Statements contained in this Form 10-Q that are not historical facts, including, but not limited to, any projections contained herein, are forward-looking statements and involve a number of risks and uncertainties. Such statements can be identified by the use of forward-looking terminology such as "may," "will," "expect," "anticipate," "estimate," or "continue" or the negative thereof or other variations thereon or comparable terminology. The actual results of the future events described in such forward-looking statements in this Form 10-Q could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are:
adverse economic conditions, industry competition and other competitive factors, adverse weather conditions such as high water, low water, tropical storms, hurricanes, fog and ice, marine accidents, lock delays, fuel costs, interest rates, construction of new equipment by competitors, government and environmental laws and regulations, and the timing, magnitude and number of acquisitions made by the Company. For a more detailed discussion of factors that could cause actual results to differ from those presented in forward-looking statements, see Item 1A-Risk Factors found in the Company's annual report on Form 10-K for the year ended December 31, 2008. Forward-looking statements are based on currently available information and the Company assumes no obligation to update any such statements.

For purposes of the Management's Discussion, all net earnings per share attributable to Kirby common stockholders are "diluted earnings per share." The weighted average number of common shares applicable to diluted earnings per share for the three months and nine months ended September 30, 2009 and 2008 were as follows:

                                              Three months ended           Nine months ended
                                                September 30,                September 30,
                                              2009          2008           2009          2008
                                                              (in thousands)
Weighted average number of common stock
- diluted                                      53,337        53,688         53,296        53,672

The decrease in the weighted average number of common shares for both 2009 periods compared with the 2008 periods primarily reflected common stock repurchases during the 2008 third and fourth quarters, partially offset by the issuance of restricted stock and the exercise of stock options.

Overview

The Company is the nation's largest domestic inland tank barge operator with a fleet of 874 active tank barges, including 49 leased barges, and 16.8 million barrels of capacity as of September 30, 2009. The Company operated an average of 215 towing vessels during the 2009 third quarter, of which 54 were chartered. The Company uses the United States inland waterway system to transport bulk liquids including petrochemicals, black oil products, refined petroleum products and agricultural chemicals. The Company also owns and operates four ocean-going barge and tug units transporting dry-bulk commodities in United States coastwise trade. Through its diesel engine services segment, the Company provides after-market services for medium-speed and high-speed diesel engines used in marine, power generation and railroad applications.

For the 2009 third quarter, net earnings attributable to Kirby were $35,014,000, or $.65 per share, on revenues of $272,166,000, compared with 2008 third quarter net earnings attributable to Kirby of $41,778,000, or $.77 per share, on revenues of $354,647,000. For the 2009 first nine months, net earnings attributable to Kirby were $96,739,000, or $1.79 per share, on revenues of $822,570,000, compared with the 2008 first nine months net earnings attributable to Kirby of $118,759,000, or $2.19 per share, on revenues of $1,033,477,000. The 2009 third quarter and first nine months performance reflected lower demand in both its marine transportation and diesel engine services segments, driven by the global economic recession.

Results for the 2008 third quarter and first nine months were negatively impacted by two major Gulf Coast hurricanes, Gustav on September 1 and Ike on September 13. Hurricane Gustav disrupted marine transportation and diesel engine services operations in Louisiana for several days. Hurricane Ike struck Houston/Galveston, significantly affecting the petrochemical and refining facilities in the path of the storm. The 2008 third quarter and first nine months results included an estimated $.09 per share negative impact from Hurricanes Gustav and Ike.

As a result of the lower demand in both the marine transportation and diesel engine services segments, the Company took specific steps to reduce overhead and lower expenditures during the 2009 first quarter. The shore staffs of the marine transportation and diesel engine services segments were reduced by approximately 6% through early retirement incentives and staff reductions. A charge of $3,953,000 before taxes, or $.05 per share, was taken in the 2009 first quarter, consisting of $2,527,000 for marine transportation and $1,426,000 for diesel engine services. The Company estimates that the 2009 first quarter early retirements and staff reductions resulted in a savings of $.02 per share for both the 2009 second and third quarters, will result in a savings of $.02 per share for 2009, net of the $.05 per share 2009 first quarter charge, and will result in a savings of $.08 per share for 2010. As of September 30, 2009, the shore staff of the marine transportation segment, including shore tankering services, and the diesel engine services segment was down 14% compared with September 30, 2008.

