Kirby Annual Report 2010

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Kirby Corporation

2010 Annual Report

2010 QUARTERLY REVIEW

(In thousands, except per share amounts) (Unaudited)

FIRST QUARTER

Revenues*

Net earnings**

$ 268,253

$ 277,661

$ 24,674

$ 28,006

Earnings per share**

.46

.52

EBITDA

$ 66,158

$ 70,553

2010
___________________________________

2009
__________________________________

Change
__________________________

(cid:115) Marine transportation demand improved, driven by higher volumes from

(3)%

(12)%

(6)%

petrochemical customers and plant outages

(cid:115) Term contracts renewed on average 10% lower and spot contracts up

3% to 6% compared with 2009 fourth quarter

(cid:115) Diesel engine services marine markets remained weak as customers continued

to defer major maintenance projects

(cid:115) Charge for early retirements and staff reductions of $.05 per share included

in both 2010 and 2009 quarter

SECOND QUARTER

2010
___________________________________

2009
__________________________________

Change
__________________________

(cid:115) Marine transportation demand stable, above all 2009 quarters, with barge

Revenues*

Net earnings**

$ 273,669

$ 272,743

$ 29,268

$ 33,719

Earnings per share**

.54

.63

EBITDA

$ 73,141

$ 80,051

– %

(13)%

(14)%

(9)%

utilization in mid to high 80% range

(cid:115) Term contract renewals stable and spot contracts up 2% to 3% compared

with 2010 ﬁrst quarter

(cid:115) Diesel engine services marine markets remained weak, particularly the

Gulf Coast oil services market

THIRD QUARTER

2010
___________________________________

2009
__________________________________

Change
__________________________

Revenues*

Net earnings**

$ 281,317

$ 272,166

$ 30,687

$ 35,014

Earnings per share**

.57

.65

EBITDA

$ 76,783

$ 84,550

3 %

(12)%

(9)%

(cid:115) Marine transportation demand for petrochemical and black oil products
improved modestly, with barge utilization in the mid to high 80% range

(cid:115) Term contract renewals stable and spot contracts ﬂat compared with

2010 second quarter

(cid:115) Diesel engine services power generation market stronger, offset by
weak marine markets, particularly the Gulf Coast oil services market

FOURTH QUARTER

Revenues*

Net earnings**

2010
___________________________________

2009
__________________________________

Change
__________________________

$ 286,318

$ 259,588

10 %

$ 31,620

$ 29,202

Earnings per share**

.59

.54

EBITDA

$ 78,681

$ 73,855

8 %

9 %

7 %

(cid:115) Marine transportation demand for petrochemical and black oil products

continued to modestly improve, with barge utilization in the high 80% range
(cid:115) Term contract renewals in some cases modestly higher and spot contracts

ﬂat to slightly positive compared with 2010 third quarter

(cid:115) Diesel engine services power generation market strong, offset by continued

weak Gulf Coast oil services market

(cid:115) 2009 quarter included a charge of $.05 per share, primarily for shore

staff reductions

* Higher diesel fuel prices resulted in higher 2010 marine transportation revenues associated with the pass through of diesel fuel to customers through fuel escalation and de-escalation clauses in term contracts when compared with 2009.
** Net earnings represent net earnings attributable to Kirby and earnings per share represent diluted earnings per share attributable to Kirby common stockholders.

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, 2010, included in this Annual Report and ﬁled with the Securities and Exchange Commission.

Cover: The crew of the M/V Daytona, a Kirby Inland Marine 4600 horsepower towboat, prepares a tow of nine loaded tank barges for a trip up the Mississippi River with

multiple destinations. On the back cover is the M/V Delos Case, a Kirby Inland Marine 1200 horsepower chartered towboat.

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:*

Net earnings attributable to Kirby

Interest expense

Provision for taxes on income

Depreciation and amortization

EBITDA*

Property and equipment, net

Total assets

Long-term debt, including current portion

Total equity

For the years ended December 31,

2010
_________

2009
_________

2008
_________

2007
_________

2006
_________

915,046

$ 881,298

$ 1,095,475

928,834

807,216

194,511
_________
$ 1,109,557
_________
_________
$
116,249
_________
_________

200,860
_________
$ 1,082,158
_________
_________
$
125,941
_________
_________

264,679
_________
$ 1,360,154
_________
_________
$
157,168
_________
_________

243,791
_________
$ 1,172,625
_________
_________
$ 123,341
_________
_________

177,002
_________
$
984,218
_________
_________
$
95,451
_________
_________

$
2.15
_________
_________

$
2.34
_________
_________

$
2.91
_________
_________

$
2.29
_________
_________

$
1.79
_________
_________

116,249

125,941

157,168

$ 123,341

95,451

10,960

72,258

11,080

78,020

14,064

97,444

20,284

76,491

15,201

58,751

95,296
_________
$
294,763
_________
_________

93,968
_________
$
309,009
_________
_________

91,199
_________
$
359,875
_________
_________

80,916
_________
$
301,032
_________
_________

64,396
_________
$
233,799
_________
_________

$ 1,118,161

$ 1,085,057

990,932

906,098

766,606

$ 1,794,937

$ 1,635,963

$ 1,526,098

$1,430,475

$ 1,271,119

200,134

200,239

$ 1,159,139

$ 1,056,095

247,307

893,555

297,383

772,807

310,362

635,013

REVENUES
(In millions)

$1,360

$1,173

$984

$1,082

$1,110

EARNINGS PER SHARE

EBITDA*
(In millions)

$2.91

$2.29

$2.34

$2.15

$360

$301

$309

$295

$1.79

$234

RETURN ON
INVESTED CAPITAL**

14.8%

13.2%

12.2%

11.2%

10.6%***

* 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 oper-

ating 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).
*** Adjusted to reﬂect average debt levels net of cash and cash equivalents for 2010.

