Kirby posted third quarter 2025 EPS of $1.65, up 6% year-over-year, as record power generation growth (revenue +56%, operating income +96%) and strong coastal margins offset near-term inland softness that pushed barge utilization into the mid 80% range. Inland spot rates fell low to mid single digits with flat term renewals, but utilization recovered to roughly 87.6% by the call. Management reaffirmed full-year EPS at the low end of its 15%-25% range while signaling improving fourth-quarter conditions and years of runway left in the inland cycle.
Good morning and thank you for joining the Kirby Corporation 2025 third 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. A 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 under Financials. 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 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 third quarter earnings per share of $1.65, a 6% increase year-over-year. In the third quarter, we delivered steady results in total, driven by robust customer demand in power generation and disciplined operational execution across all of our businesses. With near-term headwinds in the inland market and softness in some parts of distribution and services, our teams demonstrated adaptability, ensuring service continuity and performance. These efforts underscore our ability to navigate challenging conditions while maintaining momentum. Overall, our combined businesses achieved another solid quarter, reinforcing the strength of our core businesses and positioning us well for sustained growth as the market conditions improve and normalize.
In our inland marine transportation business, market conditions experienced near-term softness during the third quarter, primarily due to favorable seasonal weather, improved navigational conditions, a lighter feedstock mix for our refinery and chemical customers, and fewer barges undergoing maintenance across the industry. At the same time, petrochemical customer activity remained muted. These factors contributed to our barge utilization averaging in the mid 80% range. On the pricing front, we observed temporary weakness in the spot market. Spot market rates declined in the low to mid single digits both sequentially and year over year due to previously mentioned headwinds. Term contract renewals were flat when compared to the prior year. A combination of pricing softness and lower demand conditions led to operating margins in the high teens in the fourth quarter. We are already seeing market conditions improve and expect this trend to continue.
We also continue to see constraints in long-term barge construction, keeping new supply in check. Coastal marine transportation fundamentals remained strong throughout the third quarter, with barge utilization consistently in the mid to high 90% range, which is supported by steady customer demand and a limited supply of large capacity vessels. This favorable supply-demand dynamic continued to drive meaningful pricing gains, with term contract renewals increasing in the mid teens year-over-year. Underscoring both market strength and our leadership position, our operations team executed exceptionally well, ensuring high service reliability. The combination of strong pricing, high utilization, and operational excellence was reflected in the financial performance, with operating margins for coastal around 20%. Turning to distribution and services, our teams delivered another outstanding quarter, achieving solid year over year growth in both revenue and operating income with strong contributions across nearly all end markets.
In power generation, revenues were up 56% year-over-year, driven by robust demand for data centers and prime power customers. Inbound order momentum continued, further expanding our backlog and positioning us well for continued growth into 2026. We secured additional project wins for backup and behind the meter power applications, reinforcing our leadership in this space. Power generation has emerged as the leading contributor to growth in both revenue and operating income within the distribution and services segment. In our commercial and industrial market, revenues increased 4% year-over-year, reflecting steady marine repair activity and an ongoing recovery in on highway service. This performance highlights both the durability of our customer relationships and the effectiveness of our service platform. In oil and gas, operating income grew 5% year-over-year despite revenue declines driven by continued softness in conventional activity.
This performance reflects strong execution, disciplined cost management, and sustained execution in EFRAC equipment, which remains the bright spot in an otherwise challenging oil and gas market. Overall, the segment continued to perform well, showcasing strength in power generation and our agility in responding to changing demand patterns, with total segment operating income advancing 40% year-over-year. In addition, we remain focused on cost management, thereby enhancing operating margins, which reached 11% for the quarter. In summary, our third quarter results reflected fair performance for inland and continued strength in coastal and power generation. In inland marine, we encountered some near term headwinds due to demand and supply chains. While long term supply remained constrained in coastal, market conditions remained favorable, enabling us to maintain strong utilization levels and secure significant rate improvements on term contract renewals.
In distribution and services, robust demand for power generation, particularly from data centers and industrial customers, allowed the segment to deliver solid financial performance. We expect positive trends to continue into the fourth quarter, partially offsetting the normal seasonal slowdown. I'll talk more about our outlook later, but now I'll turn the call over to Raj to discuss the third quarter segment results and the balance sheet in more detail.