The marine transportation segment operated an average of 215 towboats during the 2009 third quarter compared with an average of 255 during the 2008 third quarter. For the 2009 first nine months, the segment operated an average of 222 towboats compared with an average of 258 during the 2008 first nine months. As demand softened during the 2008 fourth quarter and the 2009 first nine months, the Company released chartered towboats and laid-up Company owned towboats in an effort to balance horsepower needs with current requirements. Going forward, the Company will continue to monitor towboat requirements and downsize or increase the towboat fleet as market changes warrant.

Marine Transportation

For the 2009 third quarter and first nine months, approximately 84% and 81%, respectively, of the Company's revenue was generated by its marine transportation segment. The segment's customers include many of the major petrochemical and refining companies that operate in the United States. Products transported include raw materials for many of the end products used widely by businesses and consumers - plastics, fiber, paints, detergents, oil additives and paper, among others. Consequently, the Company's business tends to mirror the general performance of the United States economy and volumes produced by the Company's customer base, enhanced by the inherent efficiencies of barge transportation which is generally the lowest cost mode of surface transportation.

The Company's marine transportation segment's revenue and operating income for the 2009 third quarter decreased 21% and 11%, respectively, when compared with the third quarter of 2008. For the 2009 first nine months, revenue and operating income decreased 20% and 14%, respectively, compared with the first nine months of 2008. During the 2009 third quarter and first nine months, all four transportation markets, petrochemicals, black oil products, refined products and agricultural chemicals, saw demand for the movement of products soften, driven by the current economic recession. Pricing declined during the 2009 third quarter and first nine months as overall industry demand softened. In addition, lower diesel fuel prices resulted in lower 2009 third quarter and first nine months revenues associated with the pass through of diesel fuel to customers through fuel escalation and de-escalation clauses in term contracts when compared with the 2008 third quarter and first nine months. During the 2009 second and third quarters, petrochemical demand of more finished products into the Midwest continued to improve modestly and demand along the Gulf Coast stabilized when compared with the 2009 first quarter. Black oil products and refined products demand stabilized during the 2009 third quarter, but remained well below prior year levels. Agricultural chemical demand was weak during the 2009 third quarter and first nine months due to high Midwest inventory levels. Favorable operating conditions during the 2009 third quarter and first nine months offset to some degree the impact of the lower demand, but also drove down barge utilization.

During the 2009 third quarter and first nine months, approximately 80% of the marine transportation revenues were under term contracts and 20% were spot market revenues. With the decline in industry-wide demand, excess equipment throughout the industry was moved into the spot market, placing downward pressure on spot market pricing, as well as on contract renewals. Time charters, which insulate the Company from revenue fluctuations caused by weather and navigational delays and temporary market declines, represented approximately 54% of marine transportation revenues under term contracts during the 2009 third quarter compared to an average of 56% during 2008 and the first six months of 2009. Rates on term contracts, net of fuel, renewed during the 2009 first quarter were generally renewed at existing rates and in some cases rates were traded for longer terms, while 2009 second and third quarter contract renewals declined in the zero to 8% and 7% to 15% range, respectively, when compared with the corresponding quarters of 2008. Spot market rates for 2009, which include the cost of fuel, decreased an average of 3% to 4% in the first quarter, 10% to 15% in second quarter and 10% to 20% in the third quarter when compared with the corresponding quarters of 2008. In each of the 2009 first three quarters, the Company estimates that approximately 40% to 50% of the spot market rate decreases were fuel related. Effective January 1, 2009, annual escalators for labor and the producer price index on a number of multi-year contracts resulted in rate increases on those contracts by 4% to 5%, excluding fuel.

The marine transportation operating margin for the 2009 third quarter was 25.3% compared with 22.7% for the 2008 third quarter and 23.6% for the 2009 first nine months compared with 22.0% for the 2008 first nine months, reflecting lower fuel costs, lower shoreside headcount, the reduction of towboats operated, frozen officer and management salaries, reduced maintenance on laid-up equipment, ongoing cost reduction initiatives, more efficient operations at lower utilization levels and more favorable operating conditions compared with the 2008 corresponding periods that included the loss of revenue and additional operating expenses associated with Hurricanes Gustav and Ike.