TO OUR SHAREHOLDERS

Kirby performed well during 2010, a year that was character-
ized by continued economic uncertainty across the United
States and globally. The favorable performance was driven
by the positive impact of removing signiﬁcant costs out of our
businesses through cost reduction initiatives we implemented
in 2009 and 2010, and the improvement in petrochemical
and black oil products volumes for both domestic consump-
tion and export as the year progressed.

For 2010, Kirby reported revenues of $1.1 billion, net
earnings of $116.2 million and earnings per share of $2.15.
The results include a ﬁrst quarter charge of $4.1 million be-
fore taxes, or $.05 per share, for early retirements and staff
reductions. Since our peak headcount in October 2008, we
have reduced the size of our shore staff by 24% through
early retirements, staff reductions and employee attrition.
We believe these reductions are sustainable, assuming our
tank barge ﬂeet size remains the same.

Cash ﬂow remained strong throughout 2010, with net
cash provided by operating activities of $245.2 million, sig-
niﬁcantly exceeding our capital needs. This strong cash ﬂow
was used for capital expenditures of $136.8 million and the
repurchase of 618,000 shares of Kirby stock for $23.8 mil-
lion at an average price of $38.48 per share. We continued
to build cash and cash equivalents on our balance sheet,
totaling $195.6 million at the end of 2010.

As a result of our strong balance sheet, our debt is rated
investment grade by Moody’s, Standard & Poor’s and Fitch.
Our outstanding debt at the end of 2010 was predominately
the $200 million in senior notes that matures in 2013. Our
debt-to-capitalization ratio was 14.7% at December 31,
2010. However, the debt-to-capitalization ratio net of cash
was close to zero, at 0.4%

Our marine transportation’s petrochemical market
improved steadily during 2010. Low-priced natural gas,
a basic feedstock for the U.S. petrochemical industry,
signiﬁcantly improved the competitiveness of the U.S.
petrochemical industry. As a result, U.S. petrochemical
volumes, volumes that we transport between processing
plants and domestic waterfront terminals for domestic use
or for foreign destinations, improved as the year progressed.
This improvement in volumes resulted in an increase in our
petrochemical ﬂeet tank barge utilization to the high 80%
level during the second half of 2010. The black oil products
market also improved as the year progressed, driven by
shipments of reﬁnery feedstock and intermediates between
domestic reﬁneries and plants supporting both normal and
turnaround operations, and by U.S. exports of diesel fuel
and heavy fuel oil during the second half of 2010.

The marine transportation operating margin was 21.1%

in 2010 compared with 23.6% for 2009. The lower mar-
gin reﬂects the continued impact of lower term and spot
contract rate renewals that rolled through in 2009 and the
ﬁrst half of 2010, as well as a 29% increase in fuel costs.
These were partially offset by the beneﬁts of our ongoing
cost reductions and efﬁciency initiatives. In fact, our ability
to maintain operating margins of 20% plus in this economic
environment reﬂects our success in reducing costs while
continuing to operate safely and efﬁciently and remaining
focused on our customers’ needs.

Our diesel engine services business continued to be nega-
tively impacted by U.S. economic weakness during 2010 with
revenues, operating income and operating margin consistent
with 2009. The power generation market performed well with
engine-generator set upgrade projects, direct parts sales and
new engine sales above 2009 levels. The majority of our Gulf
Coast oil services market remained weak all year as custom-
ers continued to defer major maintenance projects. With 20%
to 25% of our diesel engine services revenues historically
associated with the Gulf Coast oil services industry, the Gulf
Coast drilling moratorium, new safety regulations on Gulf
Coast drilling operators and delays in issuing offshore drill-
ing permits placed additional pressure on an already weak
market. The segment’s operating margin for 2010 was 10.6%
compared with 10.5% for 2009. Our ability to maintain a 10%
plus operating margin, despite the large percentage of the
business tied to the Gulf Coast oil services market, reﬂects
the emphasis placed in 2009 and 2010 on reducing costs
and focusing on the stronger diesel engine services markets.
As noted earlier, capital expenditures during 2010 were

$136.8 million. We took delivery of 53 new 10,000 barrel
tank barges, four 30,000 barrel tank barges and three new
1800 horsepower towboats for $74.3 million. These new
tank barges, plus six chartered tank barges, added 800,000
barrels of capacity to our barge ﬂeet. However, during 2010
we retired 89 older tank barges and returned 12 chartered
barges, reducing our ﬂeet capacity by 1.6 million barrels. As a
result, our net tank barge capacity declined 800,000 barrels
during 2010 to 15.9 million barrels compared with 16.7 million
barrels at the beginning of 2010. In addition to builiding new
equipment, we also expended $62.5 million primarily on
upgrades to our existing marine transportation ﬂeet.

Due to our tank barge construction program and the
acceleration of older tank barge retirements, we were able
to reduce the average age of our ﬂeet. In December 2007,
the average age of a tank barge in our ﬂeet was 24.0 years.
Today, the average age is 20.3 years. Our younger ﬂeet
improves our reliability and ﬂexibility, and reduces the main-
tenance costs of the ﬂeet.

