Kirby closed 2025 as a record earnings year, with a solid fourth quarter that featured 47% power generation revenue growth, 22% coastal revenue growth, and more than $400 million in full-year free cash flow alongside over $100 million in buybacks and $130 million of debt paydown. Inland faced short-term pricing softness (term renewals and spot down low single digits) and heavy winter weather delays, but utilization exited the year near 90% and reached 94% by the call. Management issued FY2026 guidance for year-over-year earnings growth, expecting low 90% inland utilization, continued power generation strength, and a constructive multi-year marine cycle.
Good morning, and thank you for joining the Kirby Corporation 2025 fourth quarter earnings call. With me today are David Grzebinski, Kirby's Chief Executive Officer, Christian O'Neil, Kirby's President and Chief Operating Officer, and Raj Kumar, Kirby's Executive Vice President and Chief Financial Officer. 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 conference 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 factors can be found in Kirby's latest Form 10-K and in 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. 2025 was a record year for Kirby, capped off by a solid final quarter. During the fourth quarter, we navigated typical seasonal weather and year-end softness with exceptional execution by both our Marine Transportation and our Distribution and Services teams. We also continued to return capital to shareholders with over $100 million in share repurchases, and we further strengthened our balance sheet by paying down $130 million in debt. 2025's record year of earnings supported another consecutive year of generating more than $400 million in free cash flow. We closed the year with strong operational and financial momentum, combined with improving market conditions, and as we look ahead, we expect steady growth and solid performance in 2026.
In Inland Marine, early quarter market softness from muted demand and high barge availability gave way to improving conditions as the quarter progressed. Barge utilization strengthened during the quarter, averaging in the mid- to high-80% range, and overall market activity became increasingly constructive, with utilization exiting the year close to 90%. Pricing was mixed, with early quarter softness giving way to firmer prices as utilization improved. Term renewals were down in the low single digits, and spot prices declined in the low single digits sequentially. At the end of the quarter, and thus far in January, we've seen spot prices rebound in the low- to mid-single digits sequentially. With these market conditions, our teams worked hard on controlling costs, operating safely, and protecting margins. With this disciplined execution, the inland business delivered solid operating margins in the low-20% range for the quarter.
In Coastal Marine, market fundamentals remained solid, with our barge utilization levels running in the mid- to high-90% range. Throughout the quarter, customer demand was stable, supported by limited availability of large capacity vessels. Our teams delivered strong operational execution and maintained a disciplined focus on cost efficiency, and this resulted in an operating margin of approximately 20%. Turning to Distribution and Services, overall demand tracked in line with the prior quarter. We continued to see strong activity in power generation, stable marine repair demand, a slowly recovering off-highway market, and persistent softness in the conventional frac market. In power gen, total revenues grew 10% sequentially and 47% year-over-year, driven by execution on existing backlog, which was further supported by strong order flow and multiple large project wins as customers continued to prioritize reliable power solutions.
In our commercial and industrial market, revenues were down sequentially, driven by seasonal slowness in marine activity and ongoing slow recovery in the off-highway market. In oil and gas, revenues continued to be pressured by a very soft, conventional oil and gas business, yet we continued to maintain profitability in this part of the segment. In total, we exceeded our expectations in the segment as the segment grew operating income 20% for the full year. In summary, Kirby closed the fourth quarter and year on solid footing, despite the usual seasonal challenges in both segments. So far in the first quarter, we've seen stable refinery activity, improving inland utilization, and spot rates that have early signs of an upward trend. In coastal, market conditions remain stable, our barge utilization is strong, and pricing continues to move in the right direction.
In Distribution and Services, even though demand is expected to remain mixed across our product lines, power generation continues to be a standout performer, helping to offset softness in the other areas. Overall, we expect to deliver steady financial performance in 2026, with earnings projected to strengthen year-over-year. I'll talk more about our outlook later, but first, I'll let Raj discuss the fourth quarter segment results and the balance sheet in more details.
Thank you, David, and good morning, everyone. In the fourth quarter of 2025, Marine Transportation segment revenues were $482 million, and operating income was $100 million, with an operating margin in the low 20% range. Compared to the fourth quarter of 2024, total marine revenues, inland and coastal together, increased $14.9 million or 3%, and operating income increased $14 million or 17%. When compared to the third quarter of 2025, total marine revenues decreased 1%, and operating income increased 13%. As David mentioned, typical seasonal winter weather along the Gulf Coast produced an 82% sequential increase in delay days and negatively impacted operations and efficiency in the fourth quarter. Looking at the inland business in more detail. The inland business contributed approximately 79% of segment revenue.
