<PAGE>   1
 
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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-K
 
(MARK ONE)
 
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                       SECURITIES EXCHANGE ACT OF 1934
 
                 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
                                     OR
 
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
 
      FOR THE TRANSITION PERIOD FROM ................ TO ................
                           COMMISSION FILE NO. 1-7615
 
                               KIRBY CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 

<TABLE>
<S>                                             <C>
                   NEVADA                                        74-1884980
       (STATE OR OTHER JURISDICTION OF                        (I.R.S. EMPLOYER
       INCORPORATION OR ORGANIZATION)                        IDENTIFICATION NO.)
       1775 ST. JAMES PLACE, SUITE 300
               HOUSTON, TEXAS                                    77056-3453
  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                       (ZIP CODE)
</TABLE>

 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 629-9370
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 

<TABLE>
<CAPTION>
                                                          NAME OF EACH EXCHANGE ON
             TITLE OF EACH CLASS                              WHICH REGISTERED
- ---------------------------------------------   ---------------------------------------------
<S>                                             <C>
          Common Stock -- $.10 Par                         American Stock Exchange
               Value Per Share
</TABLE>

 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
 
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes  X No
- ---
 
     As of March 14, 1994, 28,275,133 shares of common stock were outstanding.
The aggregate market value of common stock held by nonaffiliates of the
registrant, based on the closing sales price of such stock on the American Stock
Exchange on March 14, 1994 was $581,184,036. For purposes of this computation,
all executive officers, directors and 10% beneficial owners of registrant are
deemed to be affiliates. Such determination should not be deemed an admission
that such executive officers, directors and 10% beneficial owners are
affiliates.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     The Company's definitive proxy statement in connection with the Annual
Meeting of the Stockholders to be held April 19, 1994, to be filed with the
Commission pursuant to Regulation 14A, is incorporated by reference into Part
III of this report.
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<PAGE>   2
 

                                     PART I
 

ITEM 1. BUSINESS
 
                                  THE COMPANY
 
     Kirby Corporation (the "Company") was incorporated January 31, 1969 in
Nevada as a subsidiary of Kirby Petroleum Co. Pursuant to the plan of
liquidation of Kirby Industries, Inc. ("Industries"), Kirby Petroleum Co., which
was then a wholly owned subsidiary of Industries, transferred to the Company in
1975 substantially all of its nonproducing oil and gas acreage, royalty
interests and interests in oil and gas limited partnerships. The Company became
publicly owned on September 30, 1976, when its common stock was distributed pro
rata to the stockholders of Industries in connection with the liquidation of
Industries. In September, 1984, the Company changed its name from "Kirby
Exploration Company" to "Kirby Exploration Company, Inc." and in April, 1990,
the name was changed from "Kirby Exploration Company, Inc." to "Kirby
Corporation."
 
     Unless the context otherwise requires, all references herein to the Company
include the Company and its subsidiaries.
 
     The Company's principal executive office is located at 1775 St. James
Place, Suite 300, Houston, Texas 77056, and its telephone number is (713)
629-9370. The Company's mailing address is P.O. Box 1745, Houston, Texas
77251-1745.
 
                             BUSINESS AND PROPERTY
 
     The Company and its subsidiaries conduct operations in three business
segments: marine transportation, diesel repair and insurance.
 
     The Company's marine transportation segment is conducted through three
divisions, organized around the markets they serve: the Inland Chemical
Division, engaged in the inland transportation of industrial chemicals and
agricultural chemicals by tank barge; the Inland Refined Products Division,
engaged in the inland transportation of refined petroleum products by tank
barge; and the Offshore Division, engaged in the offshore transportation of
petroleum products by tank barge and tank ship and dry bulk, container,
palletized cargo by barge and break-bulk and container ship. The Company's
marine transportation divisions are strictly providers of transportation
services and do not presently assume ownership of any of the products they
transport.
 
     The Company's diesel repair segment is engaged in the overhaul and repair
of diesel engines and related parts sales in two distinct markets: the marine
market, serving vessels powered by large diesel engines utilized in the various
inland and offshore marine industries; and the locomotive market, serving the
shortline and industrial railroad markets.
 
     The Company's insurance segment is engaged primarily in the writing of
property and casualty insurance in the Commonwealth of Puerto Rico through a 70%
owned subsidiary.
 
     The Company and its subsidiaries have approximately 2,050 employees with
approximately 150 in the Commonwealth of Puerto Rico and the balance in the
United States.
 
                                        1

<PAGE>   3
 
     The following table sets forth by industry segment the combined gross
revenues, operating profits (before general corporate expenses, interest expense
and income taxes) and identifiable assets (including goodwill) attributable to
the continuing principal activities of the Company for the periods indicated (in
thousands):
 

<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                                              ----------------------------------
                                                                1991          1992        1993
                                                              --------       -------     -------
<S>                                                           <C>            <C>         <C>
Gross revenues from unaffiliated customers:
  Transportation...........................................   $118,573       191,007     284,761
  Diesel repair............................................     34,386        35,889      32,025
  Insurance................................................     34,713        42,520      61,611
                                                              --------       -------     -------
                                                               187,672       269,416     378,397
  General corporate revenues...............................      1,361            87           7
                                                              --------       -------     -------
          Consolidated revenues............................   $189,033       269,503     378,404
                                                              --------       -------     -------
                                                              --------       -------     -------
Operating profits:
  Transportation...........................................   $ 17,689        28,034      42,208
  Diesel repair............................................      2,482         2,561       1,904
  Insurance................................................      4,891         1,108       4,539
                                                              --------       -------     -------
                                                                25,062        31,703      48,651
  General corporate expenses, net..........................     (1,249)       (3,563)     (4,911)
  Interest expense.........................................     (5,965)       (9,411)     (8,416)
                                                              --------       -------     -------
          Earnings before taxes on income..................   $ 17,848        18,729      35,324
                                                              --------       -------     -------
                                                              --------       -------     -------
Identifiable assets:
  Transportation...........................................   $150,477       275,616     344,488
  Diesel repair............................................     15,353        18,897      20,260
  Insurance................................................    106,401       145,246     184,868
                                                              --------       -------     -------
                                                               272,231       439,759     549,616
  Investment in unconsolidated affiliate...................        134           146         177
  General corporate assets.................................     13,637         6,515      13,460
                                                              --------       -------     -------
          Consolidated assets..............................   $286,002       446,420     563,253
                                                              --------       -------     -------
                                                              --------       -------     -------
</TABLE>

 
                                        2

<PAGE>   4
 
                             MARINE TRANSPORTATION
 
     The Company is engaged in marine transportation as a provider of service
for both the inland and offshore markets. As of March 14, 1994, the equipment
owned or operated by the Company's three marine transportation divisions was
composed of 400 inland tank barges, 10 inland dry cargo barges, 123 inland
towing vessels, six offshore tank ships, two offshore tank barges, six offshore
dry cargo barges, four offshore break-bulk and container ships and nine offshore
tugboats with the following specifications and capacities:
 

<TABLE>
<CAPTION>
                                                                              AVERAGE
                                                                    NUMBER      AGE
                                                                      IN        (IN     BARREL
                       CLASS OF EQUIPMENT                           CLASS     YEARS)   CAPACITIES
                       ------------------                           ---       ------   ---------
<S>                                                                 <C>       <C>      <C>
Inland Fleet
Inland tank barges:
  Regular double skin:
     20,000 barrels and under....................................   161       21.6     1,961,000
     Over 20,000 barrels.........................................   114       13.9     3,010,000
  Specialty double skin..........................................    20       21.0       376,000
  Single skin:
     20,000 barrels and under....................................    39       25.8       656,000
     Over 20,000 barrels.........................................    66       22.3     1,678,000
                                                                    ---       ----     ---------
          Total inland tank barges...............................   400       20.0     7,681,000
                                                                    ===       ====     =========
</TABLE>

 

<TABLE>
<CAPTION>
                                                                                       DEADWEIGHT
                                                                                        TONNAGE
                                                                                       ---------
<S>                                                                 <C>       <C>      <C>
Inland dry cargo barges..........................................    10       17.8        11,100
                                                                    ===       ====     =========
Inland towing vessels
  Inland towboats:
     2,000 horsepower and under..................................    78       20.8
     Over 2,000 horsepower.......................................    32       17.4
                                                                    ---       ----
          Total inland towboats..................................   110       19.8
  Inland bowboats................................................     6       14.1
  Harbor tugboats................................................     7       18.6
                                                                    ---       ----
                                                                    123       19.5
                                                                    ===       ====
</TABLE>

 

<TABLE>
<CAPTION>
                                                                                        BARREL
                                                                                       CAPACITIES
                                                                                       ---------
<S>                                                                 <C>       <C>      <C>
Offshore Fleet
Tank ships.......................................................     6       44.3     1,538,000
                                                                    ===       ====     =========
Tank barges......................................................     2       19.3       322,000
                                                                    ===       ====     =========
</TABLE>

 

<TABLE>
<CAPTION>
                                                                                       DEADWEIGHT
                                                                                        TONNAGE
                                                                                       ---------
<S>                                                                 <C>       <C>      <C>
Offshore break-bulk and container ships..........................     4       22.9        49,900
                                                                    ===       ====     =========
Offshore dry cargo barges(*).....................................     6       17.3       106,000
                                                                    ===       ====     =========
Offshore tugboats(*).............................................     9       18.3
                                                                    ===       ====
</TABLE>

- --------------- 
(*) Includes four barges and five tugboats owned by Dixie Fuels Limited and one
    barge and tugboat owned by Dixie Fuels II, Limited, partnerships in which a
    subsidiary of the Company owns a 35% and 50% interest, respectively.
 
                                        3

<PAGE>   5
 
     The following table sets forth the approximate marine transportation
revenue and percentage of such revenue derived from the three divisions for the
periods indicated (dollars in thousands):
 

<TABLE>
<CAPTION>
                                                        YEARS ENDED DECEMBER 31,
                                       ----------------------------------------------------------
              REVENUE                        1991                 1992                 1993
             BY PRODUCT                ----------------     ----------------     ----------------
            OR OPERATION               AMOUNTS       %      AMOUNTS       %      AMOUNTS       %
            ------------               --------     ---     --------     ---     --------     ---
<S>                                    <C>          <C>     <C>          <C>     <C>          <C>
Inland Chemical Division............   $103,948      89%    $115,448      61%    $134,578      48
Inland Refined Products Division....         --     --        29,578      15       45,940      16
                                       --------     ---     --------     ---     --------     ---
          Total inland revenues.....    103,948      89      145,026      76      180,518      64
                                       --------     ---     --------     ---     --------     ---
Offshore Division:
  Liquid petroleum products.........      3,717       3       37,716      20       47,799      17
  Dry bulk..........................     12,628      11       12,708       7       12,735       4
  Break-bulk and container..........         --     --            --     --        47,842      17
                                       --------     ---     --------     ---     --------     ---
          Total offshore revenues...     16,345      14       50,424      27      108,376      38
                                       --------     ---     --------     ---     --------     ---
Intercompany transactions...........     (3,290)     (3)      (5,236)     (3)      (5,147)     (2)
                                       --------     ---     --------     ---     --------     ---
          Total transportation
            revenues................   $117,003     100%    $190,214     100%     283,747     100%
                                       ========     ===     ========     ===      =======     ===
  
</TABLE>

 
INLAND TANK BARGE INDUSTRY
 
     The Company's Inland Chemical Division and Inland Refined Products Division
operate in the United States inland tank barge industry, which provides marine
transportation of liquid bulk cargos for customers along the United States
inland waterway system. Among the most significant segments of this industry are
the transportation of industrial and agricultural chemicals, refined petroleum
products and crude oil. The Company operates in each of these segments. The use
of marine transportation by the petroleum and petrochemical industry is a major
reason for the location of domestic refineries and petrochemical facilities on
navigable inland waterways and along the Gulf Coast. Much of the United States
farm belt is likewise situated within access to the inland waterway system,
relying on marine transportation of farm products including agricultural
chemicals.
 
     Although no official industry statistics are maintained, the Company
believes that the total number of tank barges that operate in the inland waters
of the United States has declined from an estimate of approximately 4,200 in
1981 to approximately 2,900 in 1993. The Company believes this decrease is
primarily attributable to the following reasons: increasing age of the domestic
tank barge fleet resulting in scraping; rates inadequate to justify new
construction; reduction in financial incentives to construct new equipment; and
an increase in regulations that mandate expensive equipment modification which
some owners are unwilling or unable to undertake given current rate levels and
the age of the fleet.
 
     Although well maintained tank barges can be efficiently operated for more
than 30 years, the cost of hull work for required annual Coast Guard
certifications, as well as general safety and environmental concerns, force
operators to periodically reassess their ability to recover maintenance costs.
Previously, tax and financing incentives to operators and investors to construct
tank barges, including short life depreciation, investment tax credits and
government guaranteed financing, led to the growth in the supply of domestic
tank barges to a peak of approximately 4,200 in 1981. These tax incentives have
since been eliminated and government financing programs have since been
curtailed. The supply of tank barges resulting from the earlier programs is
slowly aligning with demand for tank barge services, primarily through
attrition, as discussed above.
 
     While the United States tank barge fleet has decreased in size, domestic
production of petrochemicals, a major component of the industry's revenues, has
increased between 1982 and 1993 by approximately 48%. Growth in the economy and
the continued substitution of plastics and synthetics in a wide variety of
products have been major factors behind the increase of capacity in the
petrochemical industry. Texas and Louisiana, which are within the Company's
areas of operations, currently account for more than 78% of the total United
States production of petrochemicals.
 
                                        4

<PAGE>   6
 
COMPETITION IN THE INLAND TANK BARGE INDUSTRY
 
     The Company operates in the highly competitive marine transportation market
for commodities transported on the major inland rivers and tributaries and the
Gulf Intracoastal Waterway. The industry has become increasingly concentrated
within recent years as smaller and/or economically weaker companies have gone
out of business or have been acquired by stronger or larger companies.
Competition has historically been based primarily on price; however, shipping
customers, through increased emphasis on safety, the environment, quality and a
greater reliance on a "single source" supply of services, are more frequently
requiring that their supplier of inland tank barge services have the capability
to handle a variety of tank barge requirements, and offer flexibility, safety,
environmental responsibility and quality of service consistent with the
customer's own operations.
 
     The Company's direct competitors are primarily noncaptive marine
transportation companies. "Captive" companies are those companies that are owned
by major oil and/or petrochemical companies which, although competing in the
inland barge market to varying extents, primarily transport cargos for their own
account. Although industry statistics are not categorized by individual firms,
the Company believes it is the largest inland tank barge carrier based on its
number of barges and barrels of available capacity.
 
     While the Company competes primarily with other barge companies, it also
competes with companies owning crude oil and refined products pipelines, and, to
a lesser extent, rail tank cars and tank trucks in some areas and markets. The
Company believes that inland marine transportation of bulk liquid products
enjoys a substantial cost advantage over rail and truck transportation. The
Company also believes that crude oil and refined products pipelines, although
sometimes a less expensive form of transportation than barges, are not as
adaptable to diverse products and are generally limited to fixed point-to-point
distribution of commodities in high volumes over extended periods of time.
 