For 2011, we plan to continue our barge replacement
program as shipyard prices are attractive. Capital expendi-
tures for 2011 are projected to be in the $185 to $195 million
range, including $100 million for the construction of 40 new
tank barges, or 1.1 million barrels of capacity, and three new
1800 horsepower towboats. Based on current economic
conditions, we are forecasting that by the end of 2011 our
tank barge capacity will have increased only slightly, as we
will continue to remove older barges from our ﬂeet. We are
also projecting expending $85 to $95 million in 2011, primarily
on upgrades to our marine transportation ﬂeet.

Kirby has been ﬁnancially disciplined over the past several
years and enters 2011 with a very strong balance sheet that
can be used to take advantage of acquisition opportunities in
both our core businesses. In February 2011, we completed
the acquisition of the ship bunkering operations of Enterprise
Marine Services LLC for approximately $53.2 million in cash.
The asset purchase consisted of 21 tank barges and 15 tow-
ing vessels. The ship bunkering operation provides transpor-
tation and delivery services for ship bunkers (engine fuel) to
cruise ships, container ships and freighters, primarily in Miami,
Port Everglades, Cape Canaveral and Tampa, Florida, Mobile,
Alabama, and Houston, Texas. We also completed in Febru-
ary the purchase of a 51% interest in a Houston Ship Channel
barge shifting and barge ﬂeeting facility for $4.1 million.
These two completed acquisitions are discussed in more
detail on page 8.

Also in February 2011, we announced the signing of an

agreement to purchase United Holdings LLC, a distribu-
tor and service provider of engine and transmission related
products for the oil and gas services, power generation
and transportation industries, and a manufacturer of oilﬁeld
service equipment. The base purchase price is $270 million
in cash, before post-closing adjustments, plus a provisional
three-year earnout for up to an additional $50 million pay-
able in 2014. This pending acquisition is discussed in more
detail on page 14.

In March 2011, we announced the signing of an agree-

ment to acquire K-Sea Transportation Partners L.P., an
operator of tank barges and towing vessels participating in
the transportation of reﬁned petroleum products in the U.S.
coastwise trade. The total value of the consideration is
approximately $600 million, before post-closing adjustments
and fees, and will consist of cash and Kirby common stock.
K-Sea’s ﬂeet, consisting of 58 offshore tank barges with
3.8 million barrels of capacity and 63 tugboats, transports
reﬁned petroleum products along the U.S. East, West and
Gulf Coasts, and in Alaska and Hawaii. This pending acqui-
sition is discussed in more detail on page 8.

industry-wide disci-
pline with respect to
tank barge capacity,
the environment for
higher industry-wide
pricing during 2011
is positive. Low natu-
ral gas prices, a key
feedstock for the
U.S. petrochemical
industry, signiﬁcantly
enhances the global
competitiveness of
the U.S. petrochemi-
cal industry and may
ultimately lead to
higher petrochemical
production, as well as
petrochemical plant
expansions, both of
which would lead to
increased volumes for
the inland tank barge industry. Additionally, our 2011 out-
look for the diesel engine services market is also favorable,
driven by a strong power generation market and an im-
proved marine market, including a projected slow recovery
of the Gulf Coast oil services market as 2011 progresses.
Finally, we believe that our sustained success is due to
the efforts of our marine transportation and diesel engine
services employees, and I wish to thank each and every
Kirby employee who contributes on a daily basis to our suc-
cess. I also want to thank our Board of Directors and our
shareholders for their continued direction and support, and
add a special note of thanks to Rod Clark, a Board member
since 2008, for his service to Kirby. Rod will retire from the
Kirby Board in April. We believe that with the continued sup-
port of our employees, Board members and shareholders,
combined with Kirby’s strong ﬁnancial condition, we will
continue to prosper and create value for our shareholders.

Joe Pyne
Chairman, President and Chief Executive Ofﬁcer

Respectfully submitted,

Joseph H. Pyne
Chairman, President and Chief Executive Ofﬁcer

Based on the current strength of the U.S. petrochemical
industry, higher industry-wide utilization levels and continued

Houston, Texas
March 15, 2011

MARINE TRANSPORTATION AT A GLANCE

S E R V I C E S O F F E R E D

(cid:115) Kirby Inland Marine is the leading United States transporter

of bulk liquid products by tank barge throughout the
Mississippi River System, Gulf Intracoastal Waterway
and Houston Ship Channel.

(cid:115) Kirby transports petrochemicals, black oil products,

reﬁned petroleum products and agricultural chemicals
for the United States’ largest petrochemical and
reﬁning companies.

S T R E N G T H S

(cid:115) Kirby’s ﬂeet consists of 846 inland tank barges, comprising

16.4 million barrels of cargo capacity, and 238 inland
towboats, representing approximately 27% of the United
States inland tank barge ﬂeet.

(cid:115) A “One-Stop Shop” for customers, Kirby provides

a critical link in customers’ supply chains, transporting
and transferring bulk liquid products that keep plants
and reﬁneries operating efﬁciently.

(cid:115) Kirby’s ﬂeet size, distribution system and communication
systems allow for lower costs through economies of
scale by matching tank barges, towboats, products
and destinations more efﬁciently, resulting in backhaul

opportunities, faster turnarounds, more efﬁcient use of
horsepower and barges positioned closer to cargoes.
(cid:115) Approximately 75% of Kirby’s business is under term

contracts, of which approximately 50% are under time
charters, while 25% of business is in spot contracts.
(cid:115) Kirby places a strong emphasis on safety, with a motto

of “Safety Is Our Franchise to Operate.”

