 1,109,557 _________ _________ $ 116,249 _________ _________ 200,860 _________ $ 1,082,158 _________ _________ $ 125,941 _________ _________ $ 4.44 _________ _________ $ 3.73 _________ _________ $ 3.33 _________ _________ $ 2.15 _________ _________ $ 2.34 _________ _________ Net earnings attributable to Kirby $ 253,061 $ 209,438 $ 183,026 $ 116,249 $ 125,941 Interest expense Provision for taxes on income Depreciation and amortization EBITDA* 27,872 152,379 24,385 127,907 17,902 109,255 10,960 72,258 11,080 78,020 164,437 _________ $ 597,749 _________ _________ 145,147 _________ $ 506,877 _________ _________ 126,029 _________ $ 436,212 _________ _________ 95,296 _________ $ 294,763 _________ _________ 93,968 _________ $ 309,009 _________ _________ Property and equipment, net $ 2,370,803 $ 2,315,165 $ 1,822,173 $ 1,118,161 $ 1,085,057 Total assets $ 3,682,517 $ 3,653,128 $ 2,960,411 $ 1,794,937 $ 1,635,963 Long-term debt, including current portion $ 749,150 $ 1,135,110 $ 802,005 $ 200,134 $ 200,239 Total equity $ 2,022,153 $ 1,707,054 $ 1,454,158 $ 1,159,139 $ 1,056,095 Revenues (In millions) Earnings Per Share EBITDA* (In millions) $2,242 $2,113 $1,850 $4.44 $3.73 $3.33 $598 $507 $436 $1,082 $1,110 $2.34 $2.15 $309 $295 Return on Invested Capital** 11.2% 11.1% 10.6% 9.3% 9.6% 09 10 11 12 13 09 10 11 12 13 09 10 11 12 13 09 10 11 12 13 * EBITDA, defined as net earnings attributable to Kirby before interest expense, taxes on income, depreciation and amortization, is a non-GAAP financial measure used by Kirby because of its wide acceptance as a measure of operating profitability before nonoperating expenses (interest and taxes) and noncash charges (depreciation and amortization). ** Return on invested capital is defined as net earnings attributable to Kirby plus interest expense (net of taxes) divided by total average invested capital (average equity plus average debt). For 2010, adjusted to reflect average debt levels net of cash and cash equivalents. TO OUR SHAREHOLDERS Kirby Corporation has come a long way since it was principally an oil and gas exploration company in the 1970s and 1980s. I have had the honor to work for our shareholders and employees since joining Kirby in 1978. In 1988, Kirby transitioned from an oil and gas explora- tion company to the core business it is today. Many have contributed to Kirby’s success through hard work and good strategic decisions. Today, Kirby is the premier inland and coastal tank barge transportation company in the United States. Since 1988, the year we became a marine transporta- tion company, our revenues have grown at an annualized rate of 16.0% a year and our stock price has increased in value at an annualized rate of approximately 19%. Kirby employs 4,575 marine transportation, diesel engine services and corporate employees compared with 800 in early 1989. We have the strongest balance sheet and are the only investment grade-rated company in our busi- ness. We have a stellar reputation for delivering safe and reliable marine transportation and diesel engine services to our customers, while continuing to create value for our shareholders. We have much for which to be thankful. The 2013 year was another record-setting year for Kirby. Revenues were $2.2 billion, net earnings $253 million, and earnings per share $4.44. Compared with 2012, our revenues were up 6%, net earnings up 21%, and earnings per share up 19%. Kirby’s 2013 EBITDA was $598 million compared with 2012’s EBITDA of $507 million, an increase of 18%. Our inland tank barge operation continued its strong performance throughout 2013, with our petrochemical, black oil and refined products fleets’ utilization rates consistently above 90% levels and with continued favorable pricing trends. The United States petrochemical industry benefited from a low-cost natural gas feedstock advantage, contributing strong volumes of products moved from Gulf Coast petrochemical plants for domestic consumers and to terminals for export destinations. Movements of crude oil and natural gas condensate from the shale formations and stable refinery output have kept the black oil fleet at close to full utilization. Refined products demand also remained firm throughout 2013, benefiting from increased exports of diesel fuel and fuel oils. Our coastal tank barge fleet benefited from the Allied Transportation Company and Penn Maritime Inc. acquisitions in late 2012. Business levels in the coastal fleet started to improve during the 2012 second half and continued throughout 2013 with equipment utilization consistently in the 90% range. This improved demand was attributable to tighter industry capacity driven by demand