Diesel Engine Services

For the 2009 third quarter and nine months, approximately 16% and 19%, respectively, of the Company's revenue was generated by the diesel engine services segment, of which 56% and 61% were generated through service and 44% and 39% from direct parts sales, respectively. The results of the diesel engine services segment are largely influenced by the economic cycles of the marine, power generation and railroad industries it serves.

The Company's diesel engine services segment's 2009 third quarter revenue and operating income decreased 34% and 56%, respectively, compared with the third quarter of 2008. For the first nine months of 2009, revenue and operating income decreased 22% and 46%, respectively, compared with the 2008 first nine months. Demand levels for service and direct parts sales across all segments of the inland and offshore marine markets and offshore oil services markets remained weak as customers deferred maintenance on equipment in response to the economic slowdown. The medium-speed railroad parts and service market was also weak as industrial and shortline railroad customers deferred maintenance in response to lower railroad traffic. The medium-speed power generation market benefited from favorable service and parts sales in the 2009 first half but revenues declined in the 2009 third quarter. The 2008 third quarter and first nine months results were negatively impacted by Hurricane Gustav, as noted above, which resulted in the closure of the segment's facilities for several days, as well as customers' facilities and operations.

The diesel engine services segment's operating margin for the 2009 third quarter was 10.4% compared with 15.7% for the third quarter of 2008. For the 2009 first nine months, the operating margin was 10.9% compared with 15.8% for the 2008 first nine months. The lower operating margin for the 2009 third quarter and first nine months reflected lower service levels and direct parts sales and resulting lower labor utilization, and the charge for early retirements and staff reductions in the 2009 first quarter.

Cash Flow and Capital Expenditures

The Company continued to generate strong operating cash flow during the 2009 first nine months, with net cash provided by operating activities of $237,101,000 compared with net cash provided by operating activities for the 2008 first nine months of $183,448,000. The 29% increase was aided by a decline in accounts receivable caused by lower business activity levels during the 2009 first nine months. In addition, during the 2009 and 2008 first nine months, the Company generated cash of $2,056,000 and $8,687,000, respectively, from the exercise of stock options and $3,619,000 and $1,346,000, respectively, from proceeds from the disposition of assets. For the 2009 first nine months, cash and borrowings under the Company's revolving credit facility were used for capital expenditures of $162,972,000, including $121,742,000 for new tank barge and towboat construction and $41,230,000 primarily for upgrading the existing marine transportation fleet. The Company's debt-to-capitalization ratio decreased to 16.6% at September 30, 2009 from 21.7% at December 31, 2008, primarily due to the increase in equity from net earnings attributable to Kirby for the 2009 first nine months of $96,739,000, the exercise of stock options and lower debt. As of September 30, 2009, the Company had no outstanding balance under its $250,000,000 revolving credit facility and had $39,762,000 of cash and cash equivalents.

The Company projects that capital expenditures for 2009 will be in the $185,000,000 to $195,000,000 range, including approximately $140,000,000 for new tank barge and towboat construction. The 2009 new construction presently consists of 46 barges with a total capacity of 1,114,000 barrels and four 1800 horsepower towboats. Delivery is anticipated to be throughout 2009 and the Company anticipates that 2009 new capacity will be less than capacity to be retired. During the 2009 first nine months, the Company took delivery of 37 new barges and seven new chartered barges with a total capacity of 974,000 barrels, and three 1800 horsepower towboats. For 2010, new construction commitments include three barges with a total capacity of 49,000 barrels and three 1800 horsepower towboats, all of which are from 2007 and 2008 orders. The Company has also announced it intends to build 55 new tank barges with a total capacity of 665,000 barrels in 2010. New construction costs for 2010 are anticipated to total approximately $60,000,000.