M A R K E T S

(cid:115) Petrochemicals: Contributed 69% of 2010 marine

transportation revenue. Bulk liquid products transported
include benzene, styrene, methanol, acrylonitrile, xylene,
caustic soda, butadiene and propylene, products used
in the manufacture of both consumer nondurable goods
(70%) and consumer durable goods (30%).

(cid:115) Black Oil Products: Contributed 18% of 2010 marine
transportation revenue. Bulk liquids transported include
residual fuel oil, coker feedstock, vacuum gas oil, asphalt,
carbon black feedstock, crude oil and ship bunkers.
Drivers of the products include fuel for power plants and
ships, feedstock for reﬁneries, certain durable goods and
road construction.

The M/V Daytona pushes a nine barge tow of loaded tank barges
up the Mississippi River near Baton Rouge, Louisiana. Loaded
tank barges are staged in the Baton Rouge area from Gulf Coast
petrochemical plants and reﬁneries and are transported from
Baton Rouge to waterfront terminals and plants on the Mississippi,
Illinois and Ohio Rivers.

(cid:115) Reﬁned Petroleum Products: Contributed 8% of 2010

marine transportation revenue. Products transported
include gasoline, No. 2 oil, jet fuel, heating oil, diesel fuel
and naphtha. Drivers of the products are vehicle usage, air
travel, weather conditions and reﬁnery utilization.
(cid:115) Agricultural Chemicals: Contributed 5% of 2010
marine transportation revenue. Products transported
include anhydrous ammonia, nitrogen-based liquid fertilizer
and industrial ammonia. Drivers of the products are the
agricultural economy, including the production of corn,
cotton and wheat, and chemical feedstock usage.

R E S U L T S O F O P E R A T I O N S F O R 2010

(cid:115) Operating income of $192.8 million on revenue of
$915.0 million compared with operating income
of $208.1 million on revenue of $881.3 million for 2009.
(cid:115) Operating margin of 21.1% compared with 23.6% for 2009.
(cid:115) Higher revenue for 2010 was a reﬂection of improved tank
barge demand and utilization, primarily the result of higher
petrochemical production volumes throughout 2010, and
a 29% increase in diesel fuel prices for 2010 compared
with 2009.

(cid:115) Lower operating income and operating margin for 2010

were primarily a reﬂection of lower contract rates negotiated
throughout 2009 and early 2010, partially offset by modestly
higher tank barge utilization and cost reduction initiatives
implemented throughout 2009 and 2010.

TANK BARGE FLEET (ACTIVE)
Petrochemical/Reﬁned products
Black oil products
Pressure
Anhydrous ammonia
Specialty

Total

635
133
62
11
5

846

Total Barrel Capacity

16.4 MM

TOWBOAT FLEET (ACTIVE)
Less than 800 hp
800–1300 hp
1400–1900 hp
2000–2400 hp
2500–3200 hp
3300–4900 hp
5000 hp and greater
Spot charters

Total

1
103
84
21
16
10
2
1

238

REVENUES
(In millions)

$1,095

$929

$915

$881

$807

OPERATING INCOME
(In millions)

$245

$196

$208

$193

$153

OPERATING MARGIN

23.6%

22.4%

21.1%

19.0%

DIESEL ENGINE SERVICES AT A GLANCE

S E R V I C E S O F F E R E D

(cid:115) Kirby Engine Systems is the leading United States service
remanufacturer and replacement parts provider, as well
as an ancillary products provider for gears, transmissions,
starters, governors and marine clutches, for medium-
speed and high-speed diesel engines and reduction gears.
(cid:115) Services three distinct markets: marine, power generation

and railroad applications.

S T R E N G T H S

(cid:115) Largest service area of any United States diesel engine

services provider with 15 strategically located service and
parts facilities.

(cid:115) Provides an essential service to support the day-to-day
operations of its marine, power generation and railroad
customers.

(cid:115) Has long-term distributorships, dealerships and contract
service center relationships with major manufacturers of
diesel engines, reduction gears, transmissions, starters,
governors and marine clutches.

(cid:115) Employs over 235 factory-trained and authorized project
engineers, mechanics and machinists, providing both in-
house and worldwide in-ﬁeld service.

M A R K E T S

(cid:115) Marine: Contributed 65% of 2010 diesel engine services

revenue. Market includes engines, gears and transmissions
on inland and offshore towing vessels, harbor docking
tugs, offshore oilﬁeld service vessels, onshore and offshore
oil and gas drilling rigs, commercial ﬁshing ﬂeets, dredging
vessels, commercial ferries and Great Lakes ore carriers.

(cid:115) Power Generation: Contributed 27% of 2010 diesel
engine services revenue. Market includes engines used
in standby, peak and base load power generation and
pumping stations.

(cid:115) Railroad: Contributed 8% of 2010 diesel engine services

revenue. Market includes engines and non-engine
locomotive components for shoreline, industrial, Class II
and certain transit (passenger) railroads.

R E S U L T S O F O P E R A T I O N S F O R 2 010

(cid:115) Operating income of $20.6 million on revenue of $194.5
million compared with operating income of $21.0 million
on revenue of $200.9 million for 2009.

(cid:115) Operating margin of 10.6% compared with 10.5%

for 2009.

(cid:115) Continued weak Gulf Coast oil services market resulted in
lower labor utilization as customers continue to defer major
maintenance projects, exacerbated by the new safety
regulations in Gulf Coast drilling operations and the delays
in issuing offshore drilling permits.