for the regional coastal transportation of crude oil and natural gas condensate, including the movement of Bakken crude oil along the West Coast beginning in the 2013 fourth quarter. In addition, we continued to expand our coastal business to inland customers with coastal requirements. The tighter coastal capacity led to improved pricing trends throughout 2013. For 2013, marine transportation revenues were $1.7 billion, up 22% from $1.4 billion in 2012. Operating income was $408 million, up 31% from $312 million in 2012. The operating margin was 23.8% compared with 22.1% in 2012, driven by continued high inland tank barge utilization and pricing, and much improved coastal tank barge utilization and pricing. We continued to reinvest in our marine transporta- tion fleet during 2013, spending $253 million on capital expenditures, including $148 million for new inland tank barges, inland towboats and progress payments on the construction of two offshore dry-bulk barge and tugboat units completed in 2013. We also invested $105 million primarily for upgrades to our existing inland and coastal fleets and diesel engine services facilities. The average age of our inland tank barge fleet at the beginning of 2014 was 16.2 years compared with 24.0 years in 2008. The average age of our coastal tank barges at the begin- ning of 2014 was 16.7 years, one of the younger fleets in the coastal tank barge industry. In January 2014 we announced an expansion of our coastal fleet when we signed an agreement to construct a 185,000 barrel coastal tank barge and 10000 horse- power tugboat unit at a cost of $75 to $80 million. The unit is anticipated to be delivered in mid to late 2015. The unit will be chartered to a major customer for a four-year period with a one-year extension option. Throughout 2013, our land-based diesel engine services market remained very challenging due to excess pressure pumping equipment. Today, an estimated 18 million horsepower or 8,200 pressure pumping units exist. Due to this excess capacity, the market for building pressure pumping units was weak, and the remanufacturing of older pressure pumping units was weaker than expected. We do believe the market for remanufacturing pressure pumping equipment will improve in 2014. We are well positioned to service this equipment, as well as build new oilfield equipment as the market dictates. Our marine diesel engine services market saw stable demand throughout 2013 from inland and offshore marine customers for overhaul projects, service and parts sales, and was relatively consistent with 2012. The power 2 Kirby 2013 Annual Report generation market was also similar to 2012 for engine- generator set upgrades and parts sales for both domestic and international customers. Diesel engine services revenues were $529 million in 2013, down 25% from $704 million in 2012. Operating income was $43 million in 2013, down 36% from $66 mil- lion in 2012. The operating margin for 2013 was 8.1% compared with 9.4% for 2012. The 2013 and 2012 results included an $18.3 million credit before taxes, or $.20 per share, and a $4.3 million credit before taxes, or $.05 per share, respectively, reducing the fair value of the contingent earnout liability associated with the acquisition of United Holdings in April 2011. This liability was eliminated as of September 30, 2013, and the earnout period has expired. Cash flow remained strong throughout 2013, with net cash provided by operating activities of $601 million, significantly above our capital needs. This strong cash flow was used for capital expenditures of $253 million and to reduce our outstanding debt by $386 million. Our outstanding debt at the end of 2013 was $749 million compared with $1.14 billion at the beginning of 2013. Our debt-to-capitalization ratio was 27.0% at the end of 2013 compared with 39.9% at the beginning of the year. As announced in April 2013, I will be stepping down in 2014 as Kirby’s Chief Executive Officer but will continue to work as an active Executive Chairman of Kirby’s Board of Directors. The Board has selected David Grzebinski as my successor. I look forward to working with David and Kirby’s management team as we continue to grow and create value for our shareholders. David assumed the role of President and Chief Operating Officer in January 2014, having previously served since early 2010 as Kirby’s Executive Vice President and Chief Financial Officer. Andy Smith has joined Kirby as Executive Vice President and Chief Financial Officer. As we enter 2014, I want to thank the entire Kirby team for the contributions each of you made during 2013. To the dedi- cated vessel employees who