INLAND CHEMICAL DIVISION
 
     The Company's Inland Chemical Division provides transportation services for
three distinct markets: industrial chemicals, agricultural chemicals and barge
fleeting services. Collectively, the Division operates a fleet of 285 inland
tank barges, 84 towboats and two bowboats.
 
     Industrial Chemicals. Dixie Carriers, Inc. ("Dixie"), a subsidiary of the
Company, and its subsidiaries, Dixie Marine, Inc. ("Dixie Marine") and TPT
Transportation Company ("TPT Transportation"), and Chotin Carriers, Inc.
("Chotin"), a subsidiary of the Company, provide service to the industrial
chemical industry through intraplant movements of petrochemical feedstock and
the transportation of industrial processed chemicals and lube oils to industry
users. Operating a fleet of 216 inland tank barges, 56 towboats and two
bowboats, the fleet operates primarily along the Gulf Intracoastal Waterway, the
Mississippi River and its tributaries and the Houston Ship Channel. The business
is conducted under contracts with customers with whom the Company has long-term
relationships, as well as under short-term and spot contracts. Currently,
approximately 76% of the industrial chemical revenues are derived from term
contracts and 24% from the spot market. All of the inland tank barges used in
the transportation of industrial chemicals are of double hull construction for
increased environmental protection and, where applicable, are capable of
controlling vapor emissions to meet occupational health and safety regulations
and air quality concerns.
 
     Chotin was acquired on June 1, 1992 by means of a merger of Scott Chotin,
Inc. ("Scott Chotin") with and into Chotin. TPT Transportation acquired the
assets of TPT, a marine transportation division of Ashland Oil, Inc. on March 3,
1993. See "Note 2" to the financial statements included under Item 8 elsewhere
herein for further disclosure on the Chotin merger and the TPT Transportation
asset purchase. Dixie's and Dixie Marine's headquarters are located in Houston,
Texas and Chotin's and TPT Transportation's headquarters are in Baton Rouge,
Louisiana.
 
     Agricultural Chemicals. Brent Transportation Corporation ("Brent
Transportation"), a subsidiary of Dixie, operates 69 inland tank barges,
including 11 cryogenic anhydrous ammonia barges, and 17 towboats primarily in
transportation of agricultural chemicals, including anhydrous ammonia, to points
along the Mississippi River and its tributaries and the Gulf Intracoastal
Waterway. Brent Transportation's assets were
 
                                        5

<PAGE>   7
 
acquired effective April 1, 1989, in connection with the purchase of certain
assets of Brent Towing Company, Inc., and related affiliates ("Brent"), which
had been engaged in the transportation of agricultural chemicals and other
liquid cargos since 1961. Brent Transportation conducts its business with
customers with whom it has long-term relationships and, to a lesser extent,
under short-term contracts. Brent Transportation's headquarters are in
Greenville, Mississippi. The Company believes that Brent Transportation has the
largest inland barge fleet that primarily transports agricultural chemicals.
 
     Barge Fleeting Services. Western Towing Company ("Western"), a subsidiary
of Dixie, owns 11 towboats and operates what the Company believes to be the
largest commercial barge fleeting service (provision of temporary barge storage
facilities) in the Port of Houston, at Bolivar Peninsula and in the Port of
Freeport, Texas. Western's towboats are engaged primarily in shifting
(distribution and gathering of barges) in the Houston-Galveston area.
 
INLAND REFINED PRODUCTS DIVISION
 
     The Company's Inland Refined Products Division provides transportation
services for the refined products and harbor services markets. Collectively, the
Division operates a fleet of 115 inland tank barges, 26 towboats, seven harbor
tugboats and four bowboats.
 
     Refined Products. Sabine Transportation Company ("Sabine Transportation"),
a subsidiary of the Company, and OMR Transportation Company ("OMR
Transportation"), a subsidiary of Dixie, provide service from Gulf Coast
refineries through movements of primarily gasoline, diesel fuel and jet fuel to
waterfront terminals on the Gulf Intracoastal Waterway and the Mississippi River
and its tributaries. Many of Sabine Transportation's barges are split-product
barges which maximize shipping alternatives for customers by allowing for the
efficient transportation of smaller individual volumes of petroleum products and
providing a means to carry up to four grades of products in the same barge. In
addition, by consolidating the product requirements of several customers in
split-product equipment, the Refined Products Division is able to offer quantity
discounted rates to customers who are carrying small quantities of product.
Currently, approximately 36% of the Inland Refined Products Division's revenues
are derived from long-term contracts and 64% from the spot market.
 
     The Inland Refined Products Division was formed with the acquisition by
Sabine Transportation of certain assets of Sabine Towing & Transportation, Inc.
("Sabine") on March 13, 1992 and the acquisition by OMR Transportation of
certain of the assets of Ole Man River Towing, Inc. and related entities ("Ole
Man River") on April 2, 1992. The Inland Refined Products Division was expanded
on December 21, 1993 with the acquisition by OMR Transportation of 53 inland
tank barges from Midland Enterprises Inc. and its wholly owned subsidiary,
Chotin Transportation, Inc. ("Chotin Transportation"). See "Note 2" to the
financial statements included under Item 8 elsewhere herein for further
disclosures on the Sabine Transportation, OMR Transportation and Chotin
Transportation asset purchases. Sabine Transportation's headquarters are in Port
Arthur, Texas and OMR Transportation's headquarters are located in Vicksburg,
Mississippi.
 
     Harbor Services. Sabine Transportation provides towing, docking and
shifting services for vessels calling at the ports of Beaumont, Port Arthur and
Orange, Texas and the port of Lake Charles, Louisiana. Operating seven harbor
tugboats, the Company believes that this fleet holds a combined market share of
approximately 55% in the ports which it serves. In addition, Sabine
Transportation provides offshore ship assistance and drill-rig movements off the
Texas and Louisiana coasts.
 
OFFSHORE TRANSPORTATION INDUSTRY
 
     The Company's Offshore Division is engaged in U.S. flag offshore tank ship
and tank barge operations, offshore dry bulk cargo barge operations and offshore
container and break-bulk cargo barge and ship operations. The Division provides
transportation of petroleum products, dry bulk, containers and palletized
cargos, including United States Government preference agricultural commodities,
worldwide with particular emphasis in the Gulf of Mexico, along the Atlantic
Seaboard, Caribbean Basin ports and South American, West African and Northern
European ports.
 
                                        6

<PAGE>   8
 
COMPETITION IN THE OFFSHORE TRANSPORTATION INDUSTRY
 
     The offshore marine transportation market, like the inland transportation
market, is highly competitive. The Company operates predominantly in United
States domestic trade which is subject to the Jones Act, a federal law that
limits participation between domestic ports within the United States and its
territories to U.S. flag vessels. For a discussion of the Jones Act, see
"Governmental Regulations" below. The Company's direct competitors are primarily
captive and noncaptive operators of U.S. flag ocean-going barges, container and
break-bulk ships and tank ships. Competition is based upon price, service and
equipment availability. There are a limited number of vessels meeting the
requirements of the Jones Act which are currently eligible to engage in domestic
United States marine transportation.
 
OFFSHORE DIVISION
 
     Offshore Tank Ship and Tank Barge Operations. Sabine Transportation
operates a fleet of six owned U.S. flag single skin tank ships, that transport
petroleum products primarily domestically in the Gulf of Mexico, along the East
Coast and internationally to ports in the Caribbean Basin. Currently, four of
Sabine Transportation's tank ships are chartered to various oil companies for
the transportation of their products and two operate in the spot market,
transporting petroleum products as cargo offers. Classified as "handy size," the
tank ships have deadweight capacities ranging between 28,000 and 35,000 tons
with a total capacity of 1,538,000 barrels.
 
     As discussed under "Environmental Regulations" below, the Oil Pollution Act
of 1990 ("OPA") has placed a number of stringent requirements on tank ship
owners and operators, including the phasing out of all single hull vessels
beginning in 1995, depending on vessel size and age. In accordance with the OPA,
Sabine Transportation's tank ships are scheduled to be retired from service as
follows: one -- January 1, 1995; one -- January 1, 1996; one -- October 1, 1996;
one -- October 30, 2000; one -- November 4, 2004; and one -- January 1, 2005. In
order to stay in service beyond the retirement date, these tank ships would have
to be either retrofitted with a double hull cargo section or used exclusively in
foreign trade.
 
     In addition to the tank ships, the Company, through Dixie, owns and
operates two ocean-going tank barge and tugboat units, one of which is single
skin and one double skin. The single skin 157,000 barrel barge and tug unit and
the double skin 165,000 barrel barge and tug unit provide service in the
transportation of refined petroleum products between domestic ports along the
Gulf of Mexico and along the Atlantic Seaboard. The single skin tank barge is
scheduled to be removed from service in accordance with the OPA on January 1,
2005. The double skin tank barge meets all of the OPA construction requirements.
 
     Offshore Dry Bulk Cargo Operations. The Company's offshore dry bulk cargo
operations are conducted through Dixie's wholly owned equipment and through two
general partnerships, Dixie Fuels Limited ("Dixie Fuels") and Dixie Fuels II,
Limited ("Dixie Fuels II"), in which a subsidiary of Dixie owns a 35% and 50%
interest, respectively.
 
     Dixie and Dixie Fuels transport dry bulk cargos, such as coal, limestone,
cement, fertilizer, flour, raw sugar and grain, as well as containers between
domestic ports along the Gulf of Mexico, the East Coast and West Coast, and to
ports in the Caribbean Basin with occasional movements to West Africa and other
international ports as cargo offers. Management believes that Dixie, including
the operations of Dixie Fuels and Dixie Fuels II, is the second largest domestic
offshore dry bulk barge carrier in terms of deadweight capacity.
 
     Dixie owns one ocean-going dry bulk barge and tugboat unit that is engaged
in transportation of dry bulk commodities primarily between domestic ports along
the Gulf of Mexico and along the Atlantic Seaboard.
 
     Dixie, as general partner, also manages the operations of Dixie Fuels,
which operates a fleet of four ocean-going dry bulk barges, four ocean-going
tugboats and one shifting tugboat. The remaining 65% of Dixie Fuels is owned by
Electric Fuels Corporation ("EFC"), an affiliate of Florida Power Corporation
("Florida Power"). Dixie Fuels operates primarily under long-term contracts of
affreightment, including a contract that expires in the year 2002 with EFC to
transport coal across the Gulf of Mexico to Florida Power's facility at Crystal
River, Florida.
 
                                        7

<PAGE>   9
 
     Dixie Fuels also has a 12-year contract, which commenced in 1989, with
Holnam, Inc. ("Holnam") to transport Holnam's limestone requirements from a
facility adjacent to the Florida Power facility at Crystal River to Holnam's
plant in Theodore, Alabama. The Holnam contract provides cargo for a portion of
the return voyage for the vessels that carry coal to Florida Power's Crystal
River facility. Dixie Fuels is also engaged in the transportation of coal,
fertilizer and other bulk cargos on a short-term basis between domestic ports
and of grain from domestic ports to points primarily in the Caribbean Basin.
 
     Dixie also manages the operations of Dixie Fuels II, which operates an
ocean-going dry bulk barge and tug unit. The remaining 50% of Dixie Fuels II is
owned by EFC. Dixie Fuels II is engaged in the transportation of dry bulk cargo
and containers between domestic ports, ports in the Caribbean Basin and
international ports as cargo offers. Since May, 1993, Dixie Fuels II's barge and
tug unit has been engaged in the international transportation of preference
agricultural aid cargos for the United States Government.
 
     Offshore Break-bulk and Container Cargo Operations. In May, 1993, the
Company completed the acquisition of AFRAM Lines (USA) Co., Ltd. ("AFRAM Lines")
by means of a merger of AFRAM Lines with and into AFRAM Carriers, Inc.
("AFRAM"). AFRAM is engaged in the worldwide transportation of dry bulk,
container and palletized cargos, primarily for departments and agencies of the
United States Government. AFRAM's fleet of three U.S. flag break-bulk and
container ships specialize in the transportation of United States Government
military and preference aid cargos. See "Note 2" to the financial statements
included under Item 8 elsewhere herein for further disclosures on the AFRAM
merger. In addition, for a discussion of preference aid cargos, see
"Governmental Regulations" below. AFRAM's headquarters are located in Houston,
Texas.
 
     In early March, 1994, the Company, through its subsidiary, Americas Marine
Express, Inc. ("Americas Marine"), began all-water marine transportation
services between Memphis, Tennessee and Mexico, Guatemala, Honduras and El
Salvador. The new transportation service utilizes a chartered river/ocean vessel
that offers direct sailing between the locations. The new service provides
exporters and importers in the north, central and mid-south states with a direct
shipping alternative between Memphis and Mexico and Central America on a
fourteen day round trip basis. The direct all-water liner service accepts 20
foot and 40 foot containers, including refrigerated and tank containers, as well
as other cargo on a space available basis. The Company is of the opinion that
the liner service offers container shippers to the interior of the United States
a lower transportation cost alternative, predictable delivery time, a consistent
product flow to their customers and other benefits inherent in a direct
all-water liner service.
 
CONTRACTS AND CUSTOMERS
 
     The majority of the marine transportation contracts are for terms of one to
five years. Currently, the three marine transportation divisions of the Company
operate under long-term contracts with Agricultural Minerals Corporation,
Chevron Chemical Company, EFC, Holnam, Monsanto Chemical Company, Odfjell Tank
Ships (USA) Inc. and Shell Oil Company, among many others. While these companies
have generally been customers of the Company's marine transportation divisions
for several years and management anticipates a continuing relationship, there is
no assurance that any individual contract will be renewed. No single customer of
the Company's marine transportation segment accounted for more than 10% of the
Company's revenue in 1993, 1992 or 1991.
 
EMPLOYEES
 
     The Company's three marine transportation divisions have approximately
1,725 employees, of which approximately 1,425 are vessel crew members.
Approximately 39% of the 1,425 vessel crew members are subject to various
collective bargaining agreements with various labor organizations. No one
collective bargaining agreement covers more than 10% of the 1,425 vessel crew
members.
 
PROPERTIES
 
     The principal office of Dixie is located in Houston, Texas, in facilities
under a lease that expires in 1996. The marine transportation operating
divisions are located on the Gulf Intracoastal Canal at Belle Chasse,
 
                                        8

<PAGE>   10
 
Louisiana, a suburb of New Orleans; in Houston, Texas, near the Houston Ship
Channel; in Greenville, Mississippi and in Vicksburg, Mississippi. The
Greenville location is leased and the Belle Chasse, Houston and Vicksburg
locations are owned. Western's facilities are located on a 10.24-acre tract of
land owned by Dixie lying between the San Jacinto River and Old River Lake near
Houston, Texas. The principal office of Chotin and TPT Transportation is located
in Baton Rouge, Louisiana in owned facilities. The principal office and
operating units of Sabine Transportation are located in Port Arthur, Texas on 30
acres of owned waterfront property along the Sabine-Neches Waterway. The
principal office of AFRAM is located in Houston, Texas in leased facilities. The
principal office of Americas Marine is located in Memphis, Tennessee in leased
facilities.
 
