Kirby opened 2026 with first quarter EPS of $1.50, up 13% year-over-year, on improving marine fundamentals, 23% coastal revenue growth, and 45% power generation growth, prompting a raise of full-year EPS guidance to up 5% to up 15%. Inland tightened through the quarter on Venezuelan heavy-crude volumes, wider crack spreads, and recovering petrochemical activity, pushing spot rates about 10% above term and trending higher. Management flagged near-term Q2 headwinds from fuel-escalator lag and delayed OEM engine deliveries but signaled supportive fundamentals extending into 2027 and 2028.
Good morning, and thank you for joining the Kirby Corporation 2026 first 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. 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 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 in 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 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, Matt, and good morning, everyone. Earlier today, we announced first quarter earnings per share of $1.50, a 13% year-over-year increase compared to 2025's first quarter earnings per share of $1.33. Our first quarter results reflected improving market fundamentals in marine transportation, with utilization and pricing strengthening as the quarter progressed alongside continued strength underlying demand for power generation and Distribution and Services. While results were partially impacted by weather-related disruptions and navigational delays in our Inland Marine transportation operations and ongoing OEM-related supply constraints in Distribution and Services, underlying demand conditions remained strong across both segments. Overall, our combined businesses executed well and generated positive momentum entering into the second quarter. In Inland Marine market fundamentals improved throughout the quarter as customer demand strengthened, refinery utilization increased, and barge availability remained limited.
As expected, operations were impacted by typical seasonal weather, lock delays, and other navigational disruptions. However, market conditions became increasingly constructive, with barge utilization strengthening as the quarter progressed and averaged in the low 90% range for the full quarter. Spot pricing improved in the low single digits sequentially. Term contract renewals were flat to slightly up year-over-year, and pricing momentum continued to build during the quarter. Overall, the inland business delivered strong operating margins in the high-teens range for the quarter, driven by improved pricing and disciplined execution. Entering the second quarter, demand visibility has continued to improve, supported by strong refinery utilization and improving conditions across petrochemical markets, contributing to strong utilization and improved pricing.
Coastal marine transportation fundamentals remained strong throughout the first quarter, with barge utilization averaging in the mid to high 90% range, which was supported by steady customer demand and limited supply of large capacity vessels. This favorable supply-demand dynamic continued to drive pricing gains, with term contract renewal rates rising in the 20% range year-over-year. Our team delivered strong operational execution and maintained a disciplined focus on cost and efficiency, and this resulted in operating margins in the high-teens range. Turning to Distribution and Services, segment results reflected mixed conditions across our end markets, with power generation remaining a key growth driver. Segment revenues increased 12% year-over-year but declined sequentially due to OEM engine availability and continued softness in conventional oil and gas activity. Operating income increased modestly year-over-year, though declined sequentially as margin performance varied across our businesses.
In power generation, revenues grew 45% year-over-year from solid backlog execution and significant demand for behind-the-meter power solutions. However, revenues declined sequentially as OEM engine deliveries were lower in the quarter. Operating income increased year-over-year, with margins remaining in the mid single-digit range. In commercial and industrial, revenues increased 8% sequentially, and operating margins were in the high single-digit range, supported by strong marine repair activity and disciplined execution. In oil and gas, revenues improved 13% sequentially, though results continued to be pressured by softness in conventional oil and gas markets and resulted in margins in the mid single-digit range. Overall, the segment remains well-positioned with steady execution across a diverse portfolio of end markets. In summary, Kirby continues to operate from a position of strength. Marine transportation fundamentals remain constructive, with high utilization and improved pricing across both inland and coastal markets.
In Distribution and Services, strong activity in power generation and commercial and industrial markets continue to offset softness in our conventional oil and gas business. With this backdrop, combined with solid execution and ongoing cost discipline, we announced in this morning's press release that we are increasing our EPS guidance range for the year to up 5% to up 15%, which is up from flat to up 12% previously. I will discuss our outlook in more detail on the call, but first, I will turn it over to Raj to discuss the first quarter segment results, balance sheet, and capital allocation in more detail.