work on our boats ensuring that our customers’ products are delivered safely and efficiently, to our mechanics, machinists, engineers and manufacturing technicians, and to our shoreside and office staff who provide essential support and services, I extend my thanks for your outstanding effort and commitment last year. I want to thank our Board of Directors for their stead- fast commitment, expertise, direction and support. I want to give David Lemmon special thanks. Dave has been a Board Member since 2006 and will retire from the Board at our Annual Meeting in April. Dave’s expertise, direction and support contributed significantly to the growth of Kirby. Joe Pyne Chairman of the Board and Chief Executive Officer I also want to extend a special thank you to George Peterkin, Jr., who is also retiring from the Kirby Board in April having served as a Kirby Director since 1969. George served as President of Kirby from 1973 to 1995, Chairman of the Board from 1995 to 1999 and Chairman Emeritus since 1999. During George’s tenure as President, Chairman and later Chairman Emeritus, he helped guide Kirby’s transition from a company primarily engaged in oil and gas exploration with a small barge line to the largest inland and coastal tank barge company in the United States. I have had the unique pleasure and honor to work for you, the shareholders, employees and directors of Kirby, for over 35 years. In 1984, I became the President of Kirby’s marine transportation subsidiary and in 1995 a Director and the Chief Executive Officer of Kirby. Along the way, I have had the pleasure of working with a number of outstanding Kirby Board Chairmen, Boards of Directors and a consistently great management team. Each has brought to Kirby some unique expertise, insight and leader- ship. It is my hope that I can continue to provide wisdom, insight and leadership as Kirby’s current Chairman. Respectfully submitted, Joseph H. Pyne Chairman of the Board and Chief Executive Officer Houston, Texas March 7, 2014 MARINE TRANSPORTATION The United States’ 12,000 miles of inland interconnected rivers, canals and intracoastal waterways and 12,500 miles of coastline with its numerous ports and harbors serve as one of the world’s most efficient transportation systems, linking the United States’ heartland and coastal states to the rest of the world. Inland and coastal marine transportation is the most energy-efficient and safest means of transporting bulk liquid commodities when compared with rail and truck. The inland markets are served through Kirby Inland Marine, the United States’ largest inland tank barge operator, transporting petrochemicals, black oil, refined petroleum products and agricultural chemicals. The coastal markets are served through Kirby Offshore Marine, the United States’ largest coastal tank barge operator in the 195,000 barrel or less category, transporting refined petroleum products, black oil and petrochemicals. Revenues (In millions) Operating Income (In millions) $1,713 $1,409 $1,195 $408 $312 $262 $881 $915 $208 $193 Operating Margin 23.6% 21.9% 22.1% 21.1% 23.8% 09 10 11 12 13 09 10 11 12 13 09 10 11 12 13 2013 RESULTS OF OPERATIONS Operating income was $408 million, a 31% increase compared with $312 million for 2012. Revenues totaled $1.7 billion, a 22% increase compared with $1.4 billion for 2012. Operating margin improved to 23.8% compared with 22.1% for 2012. Results include a full year of operations of Allied acquired in November 2012 and Penn acquired in December 2012. Approximately 70% of marine transportation revenue from inland transportation and 30% from coastal transportation. 47% of revenue from transportation of petrochemicals, 25% black oil, 24% refined petroleum products and 4% agricultural chemicals. 4 Kirby 2013 Annual Report Higher operating results reflected consistent and healthy demand across all markets with 90% to 95% inland equipment utilization rates and 90% coastal equipment utilization rates, with continued favorable pricing trends. For the inland markets, higher operating results reflected continued strong production volumes from petrochemical customers for both domestic and foreign destinations, steady refinery production levels aided by the export of refined petroleum products and heavy fuel oils, and transportation of Eagle Ford, Bakken and Utica shale formation and Canadian tar sands crude oil and natural gas condensate. For the coastal markets, higher operating results reflected the acquisitions of Allied and Penn, increased crude oil and natural gas condensate movements, and the continued expansion of the coastal customer base to inland customers with coastal