GOVERNMENTAL REGULATIONS
 
     General. The Company's transportation operations are subject to regulation
by the United States Coast Guard, federal laws, state laws and certain
international conventions. The transportation of cargos in bulk are exempt from
economic regulations under the Interstate Commerce Act. Therefore, with the
exception of AFRAM and Americas Marine, the rates charged by the Company for the
transportation of such bulk cargos are negotiated between the Company and its
customers and are not set by tariff. AFRAM and Americas Marine generally operate
under published tariffs. AFRAM also bids for United States Government cargo.
 
     The majority of the Company's tank barges, all offshore barges and all
ships are inspected by the United States Coast Guard and carry certificates of
inspection. The Company's inland and offshore towing vessels are not subject to
United States Coast Guard inspection requirements; however, the Company's
offshore tugboats and offshore dry bulk and tank barges are built to American
Bureau of Shipping ("ABS") classification standards. These offshore vessels are
inspected periodically by the ABS to maintain the vessels in class. The crew
employed by the Company aboard vessels, including captains, pilots, engineers,
able-bodied seamen and tankermen, are licensed by the United States Coast Guard.
 
     The Company is required by various governmental agencies to obtain
licenses, certificates and permits for its vessels depending upon such factors
as the cargo transported, the waters in which the vessel operates, the age of
the vessels and other factors. The Company is of the opinion that the Company's
vessels have obtained and can maintain all required licenses, certificates and
permits required by such governmental agencies.
 
     The Company believes that safety concerns highlighted by the highly
publicized barge collision with the railroad bridge near Mobile, Alabama in
September, 1993 will result in additional regulations being imposed on the barge
industry in the form of personnel licensing and navigation equipment
requirements. Generally, the Company endorses the anticipated additional
regulations and believes it is currently operating to standards at least the
equal of such anticipated additional regulations.
 
     Jones Act. The Jones Act is a federal law that restricts domestic marine
transportation in the United States to vessels built and registered in the
United States. Furthermore, the Jones Act requires that the vessels be manned by
United States citizens and owned by United States citizens. For corporations,
75% of the corporations' beneficial stockholders must be United States citizens.
The Company presently meets all of the requirements of the Jones Act for its
owned vessels.
 
     Compliance with the United States ownership requirements of the Jones Act
is very important to the operations of the Company and the loss of the Jones Act
status could have a significant negative effect to the Company. The Company
monitors the citizenship requirements under the Jones Act of its employees and
beneficial stockholders and will take any remedial action necessary to insure
compliance with the Jones Act requirements.
 
     The requirements that the Company's vessels be United States built, manned
by United States citizens and the crewing requirements of the Coast Guard
significantly increase the capital and labor costs of U.S. flag vessels when
compared with foreign flag vessels. The Company's business would be adversely
affected if the Jones Act were to be modified so as to permit foreign
competition.
 
     During the past several years, the Jones Act and cargo preference laws, see
"Preference Cargo" below, have come under attack by interests seeking to
facilitate foreign flag competition for cargos reserved for U.S.
 
                                        9

<PAGE>   11
 
flag vessels under the Jones Act and cargo preference laws. These efforts have
been consistently defeated by large margins in the United States Congress. The
Company believes that continued efforts will be made to gain access to such
trade and if such access is successful, it could have an adverse effect on the
Company.
 
     Construction and Operating Differential Subsidies. The Merchant Marine Act
of 1970 permits deferral of taxes on earnings deposited into capital
construction funds. Such funds and interest earned from such funds can be used
for the construction of or acquisition of U.S. flag vessels. In addition, to
encourage U.S. flag vessels to engage in foreign trade, the Merchant Marine Act
provides for direct subsidies to equalize the disparity between costs of U.S.
flag operations and construction and the costs of foreign operations and
construction. The Company does not receive either of these subsidies on any of
its vessels.
 
     Preference Cargo. The Merchant Marine Act of 1936, as amended, requires
that preference be given to U.S. flag vessels in the transportation of certain
United States Government impelled cargos (cargos shipped either by the United
States Government or by a foreign nation, with the aid or guarantee of the
United States Government). Currently, 75% of the Government directed foreign aid
and agricultural assistance programs, which includes grains and other food
concessions, are required to be transported in U.S. flag vessels. Such programs
currently benefit the Company's offshore break-bulk ships and dry bulk barge and
tug units, some of which work primarily in this trade. The transportation of
such cargo accounted for approximately 10% of the Company's transportation
revenues in 1993, 1% in 1992 and 2% in 1991.
 
     The transportation of United States military cargo is also classified as a
preference cargo, which requires the use of U.S. flag vessels, if available. The
Company's AFRAM break-bulk ships have from time to time been chartered by the
Military Sealift Command ("MSC"). Charters to MSC accounted for 2% of the
Company's 1993 transportation revenues. The chartering by the MSC depends upon
the requirements of the United States military for marine transportation of
cargos, and, therefore, depends in part on world conditions and United States
foreign policy. Currently, none of the Company's vessels are chartered to the
MSC.
 
     The preference cargo law is often opposed by agricultural interests which
perceive they would benefit from the ability to transport preference cargos
aboard foreign flag vessels. Like the Jones Act, the Company is of the opinion
that continued efforts will be made to significantly reduce, or remove
completely, the requirement that 75% of such cargos be transported in U.S. flag
vessels. Any reduction in this percentage could have an adverse effect on the
Company's operations and, therefore, the Company will continue to participate in
efforts to preserve the present preference cargo requirements.
 
     User Fees. Federal legislation requires that inland marine transportation
companies pay a waterway user fee in the form of a tax based on propulsion fuel
used by vessels engaged in trade along the inland waterways that are maintained
by the United States Corps of Engineers. Such user fees are designed to help
defray the cost associated with replacing major components of the inland
waterway system such as locks, dams and to build new waterway projects. A
significant portion of the inland waterways on which the Company's vessels
operate are maintained by the Corps of Engineers.
 
     The Company presently pays a waterway tax of 23.4 cents per gallon,
reflecting a 4.3 cents per gallon increase imposed during October, 1993 and a 2
cents per gallon increase imposed in January, 1994. In mid-February, 1993,
President Clinton announced his economic plan which included a proposal to raise
the user tax by an additional $1.00 per gallon, such user tax to be phased in
until taking full effect in 1997. The Company and marine transportation and
shipping groups vigorously protested the user tax proposal, stating that such a
rate increase could significantly reduce the ability of the Company's customers
to be internationally competitive and would place the inland river
transportation system at a competitive disadvantage to other modes of
transportation. These efforts were successful in defeating the $1.00 per gallon
proposal as, in October, 1993, President Clinton signed into law the 1993 budget
which included a 4.3 cents per gallon increase in the waterway user tax,
increasing the total tax to 21.4 cents per gallon. In January, 1994, an
additional 2 cents per gallon was phased in, the result of prior legislation.
Currently, an additional 2 cents per gallon is scheduled to be phased in
effective January 1, 1995, with the user tax rate reaching an ultimate rate of
25.4 cents per gallon.
 
                                       10

<PAGE>   12
 
     There can be no assurance that additional user fees, above the presently
planned amounts, may not be imposed in the future.
 
ENVIRONMENTAL REGULATIONS
 
     The Company's operations are affected by various regulations and
legislation enacted for protection of the environment by the United States
Government, as well as many coastal and inland waterway states.
 
     Water Pollution Regulations. The Federal Water Pollution Act of 1972, as
amended by the Clean Water Act of 1977, the OPA, and the Comprehensive
Environmental Response, Compensation and Liability Act of 1981 impose strict
prohibitions against the discharge of oil and its derivatives or hazardous
substances into the navigable waters of the United States. These acts impose
civil and criminal penalties for any prohibited discharges and impose
substantial liability for cleanup of these discharges and any associated
damages. Certain states also have water pollution laws that prohibit discharges
into waters that traverse the state or adjoin the state and impose civil and
criminal penalties and liabilities similar in nature to those imposed under
federal laws.
 
     The OPA and various state laws of similar intent, substantially increased
over historic levels statutory strict exposure of owners and operators of
vessels for oil spills, both in terms of limit of liability and scope of
damages. The Company considers its most significant pollution liability exposure
to be the carriage of persistent oils (crude oil, asphalt, # 5 oil, # 6 oil,
lube oil and other black oil). The Company restricts the carriage of persistent
oil in inland equipment to double skin barges only. Currently, the only
persistent oil carried in the Company's offshore fleet is in a Sabine
Transportation single skin tank ship which ceases operation at year-end 1994.
 
     One of the most important requirements under OPA is the requirement that
all newly constructed tank ships or tank barges engaged in the transportation of
oil and petroleum products in the United States must be double hulled and all
existing single hull tank ships or tank barges be retrofitted with double hulls
or phased out of domestic service between January 1, 1995 and 2015, in order to
comply with the new standards. See "Offshore Division -- Offshore Tank Ships and
Tank Barge Operations" for a discussion of the effects of OPA on the Company's
offshore equipment.
 
     As a result of several recent highly publicized oil spills, federal or
state legislators could impose additional licensing, certification or equipment
requirements on marine vessel operations. Generally, the Company believes that
it is in a good position to accommodate any reasonably foreseeable regulatory
changes and that it will not incur significant additional costs. The Company
manages its exposure to losses from potential discharges of pollutants through
the use of well maintained and equipped vessels, the safety and environmental
programs of the Company and the Company's insurance program. In addition, the
Company uses double skin barges in the transportation of more hazardous
substances. There can be no assurance, however, that any new regulations or
requirements or any discharge of pollutants by the Company will not have an
adverse effect on the Company.
 
     Financial Responsibility Requirement. Commencing with the Federal Water
Pollution Control Act of 1972, as amended, vessels over three hundred gross tons
operating in United States waters have been required to maintain evidence of
financial ability to satisfy statutory liabilities for water pollution. This
evidence is in the form of a Certificate of Financial Responsibility ("CFR")
issued by the United States Coast Guard. The majority of the Company's tank
barges and all the tank ships are subject to this CFR requirement and the
Company has fully complied since inception of the requirement.
 
     The OPA amended the CFR requirements principally by expanding the scope of
liability subject to the requirements and by significantly increasing the
financial ability requirements. The United States Coast Guard promulgated a
Notice of Proposed Rulemaking on September 26, 1991 that would implement the new
financial responsibility requirements of OPA. The proposed rule, if implemented
in present form, would eliminate the ability of the Company to utilize its
insurance, which greatly exceeds the financial responsibility requirements, as a
means of satisfying the financial ability requirement under OPA. Under the
proposed rule the Company would be required to demonstrate net worth and working
capital equal to the maximum
 
                                       11

<PAGE>   13
 
statutory limit of liability under OPA and the Comprehensive Environmental
Response, Compensation and Liability Act of 1981.
 
     The Company believes it will be able to satisfy the more stringent CFR
requirements currently proposed. The Company is also of the opinion that such
proposed regulations are unnecessarily stringent and that a majority of domestic
and foreign vessel operators subject to the proposed regulation will be unable
to comply.
 
     Clean Air Regulations. The Federal Clean Air Act of 1979 requires states to
draft State Implementation Plans ("SIPs") designed to reduce atmospheric
pollution to levels mandated by this act. Several SIPs provide for the
regulation of barge loading and degassing emissions. The implementation of these
regulations will require a reduction of hydrocarbon emissions released in the
atmosphere during the loading of most petroleum products and the degassing and
cleaning of barges for maintenance or change of cargo. These new regulations
will require operators who operate in these states to install vapor control
equipment on their barges. The Company expects that future toxic emission
regulations will be developed and will apply this same technology to many
chemicals that are handled by barge. Most of the Company's barges engaged in the
transportation of petrochemicals, chemicals and refined products are already
equipped with vapor control systems. Although a risk exists that new regulations
could require significant capital expenditures by the Company and otherwise
increase the Company's costs, the Company believes that, based upon the
regulations that have been proposed thus far, no material capital expenditures
beyond those currently contemplated by the Company or increase in costs are
likely to be required.
 
     Contingency Plan Requirement. Commencing August 8, 1993, OPA and several
state statutes of similar intent require the majority of the vessels operated by
the Company to maintain approved oil spill contingency plans as a condition of
operation. The Company has submitted plans that it believes comply with
requirements, but approval has not yet been granted.
 
     Occupational Health Regulations. The Company's vessel operations are
primarily regulated by the United States Coast Guard for occupational health
standards. The Company's shore personnel are subject to the United States
Occupational Safety and Health Administration regulations. The Coast Guard has
promulgated regulations that address the exposure to benzene vapors, which
require the Company, as well as other operators, to perform extensive
monitoring, medical testing and record keeping of seamen engaged in the handling
of benzene transported aboard vessels. It is expected that these regulations may
serve as a prototype for similar health regulations relating to the carriage of
other hazardous liquid cargos. The Company believes that it is in compliance
with the provisions of the regulations that have been adopted and does not
believe that the adoption of any further regulations will impose additional
material requirements on the Company. There can be no assurance, however, that
claims will not be made against the Company for work related illness or injury
or that the further adoption of health regulations will not adversely affect the
Company.
 
     Insurance. The Company's marine transportation operations are subject to
the hazards associated with operating heavy equipment carrying large volumes of
cargo in a marine environment. These hazards include the risk of loss of or
damage to the Company's vessels, damage to third parties from impact, fire or
explosion as a result of collision, loss or contamination of cargo, personal
injury of employees, pollution and other environmental damages. The Company
maintains insurance coverage against these hazards. Risk of loss of or damage to
the Company's vessels is insured through hull insurance policies currently
insuring approximately $500 million in hull values. Vessel operating
liabilities, such as collision, cargo, environmental and personal injury, are
insured primarily through the Company's participation in protection and
indemnity mutual insurance associations under which the protection against such
hazards is in excess of $1 billion for each incident, except in the case of oil
pollution, which is limited to $500 million for each incident, but is limited to
$700 million for each incident in the case of the Company's tank ships and
ocean-going tank barges. However, because it is mutual insurance, the Company is
exposed to funding requirements and coverage shortfalls in the event claims by
the Company or other members exceed available funds and reinsurance.
 
     Environmental Protection. The Company has a number of programs that were
implemented to further its commitment to environmental responsibility in its
operations. One such program is environmental audits of barge cleaning vendors,
principally directed at management of cargo residues and barge cleaning wastes.
Another program is the participation by the Company in the Chemical
Manufacturer's Association Responsi-
 
                                       12

<PAGE>   14
 
ble Care program and the American Petroleum Institute STEP program, both of
which are oriented to continuously reducing the chemical and petroleum
industries' impact on the environment, including the distribution services area.
 
     Safety. The Company manages its exposure to the hazards incident to its
business through safety, training and preventive maintenance efforts. The
Company places considerable emphasis on safety through a program oriented
towards extensive monitoring of safety performance for the purpose of
identifying trends and initiating corrective action, and for the purpose of
rewarding personnel achieving superior safety performance. The Company believes
that its safety performance consistently places it among the industry leaders,
which is evidenced by what it believes are lower insurance costs (as a
percentage of revenue) and a lower injury level than many of its competitors.
 