Thank you, David, and good morning, everyone. In the third quarter of 2025, Marine Transportation segment revenues were $485 million and operating income was $89 million with an operating margin of 18.3%. Total marine revenues, inland and coastal together, decreased $1.2 million compared to 3Q24, and operating income decreased $11 million, or 11%, sequentially. Compared to the second quarter of 2025, total marine revenues decreased 1.5%, and operating income decreased 11%. As David mentioned, light feedstocks, good weather, fewer lock delays, and less barge maintenance in the industry exerted some downward pressure on utilization and spot market pricing. These effects were partially mitigated by strong execution and continued effective cost management. Looking at the inland business in more detail, the inland business contributed approximately 80% of segment revenue.
Average barge utilization was in the mid-80% range for the quarter, which was down from the utilization seen in the second 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 57% from time charters and 43% from contracts of affreightment. Spot market rates experienced sequential and year-over-year declines in the low to mid-single-digit range, reflecting the impact of market conditions. Term contracts renewed in the third quarter at rates consistent with prior year levels. Inland revenues declined 3% compared to the third quarter of 2024, primarily reflecting lower utilization and a moderating spot pricing, which offset the benefits of improved weather conditions. Sequentially, revenues decreased 4% versus the second quarter of 2025.
Now moving to the coastal business, coastal revenues increased 13% year-over-year and increased 11% sequentially due to the combined impact of pricing and fewer planned shipyards in the quarter. Overall, coastal had an operating margin around 20% due to improved pricing and continuing efforts to leverage costs. The coastal business represented approximately 20% 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 third 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 than in the mid-teens 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 third quarter as well as projections for 2025.
This is included in our earnings call presentation posted on our website. At the end of the third quarter, the inland fleet had 1,105 barges representing 24.5 million bbls of capacity. We expect to close 2025 with a similar fleet size and capacity at 1,105 inland barges representing 24.5 million bbls 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 third quarter of 2025 were $386 million with operating income of $43 million and an operating margin of 11%. Compared to the third quarter of 2024, the distribution and services segment revenue increased by $41 million or 12%, with operating income increasing by $12 million or 40%. When compared to the second quarter of 2025, revenues increased by $23 million or 6% and operating income increased by $7 million or 21%.
In power generation, revenues increased 56% year-over-year while operating income increased 96% year-over-year driven by demand for backup and prime power as well as behind the meter power applications. Our orders from data centers and other industrial customers for power generation and backup power installation continues to show strong growth. This has contributed to a very healthy backlog of power generation projects. Compared to the second quarter of 2025, power generation revenues increased by 24% and operating income increased by 87%. Operating margins for power generation were in the low double digits. Power generation represented 45% of total segment revenues. On the commercial and industrial side, activity levels in marine repair remained consistent while we saw a modest recovery in our on highway business.
As a result, commercial and industrial revenues were up 4% year-over-year and operating income increased 12% year-over-year driven by favorable product mix and ongoing cost savings initiatives. Commercial and industrial made up 44% of segment revenues with operating margins in the high single digit range. Compared to the second quarter of 2025, commercial and industrial revenues decreased by 3% with steady activity in marine repair and some improvement in our on highway business. Operating income was down 13% over the same period, driven by unfavorable 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 revenue from EFRAC equipment, which remains a bright spot in the segment.
As a result of this mixed demand environment, revenues declined 38% year-over-year and were down 9% sequentially. Importantly, despite the revenue decline, we achieved strong profitability gains with operating income increasing 5% year-over-year and flat sequentially. These results were driven by revenue in our EFRAC business and the benefits of disciplined cost management initiatives. During the quarter, oil and gas represented 11% of total segment revenue, and the business delivered operating margins in the low double digits. Now I'll turn to the balance sheet. As of September 30th, 2025, we had $47 million of cash with total debt of around $1.05 billion, and our debt to cap ratio improved to 23.8%. Our net debt to EBITDA was at 1.3x.
During the quarter, we had net cash flow from operating activities of $227 million, while year to date we had working capital build of approximately $200 million driven by underlying growth in the business in advance of projects, especially in the power generation space. We started to see some of this unwind in the third quarter as free cash flow improved to $160 million for the quarter. We expect to unwind more of this working capital during the fourth quarter and into next year. We used cash flow and cash on hand to fund $67 million of capital expenditure, primarily related to maintenance of equipment during the third quarter. We also used $120 million to repurchase stock at an average price of $91, with an additional $40 million in repurchases since the end of the quarter. As of September 30th, 2025, we had total available liquidity of approximately $380 million.