The Company's strong cash flow and unutilized loan facilities position the Company to take advantage of internal and external growth opportunities in its marine transportation and diesel engine services segments. The marine transportation segment's external growth opportunities include potential acquisitions of independent inland tank barge operators and captive fleet owners seeking to outsource tank barge requirements. Increasing the fleet size through external growth opportunities would allow the Company to improve asset utilization through more backhaul opportunities, faster barge turnarounds, more efficient use of horsepower, barges positioned closer to cargoes, less cleaning due to operating more barges with compatible prior cargoes, lower incremental costs due to enhanced purchasing power and minimal incremental administrative staff. The diesel engine services segment's external growth opportunities include further consolidation of strategically located diesel service providers, and expanded service capability for other engine and marine gear related products.

As a result of the continuing global recession, petrochemical and refining production is below and is anticipated to remain below 2008 levels for the remainder of 2009. Petrochemical demand of more finished products into the Midwest continued to modestly improve and demand along the Gulf Coast stabilized when compared with the 2009 first half; however, the United States economy will have to start expanding before the Company sees any significant improvement in demand. During 2008 and the 2009 first nine months, 80% of marine transportation revenues were under term contracts, of which approximately 50% are up for renewals throughout 2009, including contracts renewed in the 2009 first nine months. Rates on term contracts, net of fuel, renewed during the 2009 first quarter were generally renewed at existing rates and in some cases rates were traded for longer terms, while 2009 second and third quarter contract renewals declined in the zero to 8% and 7% to 15% range, respectively, when compared with the corresponding quarters of 2008. Spot market rates for 2009, which include the cost of fuel, decreased an average of 3% to 4% in the first quarter, 10% to 15% in second quarter and 10% to 20% in the third quarter when compared with the corresponding quarters of 2008. In each of the 2009 first three quarters, the Company estimates that approximately 40% to 50% of the spot market rate decreases were fuel related. During 2008 and the 2009 first nine months, some incremental capacity was added to the industry fleet and the Company anticipates some additional capacity will be added during the 2009 fourth quarter, based on current orders; however, the current reduction of petrochemical and refining production has resulted in excess barge capacity, lower utilization and the acceleration of the retirement of older barges. Weaker market conditions may constrain industry wide new barge orders for 2010 and the retirement of older barges may be accelerated. The Company also anticipates that the diesel engine services segment will continue to perform below 2008 levels with no notable improvement forecasted for the 2009 fourth quarter as customers continue to defer maintenance due to reduced utilization of their equipment.

Acquisitions

On June 30, 2008, the Company purchased substantially all of the assets of Lake Charles Diesel for $3,680,000 in cash. Lake Charles Diesel was a Gulf Coast high-speed diesel engine services provider operating factory-authorized full service marine dealerships for Cummins, Detroit Diesel and Volvo engines, as well as an authorized marine dealer for Caterpillar engines in Louisiana.

On March 18, 2008, the Company purchased six inland tank barges from ORIX for $1,800,000 in cash. The Company had been leasing the barges from ORIX prior to their purchase.

Results of Operations

The Company reported 2009 third quarter net earnings attributable to Kirby of $35,014,000, or $.65 per share, on revenues of $272,166,000, compared with 2008 third quarter net earnings attributable to Kirby of $41,778,000, or $.77 per share, on revenues of $354,647,000. Net earnings attributable to Kirby for the 2009 first nine months were $96,739,000, or $1.79 per share, on revenues of $822,570,000, compared with net earnings attributable to Kirby for the 2008 first nine months of $118,759,000, or $2.19 per share, on revenues of $1,033,477,000.

                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

The following table sets forth the Company's marine transportation and diesel
engine services revenues for the 2009 third quarter compared with the third
quarter of 2008, the first nine months of 2009 compared with the first nine
months of 2008 and the percentage of each to total revenues for the comparable
periods (dollars in thousands):

                                 Three months ended                                    Nine months ended
                                    September 30,                                        September 30,
                     2009           %          2008           %          2009           %           2008            %
Marine
transportation     $ 227,467          84 %   $ 286,880          81 %   $ 664,394          81 %   $   830,014          80 %
Diesel engine
services              44,699          16        67,767          19       158,176          19         203,463          20
                   $ 272,166         100 %   $ 354,647         100 %   $ 822,570         100 %   $ 1,033,477         100 %