     Quality. The Company is totally committed to the concept of quality in its
business philosophy. Through Quality Project Teams and Quality Steering
Committees, the Company's quality commitment is carried throughout the marine
transportation organization. Such committees are dedicated to directing
attention to the continuous improvement of the business processes, focusing
efforts on achieving customer satisfaction the first time, every time and
carefully monitoring statistical measures of the Company's progress in meeting
its quality objectives.
 
     The Company's commitment to quality has been expanded in recent years to
include the installation and maintenance of Quality Assurance Systems in
compliance with the International Quality Standard, ISO 9002 ("ISO"). During
1993, Dixie's offshore operations and Dixie's inland operations were awarded ISO
certifications by ABS Quality Evaluations, a leading registrar of quality
systems. Dixie's offshore operation was the first U.S. flag offshore vessel
operator to achieve this distinction, while Dixie's inland operation was the
second inland marine transportation company to be recognized in the United
States. At present, the balance of the Company's marine transportation
operations are working toward certification during 1994 and 1995. Achieving ISO
certification demonstrates the Company's total commitment to quality throughout
the organization.
 
     The benefits of implementing these Quality Assurance Systems are
significant for the Company's marine transportation operations since such
Quality Assurance Systems provide additional internal controls that improve
operating efficiency. Through documentation, problems are easier to identify and
correct, training is streamlined and favorable operational practices are easier
to identify and install company-wide. In addition, the Company's commitment to
safety and environmental protection is further enhanced.
 
                                 DIESEL REPAIR
 
     The Company is presently engaged in the overhaul and repair of diesel
engines and related parts sales through two operating subsidiaries: Marine
Systems, Inc. ("Marine Systems") and Rail Systems, Inc. ("Rail Systems"). As a
provider of diesel repair services for customers in the marine and rail
industries, the Company's diesel repair segment is divided into the marine and
locomotive markets.
 
MARINE DIESEL REPAIR
 
     Through Marine Systems, the Company is engaged in the overhaul and repair
of marine diesel engines, reduction gear repair, line boring, block welding
services and related parts sales for customers in the marine industry. The
marine diesel repair industry services tugs and towboats powered by large diesel
engines utilized in the inland and offshore barge industries. It also services
marine equipment in the offshore petroleum exploration and well service
industry, the offshore commercial fishing industry and vessels owned by the
United States Government.
 
     Marine Systems operates through four divisions providing in-house and
in-field repair capabilities. These four divisions are: Gulf Coast (based in
Houma, Louisiana); East Coast (based in Chesapeake, Virginia); Midwest (based in
East Alton, Illinois); and West Coast (based in National City, California, with
service facilities in Seattle, Washington and the Pacific Basin). All four of
Marine Systems' divisions are nonexclusive authorized service centers for the
Electromotive Division of General Motors Corporation ("EMD") selling
 
                                       13

<PAGE>   15
 
parts and service. Marine Systems is positioned through the location of its
divisions to serve all of the marine industry of the United States. Marine
Systems' Gulf Coast and Midwest divisions concentrate on larger diesel engines,
including those manufactured by EMD, that are more commonly used in the inland
and offshore barge and oil service industries. The East Coast division overhauls
and repairs the larger EMD engines used by the military and commercial customers
from Connecticut to Miami. The West Coast division concentrates on large EMD
engines used by the offshore commercial fishing industry, the military,
commercial business in the Pacific Northwest and customers in Alaska. Marine
Systems' emphasis is on service to its customers and can send its crews from any
of its locations to service customers' equipment anywhere in the world.
 
     During 1993, Marine Systems enhanced its long-term opportunities with the
addition of two distributorship agreements. Under a long-term agreement with
Paxman Diesels, Ltd. of Colchester, England, a manufacturer of diesel engines,
Marine Systems will sell engine parts and other authorized repair services.
Paxman engines are used primarily by the United States Coast Guard in its patrol
boats. In addition, during 1993, Marine Systems signed a long-term agreement
with Falk Corporation, a marine reduction gear manufacturer, whereby Marine
Systems will sell parts and offer authorized repair services.
 
     The following table sets forth the revenues of Marine Systems for the
periods indicated (dollars in thousands):
 

<TABLE>
<CAPTION>
                                                    YEARS ENDED DECEMBER 31,
                                     -------------------------------------------------------
                                          1991                1992                1993
                                     ---------------     ---------------     ---------------
               ACTIVITY              AMOUNTS      %      AMOUNTS      %      AMOUNTS      %
               --------              -------     ---     -------     ---     -------     ---
    <S>                              <C>         <C>     <C>         <C>     <C>         <C>
    Overhaul and repair............  $19,168      56%    $21,288      60%    $19,954      62%
    Direct parts sales.............   15,120      44      14,465      40      11,998      38
                                     -------     ---     -------     ---     -------     ---
              Total................  $34,288     100%    $35,753     100%    $31,952     100%
                                     =======     ===     =======     ===     =======     ===
    
</TABLE>

 
MARINE CUSTOMERS
 
     Major customers of Marine Systems include inland and offshore dry bulk and
tank barge operators, oil service companies, petrochemical companies, offshore
fishing companies, other marine transportation entities and the United States
Coast Guard, Navy and Army. Marine Systems also provides services to the
Company's fleet, which accounted for approximately 6% of Marine Systems' total
1993 revenues; however, such revenues are eliminated in consolidation, and not
included in the table above. No single customer of Marine Systems accounted for
more than 10% of the Company's revenues in 1993, 1992 or 1991.
 
     Since Marine Systems' business can be cyclical and is linked to the
relative health of the diesel power tug and towboat industry, the offshore
supply boat industry, the military and the offshore commercial fishing industry,
there is no assurance that its present gross revenues can be maintained in the
future. The results of the diesel repair service industry are largely tied to
the industries it serves, and, therefore, have been somewhat influenced by the
cycles of such industries.
 
MARINE COMPETITIVE CONDITIONS
 
     Marine Systems' primary competitors are 10 to 15 independent diesel repair
companies. While price is a major determinant in the competitive process,
reputation, consistent quality and expeditious service, experienced personnel,
access to parts inventories and market presence are significant factors. A
substantial portion of Marine Systems' business is obtained by competitive bids.
 
     Many of the parts sold by Marine Systems are generally available from other
distributors, however, Marine Systems is one of a limited number of distributors
of EMD parts. Although the Company believes it is unlikely, termination of
Marine Systems' relationship with the supplier could adversely affect its
business.
 
LOCOMOTIVE DIESEL REPAIR
 
     Through Rail Systems, the Company is engaged in the overhaul and repair of
locomotive diesel engines and sale of replacement parts for locomotives serving
the shortline and industrial railroads within the
 
                                       14

<PAGE>   16
 
continental United States. In October, 1993, EMD, the world's largest
manufacturer of diesel-electric locomotives, awarded an exclusive United States
rail distributorship to Rail Systems to provide replacement parts, service and
support to these important and expanding markets. The operations of Rail Systems
commenced in January, 1994.
 
     Rail Systems has an office and service facility in Nashville, Tennessee.
The service facility is primarily a parts warehouse. Service to the actual
locomotives are completed at sites convenient for the customer by Rail Systems'
service crews.
 
LOCOMOTIVE CUSTOMERS
 
     Shortline railroads have been a growing component of the United States
railroad industry since deregulation of the railroads in the 1970's. Generally
shortline railroads have been created through the divestiture of branch routes
from the major railroad systems. These short routes provide switching and short
haul of freight, with an emphasized need for responsive and reliable service.
Currently, about 500 shortline railroads in the United States operate
approximately 2,400 EMD engines. Approximately 280 United States industrial
users operate approximately 1,300 EMD engines. Generally, the EMD engines
operated by the shortline and industrial users are older and, therefore, require
more maintenance.
 
LOCOMOTIVE COMPETITIVE CONDITIONS
 
     As an exclusive United States distributor for EMD parts, Rail Systems will
provide all EMD parts sales to these markets, as well as provide rebuilt and
service work. Currently, other than Rail Systems, there are three primary
companies providing service for the shortline and industrial locomotives. In
addition, the industrial companies in some cases, provide their own service.
 
EMPLOYEES
 
     Marine Systems and Rail Systems have approximately 120 employees.
 
PROPERTIES
 
     The principal office of Marine Systems is located in Houma, Louisiana.
Parts and service facilities are located in Houma, Louisiana; in Chesapeake,
Virginia; in East Alton, Illinois; in National City, California; and in Seattle,
Washington. The Chesapeake, East Alton, National City and Seattle locations are
on leased property and the Houma location is situated on approximately four
acres of owned land. The principal office and service facility of Rail Systems
is located in leased facilities in Nashville, Tennessee.
 
                                   INSURANCE
 
     The Company is engaged in the writing of property and casualty insurance
primarily through Universal Insurance Company ("Universal"), a corporation
located in the Commonwealth of Puerto Rico. Since its formation in 1972,
Universal has evolved primarily from an automobile physical damage insurer to a
full service property and casualty insurer, with emphasis on the property
insurance lines. Universal is ranked third among Puerto Rican insurance
companies in terms of policyholders' surplus and admitted assets, and has
achieved an A+ (Superior) rating from A. M. Best Company, a leading insurance
rating agency, for ten consecutive years.
 
     On September 25, 1992, Universal merged with Eastern America Insurance
Company ("Eastern America"), a property and casualty insurance company in Puerto
Rico, with Universal being the surviving entity. As of December 31, 1993, the
Company owned approximately 70% of Universal's voting common stock with the
remaining approximately 30% owned by Eastern America Financial Group, Inc.
("Eastern America Group"), the former parent of Eastern America. The Company
owns 100% of the non-voting common and preferred stocks of Universal. In
accordance with a shareholder agreement among Universal, the Company and Eastern
America Group, through options and redemption rights, Universal has the right to
purchase the Company's interest in Universal over a period of up to 12 years,
the result of which would be Eastern America
 
                                       15

<PAGE>   17
 
Group becoming the owner of 100% of Universal's stock. To date, Universal has
redeemed from the Company 44,933 shares of Class B common stock for a total
redemption price of $8,000,000. Of the total redemptions to date, $7,000,000, or
39,128 shares, were redeemed in July, 1993 and $1,000,000, or 5,805 shares, were
redeemed in December, 1992.
 
INSURANCE OPERATION
 
     Universal writes a broad range of property and casualty insurance.
Universal, however, is primarily a property insurer, generating approximately
66% of its 1993 premiums written from property lines. Universal's principal
property insurance line is automobile physical damage, specifically the vehicle
single-interest risk line, which insures lending institutions against the risk
of loss of the unpaid balance of their automobile loans with respect to financed
vehicles. Vehicle single-interest premiums accounted for 25% of Universal's
consolidated premiums written in 1993.
 
     Universal's insurance business is generated primarily through independent
agents and brokers in Puerto Rico. While no one agent, other than the Eastern
America Insurance Agency, an affiliate of Eastern America Group, accounted for
more than 5% of premiums written in 1993, Universal could be adversely affected
if it were to lose several of its higher producing agents.
 
     Universal maintains an extensive program of reinsurance of the risks that
it insures, primarily under arrangements with reinsurers in London and the
United States. Property lines are reinsured under quota share agreements up to
$5,000,000. Casualty claims above $500,000 are reinsured up to $4,000,000. Ocean
marine and surety lines are reinsured under various pro rata and excess treaties
up to $500,000 and $4,000,000, respectively. Catastrophe automobile physical
damage, fire and allied lines and marine coverage affords recovery of losses
over $500,000, $1,500,000 and $250,000 up to $15,000,000, $64,000,000 and
$3,000,000, respectively.
 
     Because Universal's business is written in Puerto Rico, Universal's
insurance risk is not as diversified as the risk of a carrier that covers a
broader geographical area. A natural catastrophe could cause property damage to
a large number of Universal's policyholders, which would result in significantly
increased losses to Universal. However, the Company believes that Universal's
reinsurance program will limit its net exposure in any such catastrophe.
Property damage from Hurricane Hugo in September, 1989 attributable to Universal
was approximately $34,000,000; however, the net impact was $1,450,000 after
deducting the reinsurance recoverables.
 
     At December 31, 1993, Universal had investments of $122,412,000, consisting
primarily of short-term and available-for-sale securities. At such date,
approximately 97% of that portfolio was invested in United States Government
instruments due to their safety and to the favorable Puerto Rican tax treatment
of such securities.
 
     Universal's insurance business is governed by the Insurance Code of the
Commonwealth of Puerto Rico and in accordance with the regulations issued by the
Commissioner of Insurance of the Commonwealth of Puerto Rico.
 
REINSURANCE OPERATION
 
     Prior to 1991, the Company participated in the international reinsurance
market through Mariner Reinsurance Company Limited ("Mariner"), a wholly owned
subsidiary of the Company, and through Universal. From 1972 through 1990,
Mariner was engaged in the pro rata and excess of loss reinsurance business
dealing principally with brokers in London. This reinsurance consisted of
certain property and casualty reinsurance lines whereby Mariner participated in
the reinsurance of certain Lloyd's underwriters, British insurance companies,
and other foreign insurance companies. In addition, Mariner reinsured certain
treaties of Universal. Effective January 1, 1987, Mariner ceased writing any new
or renewal reinsurance and Mariner's business portfolio was assumed by
Universal; however, in 1989, two reinsurance contracts were transferred back to
Mariner. Effective January 1, 1991, Universal ceased accepting new participation
in the international reinsurance market and the entire reinsurance business
portfolio was assumed by Mariner.
 
                                       16

<PAGE>   18
 
During the 1992 year, Mariner, based on certain delayed and certain timely loss
advices, increased its loss reserves. See "Note 5" to the financial statements
included under Item 8 elsewhere herein for further disclosures on the increase
in the Mariner reserves.
 
     With the 1990 year being the final year for participation in the
reinsurance market, neither Mariner nor Universal was involved in any subsequent
catastrophes such as Hurricane Andrew. Neither Universal nor Mariner does
business with any of the Company's other subsidiaries, nor is there any
connection, other than common ownership.
 
     The Company is currently pursuing strategies to withdraw from the runoff of
Mariner's reinsurance business at the earliest possible date. Such strategies
include the possible commutation of Mariner's open book of reinsurance business
in exchange for a portion of, or all of, Mariner's assets. As of December 31,
1993, the Company had net equity in Mariner of approximately $1,500,000.
 
CAPTIVE INSURANCE OPERATION
 
     Effective January 1, 1994, the Company established a captive insurance
company, Oceanic Insurance Limited ("Oceanic"). The captive will insure only
risks of the Company and its domestic subsidiaries.
 
EMPLOYEES
 
     Universal has approximately 150 employees, all in the Commonwealth of
Puerto Rico. Mariner's and Oceanic's activities are handled by the Company's
employees and by agents in Bermuda.
 
PROPERTIES
 
     Universal's office is located in San Juan, Puerto Rico. The office is
leased with an expiration date of January 31, 1998.
 

