Kirby delivered a strong second quarter of 2025 with EPS of $1.67, up 17% year-over-year, on solid inland and coastal marine results and 31% growth in power generation. Coastal margins reached the high teens on tight supply and mid-20% renewal gains, while oil and gas operating income surged on EFRAC despite revenue declines. Emerging chemical-volume softness entering July prompted a cautious tone, with management reaffirming 15%-25% full-year EPS growth but skewing toward the low end.
Good morning and thank you for joining the Kirby Corporation 2025 second quarter earnings call. With me today are David Grzebinski, Kirby's Chief Executive Officer, Raj Kumar, Kirby's Executive Vice President and Chief Financial Officer, and Christian O’Neil, Kirby's President and Chief Operating Officer. The slide presentation for today's conference call, as well as the earnings release which was issued earlier today, can be found on our website. During this call we may refer to certain non-GAAP or adjusted financial measures. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings press release and are also available on our website in the Investor Relations section. As a reminder, statements contained in this conference call 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, and our actual results could differ materially from those anticipated as a result of various factors. A list of these risk factors can be found in Kirby's latest Form 10-K filing and in our other filings made with the SEC from time to time. I will now turn the call over to David.
Thank you, Kurt, and good morning everyone. Earlier today we announced second quarter earnings per share of $1.67, a 17% increase year-over-year from $1.43 in the second quarter of 2024. Our second quarter performance reflected solid execution across both of our business segments and continued strength in our core markets, supported by healthy customer demand, disciplined pricing, and solid operational performance. Our teams continued to adapt and deliver strong results despite some navigational challenges in marine and supply delays in distribution and services.
Overall, our combined businesses did deliver another solid quarter in inland marine transportation. Market conditions remained favorable during the second quarter. Customer activity was steady with barge utilization rates consistently in the low to mid 90% range, reflecting healthy demand across our core markets. Compared to the first quarter, weather conditions improved, but navigational and lock delays posed a modest headwind that challenged operational efficiency. Despite these headwinds, our teams executed well. On the pricing front, we saw continued gains in pricing. Spot market rates increased in the low single digits sequentially and in the mid single-digits year-over-year, supported by limited barge availability and firm customer demand. Term contract renewals also trended higher with low to mid single digit increases compared to prior year. The combination of improved pricing, disciplined execution, and resilient demand helped drive operating margins into the low 20% range.
Despite the operational challenges, this performance underscores the strength of our inland marine business and our ability to deliver solid results in a dynamic environment. In coastal marine transportation, market fundamentals remained strong throughout the second quarter. Barge utilization was consistently in the mid to high 90% range and was supported by steady customer demand and limited supply of large capacity vessels. This supply demand dynamic continued to drive meaningful pricing gains with term contract renewals increasing in the mid 20% range year-over-year, which is a clear indication of the market's strength and our leading position in the market. Operationally, the quarter benefited from a reduction in planned shipyard maintenance which had been a headwind in the prior periods. While some maintenance activity continued, its impact was less pronounced, allowing for improved asset availability and improved revenue generation.
The combination of strong pricing, high utilization, and fewer planned shipyards contributed to solid financial performance with operating margins reaching the high teens. Turning to distribution and services, our teams delivered a strong second quarter, achieving year-over-year growth in both revenue and operating income with solid contributions across most of our end markets. In power generation, revenues were up 31% year-over-year, driven by robust demand from data centers and industrial customers. The pace of inbound orders remained strong, further building our backlog and positioning us well for the second half of this year. We also secured additional project wins for backup and critical power applications, reinforcing our leadership in this space. In commercial and industrial markets, revenues rose 5% year-over-year, supported by steady marine repair activity and a modest recovery in on highway services.
These gains reflected both the resilience of our customer base and the effectiveness of our service network. Operating income increased 24% year-over-year, driven by favorable product mix and ongoing cost control initiatives. In oil and gas, we delivered 180%+ year-over-year increase in operating income even while revenues declined due to continued softness in conventional activity. This performance was driven by strong execution, disciplined cost management, and continued growth in EFRAC equipment, which remains the lone bright spot in this challenged market. Overall, the segment performed well and demonstrated our ability to adapt to shifting demand dynamics and to capitalize on growth opportunities. We did deliver approximately 10% operating margins in the quarter. In summary, our second quarter results reflected continued strength in market fundamentals across both segments.
Despite some navigational challenges and some supply delays in inland marine, favorable market conditions supported higher rates and steady barge utilization. In coastal marine, wide supply and demand dynamics remained constructive, enabling us to maintain high utilization and the ability to secure meaningful rate increases on term contract renewals in distribution and services. Robust demand for power generation, particularly from data centers and industrial customers, largely offset softness in oil and gas, allowing the segment to deliver solid financial performance in a mixed demand environment. We expect positive trends to remain as we move through the back half of this year. I'll talk more about our outlook later, but first I'll turn the call over to Raj to discuss the second quarter segment results and balance sheet in more detail.