requirements. The wheelhouse of the M/V Niceville, an 1800 horsepower inland towboat built in 2009, with two pressure barges at a terminal in Pascagoula, Mississippi. The picture was taken by James Bates, a Pilot for Kirby Inland Marine. KIRBY INLAND MARINE Kirby Inland Marine is an integral part of the United States inland tank barge industry, a mixture of large integrated marine transportation companies and small operators, as well as captive fleets owned by United States refining and petrochemical companies. The inland tank barge industry provides marine transportation of bulk liquid cargoes throughout the Mississippi River System and along the Gulf Intracoastal Waterway. The use of marine transportation by the petrochemical and refining industries is a major reason for the location of United States petrochemical facilities and refineries on navigable inland waterways. Texas and Louisiana currently account for approximately 80% of the United States production of petrochemicals. SERVICES OFFERED Largest inland transporter of bulk liquid products by tank barge throughout the Mississippi River System, Gulf Intracoastal Waterway and Houston Ship Channel. Transports petrochemicals, black oil, including crude oil and natural gas condensate, refined petroleum products and agricultural chemicals for United States petrochemical and refining companies. STRENGTHS Kirby’s inland fleet consists of 861 tank barges, comprising 17.3 million barrels of cargo capacity and representing approximately 25% of the total number of industry inland tank barges, and 253 towboats. Offers safe, dependable, cost-effective and environ- mentally sound transportation of bulk liquid products throughout the nation’s inland waterways system. Fleet size, distribution system and communication system allow for economies of scale through the ability to match tank barges, towboats, products and destinations to meet customers’ needs. Towboats are operated by highly trained crews and supported by experienced shoreside staff and state-of-the-art communication and training systems and facilities. Approximately 75% of revenues under term contracts, of which 58% are under time charters, and 25% of revenues under spot contracts. MARKETS Petrochemicals: Products transported include ben- zene, styrene, methanol, acrylonitrile, xylene, caustic soda, butadiene, propylene, butane and propane. Driver is the manufacture of consumer nondurable goods (70%) and consumer durable goods (30%). Black Oil: Products transported include residual fuel oil, coker feedstock, vacuum gas oil, asphalt, carbon black feedstock, crude oil, natural gas condensate and ship bunkers. Drivers are fuel for power plants and ships, feedstock for refineries, certain durable goods and road construction. Refined Petroleum Products: Products transported include various blends of finished gasoline, gasoline blendstocks, No. 2 oil, jet fuel, heating oil, diesel fuel, naphtha and ethanol. Drivers are vehicle usage, air travel, weather conditions and refinery utilization. Agricultural Chemicals: Products transported include anhydrous ammonia, nitrogen-based liquid fertilizer and industrial ammonia. Drivers are corn, cotton and wheat production, and chemical feed- stock usage. TANK BARGE FLEET Petrochemicals/refined products Black oil Pressure Anhydrous ammonia Specialty Total Total Barrel Capacity TOWBOAT FLEET 800–1300 hp 1400–1900 hp 2000–2400 hp 2500–3200 hp 3300–4800 hp 5000 hp and greater Spot charters Total 670 118 58 10 5 861 17.3 MM 96 84 43 15 12 2 1 253 6 Kirby 2013 Annual Report A Kirby Inland Marine tow with two loaded 30,000 barrel tank barges transits the lower Mississippi River. Kirby transports a wide variety of petrochemicals, black oil, refined petroleum products and agricultural chemicals. The principal distribution system encompasses the Gulf Intracoastal Waterway, the Mississippi River System and the Houston Ship Channel. This photo was taken by James Bates, a Pilot for Kirby Inland Marine. KIRBY OFFSHORE MARINE Kirby Offshore Marine is an integral part of the United States coastal tank barge industry, composed mainly of large integrated marine transportation companies and small operators. The coastal tank barge industry distributes refined petroleum products from regional refineries and pipeline terminals to regional terminals along the East, Gulf and West Coasts and in Alaska and Hawaii. Crude oil and natural gas condensate are distributed regionally from terminals to coastal refineries on the East, Gulf and West Coasts. Petrochemicals are primarily distributed from Gulf Coast petrochemical plants to customers along the Gulf and East Coasts. SERVICES OFFERED