I
TEM 2. PROPERTIES
 
     The information appearing in Item 1 is incorporated herein by reference.
The Company and Dixie currently occupy leased office space at 1775 St. James
Place, Suite 300, Houston, Texas under a lease that expires in 1996. The Company
believes that its facilities are adequate for its needs and additional
facilities would be readily available.
 

ITEM 3. LEGAL PROCEEDINGS
 
     See "Note 13" to the financial statements included under Item 8 elsewhere
herein for a discussion of legal proceedings.
 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     During the fourth quarter of the fiscal year December 31, 1993, no matter
was submitted to a vote of security holders through solicitation of proxies or
otherwise.
 
                                       17

<PAGE>   19
 
EXECUTIVE OFFICERS OF THE REGISTRANT
 
     The executive officers of the Company are as follows:
 

<TABLE>
<CAPTION>
                   NAME                       AGE              POSITIONS AND OFFICES
                   ----                       ---              ---------------------
<S>                                           <C>   <C>
George A. Peterkin, Jr.....................    66   President, Director and Chief Executive
                                                    Officer
J. H. Pyne.................................    46   President of Dixie and Executive Vice
                                                    President and Director of Kirby
Brian K. Harrington........................    47   Senior Vice President, Treasurer and
                                                    Assistant Secretary
G. Stephen Holcomb.........................    48   Vice President, Controller, Assistant
                                                    Treasurer and Assistant Secretary
Ronald C. Dansby...........................    54   Vice President -- Inland Chemical Division
Steven M. Bradshaw.........................    45   Vice President -- Inland Refined Products
                                                      Division
Patrick L. Johnsen.........................    48   Vice President -- Offshore Division
Dorman L. Strahan..........................    37   Vice President -- Diesel Repair Division
Mark R. Buese..............................    37   Vice President -- Administration
Jack M. Sims...............................    51   Vice President -- Human Resources
</TABLE>

 
     No family relationship exists between the executive officers or between the
executive officers and the directors. Officers are elected to hold office until
the annual meeting of directors, which immediately follows the annual meeting of
stockholders, or until their respective successors are elected and have
qualified.
 
     George A. Peterkin, Jr. holds a degree in business administration, was
elected a Director of the Company in 1973 and was employed as its President on
October 1, 1976. He had served as a Director of Kirby Industries, Inc. since
1969 and as President of Industries since January, 1973. Prior to that, he was
President of Dixie from 1953 through 1972.
 
     J. H. Pyne holds a degree in liberal arts from the University of North
Carolina and has served as President of Dixie since July, 1984, was elected a
Director of the Company in July, 1988, and was elected Executive Vice President
of the Company in 1992. He also served in various operating and administrative
capacities with Dixie from 1978 to 1984, including Executive Vice President from
January to June, 1984. Prior to joining Dixie, he was employed by Northrop
Services, Inc. and served as an officer in the United States Navy.
 
     Brian K. Harrington is a Certified Public Accountant and holds an M.B.A.
degree from the University of Oregon. He has served as Treasurer and Principal
Financial Officer of the Company and Dixie since May, 1989, Vice President since
September, 1989 and Senior Vice President since 1993. Prior to joining the
Company, he was engaged as a financial consultant with emphasis in the
petrochemical distributing industry, providing services to Dixie and other
companies. Prior to 1979, he was Vice President of Planning, Marketing and
Development for Paktank Corporation.
 
     G. Stephen Holcomb holds a degree in business administration from Stephen
F. Austin State University and has served the Company as Vice President,
Controller, Assistant Treasurer and Assistant Secretary since January, 1989. He
also served as Controller from January, 1987 to January, 1989, and as Assistant
Controller and Assistant Secretary from 1976 through 1986. Prior to that, he was
Assistant Controller of Kirby Industries, Inc. from 1973 to 1976. Prior to
joining the Company, he was employed by Cooper Industries, Inc.
 
     Ronald C. Dansby holds a degree in business administration from the
University of Houston and has served the Company as Vice President -- Inland
Chemical Division since 1993. He also serves as President of Dixie Marine,
joining the Company in connection with the acquisition of Alamo Inland Marine
Co. ("Alamo") in 1989. He had served as President of Alamo since 1974. Prior to
that, he was employed by Alamo Barge Lines and Monsanto Chemical Company from
1962 to 1973.
 
     Steven M. Bradshaw holds a M.B.A. degree from Harvard Business School and
has served the Company as Vice President -- Inland Refined Products Division
since 1993. He also serves as Executive Vice President -- Marketing of Dixie
since 1990 and served in various operating and administrative capacities with
 
                                       18

<PAGE>   20
 
Dixie from 1981 to 1990, including Vice President -- Sales from 1985 to 1990.
Prior to joining Dixie, he was employed by the Ohio River Company and served as
an officer in the United States Navy.
 
     Patrick L. Johnsen holds a degree in nautical science from California
Maritime Academy and has served as Vice President -- Offshore since 1993. Prior
to joining the Company in August, 1993, he served in senior seagoing and
shoreside capacities with Mobil Shipping and Transportation, including
Chartering and United States Fleet Manager. Prior to joining Mobil in 1978, he
was employed at sea by various shipping companies, including Sabine.
 
     Dorman L. Strahan attended Nicholls State University and has served the
Company as Vice President -- Diesel Repair since 1993. He also serves as
President of Marine Systems since 1986 and President of Rail Systems since 1993.
After joining the Company in 1982 in connection with the acquisition of Marine
Systems, he served as Vice President of Marine Systems until 1985.
 
     Mark R. Buese holds a degree in business administration from Loyola
University and has served the Company as Vice President -- Administration since
1993. He also serves as Vice President of Dixie since 1985 and served in various
sales, operating and administrative capacities with Dixie from 1978 through
1985, including President of Western.
 
     Jack M. Sims holds a degree in business administration from the University
of Miami and has served the Company as Vice President -- Human Resources since
1993. Prior to joining the Company in March, 1993, he served as Vice President
- -- Human Resources for Virginia Indonesia Company from 1982 through 1992,
Manager -- Employee Relations for Houston Oil and Minerals Corporation from 1977
through 1981 and in various professional and managerial positions with Shell Oil
Company from 1967 through 1977.
 

                                    PART II
 

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS
 
     The Company's common stock is traded on the American Stock Exchange under
the symbol KEX. The following table sets forth the high and low sales prices for
the common stock for the periods indicated as reported by The Wall Street
Journal.
 

<TABLE>
<CAPTION>
                                                                           SALES PRICES
                                                                         -----------------
                                                                         HIGH         LOW
                                                                         -----       -----
    <S>                                                                  <C>         <C>
    1992
      First Quarter...................................................   $15 3/8     11
      Second Quarter..................................................   $15 1/2     11 1/8
      Third Quarter...................................................   $14         11 1/2
      Fourth Quarter..................................................   $13 1/4     10
    1993
      First Quarter...................................................   $14 3/8     11 3/8
      Second Quarter..................................................   $19 1/8     13 5/8
      Third Quarter...................................................   $22         17
      Fourth Quarter..................................................   $21 3/4     17 5/8
    1994
      First Quarter (through March 14, 1994)..........................   $23 3/8     20 1/8
</TABLE>

 
     As of March 14, 1994, the Company had 28,275,133 outstanding shares held by
approximately 2,300 stockholders of record.
 
     On September 5, 1989, the Company paid a cash dividend of $.10 per share of
common stock to stockholders of record as of August 14, 1989. A similar dividend
was paid in 1988. The Company does not have an established dividend policy.
Decisions regarding the payment of future dividends will be made by the Board of
Directors based on the facts and circumstances that exist at that time. Prior to
1988, the Company had not paid any cash dividends on its common stock since it
became a publicly held company in 1976.
 
                                       19

<PAGE>   21
 

ITEM 6. SELECTED FINANCIAL DATA
 
     The comparative selected financial data of the Company and consolidated
subsidiaries is presented for the five years ended December 31, 1993. The
information should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations of the Company and the
Financial Statements and Schedules included under Item 8 elsewhere herein (in
thousands, except per share amounts):
 

<TABLE>
<CAPTION>
                                                           FOR THE YEARS ENDED DECEMBER 31,
                                                 ----------------------------------------------------
                                                 1989(1)      1990       1991      1992(1)    1993(1)
                                                 --------    -------    -------    -------    -------
<S>                                              <C>         <C>        <C>        <C>        <C>
Revenues:
  Transportation..............................   $ 83,450    109,366    117,003    190,214    283,747
  Diesel repair...............................     18,990     24,894     34,288     35,753     31,952
  Insurance...................................     30,668     31,412     27,947     34,661     52,875
  Investment income...........................      7,045      7,885      6,875      6,795      7,910
  Gain on disposition of assets...............        487        393      1,412        427        355
  Other.......................................        696      1,834      1,508      1,653      1,565
                                                 --------    -------    -------    -------    -------
                                                 $141,336    175,784    189,033    269,503    378,404
                                                 --------    -------    -------    -------    -------
                                                 --------    -------    -------    -------    -------
Earnings before extraordinary item and
  cumulative effect of accounting changes.....   $  8,913     13,500     13,298     13,598     22,829
Extraordinary item(2).........................      2,600      1,900         --         --         --
                                                 --------    -------    -------    -------    -------
  Earnings before cumulative effect of
     accounting changes.......................     11,513     15,400     13,298     13,598     22,829
  Cumulative effect on prior years of
     accounting changes(3)....................         --         --         --    (12,917)        --
                                                 --------    -------    -------    -------    -------
               Net earnings...................   $ 11,513     15,400     13,298        681     22,829
                                                 --------    -------    -------    -------    -------
                                                 --------    -------    -------    -------    -------
Earnings (loss) per share of common stock:
  Primary:
     Earnings before extraordinary item and
       cumulative effect of accounting
       changes................................   $    .39        .60        .61        .60        .86
     Extraordinary item(2)....................        .11        .08         --         --         --
                                                 --------    -------    -------    -------    -------
     Earnings before cumulative effect of
       accounting changes.....................        .50        .68        .61        .60        .86
     Cumulative effect on prior years of
       accounting changes (3).................         --         --         --       (.57)        --
                                                 --------    -------    -------    -------    -------
               Net earnings...................   $    .50        .68        .61        .03        .86
                                                 --------    -------    -------    -------    -------
                                                 --------    -------    -------    -------    -------
  Fully diluted net earnings -- 1991 only.....                          $   .59
                                                                        -------
                                                                        -------
Weighted average shares outstanding...........     22,952     22,700     21,952     22,607     26,527
Net cash provided by continuing operations
  before extraordinary item and changes in
  assets and liabilities......................   $ 19,467     30,032     28,620     35,387     58,998
Capital expenditures..........................   $ 78,926     18,104     38,215    132,537     90,542
Dividend ($.10) per common share..............   $  2,272         --         --         --         --
</TABLE>

 

<TABLE>
<CAPTION>
                                                                     DECEMBER 31,
                                                 ----------------------------------------------------
                                                 1989(1)      1990       1991      1992(1)    1993(1)
                                                 --------    -------    -------    -------    -------
<S>                                              <C>         <C>        <C>        <C>        <C>
Investments...................................   $ 92,112     88,687     94,747    115,838    127,303
Property and equipment, net...................   $100,335    106,437    129,617    237,596    283,413
Total assets..................................   $246,976    253,716    286,002    446,420    563,253
Insurance reserves and claims.................   $ 54,217     55,049     53,587     81,559    116,865
Long-term debt................................   $ 77,025     68,428     80,702    158,922    120,559
Stockholders' equity..........................   $ 87,929     97,112    111,625    122,825    211,749
</TABLE>

 
                                                   (Footnotes on following page)
 
                                       20

<PAGE>   22
 
- ---------------
 
(1) Comparability with prior periods is affected by the acquisitions of Alamo
    and Brent in the second quarter of 1989, the acquisition of Sabine in the
    first quarter of 1992, the acquisition of Ole Man River and merger with
    Scott Chotin in the second quarter of 1992, the merger with Eastern America
    in the third quarter of 1992, the acquisition of TPT in the first quarter of
    1993, the merger with AFRAM Lines in the second quarter of 1993 and the
    acquisition of Chotin Transportation in the fourth quarter of 1993.
 
(2) The extraordinary item for the years ended December 31, 1989 and 1990
    represents the reduction in equivalent income taxes from utilization of
    financial net operating loss carryforwards.
 
(3) Cumulative effect on prior years from the adoption of Statement of Financial
    Accounting Standards ("Accounting Standards") No. 106, "Employers'
    Accounting for Postretirement Benefits Other than Pensions," net of
    equivalent income taxes and Accounting Standards No. 109, "Accounting for
    Income Taxes."
 

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS OF THE COMPANY
 
RESULTS OF OPERATIONS
 
     The Company reported net earnings for the 1993 year of $22,829,000, or $.86
per share, compared with net earnings before the cumulative effect of changes in
accounting principles for the 1992 year of $13,598,000, or $.60 per share, and
net earnings of $13,298,000, or $.61 per share, for 1991. Net earnings for 1992
were $681,000, or $.03 per share.
 
     The Company adopted, effective January 1, 1992, Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other than Pensions" and
Accounting Standards No. 109, "Accounting for Income Taxes." Collectively, the
recognition of the cumulative effect of the adoption of the Accounting Standards
for all prior years reduced the Company's 1992 net earnings by $12,917,000, or
$.57 per share. The adoption of both Accounting Standards also reduced the
Company's 1992 operating earnings after taxes by $1,271,000, or $.06 per share.
 
     Accounting Standards No. 106 established a new accounting principle for the
cost of retiree health care benefits. The cumulative effect on prior years for
the change in accounting principle resulted in an expense after applicable
income taxes of $2,258,000, or $.10 per share. In addition to the impact of the
cumulative effect on prior years, the effect of adoption of Accounting Standards
No. 106 reduced the Company's 1992 operating earnings after applicable income
taxes by $355,000, or $.02 per share.
 
     Accounting Standards No. 109 required a change from the deferred method to
the asset and liability method of accounting for income taxes. The cumulative
effect on prior years for the change in accounting principle resulted in an
expense of $10,659,000, or $.47 per share. The effect of the adoption of
Accounting Standards No. 109 reduced the Company's 1992 operating earnings after
taxes by $916,000, or $.04 per share.
 
     In 1993, the corporate federal income tax rate was increased from 34% to
35%. In accordance with Accounting Standards No. 109, the effect of the increase
in the corporate federal income tax rate resulted in additional federal taxes of
$1,131,000, or $.04 per share, for 1993.
 
     The adoption of the Accounting Standards had no effect on the Company's
cash flow.
 
     The Company conducts operations in three business segments: marine
transportation, diesel repair and property and casualty insurance. A discussion
of each segment follows:
 
MARINE TRANSPORTATION
 
     The Company's marine transportation revenues for the 1993 year totaled
$283,747,000, reflecting a 49% increase when compared with $190,214,000 reported
in 1992 and a 143% increase when compared with $117,003,000 reported in 1991.
The 49% increase for the 1993 year reflects the operations of three marine
transportation companies acquired during the 1992 year, one in March, one in
April and one in June, and the operations of three marine transportation
companies acquired during the 1993 year, TPT Transportation on
 
                                       21

<PAGE>   23
 
March 3, AFRAM on May 14 and Chotin Transportation on December 21, all of which
were accounted for under the purchase method of accounting. Collectively, the
operations of TPT Transportation, AFRAM and Chotin Transportation generated
revenues during 1993 of approximately $61,400,000 since their dates of
acquisition. In addition, the revenues for each year reflect the new and
existing equipment additions to both the inland and offshore fleets made during
the years.
 