(cid:115) Power generation service levels increased with higher

engine-generator set upgrades in the second half of 2010.

(cid:115) Beneﬁted from cost reduction initiatives implemented

throughout 2009 and 2010.

SERVICE LOCATIONS

MANUFACTURER RELATIONSHIPS

Medium-Speed Diesel Engines
Houma, LA (2 locations)
Chesapeake, VA
Paducah, KY
Rocky Mount, NC
Seattle, WA
Tampa, FL

High-Speed Diesel Engines
Houma, LA
Baton Rouge, LA
Belle Chasse, LA
Houston, TX
Lake Charles, LA
Mobile, AL
Morgan City, LA
New Iberia, LA

Medium-Speed Diesel Engines
Electro-Motive Diesel, Inc.
Alco
Cooper-Bessemer
Nordberg

High-Speed Diesel Engines
Caterpillar
Detroit Diesel
MTU

Cummins
John Deere

Ancillary Products
Allison Transmission (transmissions)
Twin Disc (transmissions)
Falk Corporation (reduction gears)
Ingersoll-Rand (starters)
Woodward Governor (governors)
Oil States Industries (marine clutches)

REVENUES
(In millions)

$265

$244

$177

OPERATING INCOME
(In millions)

$39.6

$37.9

OPERATING MARGIN

14.9%

15.6%

15.0%

$201

$195

$26.4

10.5%

10.6%

$21.0

$20.6

Jerry Boudreaux, a Kirby Engine Systems medium-
speed mechanic, rebuilds a 1000 horsepower Electro-
Motive 8-645E propulsion engine for a locomotive
customer. In-house service is provided through
15 service and parts facilities, consisting of the
refurbishment or rebuilding of engines, gears
and transmissions, and the direct sales of OEM
replacement parts.

MARINE TRANSPORTATION

In early 2011, we completed two service enhancing acquisitions, the purchase of a ship bun-
kering operation on February 24 and the purchase of a 51% interest in a shifting and ﬂeeting
facility on February 9. In addition, on March 13 we announced the signing of an agreement to
purchase a major operator of tank barges and towing vessels participating in the transporta-
tion of reﬁned petroleum products in U.S. coastwise trade.

20 11 M A R I N E T R A N S P O R T A T I O N A C Q U I S I T I O N S

On February 24, 2011, we completed the acquisition of the ship bunkering operations of
Enterprise Marine Services LLC for approximately $53.2 million in cash. The assets pur-
chased consist of 21 inland and offshore tank barges and 15 towboats and tugboats that
provide transportation and delivery services for ship bunkers (engine fuel) to cruise ships,
container ships and freighters primarily in the Miami, Port Everglades and Cape Canaveral,
Florida, area, the three largest cruise ship ports in the United States, as well as Tampa,
Florida, Mobile, Alabama, and Houston, Texas. The acquired vessels and operations, imme-
diately accretive to Kirby’s earnings, expanded our marine transportation footprint in Florida,
as well as expanded our existing Houston Ship Channel ship bunkering operation. The ac-
quired tank barges are relatively new, with an average age of seven years, and the large ma-
jority of the vessels are under time charter agreements ranging from two to three years.

We also purchased on February 9, 2011, a 51% interest in a shifting operation and ﬂeeting

facility for dry cargo barges and tank barges on the Houston Ship Channel for $4.1 million in
cash. This acquisition is complementary to Kirby’s existing Houston Ship Channel ﬂeeting assets
and shifting services, providing barge storage capabilities closer to certain customers’ docks.

A G R E E M E N T T O A C Q U I R E K- S E A T R A N S P O R T A T I O N P A R T N E R S L. P.

On March 13, 2011, we announced the signing of an agreement to acquire K-Sea Trans-
portation Partners L.P., an operator of tank barges and tugboats participating in the coast-
wise transportation primarily of reﬁned petroleum products in the U.S. The total value of the
transaction is approximately $600 million, before post-closing adjustments and fees, and
will consist of cash, Kirby common stock and the reﬁnancing of K-Sea debt. K-Sea’s ﬂeet,
consisting of 58 tank barges with a capacity of 3.8 million barrels and 63 tugboats, oper-
ates along the East Coast, West Coast and Gulf Coast of the U.S., as well as in Alaska and
Hawaii. K-Sea’s tank barge ﬂeet, 54 of which are doubled hulled, has an average age of ap-
proximately nine years and is one of the youngest ﬂeets in the coastwise trade. K-Sea’s cus-
tomers include major oil companies and reﬁners, many of which are current Kirby customers
for inland tank barge services. Headquartered in East Brunswick, New Jersey, K-Sea has
major operating facilities in New York, Philadelphia, Norfolk, Seattle and Honolulu. The acqui-
sition of K-Sea is a great foundation from which to expand our liquid transportation business
into the U.S. Jones Act coastwise trade by extending Kirby’s tank barge service to our cus-
tomers with U.S. coastwise transportation requirements.

Under the terms of the agreement, the total value of the transaction is approximately

$600 million, consisting of $335 million for K-Sea’s equity and the reﬁnancing of $265 million of
K-Sea debt. K-Sea’s common and preferred unitholders will receive $8.15 per unit in consider-
ation in the form of cash and Kirby common stock. K-Sea’s common unitholders will have the
election to receive for each common unit either $8.15 in cash or $4.075 in cash and 0.0734 of
a share of Kirby common stock. K-Sea’s preferred unitholders will receive for each preferred
unit $4.075 in cash and 0.0734 of a share of Kirby common stock. K-Sea’s general partner will
receive $8.15 in cash for each general partner unit and $18 million in cash for its incentive dis-
tribution rights. The closing of the transaction is expected to occur in June or July 2011.