MARKETS United States’ largest coastal transporter of bulk liquid cargoes by tank barge in the 195,000 barrels or less category, operating along the East, Gulf and West Coasts and in Alaska and Hawaii. Transports refined petroleum products, black oil, including crude oil and natural gas condensate, and petrochemicals for United States refining and petrochemical companies. STRENGTHS Kirby’s coastal fleet consists of 72 tank barges (71 of which are double hull), comprising 6.0 million barrels of cargo capacity and representing approximately 27% of the total number of industry coastal tank barges in the 195,000 barrels or less category, and 76 tugboats. Widest geographic presence in the coastal tank barge industry with operations along the East, Gulf and West Coasts and in Alaska and Hawaii. Single-source provider to large refining and petrochemi- cal companies that require broad geographic coverage. Approximately 75% of revenues under term contracts, of which 90% are under time charters, and 25% of revenues under spot contracts. In January 2014, announced the signing of an agree- ment to construct an articulated 185,000 barrel coastal tank barge and 10000 horsepower tugboat unit for $75 to $80 million for delivery in mid to late 2015. The unit will be chartered to a major customer for a four- year period with a one-year extension option. Refined Petroleum Products: Products transported include various blends of finished gasoline, gasoline blendstocks, No. 2 oil, jet fuel, heating oil, diesel fuel, naphtha and ethanol. Drivers are vehicle usage, air travel, weather conditions and refinery utilization. Black Oil: Products transported include residual fuel oil, coker feedstock, vacuum gas oil, asphalt, carbon black feedstock, crude oil, natural gas condensate and ship bunkers. Drivers are fuel for power plants and ships, feedstock for refineries, certain durable goods and road construction. Petrochemicals: Products transported include cumene, phenol, acetone, cyclohexane and caustic soda. Driver is the manufacture of consumer nondurable goods (70%) and consumer durable goods (30%). TANK BARGE FLEET Refined products/petrochemicals Black oil Total Total Barrel Capacity 46 26 72 6.0 MM TUGBOAT FLEET 1000–1900 hp 2000–2900 hp 3000–3900 hp 4000–4900 hp 5000–6900 hp Greater than 7000 hp Total 8 8 16 23 11 10 76 8 Kirby 2013 Annual Report The M/V Java Sea and the DBL 78 operate as an articulated tugboat and tank barge unit (“ATB”). ATBs are designed to combine the economics of tugboat and barge operation with the speed and weather reliability of a ship. DIESEL ENGINE SERVICES High-speed and medium-speed diesel engines provide the main propulsion for United States inland towboats, offshore tugboats, offshore oil service vessels, commercial fishing vessels, United States military vessels and other marine applications. Medium-speed diesel engines are used by the power generation industry for standby, peak and base-load power generation. High-speed diesel engines are used by the United States oil and gas industry to power its oil service equipment, including pressure pumping units. The marine and power generation markets are served through Kirby Engine Systems, providing aftermar- ket service for medium-speed and high-speed diesel engines, reduction gears and other ancillary products. The land-based markets are served through United Holdings, providing service and distribution of high- speed diesel engines, transmissions, pumps and compression products, and manufacture and remanufacture of customized oilfield service equipment, including pressure pumping units. There is approximately 18 million horsepower, or 8,200 pressure pumping units, operating in the United States oil services market. Revenues (In millions) Operating Income (In millions) Operating Margin $704 $656 $529 $68.1 $66.4 10.5% 10.6% 10.4% 9.4% 8.1% $42.8 $201 $195 $21.0 $20.6 09 10 11 12 13 09 10 11 12 13 09 10 11 12 13 2013 RESULTS OF OPERATIONS • • • • • • Operating income was $43 million, a 36% decrease compared with $66 million for 2012. Revenues totaled $529 million, a 25% decrease compared with $704 million for 2012. Operating margin was 8.1% compared with 9.4% for 2012. 2013 and 2012 results included an $18.3 million credit before taxes, or $.20 per share, and a $4.3 million credit before taxes, or $.05 per share, respectively, reducing the fair value of the contingent earnout liability associated with the acquisition of United in April 2011. The United contingent earnout liability was eliminated as of September 30, 2013. Approximately 60% of diesel engine services revenue from land-based operations and 40% from marine and power generation. 