Average barge utilization was in the mid- to high 80% range for the quarter, which was an improvement over the third quarter of 2025, but down from the fourth quarter of 2024. Long-term Inland Marine Transportation contracts, or those contracts with a term of 1 year or longer, contributed approximately 70% of revenue, with 59% from time charters and 41% from contracts of affreightment. Lower market conditions contributed to spot market rates that were down in the low single digits sequentially and in the mid-single-digit range year over year. Our term contracts that renewed during the fourth quarter were down in the low single-digit range due to the short-term softness in the market. Compared to the fourth quarter of 2024, inland revenues decreased 1%, primarily due to lower utilization.
Inland revenues increased 3% compared to the third quarter of 2025 due to higher utilization from improved market conditions. Inland operating margins were in the low 20% range. Margins improved sequentially, driven by aggressive cost management, which helped offset softer pricing, lingering inflationary pressures, and challenging operating conditions caused mainly by weather delays. Now moving to the coastal business. Coastal revenues increased 22% year-over-year, driven by steady demand, higher contract prices, and limited availability of large capacity equipment. Overall, coastal had an operating margin around 20%, benefiting from higher pricing and effective cost management. We do expect to see some margin headwinds going into the first quarter of 2026, given the higher number of planned shipyards. The coastal business represented 21% of revenues for the Marine Transportation segment.
Average coastal barge utilization was in the mid- to high-90% range, which was in line with both the fourth quarter of 2024 and the third quarter of 2025. During the quarter, the percentage of coastal revenue from under term contracts was approximately 100%, all of which were time charters. There were no term contracts scheduled for renewal in the fourth quarter. With respect to our tank barge fleet, for both the inland and coastal businesses, we have provided a reconciliation of the changes in the fourth quarter, as well as an outlook for the full year 2026. This is included in our earnings call presentation posted on our website.
At the end of the fourth quarter, the inland fleet had 1,105 barges, representing 24.5 million barrels of capacity, and is expected to be flat in 2026. 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 fourth quarter of 2025 were $370 million, with operating income of $30 million and an operating margin of 8.1%. Compared to the fourth quarter of 2024, the Distribution and Services segment revenue increased by $35 million or 10%, with operating income increasing by $3 million or 12%. This growth was driven by the power generation business.
When compared to the third quarter of 2025, revenues decreased by $16 million or 4%, and operating income decreased by $13 million or 30% due to the year-end softness in marine repair and off-highway activity and continued weakness in the conventional frac market. Moving through the segment in more detail. In power generation, we continue to see significant power generation orders from backup and prime power, data centers, and other industrial applications, resulting in higher backlog. Overall, total power generation revenues were up 47% year-over-year, with operating margins in the high single digits. Power generation represented 52% of total segment revenues. This is the second quarter in a row that power generation increased its contribution to the overall segment. We anticipate this trend to continue, given the strength we are seeing in the data center and backup power markets.
On the commercial and industrial side, activity remained steady in marine repair and on-highway. As a result, commercial and industrial revenues were almost in line with the prior year. However, revenues were down 11% sequentially due to seasonal softness in marine repair and on-highway activity. Commercial and industrial made up 40% of segment revenues and had operating margins in the high single digits. In the oil and gas market, we continue to see softness in legacy conventional frac-related equipment as lower rig counts and lower fracking activity tempered demand for new engines, transmissions, service, and parts throughout the quarter. Revenues in oil and gas were down 45% year-over-year and 33% sequentially, and operating income was down 30% year-over-year and 54% sequentially.
Even with the declines in revenue, oil and gas was able to aggressively manage costs and maintain profitability. Oil and gas had operating margins in the high single digits in the fourth quarter and represented 8% of segment revenue. I would like to take a moment to call out a few other items that have had an impact on the income statement in the quarter. We have seen an increasing trend in our medical costs and expect this to continue in 2026. This impacted fourth quarter operating margins in both of our segments. Conversely, moving down the income statement, our general corporate expenses declined in the quarter as we experienced lower claims losses, driven by our strong focus on safety and execution. The medical cost increases were largely offset by the lower claims losses.
We will continue our relentless focus on strong safety and operational excellence, but we expect continued higher medical costs going forward, and we expect general corporate expenses to normalize in 2026 at a similar level to the first three quarters of 2025. I'll now turn to the balance sheet. As of December 31, 2025, we had $79 million of cash, with total debt around $920 million, and our debt-to-cap ratio was 21.4%. During the quarter, we had net cash from operating activities of around $312 million. Fourth quarter cash flow from operations benefited from working capital reduction of approximately $127 million. We used cash flow and cash on hand to fund $47 million of capital expenditures, primarily related to maintenance of marine equipment.
cash flow generation during the quarter was just over $265 million. We used $102 million to repurchase stock at an average price just under $99 and reduced our debt by around $130 million, further strengthening our balance sheet. As of December 31, we had total available liquidity of approximately $542 million. For all of 2025, we generated cash flow from operations of $670 million, driven by higher revenues and earnings and our continued focus on working capital. Having said that, we still see some supply constraints causing some headwinds to managing working capital in the near term, especially to support the growth in the power generation space, and expect a build in working capital at least in the first half of 2026.