During 2010, Kirby Inland Marine moved over 51 million
tons of liquid cargoes on the Mississippi River System and
the Gulf Intracoastal Waterway. Inland barge transporta-
tion is one of the safest modes of transportation in the
United States. It generally involves less urban exposure
than railroads or trucks and operates on a system with
relatively fewer crossing junctions and in areas relatively
remote from population centers.

NAVIGATION SAFETY – “BETWEEN THE STICKS”

Navigation safety is a critical element in Kirby’s transportation service, ensuring that our
customers’ liquid cargos are transported along the waterways efﬁciently and without inci-
dent. Continuous improvement of navigation safety is also a core Kirby objective and a key
requirement of our customers.

Kirby’s wheelmen, our Captains and Pilots, understand navigation safety is a condition

of standing watch on a Kirby vessel. A ﬂawless watch is a 24/7 expectation.

To achieve a ﬂawless watch requires a high degree of leadership, as well as talent, skill
and the study and mastery of the challenges of inland waterway navigation. Our process for
selecting and training wheelhouse personnel, and continuously working to improve their perfor-
mance, ensures that Kirby’s wheelmen deliver as well as set the standard for navigation safety.

B E T W E E N T H E S T I C K S

Navigation safety occurs in an environment that we call “Between the Sticks,” when the
wheelman standing watch maneuvers a tow, consisting of a towboat and one or more tank
barges, on a waterway.

First and foremost, a wheelman must continuously monitor his environment, consciously
focusing on maintaining an “effective lookout” around the tow at all times. The Kirby wheel-
man must understand and respond to ever-changing navigation conditions, while ensuring
that the tow properly and safely advances and maneuvers within the conﬁnes of the inland
waterways and restrictive channels.

To meet these navigational challenges, the wheelman must utilize modern wheelhouse
instrumentation to fully understand the effects of the “invisibles,” the state of the wind, water
and currents, and how those detected “invisibles” are affecting the tow. While near other ves-
sels and locks, the wheelman must also be alert to issues of vessel-to-vessel hydrodynamic
interaction, collision avoidance and overall risk management.

A P P R E N T I C E S T E E R S M A N T R A I N I N G P R O G R A M

New wheelmen are developed through Kirby’s apprentice steersmen training program. This
program selects outstanding employees rising in the Kirby ranks as well as qualiﬁed gradu-
ates from maritime academies. The apprentice steersmen training program requires a mini-
mum of 30 months to fully complete and ensures the mastery of three essential skill sets:
watchkeeping, maneuvering and vessel signaling. Our apprentice steersmen program in-
cludes classroom study, augmented with wheelhouse simulator-based assessments and real
time wheelhouse training on Kirby’s towboats, supervised by Kirby’s experienced Captains.

U S I N G T H E S I M U L A T O R F O R S T E E R S M E N T R A I N I N G

While it is essential that a steersman have as much time as possible to learn on a vessel, the
addition of the Vessel Training Simulator to our Training Center has allowed us to provide fo-
cused, repetitive practice of challenging and difﬁcult-to-schedule tasks in a managed setting.
The Vessel Training Simulator features four large screen monitors to provide a real wheel-

house feel in a land-based controlled environment. Entering the simulator, one has the feel
of stepping into a wheelhouse, complete with the rumbling noise of the engines and the slight
vibration in the ﬂoor. A steersman might have few opportunities to practice narrow channel
maneuvering on a towboat; however, using the simulator, a steersman can learn through repe-
tition and improvement while under the supervision and guidance of an experienced wheelman
how to handle even the most difﬁcult of situations.

Our apprentice steersmen training program is producing skilled wheelmen capable of
commanding a Kirby towboat. Kirby’s training programs have received United States Coast
Guard approval and are the most advanced and effective in the promotion of navigation
safety in the inland maritime industry.

Pushing multiple barges safely along the United States inland waterways
requires skills, knowledge and a commitment to navigation safety. William
Battise, the Relief Captain on the M/V Daytona, maneuvers a tow consisting of
nine loaded tank barges on the Mississippi River near Baton Rouge, Louisiana.

TANK BARGE AND TOWBOAT CONSTRUCTION, MEETING THE
DEMANDS OF OUR CUSTOMERS

One of the keys to successfully serving the inland marine transportation needs of our custom-
ers is a well maintained and ﬂexible tank barge and towboat ﬂeet. Investments we make in our
existing ﬂeet, coupled with our ﬂeet construction program, position Kirby well for the future, en-
suring a safe and well-maintained ﬂeet to meet the volume demands of our customers.

For many years, Kirby has closely monitored the industry’s tank barge ﬂeet age and capac-
ity compared with industry demand. In order to maintain our customer service levels, we imple-
mented a formal, future focused, pro-active tank barge ﬂeet management and replacement
program in 1999. The intent of the program was to position the ﬂeet to respond to increases
and reduction in demands. The program’s ﬂexibility was demonstrated from 2004 to 2008, as
Kirby responded to increased customer demand using a combination of new construction and
reinvestment of capital in existing equipment to meet increasing customer volumes. With the
United States and global economic recession starting in 2008 and a corresponding decline in
industry-wide tank barge utilization during 2009 and 2010, we retired older tank barges that
required higher maintenance expenditures, thereby reducing the annual cost of maintaining our
ﬂeet. Our cash ﬂow was used for the construction of new tank barges rather than for mainte-
nance of older tank barges. Also during 2009 and 2010, reduced prices for steel on the supply
side, combined with excess shipyard capacity, signiﬁcantly reduced the cost of new tank barge
construction. Kirby used this time to renew our ﬂeet.