Thank you, David, and good morning, everyone. In the first quarter of 2026, marine transportation segment revenues were $497 million, and operating income was $90 million with an operating margin of 18%. Compared to the first quarter of 2025, total marine transportation revenues increased $21 million or 4%, and operating income increased $3 million or 4%. When compared to the fourth quarter of 2025, total marine revenues increased 3%, and operating income decreased 11%. As David mentioned, typical seasonal winter weather produced a 20%-25% sequential increase in delay days and negatively impacted operations and efficiency in the first quarter. Looking at the inland business in more detail. The inland business contributed approximately 79% of segment revenue.
Average barge utilization was in the low 90% range for the quarter, which was an improvement over the fourth quarter of 2025 and in line with the first quarter of 2025. Long-term Inland Marine transportation contracts, or those contracts with a term of one year or longer, contributed approximately 65% of revenue, with 56% from time charters and 44% from contracts of affreightment. Improved market conditions resulted in spot market rates moving up in the low single-digits sequentially, but were down in the mid single-digit range from a year ago. Our term contracts that renewed during the first quarter were flat to slightly up. Compared to the first quarter of 2025, inland revenues were flat but increased 4% compared to the fourth quarter of 2025 due to improved market conditions. Inland operating margins were in the high-teens range.
Moving to the coastal business, coastal revenues increased 23% year-over-year, driven by strong customer demand and limited availability of large capacity equipment. Overall, coastal had an operating margin in the high-teens range benefiting from higher pricing and effective cost management. 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 first quarter of 2025 and the fourth quarter of 2025. During the quarter, the percentage of coastal revenue under term contracts was approximately 92%. Renewals of term contracts were on average approximately 20% higher year-over-year.
With respect to our tank barge fleet for both the inland and coastal businesses, we have provided a reconciliation of the changes in the first quarter as well as projections for the full year. This is included in our earnings call presentation posted on our website. At the end of the first quarter, the inland fleet had 1,124 barges, representing 25,100,000 bbl of capacity and is expected to be slightly up in 2026. Coastal marine is expected to remain unchanged from the first quarter of 2026. I will review the performance of the Distribution and Services segment. Revenues for the first quarter of 2026 were $347 million, with operating income of $23 million and an operating margin of 6.7%.
Compared to the first quarter of 2025, the Distribution and Services segment revenue increased by $37 million or 12%, with operating income increasing by approximately $1 million or 3%. This growth was primarily driven by power generation and strong marine repair activity. When compared to the fourth quarter of 2025, revenues decreased by $23 million or 6%, and operating income decreased by $7 million or 22% as a result of lower power generation shipments due to OEM engine availability, weakness from on-highway repair, and continued softness in the conventional freight market. Moving through the segment in more detail. In power generation, we continue to see meaningful order activity for the behind-the-meter prime power and backup power solutions for data centers and other industrial applications. This has resulted in continued growth in our backlog.
However, engine availability from OEMs is limiting how quickly some of that demand converts to revenue. Overall, total power generation revenues were up 45% year-over-year, with operating margins in the mid single-digits. Power generation represented 44% of total segment revenues. On the commercial and industrial side, activity was strong in marine repair, and as a result, commercial and industrial revenues increased 1% year-over-year and 8% sequentially. Commercial and industrial made up 46% of segment revenues and had operating margins in the high single-digits. In the oil and gas market, we continue to see softness in conventional frac-related equipment as lower rig counts and fracking activity softened demand for new engines, transmissions, service, and parts throughout the quarter.
Revenue in oil and gas was down 25% year-over-year, but increased 13% sequentially, while operating income was down 53% year-over-year and down 28% sequentially. Oil and gas had operating margins in the mid single-digits in the first quarter and represented 10% of segment revenue. I will now move to the balance sheet. As of quarter end, we had $58 million of cash, with total debt of $983 million, and our debt to capitalization ratio was 22.3%. We ended the first quarter with $635 million of available liquidity. During the first quarter, we entered into an amended and restated credit agreement that extended the facility maturity date to March 26, 2031 and increased the revolving credit facility commitments to $750 million and eliminated the term loan credit facility.