As a result of the lower demand in both the marine transportation and diesel engine services segments, the Company took specific steps to reduce overhead and lower expenditures during the 2009 first quarter. The shore staffs of the marine transportation and diesel engine services segments were reduced by approximately 6% through early retirement incentives and staff reductions. A charge of $3,953,000, or $.05 per share, was taken in the 2009 first quarter before taxes, consisting of $2,527,000 for marine transportation and $1,426,000 for diesel engine services. The Company estimates that the 2009 first quarter early retirements and staff reductions resulted in a savings of $.02 per share for both the 2009 second and third quarters, will result in a savings of $.02 per share for 2009, net of the $.05 per share 2009 first quarter charge, and will result in a savings of $.08 per share for 2010. As of September 30, 2009, the shore staff of the marine transportation segment, including shore tankering services, and the diesel engine services segment was down 14% compared with September 30, 2008.

Marine Transportation

The Company, through its marine transportation segment, is a provider of marine transportation services, operating inland tank barges and towing vessels, transporting petrochemicals, black oil products, refined petroleum products and agricultural chemicals along the United States inland waterways. As of September 30, 2009, the Company operated 874 active inland tank barges, with a total capacity of 16.8 million barrels, compared with 915 active inland tank barges at September 30, 2008, with a total capacity of 17.5 million barrels. The Company operated an average of 215 active inland towing vessels during the 2009 third quarter and 222 during the 2009 first nine months compared with 255 during the 2008 third quarter and 258 during the first nine months of 2008. The Company owns and operates four offshore dry-bulk barge and tug units engaged in the offshore transportation of dry-bulk cargoes. The Company also owns a two-thirds interest in Osprey Line, L.L.C., operator of a barge feeder service for cargo containers on the Gulf Intracoastal Waterway, as well as several ports located above Baton Rouge on the Mississippi River.

                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

The following table sets forth the Company's marine transportation segment's
revenues, costs and expenses, operating income and operating margins for the
three months and nine months ended September 30, 2009 compared with the three
months and nine months ended September 30, 2008 (dollars in thousands):

                                  Three months ended                          Nine months ended
                                    September 30,                               September 30,
                                                        %                                           %
                          2009          2008          Change          2009          2008          Change
Marine transportation
revenues                $ 227,467     $ 286,880            (21 )%   $ 664,394     $ 830,014            (20 )%

Costs and expenses:
Costs of sales and
operating expenses        125,160       173,249            (28 )      373,177       507,083            (26 )
Selling, general and
administrative             18,623        24,477            (24 )       61,047        68,382            (11 )
Taxes, other than on
income                      2,752         3,318            (17 )        8,256         9,741            (15 )
Depreciation and
amortization               23,337        20,811             12         64,964        62,113              5
                          169,872       221,855            (23 )      507,444       647,319            (22 )
Operating income        $  57,595     $  65,025            (11 )%   $ 156,950     $ 182,695            (14 )%

Operating margins 25.3 % 22.7 % 23.6 % 22.0 %

Marine Transportation Revenues

The following table shows the marine transportation markets serviced by the
Company, the marine transportation revenue distribution for the first nine
months of 2009, products moved and the drivers of the demand for the products
the Company transports:

                             2009
                         Nine Months
                           Revenue
 Markets Serviced        Distribution          Products Moved             Drivers
Petrochemicals               68%           Benzene, Styrene,         Consumer
                                           Methanol,                 non-durables -
                                           Acrylonitrile, Xylene,    70%, Consumer
                                           Caustic                   durables - 30%
                                           Soda, Butadiene,
                                           Propylene

Black Oil Products           19%           Residual Fuel Oil,        Fuel for Power
                                           Coker Feedstock,          Plants and
                                           Vacuum Gas Oil,           Ships, Feedstock
                                           Asphalt, Carbon Black     for Refineries,
                                           Feedstock, Crude Oil,     Road Construction
                                           Ship Bunkers

Refined Petroleum             9%           Gasoline, No. 2 Oil,      Vehicle Usage, Air
Products                                   Jet Fuel, Heating Oil,    Travel,
                                           Naphtha, Diesel Fuel      Weather
                                                                     Conditions,
                                                                     Refinery
                                                                     Utilization

Agricultural                  4%           Anhydrous Ammonia,        Corn, Cotton and
. . .