T A N K B A R G E C O N S T R U C T I O N

During 2009 and 2010, we took delivery of 100 new tank barges and retired 189, many of
which were smaller capacity, non-standard size barges, reducing our overall capacity by 1.6
million barrels. For 2011, we expect the delivery of 40 new tank barges and we will retire an
estimated 48 tank barges, resulting in a net addition of approximately .3 million barrels of
capacity. For 2012 and forward, based on the current economic environment, our plan is to
match tank barge retirements with new construction.

The result of our tank barge construction program and the retirement of older tank barges is
a reduction in the average age of our ﬂeet. As of December 31, 2007, the average age of a tank
barge in our ﬂeet was 24.0 years. Today, the average age is 20.3 years. Our goal is to systemati-
cally upgrade our tank barge ﬂeet while maintaining our leading position in the markets we serve.
Beginning in 2006, the design of our petrochemical and reﬁned products ﬂeet was changed
to 6 psi (six pounds). This change eliminates fugitive emissions of high vapor pressure cargoes
during periods of hot weather. We worked closely with a number of our suppliers in the redesign
of our tank barges, thereby improving the overall barge design and increasing the strength of the
appendages. We currently operate 119 of these 6 psi tank barges, the only inland marine trans-
portation company building its tank barges to that pressure rating.

T O W B O A T C O N S T R U C T I O N

Fleet replacement also includes towboats. In 2006, we began a towboat construction pro-
gram with the delivery of four 2100 horsepower, 90 foot class towboats. Between 2007 and
2010, we took delivery of twelve 1800 horsepower, 76 foot class towboats. The new tow-
boats are state-of-the-art designed to match the service requests of our customers, replac-
ing older, lower horsepower towboats that required higher maintenance costs. The engines
are fuel efﬁcient and environmentally friendly, and the wheelhouses are designed for im-
proved visibility with full view windows and ergonomically designed consoles. These vessels
were also built with a focus on safety and crew comfort. Crew habitability was signiﬁcantly
improved with enhanced living spaces and reductions in noise. We will take delivery of two
additional 1800 horsepower, 86 foot towboats in 2011, and one early in 2012.

Two Kirby Inland Marine 30,000 barrel tank barges under construction at
the West Gulf Marine shipyard in Galveston, Texas. Kirby took delivery of 57
new tank barges and three new 1800 horsepower towboats during 2010,
and new construction commitments for 2011 include 40 tank barges and
three 1800 horsepower towboats.

DIESEL ENGINE SERVICES

Kirby Engine Systems provides diesel engine services and remanufactured and replacement
parts for medium-speed and high-speed diesel engines, gears and transmissions, a service
that is essential to the day-to-day operations of marine companies, power generation facili-
ties and railroads. Through three operating subsidiaries, Marine Systems, Inc., Engine Sys-
tems, Inc. and Rail Systems, Inc., we provide both in-house and worldwide in-ﬁeld service
and offer our customers a single source for all their engines, gears and transmissions service
and parts requirements. The distributorship, dealership and contract service center relation-
ships we have developed with the manufacturers of medium-speed and high-speed diesel
engines and ancillary products are one of the major keys to our success.

D I S T R I B U T O R S H I P S , D E A L E R S H I P S A N D C O N T R A C T S E R V I C E C E N T E R R E L A T I O N S H I P S

The principal medium-speed diesel engines we service are those manufactured by Electro-
Motive Diesel, Inc. (“EMD”). We have a 45-year relationship with EMD, currently serving as
the authorized distributor in 17 Eastern states and the Caribbean, the worldwide distributor
for parts to the nuclear industry, and the U.S. distributor to the shortline, industrial and cer-
tain transit and Class II railroads. We also operate contract service centers in the Gulf Coast,
Midwest and West Coast regions.

In the high-speed market, we operate factory-authorized service dealerships for
Cummins, Detroit Diesel, MTU and John Deere diesel engines. We also operate factory-
authorized marine dealerships for Caterpillar in Alabama, Kentucky, Louisiana and Texas.
The Texas dealership was awarded to Kirby in June 2010.

We also have dealer and distributor relationships with gear and transmission manufacturers

such as Falk, Lufkin, Allison, Twin Disc and Reintjes that complement the high-speed and
medium-speed engine operations.

A N N O U N C E D A C Q U I S I T I O N O F U N I T E D H O L D I N G S L LC

On February 21, 2011, we announced the signing of an agreement to purchase United Hold-
ings LLC, a distributor and service provider of engines and transmission related products for
the oil and gas services, power generation and transportation industries. The base purchase
price is $270 million in cash, before post-closing adjustments, plus a provisional three-year
earnout for up to an additional $50 million payable in 2014. United, headquartered in Oklahoma
City, Oklahoma, with 21 locations across 13 states, distributes and services equipment and
parts for Allison Transmission, MTU Detroit Diesel Engines, Daimler Trucks North America, and
other diesel and natural gas engines. United also manufactures oilﬁeld service equipment, in-
cluding hydraulic fracturing equipment. United’s principal customers are oilﬁeld service compa-
nies, oil and gas operators and producers, compression service companies and transportation
companies. The closing of the acquisition is expected to occur in April 2011.