10 Kirby 2013 Annual Report The marine market saw stable demand for service and parts sales to inland and offshore marine customers and consistent demand for service and parts sales to Gulf of Mexico offshore supply and drilling industry customers. The power generation market saw consistent generator set upgrades and parts sales for both domestic and international customers. The land-based market remained challenging with lower demand for the manufacturing of pressure pumping units and oilfield service equipment, as well as sales and service of land-based diesel engines, transmissions and parts. In addition, the market for the remanufacturing of older pressure pumping units remained relatively stable, but at lower levels. Walton Russ works on a gear damper for an EMD medium-speed diesel engine at Kirby Engine Systems’ Houma, Louisiana, facility. Kirby Engine Systems and United employ over 600 factory-trained and authorized project engineers, mechanics, machinists and manu- facturing technicians providing in-house service and parts through 33 facilities, as well as field service nationwide and worldwide. KIRBY ENGINE SYSTEMS Kirby Engine Systems is the leading United States marine and power generation service and OEM replace- ment parts provider for medium-speed and high-speed diesel engines, as well as ancillary products provider for reduction gears, transmissions, starters, governors and marine clutches. Through long-standing customer relationships and key distributorships, dealerships and contract service center relationships, Kirby provides an essential service to support the day-to-day operations of its marine and power generation domestic and international customers. • Power Generation: Medium-speed diesel engines and safety-related products used in standby, peak and base-load power generation and generator set upgrades. Markets are domestic and international utilities and worldwide nuclear power industry. SERVICE LOCATIONS Medium-Speed Diesel Engines Houma, LA Paducah, KY Rocky Mount, NC Chesapeake, VA Seattle, WA Tampa, FL High-Speed Diesel Engines Houma, LA Baton Rouge, LA Belle Chasse, LA New Iberia, LA Mobile, AL Thorofare, NJ Houston, TX MANUFACTURER RELATIONSHIPS Medium-Speed Diesel Engines Electro-Motive Diesel, Inc. Cooper-Bessemer Nordberg High-Speed Diesel Engines Caterpillar Cummins MTU Detroit Diesel John Deere Ancillary Products Allison Transmission (transmissions) Falk Corporation (reduction gears) Ingersoll-Rand (starters) Woodward (governors) Oil States Industries (marine clutches) Alfa Laval (heat exchangers/separators) SERVICES OFFERED • • Provides factory-trained and authorized project engineers, mechanics and machinists to overhaul and repair medium-speed and high-speed diesel engines and ancillary products, sells OEM replacement parts, maintain facilities to rebuild component parts, entire diesel engines and ancillary products, and sells new engines. Offers preferential service agreements with large operators of diesel-powered marine equipment, providing such operators with one source of support and service for all of their requirements at pre- negotiated prices. STRENGTHS • • Long-term distributorships, dealerships and contract service center relationships with major manufacturers of medium-speed and high-speed diesel engines, reduction gears and ancillary equipment. Operates the largest service area of any United States marine and power generation diesel engine services provider through 13 strategically located service and parts facilities along the Gulf Coast, East Coast, and West Coast, and in the Midwest. MARKETS • Marine: Medium-speed and high-speed diesel engines and ancillary products on inland towboats and coastal tugboats, harbor docking tugs, offshore oilfield service vessels, offshore oil and gas drilling rigs, coastal ferries, commercial fishing vessels, inland dredging vessels, Great Lakes carriers and United States government vessels. Market drivers are the activity levels of the industries served and cycles of such industries. 