During the quarter, net cash provided by operating activities was $97.7 million, and capital expenditures were $48.3 million, resulting in free cash flow of $49.4 million. In the first quarter of 2026, Kirby returned $52.7 million of capital to shareholders through share repurchase at an average price of $123.18. We continued to execute on our focused and disciplined acquisition strategy by agreeing to acquire 23 barges and three high horsepower boats from an undisclosed seller in the Inland Marine business for $95.8 million, of which $81.4 million was paid during the first quarter. With respect to CapEx, we continue to expect capital spending to range between $220 million and $260 million for the year.
Approximately $170 million-$210 million is associated with marine maintenance capital and improvements to existing inland and coastal marine equipment, and for facility improvements. Approximately $65 million is associated with growth capital spending in both our businesses. We remain on track to generate cash flow from operations of $575 million-$675 million for the year, resulting in expectations for another year of very strong free cash flow generation. As always, we remain committed to a balanced capital allocation approach using free cash flow to return capital to shareholders while pursuing 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. We are off to a solid start in 2026. Global macro and geopolitical developments, including the Iran conflict, the Venezuelan oil situation, and the broader geopolitical uncertainty continue to create near-term variability. That said, the current conditions are proving somewhat supportive for our operations. In Inland Marine, we anticipate positive market dynamics driven by limited new barge construction and strong demand from refining and petrochemical customers. Barge utilization is expected to be in the low 90% range as we move through the year. This is supported by strong refinery utilization and improving chemicals activity. We do expect near-term cost headwinds in our Inland Marine operations during the second quarter due to rising fuel, particularly diesel costs.
We currently expect the cost escalators and rate recovery mechanisms in our contracts will lag the near-term fuel cost increases during the second quarter, but will ultimately be realized in the following quarters in the second half. As most of you are aware, there is generally a 30 to 120 day delay or lag before term contracts adjust for fuel. We anticipate this timing issue could result in approximately $0.05-$0.10 of earnings per share impact in the second quarter. Overall, we expect inland revenues to grow in the low to mid single-digits on a year-over-year basis, with margins averaging in the high-teens to low 20% range for the full year. In coastal marine, market conditions remain favorable with balanced supply and demand across the fleet.
Steady customer demand is expected to continue through the balance of the year, with barge utilization in the mid-90% range. While we anticipate elevated shipyard activity in the second quarter, we continue to expect mid single-digit revenue growth year-over-year and operating margins in the high-teens, driven by gradual pricing improvements as term contracts renew. In Distribution and Services segment, ongoing demand in power gen and marine repair activity is expected to help offset softness in on-highway service and repair and low levels of oil and gas activity, with results remaining mixed overall. In power gen, underlying demand fundamentals remain strong. Results, however, continue to be impacted by engine availability.
Delayed OEM engine deliveries continue to contribute to variability, and as a result, we expect approximately $0.10-$0.15 of earnings per share impact in the second quarter as certain projects shift into the second half of the year due to delayed engine deliveries from OEMs. Within commercial and industrial, marine repair demand remains healthy while on-highway service and repair demand continues to be constrained. In oil and gas, results continue to be pressured by lower overall activity as the shift away from conventional frac continues and customers maintain a disciplined approach to capital spend. The current oil and gas ecosystem may become a potential upside if it persists much longer.
Overall, the Distribution and Services segment continues to benefit from its diversified end market exposure and in particular, the power gen ecosystem. Overall, the company expects segment revenues to be flat to slightly up for the full year, with operating margins in the mid to high single digits. To conclude, we're off to a solid start in 2026 and have a favorable outlook for the remainder of the year. With a strong balance sheet and solid free cash flow, we continue to allocate capital in a disciplined manner, balancing share repurchases with opportunistic investments and acquisitions. Overall, we expect solid financial performance this year, as is reflected in our decision to increase full year EPS guidance, and we see supportive fundamentals driving continued earnings growth beyond 2026 and well into 2027 and 2028. Operator, this concludes our prepared remarks. Christian, Raj and I are now prepared to take questions.