With the expansion of the North America shale gas market due to the high amount of
shale gas reserves, United is a logical extension of our diesel engine service business into
the land based diesel engine and transmission services business. United manufactures
hydraulic fracturing units and services their components, which include high-speed diesel
engines, transmissions and pumps, many of the same components used by our marine cus-
tomers. With an estimated 10 million horsepower employed in the North America hydraulic
fracturing business, and with signiﬁcant additional horsepower forecast to be added in the
future, United is well positioned to beneﬁt from a strong land based services market going
forward, especially in the servicing and parts distribution of engines and transmissions used
in the oil and gas industry.

Allen Ledet, a Kirby Engine Systems high-speed mechanic, rebuilds a
825 horsepower Caterpillar 3412-7BL propulsion engine for a marine customer.
Kirby employs over 235 factory-trained and authorized project engineers,
mechanics and machinists, providing in-house and worldwide in-ﬁeld service.

BOARD OF DIRECTORS

James R. Clark 4
Retired President and COO
of Baker Hughes Incorporated
Director since 2008

William M. Lamont, Jr. 1, 3, 4
Private Investor
Director since 1979

Monte J. Miller 3
Retired Executive Vice President,
Chemicals, of Flint Hills Resources, LP
Director since 2006

Richard R. Stewart 2
Retired President and CEO of
GE Aero Energy
Director since 2008

C. Berdon Lawrence 1
Chairman Emeritus of Kirby
Director since 1999

David L. Lemmon 2
Retired President and CEO of
Colonial Pipeline Company
Director since 2006

George A. Peterkin, Jr. 1
Chairman Emeritus of Kirby
Director since 1973

Joseph H. Pyne 1
Chairman of the Board, President and
Chief Executive Ofﬁcer of Kirby
Director since 1988

1 Executive Committee
2 Audit Committee
3 Compensation Committee
4 Governance Committee

KIRBY INLAND
MARINE, LP

Gregory R. Binion
President

James F. Farley
Executive Vice President—
Operations

William G. Ivey
Executive Vice President—
Marketing

James C. Guidry
Senior Vice President—Vessel
Operations

Mel R. Jodeit
Senior Vice President—Sales

Patrick C. Kelly
Vice President—Kirby Logistics
Management

C. Gene Moore
Vice President—River Vessel
Operations

Richard C. Northcutt
Vice President—Trafﬁc

Christian G. O’Neil
Vice President—Sales

C. Linn Peterson
Vice President—Florida Bunkering
Operations

John E. Russell
Senior Vice President—Sales

John W. Sansing, Jr.
Vice President—Maintenance

William M. Withers
Senior Vice President—Sales

Cliff R. Stanich
Vice President—Sales

Stephen C. Butts
Vice President—Sales

Thomas H. Whitehead
Vice President—Sales

Robert D. Goolsby
Vice President—Facility Operations

Carl R. Whitlatch
Vice President and Controller

KIRBY OCEAN
TRANSPORT COMPANY

KIRBY ENGINE
SYSTEMS, INC.

Joseph H. Pyne
President

Dorman Lynn Strahan
President

William M. Withers
Vice President

Mia C. Cradeur
Vice President and Controller

OSPREY LINE, L.L.C.

John T. Hallmark
President

Charles J. Duet
Vice President

David H. Farrar
Vice President—Procurement
and Distribution

John A. Manno
Vice President—Business
Development

Engine Systems, Inc.

John A. Manno
Vice President

P. Scott Mangan
Vice President—East Coast
and West Coast

Marine Systems, Inc.

Lynn A. Ahlemeyer
Vice President—Gulf Coast

Thomas W. Bottoms
Vice President—Midwest and
Mobile

Troy A. Bourgeois
Vice President—Sales

Rail Systems, Inc.

John A. Manno
Vice President

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

KIRBY
CORPORATION

Joseph H. Pyne
Chairman of the Board,
President and
Chief Executive Ofﬁcer

David W. Grzebinski
Executive Vice President and
Chief Financial Ofﬁcer

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

Joseph H. Reniers
Vice President—Human Resources

Renato A. Castro
Treasurer

Thomas G. Adler
Secretary

COMMON STOCK MARKET PRICE

2011
First Quarter
(through March 11, 2011)

2010
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

2009
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Sales Price

High

Low

$57.43

$43.29

$38.77
$43.96
$43.33
$45.78

$31.16
$36.32
$39.16
$37.28

$30.83
$36.60
$35.78
$39.25

$19.46
$25.93
$28.71
$32.30

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 2011 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 26, 2011.

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) 575-2897
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 1, 2011, there were
53,668,000 common shares outstanding
held by approximately 830 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, 2005, in stock or index, including reinvestment of dividends.
Fiscal year ended December 31.

12/05

12/06

12/07

12/08

12/09

12/10

Kirby Corporation

100.00

130.84

178.19

104.89

133.53

168.87

Dow Jones
US Marine
Transportation

100.00

101.12

118.86

55.97

69.84

79.43

Russell 2000

100.00

118.37

116.51

77.15

98.11

124.46

$225

$150

$75

(cid:81) Kirby Corporation (cid:81)(cid:3)Dow Jones US Marine Transportation (cid:81) Russell 2000

Kirby Corporation

Corporate Headquarters: 55 Waugh Drive, Suite 1000, Houston, Texas 77007

Mailing Address: P. O. Box 1745, Houston, Texas 77251-1745

(713) 435-1000 Fax: (713) 435-1010

Web site: www.kirbycorp.com