Thank you, David, and good morning, everyone. In the second quarter of 2025, Marine Transportation segment revenues were $493 million and operating income was $99 million with an operating margin of 20.1%. Total marine revenues, inland and coastal together, increased $7.8 million or 2% compared to the second quarter of 2024, and operating income increased $4.2 million or 4%. Sequentially, compared to the first quarter of 2025, total marine revenues increased 3% and operating income increased 14%. As David mentioned, some navigational and lock delays impacted operations and efficiency in inland. This was offset by solid underlying customer demand, improved pricing, and most importantly, execution. Looking at the inland business in more detail, the inland business contributed approximately 81% of segment revenue. Average barge utilization was in the low to mid 90% range for the quarter, which was in line with the utilization seen in the first quarter of 2025.
Long-term inland marine transportation contracts, or those contracts with a term of one year or longer, contributed approximately 70% of revenue, with 60% from time charters and 40% from contracts of affreightment. Improved market conditions contributed to spot market rates increasing sequentially in the low single digits and in the mid single digit range year-over-year. Term contracts that renewed during the second quarter were up on average in the low to mid single digits compared to the prior year. Compared to the second quarter of 2024, inland revenues increased 1% primarily due to pricing offsetting the negative impacts of navigational challenges. Sequentially, inland revenues increased 1% compared to the first quarter of 2025 due to better weather conditions. Inland operating margins were in the low 20% range. Now I'll move to the coastal business.
Coastal revenues increased 3% year-over-year and increased 14% sequentially due to the combined impact of pricing and fewer planned shipyards in the quarter. Overall, coastal had operating margins of high teens due to the improved pricing and continued cost leverage. The coastal business represented 19% of revenues. For the Marine Transportation segment, average coastal barge utilization was in the mid to high 90% range, which is in line with the second quarter of 2024. During the quarter, the percentage of coastal revenue under term contracts was approximately 100%, of which approximately 100% were time charters. Renewals of term contracts were on average higher year-over-year in the mid 20% range. With respect to our tank barge fleet for both the inland and coastal businesses, we have provided a reconciliation of the changes in the second quarter as well as projections for 2025.
This is included in our earnings call presentation posted on our website. At the end of the second quarter, the inland fleet had just over 1,100 barges representing 24.5 million barrels of capacity. We expect to end 2025 with a total of 1,110 inland barges representing 24.6 million barrels of capacity. Coastal marine is expected to remain unchanged for the year. Now I'll review the performance of the distribution and services segment. Revenues for the second quarter of 2025 were $363 million with operating income of $35 million and operating margin of 9.8%. Compared to the second quarter of 2024, the distribution and services segment saw revenue increase by $23 million or 7%, while operating income increased by $6 million or 20%. When compared to the first quarter of 2025, revenue increased by $53 million or 17% and operating income increased by $13 million or 57%.
In power generation, revenue increased 31% year-over-year driven by robust sales. Our orders from data centers and other industrial customers for power generation and backup power installation continues to grow. This contributed to a very healthy backlog of power generation projects. Compared to the first quarter of 2025, power generation revenues increased by 35% and operating income increased by 88%. Operating margins for power generation were in the mid to high single digits. Power generation represented 39% of total segment revenues. On the commercial and industrial side, activity levels in marine repair remained strong while there was a modest recovery in our on highway business. As a result, commercial and industrial revenues were up 5% year-over-year and operating income increased 24% year-over-year driven by favorable product mix and ongoing cost savings initiatives.
Commercial and industrial made up 48% of segment revenues with operating margins in the low double digits. Compared to the first quarter of 2025, commercial and industrial revenues increased by 8% on increased activity in marine repair and our on highway businesses. Operating income was up 46% over the same period, driven by favorable product mix in the oil and gas market. We continue to experience softness in conventional FRAC related equipment as lower rig counts tempered demand for new engines, transmissions, and parts throughout the quarter. This decline in conventional activity was partially offset by ongoing deliveries of EFRAC equipment, which remains a bright spot in the segment. As a result of this mixed demand and environment, revenues declined 27% year-over-year, though they were up 8% sequentially.
Importantly, despite the revenue decline, we achieved strong profitability gains with operating income increasing 43% sequentially and 182% year-over-year. These results were driven by continued growth in our EFRAC business and the benefit of disciplined cost management initiatives. During the quarter, oil and gas represented 13% of total segment revenue, and the business delivered operating margins in the low double digits. Now moving to the balance sheet, as of June 30, 2025, we had $68 million of cash and total debt of around $1.12 billion, and our debt to cap ratio remained at 24.8%. With our net debt to EBITDA being just under 1.4 times during the quarter, we had net cash from operating activities of $94 million.
Second quarter cash flow from operations was impacted by a working capital bill of approximately $83 million driven by underlying growth in the business in advance of projects, especially in the power generation space. We expect to unwind some of this working capital as the year progresses. We used cash flow and cash on hand to fund $71 million of capital expenditures, or CapEx, primarily related to maintenance of equipment. During the second quarter, we also used $31.2 million to repurchase stock at an average price of $94. As of June 30, 2025, we have total available liquidity of approximately $331.5 million. We remain on track to generate cash flow from operations of $620 to $720 million on higher revenues and EBITDA for 2025. We still see some supply constraints posing some headwinds to managing working capital in the near term.