     The transportation segment's inland operations were curtailed to some
degree during the 1993 third quarter by flooding in the upper Mississippi River
and the closing of the Algiers Lock at New Orleans. Collectively, the pretax
effect of the two events reduced the 1993 results by an estimated $2.4 million.
 
     Flooding in the upper Mississippi River closed the upper River to marine
transportation movements from June 24 through August 22 and continued to disrupt
deliveries even after that date. Movements north of Cairo, Illinois were
curtailed substantially; several of the inland river towing units were stranded
by the flood; and the segment's lower Mississippi River marine operations were
rescheduled. The closing of the Algiers Lock for repair from July 1 through
September 10 required the inland towing vessels to use alternate routes, which
resulted in time delays. The Algiers Lock is situated along the main artery of
the Intracoastal Waterway near New Orleans.
 
     As a provider of service for both the inland and offshore United States
markets, the marine transportation segment is divided into three divisions
organized around the markets they serve: the Inland Chemical Division, serving
the inland industrial and agricultural chemical markets; the Inland Refined
Products Division, serving the inland refined products market; and the Offshore
Division, which serves the offshore petroleum products, container, dry bulk and
palletized cargo markets.
 
     Movements of inland industrial chemicals for the petrochemical processing
industry, handled by the segment's Inland Chemical Division, were intermittently
weak during the 1993 year. In the latter part of the 1993 first quarter, the
Inland Chemical Division's equipment utilization and rates reflected signs of
improvement from the recessionary pressures which negatively influenced the
market during all of 1992 as well as the second half of 1991. While the
improvement continued through the 1993 second quarter, equipment utilization was
somewhat lower during the 1993 third quarter and remained static during the
balance of 1993. Budgetary constraints by petrochemical manufacturers have held
back needed rate increases.
 
     Movements of liquid fertilizer and anhydrous ammonia have remained at high
levels for the 1993, 1992 and 1991 years due to continued heavy usage of
fertilizer products and consistent export sales. For the 1993 year, the
movements of liquid fertilizer were conducted well past the normal fertilizer
season, as fertilizer terminals which could not be reached during the flooding
in the upper Mississippi River were supplied and the demand for fertilizer was
enhanced due to flooding of the River farmlands.
 
     The Inland Refined Products Division, which moves inland refined products
(gasoline, diesel fuel and jet fuel) reflected improvements during the 1993 year
primarily due to a strong demand for gasoline and the resupplying of terminals
in the upper Mississippi River flood areas. Such growth in demand benefitted
equipment utilization and enabled modest rate increases. The Inland Refined
Products Division, formed in 1992 with the acquisitions by Sabine Transportation
and OMR Transportation, reflected weakness of demand during the 1992 year, as
the peak driving season fell below expectations.
 
     Revenues from the Offshore Division improved significantly during the 1993
year, primarily from the merger with AFRAM Lines on May 14, 1993. Throughout
1993, the Division's dry bulk, container and palletized cargo vessels have
remained in heavy demand, being taken out of service only for scheduled
maintenance. The merger with AFRAM Lines has improved the Division's ability to
transport cargos for United States Government aid programs and military use. The
Offshore Division's liquid market, however, has shown price and demand weakness
due to excess capacity in the offshore liquid market, particularly affecting
spot prices. During 1993, certain equipment was idle due to lack of business.
For the 1992 year, revenues from the Offshore Division were significantly
enhanced with the addition of Sabine Transportation's six tank ships, all of
which were fully booked, except for periods of scheduled maintenance.
 
     Each year includes gains from the disposition of primarily single skin
barges and other surplus or obsolete transportation assets. Such gains totaled
$525,000 for 1993, $494,000 for 1992 and $1,414,000 for 1991.
 
                                       22

<PAGE>   24
 
     Costs and expenses, excluding interest expense, for the marine
transportation segment for the 1993 year increased to $242,553,000, an increase
of 49% over the comparable 1992 expense of $162,973,000 and 140% over 1991 costs
and expenses of $100,884,000. Most of the increases for both comparable periods
reflect the costs and expenses, including depreciation, associated with the
acquisitions and mergers consummated during the 1993 and 1992 years. In
addition, the increases reflect higher equipment costs, employee health and
welfare costs, general and administrative costs and inflationary increases in
costs and expenses.
 
     The marine transportation pretax earnings for 1993 were $35,668,000, an
increase of 63% over 1992 pretax earnings of $21,836,000 and 164% over 1991
pretax earnings of $13,507,000.
 
DIESEL REPAIR
 
     The Company's diesel repair segment reported diesel repair revenues of
$31,952,000 for 1993 reflecting an 11% decrease compared with $35,753,000 for
1992 and a 7% decrease compared with $34,288,000 for 1991. With diesel repair
facilities in five locations nationwide that cater to specific markets, each
location has been influenced by different economic or environmental conditions
during the three comparable periods. The East Coast facility, catering to the
military, has been slowed in 1993 and 1992 by United States military reductions
and government budget restraints. The Midwest facility, which caters to the
inland barge industry, has been hampered to some degree in 1993 and 1992 by the
recession, however, the 1993 year was significantly affected by the flooding in
the upper Mississippi River during the 1993 third quarter. Revenues from the
segment's Midwest facility were reduced by an estimated $900,000, as customers
affected by the flooding either curtailed or postponed scheduled repairs and
overhauls and significantly curtailed parts purchases. The Gulf Coast facility,
tied to the inland and offshore barge and oil service industries was hampered
during 1992 by the recession, however, during 1993, business has remained
relatively constant. The West Coast facilities, whose primary emphasis is the
offshore tuna fishing industry, were negatively affected during 1993 and 1992 by
deferred maintenance of equipment by their commercial fishing customers due to
low tuna prices caused by the worldwide surplus of tuna. Diesel repair revenues
increased by $6,000,000 in 1992 and $2,000,000 in 1991 due to the West Coast
facility acquisition in July, 1991.
 
     Costs and expenses, excluding interest expense, for the diesel repair
segment for 1993 totaled $30,121,000, compared with $33,328,000 for 1992 and
$31,904,000 for 1991. The decrease of 10% for 1993 when compared with 1992
reflects the overall decline in revenues and its effect on the segment's profit
margins. The increase for 1992 and 1991 reflects the growth of the segment's
direct parts sales and overhaul and repair revenues. In addition, for the 1992
year, the increase in costs and expenses partially reflects the opening of the
Seattle facility and the acquisition of the West Coast facility in 1991, which
also increased the 1991 costs and expenses.
 
     The diesel repair segment's pretax earnings for 1993 were $1,577,000, a
decrease of 30% compared with 1992 pretax earnings of $2,263,000 and 29% under
1991 pretax earnings of $2,213,000.
 
PROPERTY AND CASUALTY INSURANCE
 
     The Company's property and casualty insurance segment, which is conducted
primarily through Universal, reported premiums written of $80,993,000 for 1993,
compared with $52,830,000 for 1992 and $36,481,000 for 1991. The 53% increase in
premiums written during 1993 compared with 1992 reflected business generated
from Eastern America's portfolio brought in with the merger of Eastern America
with and into Universal in September, 1992, a new government policy, two vehicle
single-interest portfolio transfers and the addition of vehicle single-interest
business from two financial institutions, which was the result of an improvement
in automobile sales during 1993. The 45% increase in premiums written during
1992 compared with 1991 reflected the increased emphasis in participation in the
commercial multi-peril and double-interest lines of business, as premium volumes
in the automobile single-interest line remained low due to depressed new
automobile sales in Puerto Rico. Premiums written for the 1992 year also
included $3 million of single-interest premiums associated with a portfolio
transfer which occurred during the 1992 first quarter. In addition, the 1992
year reflected the merger of Eastern America with and into Universal. Premiums
written in
 
                                       23

<PAGE>   25
 
1991 reflected the reduction in the automobile single-interest line, offset to
some degree by increased participation in the commercial multiple-peril and
automobile double-interest lines of business.
 
     Net premiums earned for 1993 totaled $48,243,000 compared with $29,552,000
for 1992 and $23,561,000 for 1991. The 63% increase in net premiums earned
during 1993 compared with 1992 reflected the business generated from the Eastern
America portfolio as well as a significant increase in the single-interest line
of business during 1993. Net premiums earned for all three years were negatively
affected by the high reinsurance costs for the commercial multiple-peril line
associated with the ceding of a portion of the gross premium under the segment's
reinsurance program. Due to the number of worldwide catastrophic events within
the past few years, the cost of the segment's reinsurance program continued to
substantially increase.
 
     Investment income is generated primarily from the segment's investment in
United States Treasury securities, due to their investment safety and favorable
Puerto Rico tax treatment. Investment income totaled $7,741,000 for 1993
compared with $6,454,000 for 1992 and $5,994,000 for 1991. The segment, prior to
the decline in interest rates, procured a constant yield from the purchase of
United States Treasury securities with fixed rates. Even though interest rates
on investment securities have remained low since 1991, the insurance segment's
investment portfolio has reflected excellent market performance during 1992 and
1993. In addition, the 1993 investment income reflected the full year effect of
the merger with Eastern America. The investment portfolio of Eastern America at
the date of the merger totaled approximately $21 million. In addition, the
insurance segment recognized investment gains of $1,164,000 in 1993, $1,478,000
in 1992 and $853,000 in 1991.
 
     Losses, claims and settlement expenses for 1993 totaled $37,496,000
compared with $26,289,000 for 1992 and $18,103,000 for 1991. The 43% increase
for 1993 compared with 1992 reflected the merger with Eastern America as well as
the significant increase in business volume, particularly from the
single-interest line. In addition, the 1992 year reflected an abnormal year for
losses from the commercial multiple-peril line, which experienced high losses
from specific events. The 1992 year also included a reserve of $2,500,000
recorded in Mariner, the Company's Bermuda reinsurance subsidiary, which
participated in the writing of property and casualty lines of reinsurance from
1970 through 1990. During 1992, Mariner received certain delayed large loss
advices, which resulted in the increase in its loss reserves. The 1990 year was
the last year for participation in the reinsurance market. For the 1991 year,
the insurance segment's loss experience was favorable, the result of a decrease
in losses from the commercial multiple-peril and automobile single-interest
lines.
 
     Management continues to review the runoff of the reinsurance business
previously written by Mariner with the intent of seeking an expedient withdrawal
from this business and closure of Mariner's activities, including consideration
of commutation of Mariner's book of business. A commutation would entail the
transfer of liability from known and incurred but not reported losses to a
second party in exchange for a portion of, or all of, Mariner's assets. As of
December 31, 1993, the Company had net equity in Mariner of approximately
$1,500,000.
 
     Policy acquisition costs for 1993 totaled $11,085,000 compared with
$8,649,000 for 1992 and $7,181,000 for 1991. Generally, policy acquisition costs
for each year increased due to the higher commission rates associated with the
property insurance lines. The results for the 1993 and 1992 year also reflected
the merger with Eastern America.
 
     As of December 31, 1993 and 1992, the Company owned 70% and 75%,
respectively, of the voting common stock of Universal, with the balance owned by
Eastern America Group. The Company owned 100% of the non-voting common and
preferred stocks. Minority interest expense for the 1993 year totaled
$1,623,000.
 
     The Company's portion of the property and casualty insurance segment's
pretax earnings totaled $4,539,000 for 1993, compared with $1,108,000 for 1992
and $4,891,000 for 1991.
 
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
 
     In October, 1990, the Board of Directors approved the authorization to
purchase 2,000,000 shares of common stock. Currently, approximately 1,700,000
shares remain under the repurchase authorization. The
 
                                       24

<PAGE>   26
 
Company is authorized to purchase the common stock on the American Stock
Exchange and in private negotiated transactions. When repurchasing common
shares, the Company is subject to price, trading volume and other market
considerations. Shares repurchased may be used for reissuance upon the exercise
of stock options and other purposes. The purchase of additional shares depends
on numerous conditions, including the price of the common stock, capital
investment opportunities and other factors. From 1988 through January, 1991, the
Company purchased approximately 2,300,000 shares of common stock at an average
price of $5.71 per share.
 
     The Company and Dixie have separate revolving credit agreements with an
established line of credit of $50,000,000 each. Proceeds under the credit
agreements, which provide for interest rates, based at the Company's option, on
the prime rate, Eurodollar rate or CD rates, can be used for general corporate
purposes, the purchase of new or existing equipment or for business
acquisitions. As of March 14, 1994, the Company and Dixie had $33,600,000 and
$33,900,000, respectively, available for takedown under the credit agreements.
The Company and Dixie entered into the separate credit agreements in April, 1993
providing for aggregate borrowings of up to $30,000,000 and $50,000,000,
respectively. In August, 1993, the Company's line of credit was increased to
$50,000,000.
 
     In March, 1992, Dixie entered into a $20,000,000 acquisition credit
facility with Texas Commerce Bank National Association which provided the
transportation segment with in-place financing for possible future acquisitions.
On June 1, 1992, the acquisition credit facility was activated with the merger
of Scott Chotin into a subsidiary of the Company and in August, 1992, the
acquisition credit facility was retired.
 
     In August, 1992, Dixie sold $50,000,000 of 8.22% notes, due June 30, 2002,
in a private placement. Proceeds from these notes were used to retire the
$20,000,000 acquisition credit facility with Texas Commerce Bank National
Association and the retirement of two $5,000,000, 10% subordinated promissory
notes originally issued as part of the purchase in 1989 of the assets of Brent,

with the balance of the proceeds used to reduce the amount outstanding under
Dixie's $50,000,000 revolving credit agreement.
 
     In May, 1993, the Company called for redemption on June 4, 1993, the entire
$50,000,000 aggregate principal amount of its 7 1/4% Convertible Subordinated
Debentures due 2014 ("Debentures") issued in October, 1989 at a redemption price
of 105.075% of the principal amount of the Debentures, plus accrued interest on
the principal of the Debentures from April 1, 1993 to the date fixed for
redemption. Prior to, or on May 27, 1993, the fifth business day prior to the
date set for redemption under the Debentures, the holders of the entire
$50,000,000 of Debentures elected to convert such Debentures into common stock
of the Company at a conversion price of $11.125 per share. The conversion of the
Debentures increased the issued and outstanding common stock of the Company by
4,494,382 shares.
 
  Business Acquisitions and Developments
 
     Following the Company's stated strategy of acquiring businesses to
complement its existing operations, the Company has been actively engaged in the
acquisition of, or merger with, companies during the 1991, 1992 and 1993 years.
 
     In May, 1991, Brent Transportation purchased for $2,550,000 in cash all of
the operating assets of International Barges, Inc. The assets consist of three
cryogenic inland tank barges currently operating under a term contract
transporting industrial anhydrous ammonia. The acquisition incorporates the
handling of industrial anhydrous ammonia with Brent Transportation's established
market position in the transporting of anhydrous ammonia for use in agriculture.
 