We remain on track to generate cash flow from operations of $620 million-$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 the fourth quarter and into 2026. With respect to CapEx, we expect capital spending to range between $260 and $290 million for the year. Approximately $180 millio-$210 million of CapEx is associated with marine maintenance capital and improvements to existing inland and coastal marine equipment and facility improvements. Up to approximately $80 million is associated with growth capital spending in both of our business. 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 over to David to discuss the remainder of our outlook for the fourth quarter.
Thank you, Raj. We've delivered strong performance through the first three quarters of 2025, and 2025 will be a record earnings year for Kirby. As global economic and geopolitical conditions continue to evolve, we remain vigilant in assessing potential volume impacts and are committed to proactive strategies that mitigate risk, safeguard performance, and position us for long-term growth. Importantly, despite near-term challenges in the inland market, we remain confident the inland barge cycle still has years to go given the supply constraints. Our structural advantages in marine and growing backlog in power generation provide meaningful upside potential. With our strong balance sheet and robust free cash flow, we are well positioned to pursue strategic investments, whether through targeted capital projects, selective acquisitions, or returning capital to shareholders. This financial strength provides us with the flexibility to manage near-term uncertainty while remaining focused on creating long-term value in inland marine.
We anticipate market conditions to remain stable, with some early signs of improvement evident so far in the fourth quarter. Barge utilization has improved entering the fourth quarter and is now running in the high 80% range. Seasonal weather factors could work to further reduce barge availability across the industry, which should support higher barge utilization for the full quarter. Our team is closely monitoring for any softness in demand for refined products and chemicals and will continue to adapt to shifting market dynamics. Markets appear stable while 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. Spot market pricing could continue to face modest pressure in the near term if demand softness reemerges. However, thus far in the fourth quarter, we have seen a meaningful improvement in demand.
Our team continues to exercise cost discipline in response to shifting market conditions, which has helped us preserve operating margins despite volatility. At the same time, we are selectively holding certain costs steady in anticipation of a robust market recovery, ensuring we remain well positioned to scale efficiently as demand improves. Overall, inland revenues and margins are expected to improve modestly from the third quarter levels, and that is assuming tighter barge availability holds in the fourth quarter. In coastal, market conditions remain robust, underpinned by limited large capacity vessel availability across the industry. This constrained supply side environment continues to drive pricing momentum and is supporting higher term contract prices. Steady customer demand is expected to continue through the rest of the year with our barge utilization in the mid to high 90% range.
With our coastal fleet fully committed under term contracts, we expect to offset any seasonal weather-related impacts and maintain both revenues and margin in line with the third quarter levels. In our distribution and services segment, our outlook reflects strength in expanding markets supported by our team's disciplined execution and focus on growth opportunities. Power generation continues to be a key driver, fueled by strong sales and order activity from data centers and industrial customers.
In commercial and industrial, demand for marine repair remains steady. The on-highway service and repair market has shown a modest recovery and is expected to continue its gradual improvement into 2026. In oil and gas, we anticipate revenues to decline in the low to mid double-digit range, driven by the ongoing transition from conventional frac to EFRAC technologies and continued capital discipline among the oil and gas customers. Despite the revenue headwinds, profitability has improved, supported by disciplined cost management and increased EFRAC deliveries. Overall, we now expect total distribution and services segment revenues to grow in the mid single-digit range for the full year, with operating margins in the high single-digit. To conclude, we delivered solid performance through the first three quarters of 2025 and we maintain a steady outlook for the remainder of the year.
Our balance sheet remains strong and we expect to generate significant free cash flow in the fourth quarter. In the absence of acquisitions, we plan to continue allocating the majority of that free cash flow towards share repurchases. With favorable market fundamentals in place, we expect our businesses to deliver solid and improving financial results for the next several years. We remain confident in the strength of our core businesses and the effectiveness of our long-term strategy. We are committed to capitalizing on growth opportunities and driving sustainable shareholder value. Operator, this concludes our prepared remarks. We are now ready to take questions.