12 Kirby 2013 Annual Report UNITED HOLDINGS United Holdings is a major United States participant in the remanufacturing and manufacturing of oilfield service equipment, including pressure pumping units used in the hydraulic fracturing of the ever-expanding North American shale formations. The boom in North American fracturing of shale formations has increased the installed base of diesel engine horsepower employed in fracturing from an estimated seven million horse- power in 2008 to an estimated 18 million horsepower today. The heavy duty cycle associated with hydraulic fracturing is creating an annuity for remanufacturing and servicing of these pressure pumping units. SERVICES OFFERED MARKETS • • • Manufactures customized oilfield service equipment, including pressure pumping units, nitrogen pumping units, cementers, mud pumpers, blenders and hydration units, as well as customized compression systems. Provides factory-trained and authorized mechanics to overhaul, service and repair high-speed diesel engines, pumps and transmissions, providing in- house and in-field service capabilities. Distributes new engines and transmissions, and sells OEM replacement parts for on- and off-highway use. • • STRENGTHS • • • • An estimated 18 million horsepower of pressure pumping units (estimated 8,200 units) operate in North America. United’s principal oilfield service remanufacturing, manufacturing, distribution and service facilities are located in Oklahoma. Oilfield service equipment, including pressure pumping units, is transported by tractor-trailer truck. Most major North American shale oil and natural gas producing regions are within a one-day drive of United’s Oklahoma facilities. Long-standing distribution relationships with MTU Detroit Diesel and Allison Transmission. United has long-standing customer relationships with large and mid-cap oilfield service providers, oil and gas operators and producers, natural gas transmis- sion companies and public utilities. Service and Distribution: Facilities centered in the United States shale production regions and transpor- tation corridors. Market drivers are overhaul, service and repair of existing oilfield service equipment, including pressure pumping units, engines, transmis- sions and compression systems used by United’s customers in the development of shale formations, in the power generation, agricultural and construction industries, and in municipalities. Manufacturing: Manufacture of oilfield service equipment, including pressure pumping units. Market drivers are the ever-expanding exploration of North American shale formations as well as the manufacture of customized compression systems for the production, storage and pipeline transportation of natural gas. LOCATIONS Manufacturing Oklahoma City, OK (5 locations) Henderson, CO Service and Distribution Oklahoma City, OK Tulsa, OK Little Rock, AR Van Buren, AR Shreveport, LA Billings, MT Amarillo, TX Austin, TX Houston, TX Laredo, TX Lubbock, TX Pharr, TX San Antonio, TX Casper, WY MANUFACTURER RELATIONSHIPS MTU Detroit Diesel Allison Transmission Daimler Trucks NA Isuzu Heil Tymco Cameron Dresser-Rand Waukesha FS-Elliott Gardner Denver GM Powertrain Thermo King BOARD OF DIRECTORS Richard J. Alario 2 Chairman, President and CEO of Key Energy Services, Inc. Director since 2011 C. Sean Day 3, 4 Chairman of Teekay Corporation Director since 1996 Bob G. Gower 1, 2, 3 Retired Chairman of Lyondell Petrochemical Company Director since 1998 OFFICERS William M. Lamont, Jr. 1, 3, 4 Private Investor Director since 1979 David L. Lemmon 2 Retired President and CEO of Colonial Pipeline Company Director since 2006 Monte J. Miller 3, 4 Retired Executive Vice President, Chemicals, of Flint Hills Resources, LP Director since 2006 George A. Peterkin, Jr. 1 Chairman Emeritus of Kirby Director since 1969 Joseph H. Pyne 1 Chairman of the Board and Chief Executive Officer of Kirby Director since 1988 Richard R. Stewart 2 Retired President and CEO of GE Aero Energy Director since 2008 William M. Waterman Retired President and CEO of Penn Maritime Inc. Director since 2012 1 Executive Committee 2 Audit Committee 3 Compensation Committee 4 Governance Committee Kirby Corporation Marine Transportation Group Diesel Engine Services Group Kirby Offshore Marine, LLC Kirby Engine Systems, Inc. James F. Farley President John W. Sansing, Jr. Senior Vice President— Maintenance William M. Withers Senior Vice President—Sales Charles R. Ferrer, Jr. Vice President—Sales Dorman Lynn Strahan President Mia C. Cradeur Vice President and Controller John A. Manno Vice President—Business Development Engine Systems, Inc. William L. Oppenheimer Vice President—Maintenance John A. Manno Vice President C. Linn Peterson Vice President—Vessel Operations P. Scott Mangan Vice President—East Coast Carl R. Whitlatch Vice President and Controller Marine Systems, Inc. Lynn A. Ahlemeyer Vice President—Gulf Coast and West Coast Thomas W. Bottoms Vice President—Midwest Troy A. Bourgeois Vice President—Sales Kirby Ocean Transport Company Joseph H. Pyne President William M. Withers Vice President Osprey Line, L.L.C. John T. Hallmark President Charles J. Duet Vice President United Holdings LLC Michael W. Coulter President David W. Grage Chief Financial Officer Kirk