     In July, 1991, Marine Systems purchased the operating assets of Steve
Ewing's Diesel Service, Inc., a National City, California based company engaged
in the repair and overhaul of marine diesel engines and related parts sales. The
acquired assets, consisting of inventory and fixed assets, are operated under
the name of Ewing Marine Systems, Inc. The acquisition expanded the diesel
repair segment's markets to the West Coast and the Pacific Basin and enables the
segment to offer nationwide service to its customers.
 
     On March 13, 1992, the Company completed the purchase of Sabine for
$36,950,000 in cash. Sabine, located in Port Arthur, Texas, was engaged in
coastal and inland marine transportation of petroleum products
 
                                       25

<PAGE>   27
 
and in harbor tug services. The purchased properties included six U.S. flag tank
ships, 33 owned and five leased inland tank barges, 11 owned and four leased
towboats, three owned bowboats, eight owned tugboats, land and buildings. The
Company has continued to use the assets of Sabine in the same business that
Sabine conducted prior to the purchase. The purchase was financed through
$9,950,000 of existing cash balances, borrowings of $9,000,000 under the
transportation segment's bank revolving credit agreement, as well as an
$18,000,000 bank term loan with a negative pledge of the assets acquired from
Sabine. Based on audited information, assets acquired from Sabine had total
revenues for the years ended December 31, 1990 and 1991 of $62,886,000 and
$62,986,000, respectively. Operations of the assets acquired from Sabine are
included as part of the Company's operations effective March 13, 1992, in
accordance with the purchase method of accounting.
 
     On April 2, 1992, OMR Transportation completed the purchase of Ole Man
River for $25,575,000 in cash. Ole Man River, located in Vicksburg, Mississippi,
was engaged in inland marine tank barge transportation of petroleum products
along the Mississippi River System and the Gulf Intracoastal Waterway. The
purchased properties included 24 owned and two leased tank barges, eight owned
towboats, land and buildings. The Company has continued to use the assets of Ole
Man River in the same business that Ole Man River conducted prior to the
purchase. The asset purchase was funded by borrowings under the transportation
segment's bank revolving credit agreement. Based on audited information, Ole Man
River had total revenues for the years ended December 31, 1990 and 1991 of
$14,676,000 and $15,550,000, respectively. Operations of the assets acquired
from Ole Man River are included as part of the Company's operations effective
April 2, 1992, in accordance with the purchase method of accounting.
 
     On June 1, 1992, the Company completed the acquisition of Scott Chotin by
means of a merger with and into a wholly owned subsidiary of the Company for an
aggregate consideration of approximately $34,900,000. Pursuant to the Agreement
and Plan of Merger, the Company issued 870,892 shares of common stock, valued at
$12.625 per share, to certain Scott Chotin shareholders and paid the
shareholders of Scott Chotin approximately $9,700,000 in cash in exchange for
the working capital and all of the outstanding common stock of Scott Chotin,
discharged existing debt of Scott Chotin of approximately $7,400,000 and paid to
certain executives and shareholders of Scott Chotin $5,000,000 for agreements
not to compete. In addition, the Company recorded a liability reserve for the
issuance, over a three-year period after the closing, of up to 170,000
additional shares of the Company's stock contingent upon the resolution of
certain potential liabilities resulting from operations of Scott Chotin prior to
the merger. In June, 1993, the Company issued 22,500 shares under the contingent
stock agreement. Scott Chotin, located in Mandeville, Louisiana, was engaged in
inland marine tank barge transportation of industrial chemicals and asphalt
along the Mississippi River System and the Gulf Intracoastal Waterway. Scott
Chotin's inland fleet consisted of 29 owned tank barges, six of which operate in
the asphalt trade, 10 owned dry cargo barges, eight owned towboats, land and
buildings. The Company has continued to use the assets of Scott Chotin in the
same business that Scott Chotin conducted prior to the merger. The cash portion
of the merger was financed through existing cash balances, borrowings under a
subsidiary of the Company's $20,000,000 acquisition line of credit, as well as a
$16,000,000 bank term loan with a negative pledge of the assets. Based on
audited information, Scott Chotin recorded total revenues for the years ended
May 31, 1991 and 1992 of $20,894,000 and $18,817,000, respectively. Scott
Chotin's operations are included as part of the Company's operations effective
June 1, 1992, in accordance with the purchase method of accounting.
 
     On September 25, 1992, the Company completed the acquisition of Eastern
America, a property and casualty insurance company in Puerto Rico, by means of a
merger of Eastern America with and into the Company's insurance subsidiary,
Universal, with Universal being the surviving entity. Presently, the Company
owns approximately 70% of the voting common stock of Universal, with the
remaining approximately 30% owned by Eastern America Group, the former parent of
Eastern America. Through options and redemption rights included in the merger
transaction, Eastern America Group could become the owner of up to 100% of
Universal's stock over a period of up to 12 years. Based on audited information,
Eastern America reported total revenues of $11,951,000 and $13,544,000 for the
years ended December 31, 1990 and 1991, respectively. To date, Universal has
redeemed a total 44,933 shares of its common stock from the Company at a price
of $8,000,000. In July, 1993, Universal redeemed 39,128 shares for $7,000,000
and in December, 1992, Universal
 
                                       26

<PAGE>   28
 
redeemed 5,805 shares for $1,000,000. Eastern America's operations are included
as part of the Company's operations effective September 25, 1992, in accordance
with the purchase method of accounting.
 
     On March 3, 1993, TPT Transportation completed the purchase of TPT, a
marine transportation division of Ashland Oil, Inc., for approximately
$24,400,000 in cash, subject to post-closing adjustments. TPT was engaged in the
inland marine transportation of industrial chemicals and lube oil primarily from
the Gulf Intracoastal Waterway to customers primarily on the upper Ohio River.
TPT's inland fleet consisted of 61 owned and six leased double skin tank barges,
four owned and one leased single skin tank barges and five owned towboats. Of
the 72 barges, 32 are equipped with vapor control systems while 30 barges are
dedicated to the transportation of lube oil, where vapor control equipment is
not required. The Company has continued to use the assets of TPT in the same
business that TPT conducted prior to the purchase. The asset purchase was
financed under the transportation segment's bank revolving credit agreement.
Based on unaudited information, TPT had total revenues for the fiscal year ended
September 30, 1992, of $17 million. The asset purchase was accounted for in
accordance with the purchase method of accounting effective March 3, 1993.
 
     On May 14, 1993, the Company completed the acquisition of AFRAM Lines by
means of a merger with and into a wholly owned subsidiary of the Company, for an
aggregate consideration of $16,725,000. In addition, the merger provides for an
earnout provision not to exceed $3,000,000 in any one year and not to exceed a
maximum of $10,000,000 over a four year period. The earnout provision will be
recorded as incurred as an adjustment to the purchase price. As of December 31,
1993, a $2,250,000 earnout provision, which accrues from April 1 to March 31 of
the following year, had been recorded. Under the terms of the merger, the
Company issued 1,000,000 shares of its common stock in exchange for all of AFRAM
Lines outstanding stock and paid certain executives and shareholders of AFRAM
Lines agreements not to compete totaling $2,000,000. AFRAM Lines located in
Houston, Texas, was engaged in the worldwide transportation of dry bulk,
container and palletized cargos, primarily for Departments and Agencies of the
United States Government. The Company has continued to use the assets of AFRAM
Lines in the same business that AFRAM Lines conducted prior to the merger. AFRAM
Lines fleet consisted of three U.S. flag container and break-bulk ships which
specialize in the transportation of United States Government military and aid
cargos. Based on audited information, AFRAM Lines recorded transportation
revenues for the years ended June 30, 1992 and 1991 of $38,758,000 and
$29,817,000, respectively. Unaudited historical transportation revenues for the
year ended December 31, 1992 were $46,268,000. The merger, effective as of April
1, 1993, was accounted for in accordance with the purchase method of accounting.
The financial results for the 1993 year include the net earnings from the
operations from May 14, 1993, as the net earnings from April 1, 1993 to May 14,
1993, were recorded as a reduction of the purchase price.
 
     In May, 1993, Marine Systems enhanced its long-term opportunities with the
addition of two distributorship agreements. Under a long-term agreement with
Paxman Diesels, Ltd. of Colchester, England, a manufacturer of diesel engines,
Marine Systems will sell engine parts and offer authorized repair services. In
addition, in May, 1993, Marine Systems signed a long-term agreement with Falk
Corporation, a marine reduction gear manufacturer, whereby Marine Systems will
sell parts and offer authorized repair services.
 
     As an expansion of the diesel repair segment, the Company is engaged
through Rail Systems in the overhaul and repair of locomotive diesel engines and
sale of replacement parts for locomotives, serving shortline and industrial
railroads within the continental United States. In October, 1993, EMD, the
world's largest manufacturer of diesel-electric locomotives, awarded an
exclusive shortline and industrial rail distributorship to Rail Systems to
provide replacement parts, service and support to these important and expanding
markets. The operations of Rail Systems commenced in January, 1994.
 
     On December 21, 1993, OMR Transportation completed the cash purchase of
certain assets of Chotin Transportation. Chotin Transportation, located in
Cincinnati, Ohio, was engaged in the inland marine transportation of refined
products by tank barge primarily from the lower Mississippi River to the Ohio
River under a long-term contract with a major oil company. The purchased
properties included 50 single skin and three double skin inland tank barges and
a transportation contract, which expires in the year 2000. The asset purchase
was funded by borrowings under the transportation segment's bank revolving
credit agreement.
 
                                       27

<PAGE>   29
 
Operations of the assets acquired from Chotin Transportation are included as
part of the Company's operations effective December 21, 1993, in accordance with
the purchase method of accounting.
 
     In March, 1994, the Company through its subsidiary, Americas Marine, began
all-water marine transportation services between Memphis, Tennessee and Mexico,
Guatemala, Honduras and El Salvador. The new transportation service utilizes a
chartered foreign flag river/ocean vessel which offers direct sailing between
the locations. The new service provides exporters and importers in the north,
central and mid-south states with a direct shipping alternative between the
locations on a fourteen day round trip basis. The direct all-water liner service
accepts 20 foot and 40 foot containers, including refrigerated and tank
containers, as well as other cargo on a space available basis.
 
  Capital Expenditures
 
     The Company continued to enhance its existing operations through the
acquisitions of existing equipment during the 1991, 1992 and 1993 years and
construction of new equipment during the 1991 and 1992 years.
 
     During 1991, six new 29,000 barrel capacity double skin inland tank barges,
which were constructed under a contract entered into in May, 1990, were placed
in service. Three of the barges were placed into service in July, one in August
and two in September. The six barges cost approximately $8,000,000, including
enhancements after delivery. In March, 1991, an option was exercised to purchase
six additional 29,000 barrel capacity double skin inland tank barges at a total
purchase price including enhancements after delivery, of approximately
$8,000,000. The first barge was placed in service in November, 1991, followed by
one barge each month through March, 1992. The remaining barge was placed in
service in May, 1992.
 
     Through a 50% partnership with EFC, one dry cargo barge and tug unit for
use in the offshore market was purchased for approximately $5,500,000, with
capitalized restorations and modifications to the barge and tug unit of
approximately $7,500,000. The equipment was placed in service in May, 1991.
 
     In July, 1992, a 165,000 barrel double skin ocean-going tank barge and tug
unit was purchased for approximately $9,200,000. The unit is currently working
in the offshore refined products trade.
 
     In July, 1992, four existing inland towboats were purchased for a total
purchase price of $1,650,000. The towboats are being used in the industrial
chemical market.
 
     In July, 1992, the diesel repair segment expanded its market to the Pacific
Northwest with the opening of a service facility in Seattle, Washington, serving
both the inland and offshore marine industries. Emphasis is focused on the
repair of diesel engines in the marine transportation industry and various
governmental agencies.
 
     In August, 1992, a 17,000 barrel capacity pressure barge which was
constructed under a contract entered into in September, 1991, was placed into
service in the industrial chemical market. Cost of the barge was approximately
$2,700,000.
 
     In October, 1993, three inland towboats were purchased for approximately
$895,000. The towboats are being used in the refined products market.
 
     In addition to the new and existing transportation equipment mentioned
above, during 1991, 1992 and 1993, the Company's transportation subsidiaries
continued to add to their fleet through separate purchases of existing
equipment. In 1991, two existing towboats and seven existing double skin inland
tank barges were purchased for use in the industrial and agricultural chemical
market. In 1992, four inland tank barges were purchased and renovated for use in
the agricultural market and an inland towboat was purchased for use in the
refined products market. In 1993, three existing double skin inland tank barges
were purchased and renovated for use in the agricultural market and one inland
towboat was purchased for use in the fleeting and shifting operation.
 
                                       28

<PAGE>   30
 
  Liquidity
 
     Within the past three years, the Company has generated significant cash
flow from its operating segments to fund its capital expenditures, asset
acquisitions, debt service and other operating requirements. During 1993, 1992
and 1991, the Company generated net cash provided by operating activities of
$61,614,000, $38,372,000 and $26,498,000, respectively.
 
     During each year, inflation has had a relatively minor effect on the
financial results of the Company. The marine transportation segment has
long-term contracts which generally contain cost escalation clauses whereby
certain costs, including fuel can be passed through to its customers, while the
segment's short-term, or spot business, is based principally on current prices.
In addition, the marine transportation assets acquired and accounted for using
the purchase method of accounting were adjusted to a fair market value and,
therefore, the cumulative long-term effect on inflation was reduced. The repair
portion of the diesel repair segment is based on prevailing current market
rates. For the property and casualty insurance segment, 97% of its investments
were classified as available-for-sale or short-term investments, which consists
primarily of United States Governmental instruments.
 
     Universal is subject to dividend restrictions under the stockholders'
agreement between the Company, Universal and Eastern America Group. In addition,
Universal is subject to industry guidelines and regulations with respect to the
payment of dividends.
 
     The Company has no present plan to pay dividends on common stock in the
near future.
 

I
TEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     The response to this item is submitted as a separate section of this report
(see Item 14, page 60).
 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
     On October 20, 1992, the Company engaged the accounting firm of KPMG Peat
Marwick to serve as the principal independent public accountant. The services of
the accounting firm of Deloitte & Touche, who previously served as the Company's
independent public accountant, were terminated effective October 20, 1992,
except for the Company's subsidiary, Universal, which continues to be audited by
Deloitte & Touche. The engagement of KPMG Peat Marwick to serve as the principal
independent public accountant and the termination of Deloitte & Touche were
approved by unanimous consent of the Company's Board of Directors upon the
recommendation by the Company's Audit Committee.
 
     With respect to the audit for the year ended December 31, 1991 and the
unaudited period to October 20, 1992, there have been no disagreements with
Deloitte & Touche on any matters of accounting principles or practices,
financial statement disclosure, or accounting scope or procedure. The report of
Deloitte & Touche on the financial statements for the year ended December 31,
1991 contained no adverse opinion or disclaimer of opinion and was not qualified
or modified as to uncertainty, audit scope or accounting principles.
 