Having said that, we expect to unwind this working capital as orders ship in 2025 and beyond. With respect to CapEx, we now expect capital spending to range between $260 and $290 million for the year. Approximately $180 to $210 million of CapEx is associated with marine maintenance and capital improvements to existing inland and coastal marine equipment and facility improvements. Approximately $80 million is associated with growth capital spending in both of our businesses. This is a slight decrease from previous expectations as the timing of certain growth initiatives has shifted a bit, allowing us to defer some CapEx into 2026. As always, we are committed to a balanced capital allocation approach. We will use this cash flow to opportunistically return capital to shareholders and continue to pursue long-term value creating investment and acquisition opportunities.
I will now turn the call back over to David to discuss the remainder of our outlook for 2025.
Thanks, Raj. We had a good first half of 2025. That said, the macro environment has become more complex. Recent shifts in trade policy have introduced additional uncertainty, influenced customer purchasing behavior, and contributed to softness in select end markets. These dynamics are beginning to affect trade flows in areas like chemicals and are also creating sourcing challenges in our power generation supply chain. We are closely monitoring the evolving macroeconomic and geopolitical landscape and their potential to impact our volumes. With that said, we still expect 15%-25% year-over-year growth in earnings for all of 2025. However, if these trends persist, we could finish the year closer to the lower end of our guidance range, with any movement toward the higher end of that range dependent on improvement in macroeconomic conditions in the second half of this year.
While we are taking a prudent view given the current environment, our core businesses remain strong, and we are well positioned to outperform if demand continues. Our structural advantages in marine and a growing backlog in power generation provide meaningful upside potential over time. Although the external environment has become less predictable, we remain confident in our ability to adapt, execute, and deliver results. We also commit to maintaining capital discipline with a strong balance sheet and solid free cash flow generation. We are well positioned to invest strategically, whether through selective capital projects, acquisitions, or returning capital to our shareholders. This financial strength gives us the flexibility to navigate near-term uncertainty while staying focused on long-term value creation.
Diving into the segments a bit, in inland marine, we anticipate constructive market dynamics due to limited new barge construction in the industry, but we are seeing some signs of price moderation, at least for now. Term contract rates are expected to continue improving over the long term, driven by the slow pace of new build activity and tight vessel availability. However, spot market pricing may come under pressure in the near term if demand softness persists. Barge utilization, while still healthy, has moderated slightly entering the third quarter and is now expected to be in the low 90% range for the third quarter. Inflation remains a factor, particularly in labor, and the industry-wide mariner shortage continues to constrain capacity growth.
Overall, inland revenues are expected to grow in the low to mid single digit range on a full year basis, and operating margins are expected to remain in the low 20% range, assuming no major disruptions from tariffs or broader economic conditions. Coastal market conditions remain robust, underpinned by limited large capacity vessels available across the industry. This constrained supply side environment is driving pricing momentum and supporting higher term contract prices. Steady customer demand is expected to continue through the second half of the year. With our barge utilization in the mid to 90% range, we are seeing improved operating leverage as shipyard activity winds down. With essentially 100% of the coastal fleet on term contracts, we expect a meaningful step up in both revenues and margins for the remainder of the year. That said, we remain mindful of ongoing inflationary pressures and labor constraints.
For all of 2025, we expect revenues in coastal to increase in the high single to low double digit range compared to 2024. We also expect coastal operating margins to improve to the mid to high teens range on a full year basis. In the distribution and services segment, results remain mixed across end markets as power generation continues to be a bright spot, fueled by strong sales and orders from data centers and industrial customers, which is helping to offset weakness in other areas. In commercial and industrial, the demand outlook in marine repair remains steady. The on highway service and repair market, while still soft, is showing signs of bottoming out with modest recovery expected in the second half of this year.
In oil and gas, we expect revenues to be down in the high single to low double digit range as the shift away from conventional activity to EFRAC continues to take place and customers continue to maintain considerable capital discipline. Despite the revenue decline, profitability has improved, driven by disciplined cost management and an increase in EFRAC deliveries overall. The company now expects total segment revenues to be flat to slightly up for the full year, with operating margins in the high single digits. To conclude, we had a solid first half of 2025, and we have a favorable outlook for the remainder of the year. Our balance sheet is strong, and we expect to generate significant free cash flow this year. In the absence of any acquisitions, we would expect to use the majority of this free cash flow for share repurchases.
With favorable market fundamentals continuing, we expect our businesses to deliver solid and improving financial results as we move forward through the remainder of this year. As we look long term, we are confident in the strength of our core businesses and in our long term strategy. We intend to continue capitalizing on strong market fundamentals and driving shareholder value creation. Operator, this concludes our prepared remarks and we are now ready to take questions.