K. Waite Chief Accounting Officer United Engines David L. Tonne Vice President—Aftermarket UE Manufacturing Christopher J. Rinehart Vice President—Engineered Products Ronnie E. Stover Vice President—Sales UE Compression G. Keith Kern Vice President Thermo King of Houston Jason K. Robison Vice President Joseph H. Pyne Chairman of the Board and Chief Executive Officer David W. Grzebinski President and Chief Operating Officer C. Andrew Smith Executive Vice President and Chief Financial Officer William G. Ivey President— Marine Transportation Group Ronald A. Dragg Vice President and Controller G. Stephen Holcomb Vice President—Investor Relations Amy D. Husted Vice President—Legal David R. Mosley Vice President and Chief Information Officer Christian G. O’Neil Vice President—Human Resources Joseph H. Reniers Vice President—Supply Chain Renato A. Castro Treasurer Thomas G. Adler Secretary Kirby Inland Marine, LP William G. Ivey President Mel R. Jodeit Executive Vice President— Marketing James C. Guidry Senior Vice President—Vessel Operations John E. Russell Senior Vice President—Sales John W. Sansing, Jr. Senior Vice President— Maintenance William M. Withers Senior Vice President—Sales Stephen C. Butts Vice President—Sales Robert D. Goolsby Vice President—Facility Operations Patrick C. Kelly Vice President—Sales Richard C. Northcutt Vice President—Sales and Horsepower Management Lester A. Parker Vice President—River Vessel Operations Cliff R. Stanich Vice President—Sales Thomas H. Whitehead Vice President—Sales Carl R. Whitlatch Vice President and Controller 14 Kirby 2013 Annual Report Common Stock Market Price 2014 First Quarter (through March 3, 2014) 2013 First Quarter Second Quarter Third Quarter Fourth Quarter 2012 First Quarter Second Quarter Third Quarter Fourth Quarter Sales Price High Low $104.91 $92.86 $ 78.04 $ 82.84 $ 89.19 $ 99.41 $61.41 $71.44 $79.15 $82.16 $ 70.61 $ 67.36 $ 58.83 $ 61.89 $61.20 $42.78 $45.72 $53.60 Financial and Investor Relations Copies of Kirby’s Form 10-K (which is incorporated in this Annual Report) are available free of charge. Either contact G. Stephen Holcomb, Vice President– Investor Relations, at Kirby’s corporate headquarters, e-mail Steve.Holcomb@ kirbycorp.com, or visit Kirby’s web site at www.kirbycorp.com. SHAREHOLDER INFORMATION Annual Meeting The 2014 Annual Meeting of Stockholders will be held at Kirby’s Houston office, 55 Waugh Drive, 9th Floor, Houston, Texas 77007, at 10:00 a.m. (CDT), Tuesday, April 29, 2014. Corporate Headquarters Executive Office: 55 Waugh Drive, Suite 1000 Houston, Texas 77007 Telephone: (713) 435-1000 Fax: (713) 435-1010 Web site: www.kirbycorp.com Mailing Address: P.O. Box 1745 Houston, Texas 77251-1745 Inquiries Regarding Stock Holdings Registered shareholders (shares held in owner’s name) should address communica- tions concerning address changes, lost certificates and stock transfers to: Computershare Trust Company, N.A. P.O. Box 43078 Providence, Rhode Island 02940-3078 Telephone: (781) 575-2879 Web site: http://computershare.com Beneficial shareholders (shares held in the name of banks or brokers) should address communications to their banks or stockbrokers. All other inquiries should be addressed to G. Stephen Holcomb, Vice President– Investor Relations, at Kirby’s corporate headquarters. Web Site For more investor information, as well as information about Kirby, visit Kirby’s web site at www.kirbycorp.com. Independent Registered Accountants KPMG LLP BG Group Place 811 Main Street, Suite 4500 Houston, Texas 77002 Common Stock Information Stock trading symbol—KEX The New York Stock Exchange is the principal market for Kirby’s common stock. As of March 3, 2014, there were 56,933,000 common shares outstanding held by approximately 775 registered shareholders. The number of registered shareholders does not reflect the number of beneficial owners of common stock. Comparison of 5 Year Cumulative Total Return Return on $100 invested on December 31, 2008, in stock or index, including reinvestment of dividends. Fiscal year ended December 31. 12/08 12/09 12/10 12/11 12/12 12/13 Kirby Corporation 100.00 127.30 161.00 240.64 226.21 362.76 Russell 2000 100.00 127.17 161.32 154.59 179.86 249.69 Dow Jones US Marine Transportation 100.00 124.15 141.92 148.05 163.17 242.76 $375 $250 $125 0 08 09 10 11 12 13 (cid:81) Kirby Corporation (cid:81)(cid:3)Russell 2000 (cid:81)(cid:3)Dow Jones US Marine Transportation Kirby Corporation Corporate Headquarters: 55 Waugh Drive, Suite 1000, Houston, Texas 77007 Mailing Address: P. O. Box 1745, Houston, Texas 77251-1745 Telephone: (713) 435-1000 Fax: (713) 435-1010 Web site: www.kirbycorp.com