With respect to CapEx, our total capital spending was $264 million for 2025. Approximately $220 million was associated with marine maintenance, capital, and improvements to existing inland and Coastal Marine equipment and facility improvements. Approximately $45 million was associated with growth capital spending in both of our businesses. For 2026, we expect CapEx to fall into the $220 million-$260 million range. We generated $406 million of free cash flow in 2025, which exceeded the high end of our guidance, driven in part by a favorable working capital release in the fourth quarter. We expect 2026 to be another good year for free cash flow generation, with operating cash flow expected to be ranging from $575 million to $675 million.
As always, we are committed to a balanced capital allocation approach and will use this cash flow to return capital to shareholders and continue to pursue long-term, value-creating investment and acquisition opportunities. I will now turn the call back to David to discuss our full 2026 outlook.
Thank you, Raj. 2026 is off to a strong start. While macro factors, including Venezuelan oil flows and ongoing tariff developments, may create some near-term noise, they could also present upside for demand. We exited the year with solid momentum. Refinery activity is steady, inland barge utilization is improving, and spot rates are showing early signs of firming. Coastal market conditions remain constructive, with pricing continuing to move in the right direction. In Distribution and Services, even though demand will vary across product lines, our power generation business remains a standout. Our expanding backlog, continued strength in customer demand, and the rising importance of reliable 24/7 power are driving sustained performance in this segment. These tailwinds are helping to balance softness in other parts of the business, but they do position us for continued growth.
Overall, we expect to deliver consistent year-over-year earnings growth in 2026, supported by stable operations, improving market fundamentals, and strong execution across the company. Moving to specific detail on the segments, in Inland Marine, limited new build activity continues to keep equipment supply in balance and supports constructive market fundamentals. We expect refinery utilization to remain healthy and see early signs of strengthening petrochemical demand, which together should support higher fleet activity. For the full year, we anticipate barge utilization to average in the low 90% range, with pricing improving steadily as demand improves. In addition, 2026 is expected to be a lower maintenance year for the fleet, providing more barges available for service. Overall, inland revenues are expected to increase in the low to mid-single digits year-over-year.
As is typical, seasonal weather, winter weather has set in, and that will weigh heavily on both revenues and margins in the first quarter. However, as we move through the year, we expect operating performance to strengthen. Margins should gradually improve with better utilization, firmer pricing, and lower maintenance, ultimately averaging in the high teens or low twenties for the full year. In coastal, market conditions remain favorable, and supply and demand remain balanced across the industry fleet. Steady customer demand is expected to keep our barge utilization in the mid-90% range. While we expect elevated shipyard activity to persist throughout the year, we still anticipate mid-single-digit revenue growth versus 2025, which has been helped by gradual pricing improvement as new contracts renew.
Coastal operating margins are expected to be in the high teens range on a full year basis, with some pressure in the first part of the year due to heavy shipyards. In the Distribution and Services segment, we expect stable growth supported by rising customer demand in several areas, offsetting weakness in others. We anticipate that deliveries will continue to be somewhat uneven due to persistent availability constraints and long OEM lead times, which are affecting the timing of equipment and parts flows, but fundamental demand trends continue to show strength. Power generation will continue to be a core engine of growth for the segment, driven by a robust order pipeline, expanding backlog, and rising customer focus on reliable prime power and backup power solutions across industrial and energy applications.
In commercial and industrial, the outlook remains stable, with solid marine repair activity and ongoing improvement in on-highway service and repair activity. In oil and gas, we expect revenues to be down in the double-digit range as demand continues to be soft, but more importantly, we expect to continue to maintain profitability in oil and gas, driven by strong cost control. Overall, the company expects total segment revenues to be flat to slightly higher year-over-year, with strength in power generation helping to offset lower oil and gas activity. Operating margins are projected to be in the mid to high single-digit range on average for the full year, with continued discipline on cost management. To conclude, overall, 2025 was another record year of earnings, and we remain encouraged as we look to this year and beyond.
Despite the softness we saw in the inland market in the second half of 2025, limited new build activity in the marine market continues to keep industry supply in check, and our customer demand remains solid. The demand for our power generation equipment is strong and growing as we continue to receive new orders and build backlog. Our balance sheet is in excellent condition, and we expect to generate significant free cash flow again in 2026. Overall, we anticipate solid financial performance for this year, with solid earnings growth and supportive fundamentals extending into the coming years. Operator, this concludes our prepared remarks. Christian, Raj, and I are ready to take questions.