                                    PART III
 

ITEMS 10 THROUGH 13.
 
     The information for these items has been omitted inasmuch as the registrant
will file a definitive proxy statement with the Commission pursuant to the
Regulation 14A within 120 days of the close of the fiscal year ended December
31, 1993, except for the information regarding executive officers which is
provided in a separate item caption, "Executive Officers of the Registrant," and
is included as an unnumbered item following Item 4 in Part I of this Form 10-K.
 
                                       29

<PAGE>   31
 

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To the Board of Directors and Stockholders of
Kirby Corporation
 
     We have audited the accompanying consolidated statements of earnings,
stockholders' equity and cash flows of Kirby Corporation and its subsidiaries
for the year ended December 31, 1991. Our audit also included the financial
statement schedules listed in Part IV, Item 14, for the year ended December 31,
1991. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on such financial statements and financial statement schedules based on
our audit.
 
     We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
 
     In our opinion, such consolidated financial statements present fairly, in
all material respects, the results of operations, changes in stockholders'
equity and cash flows of Kirby Corporation and its subsidiaries for the year
ended December 31, 1991 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedules, when
considered in relation to the consolidated financial statements for the year
ended December 31, 1991, taken as a whole, present fairly in all material
respects the information set forth therein.
 
                                            DELOITTE & TOUCHE
 
Houston, Texas
March 2, 1992, except for Note 2

  as to which the date is
  March 18, 1992
 
                                       30

<PAGE>   32
 

                          INDEPENDENT AUDITORS' REPORT
 
To the Board of Directors of
Kirby Corporation:
 
     We have audited the accompanying consolidated balance sheets of Kirby
Corporation and consolidated subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of earnings, stockholders' equity and cash
flows for the years then ended. In connection with our audits of the
consolidated financial statements, we have also audited the related financial
statement schedules. These consolidated financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. The financial statements and financial statement
schedules of Kirby Corporation and consolidated subsidiaries as of and for the
year ended December 31, 1991 were audited by other auditors whose report thereon
dated March 2, 1992, except for Note 2 to which the date is March 18, 1992,

expressed an unqualified opinion on those statements. We did not audit the
consolidated financial statements of Universal Insurance Company and its
subsidiaries, a 70 percent owned subsidiary, which statements reflect total
assets constituting 33 percent and 32 percent and total revenues constituting 14
percent and 16 percent in 1993 and 1992, respectively, of the related
consolidated totals. Those statements and the amounts included in the related
1993 and 1992 financial statement schedules were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for Universal Insurance Company and its subsidiaries, is based
solely on the report of the other auditors.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
 
     In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Kirby Corporation and subsidiaries
as of December 31, 1993 and 1992, and the results of their operations and their
cash flows for the years then ended in conformity with generally accepted
accounting principles. Also, in our opinion, based on our audits and the report
of the other auditors, the related financial statement schedules, when
considered in relation to the 1993 and 1992 basic consolidated financial
statements taken as a whole, present fairly, in all material respects the
information set forth therein.
 
     As discussed in note 3 to the consolidated financial statements, the
Company changed its method of accounting for investments in equity securities in
1993 to adopt the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." As discussed in note 5 to the
consolidated financial statements, the Company adopted the provisions of the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 113, "Accounting and Reporting for Reinsurance of Short-Duration
and Long-Duration Contracts" in 1993.
 
     As discussed in note 7 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1992 to adopt the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." As discussed in
note 10 to the consolidated financial statements, the Company adopted the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions" in 1992.
 
                                          KPMG PEAT MARWICK
 
Houston, Texas
February 21, 1994
 
                                       31

<PAGE>   33
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                                 BALANCE SHEETS
                           DECEMBER 31, 1992 AND 1993
 
                                     ASSETS
 

<TABLE>
<CAPTION>
                                                                           1992         1993
                                                                         --------     --------
                                                                           ($ IN THOUSANDS)
<S>                                                                      <C>          <C>
Marine Transportation, Diesel Repair and Other
  Current assets:
     Cash and invested cash............................................  $  2,187        1,999
     Accounts and notes receivable, net of allowance for doubtful
      accounts.........................................................    35,104       50,722
     Inventory -- finished goods, at lower of average cost or market...     7,690        7,531
     Prepaid expenses..................................................     4,245        7,393
     Deferred taxes....................................................       505        2,768
                                                                         --------     --------
          Total current assets.........................................    49,731       70,413
                                                                         --------     --------
  Property and equipment, at cost......................................   338,594      406,675
     Less allowance for depreciation...................................   102,672      125,459
                                                                         --------     --------
                                                                          235,922      281,216
                                                                         --------     --------
  Excess cost of consolidated subsidiaries.............................     4,230        7,429
  Noncompete agreements, net of accumulated amortization of $7,298
     ($4,700 in 1992)..................................................     6,350        5,752
  Sundry...............................................................     5,526       13,575
                                                                         --------     --------
          Total assets -- marine transportation, diesel repair and
            other......................................................   301,759      378,385
                                                                         --------     --------
Insurance
  Investments:
     Fixed maturities:
       Available-for-sale securities...................................        --      102,175
       Trading account securities......................................    45,693           --
       Investment account securities...................................    57,183           --
     Short-term investments............................................    12,962       25,128
                                                                         --------     --------
                                                                          115,838      127,303
  Cash and invested cash...............................................     5,113       12,937
  Accrued investment income............................................     2,382        1,998
  Accounts and notes receivable, net of allowance for doubtful
     accounts..........................................................    10,938       12,195
  Reinsurance receivable on paid losses................................     2,805       15,186
  Prepaid reinsurance premiums.........................................        --        5,773
  Deferred policy acquisition costs....................................     5,912        7,279
  Property and equipment, at cost, net of allowance for depreciation...     1,673        2,197
                                                                         --------     --------
          Total assets -- insurance....................................   144,661      184,868
                                                                         --------     --------
                                                                         $446,420      563,253
                                                                         --------     --------
                                                                         --------     --------
</TABLE>

 
                See accompanying notes to financial statements.
 
                                       32

<PAGE>   34
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                                 BALANCE SHEETS
                           DECEMBER 31, 1992 AND 1993
 
                      LIABILITIES AND STOCKHOLDERS' EQUITY
 

<TABLE>
<CAPTION>
                                                                           1992         1993
                                                                         --------     --------
                                                                           ($ IN THOUSANDS)
<S>                                                                      <C>          <C>
Marine Transportation, Diesel Repair and Other
  Current liabilities:
     Current portion of long-term debt.................................  $ 10,962       10,962
     Accounts payable..................................................    11,428       11,767
     Federal income taxes payable......................................       486           --
     Accrued liabilities:
       Interest........................................................     1,192          166
       Insurance premiums and claims...................................     4,709        6,181
       Bonus, pension and profit-sharing plans.........................     6,846       10,491
       Taxes, other than on income.....................................     1,355        3,052
       Other...........................................................     3,183        8,008
     Deferred revenues.................................................     3,172        5,637
                                                                         --------     --------
          Total current liabilities....................................    43,333       56,264
                                                                         --------     --------
  Long-term debt, less current portion.................................   147,960      109,597
  Deferred taxes.......................................................    27,005       39,735
  Other long-term liabilities..........................................     7,349        8,913
                                                                         --------     --------
          Total liabilities -- marine transportation, diesel repair and
            other......................................................   225,647      214,509
                                                                         --------     --------
Insurance
  Losses, claims and settlement expenses...............................    35,588       49,930
  Unearned premiums....................................................    42,209       61,558
  Reinsurance premiums payable.........................................     3,762        5,377
  Deferred Puerto Rico taxes...........................................     2,457        3,549
  Other liabilities....................................................     4,781        4,576
  Minority interest in consolidated insurance subsidiary...............     9,150       12,005
                                                                         --------     --------
          Total liabilities -- insurance...............................    97,947      136,995
                                                                         --------     --------
Contingencies and Commitments..........................................        --           --
Stockholders' Equity:
  Preferred stock, $1.00 par value per share. Authorized 20,000,000
     shares............................................................        --           --
  Common stock, $.10 par value per share. Authorized 60,000,000 shares,
     issued 30,759,000 shares (25,242,000 in 1992).....................     2,524        3,076
  Additional paid-in capital...........................................    93,670      156,340
  Unrealized net gains in value of long-term investments...............     1,211        4,440
  Retained earnings....................................................    39,170       61,339
                                                                         --------     --------
                                                                          136,575      225,195
  Less cost of 2,555,000 shares in treasury (2,613,000 in 1992)........    13,749       13,446
                                                                         --------     --------
                                                                          122,826      211,749
                                                                         --------     --------
                                                                         $446,420      563,253
                                                                         --------     --------
                                                                         --------     --------
</TABLE>

 
                See accompanying notes to financial statements.
 
                                       33

<PAGE>   35
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                             STATEMENTS OF EARNINGS
              FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
 

<TABLE>
<CAPTION>
                                                                   1991       1992       1993
                                                                 --------    -------    -------
                                                                     (IN THOUSANDS, EXCEPT
                                                                       PER SHARE AMOUNTS)
<S>                                                              <C>         <C>        <C>
Revenues:
  Transportation...............................................  $117,003    190,214    283,747
  Diesel repair................................................    34,288     35,753     31,952
  Net premiums earned..........................................    23,561     29,552     48,243
  Commissions earned on reinsurance............................     4,387      5,108      4,632
  Investment income............................................     6,874      6,795      7,910
  Gain on disposition of assets................................     1,412        427        355
  Realized gain on investments.................................       853      1,478      1,164
  Other........................................................       655        176        401
                                                                 --------    -------    -------
                                                                  189,033    269,503    378,404
                                                                 --------    -------    -------
Costs and expenses:
  Cost of sales and operating expenses (except as shown
     below)....................................................    96,339    143,330    204,721
  Losses, claims and settlement expenses.......................    18,103     26,289     37,496
  Policy acquisition costs.....................................     7,181      8,649     11,085
  Selling, general and administrative..........................    23,140     32,805     40,162
  Taxes, other than on income..................................     5,498      8,867     11,475
  Depreciation and amortization................................    14,959     21,423     28,102
  Minority interest expense....................................        --         --      1,623
                                                                 --------    -------    -------
                                                                  165,220    241,363    334,664
                                                                 --------    -------    -------
          Operating income.....................................    23,813     28,140     43,740
Interest expense...............................................     5,965      9,411      8,416
                                                                 --------    -------    -------
          Earnings before taxes on income......................    17,848     18,729     35,324
                                                                 --------    -------    -------
Provision (benefit) for taxes on income:
  United States................................................     4,550      5,151     11,136
  Puerto Rico..................................................        --        (20)     1,359
                                                                 --------    -------    -------
                                                                    4,550      5,131     12,495
                                                                 --------    -------    -------
          Earnings before cumulative effect of accounting
            changes............................................    13,298     13,598     22,829
Cumulative effect on prior years of accounting changes:
  Postretirement health care benefits, net of applicable income
     taxes of $1,163...........................................        --     (2,258)        --
  Income taxes.................................................        --    (10,659)        --
                                                                 --------    -------    -------
          Net earnings.........................................  $ 13,298        681     22,829
                                                                 --------    -------    -------
                                                                 --------    -------    -------
Earnings (loss) per share of common stock:
  Primary:
     Earnings before cumulative effect of accounting changes...  $    .61        .60        .86
     Cumulative effect on prior years of accounting changes....        --       (.57)        --
                                                                 --------    -------    -------
          Net earnings.........................................  $    .61        .03        .86
                                                                 --------    -------    -------
                                                                 --------    -------    -------
  Fully diluted net earnings -- 1991 only......................  $    .59
                                                                 --------
                                                                 --------
</TABLE>

 
                See accompanying notes to financial statements.
 
                                       34

<PAGE>   36
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
 

<TABLE>
<CAPTION>
                                                                   1991       1992       1993
                                                                 --------    -------    -------
<S>                                                              <C>         <C>        <C>
Common stock:
  Balance at beginning of year.................................  $  2,437      2,437      2,524
  Par value of common stock issued in acquisition of marine
     transportation companies..................................        --         87        102
  Par value of common stock issued in conversion of 7 1/4%
     Subordinated Convertible Debentures.......................        --         --        450
                                                                 --------    -------    -------
  Balance at end of year.......................................  $  2,437      2,524      3,076
                                                                 --------    -------    -------
                                                                 --------    -------    -------
Additional paid-in capital:
  Balance at beginning of year.................................  $ 82,755     82,762     93,670
  Excess of par value of cost of common stock issued in
     acquisition of marine transportation companies............        --     10,908     14,859
  Excess of par value of cost of common stock issued in
     conversion of 7 1/4% Subordinated Convertible Debentures
     and related cost of conversion............................        --         --     47,624
  Excess of cost of treasury stock sold over proceeds received
     upon exercise of employees' stock options.................         7         --        (27)
  Tax benefit of exercise of employee stock options............        --         --        214
                                                                 --------    -------    -------
  Balance at end of year.......................................  $ 82,762     93,670    156,340
                                                                 --------    -------    -------
                                                                 --------    -------    -------
Unrealized net gains (losses) in value of investments:
  Balance at beginning of year.................................  $    149      1,830      1,211
  Net increase (decrease) in valuation of investments during
     the year, net of minority interest for 1993...............     1,681       (619)     3,229
                                                                 --------    -------    -------
  Balance at end of year.......................................  $  1,830      1,211      4,440
                                                                 --------    -------    -------
                                                                 --------    -------    -------
Retained earnings:
  Balance at beginning of year.................................  $ 25,191     38,489     39,170
  Net earnings for the year....................................    13,298        681     22,829
  Unfunded pension obligation..................................        --         --       (660)
                                                                 --------    -------    -------
  Balance at end of year.......................................  $ 38,489     39,170     61,339
                                                                 --------    -------    -------
                                                                 --------    -------    -------
Treasury stock:
  Balance at beginning of year.................................  $(13,419)   (13,892)   (13,749)
  Purchase of treasury stock...................................      (475)        --         --
  Cost of treasury stock sold upon exercise of employees' stock
     options...................................................         2        143        303
                                                                 --------    -------    -------
  Balance at end of year.......................................  $(13,892)   (13,749)   (13,446)
                                                                 --------    -------    -------
                                                                 --------    -------    -------
</TABLE>

 
                See accompanying notes to financial statements.
 
                                       35

<PAGE>   37
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
 

<TABLE>
<CAPTION>
                                                                                      1991        1992        1993
                                                                                    --------    --------    --------
<S>                                                                                 <C>         <C>         <C>
Cash flows from operating activities:
  Earnings before cumulative effect of accounting changes.........................  $ 13,298      13,598      22,829
  Adjustments to reconcile earnings to net cash provided by operating activities:
    Depreciation and amortization.................................................    14,959      21,423      28,102
    Provision for doubtful accounts...............................................        62         414         271
    Realized gain on investments..................................................      (853)     (1,478)     (1,164)
    Increase in deferred taxes....................................................     2,600       1,895       5,207
    Gain on disposition of assets.................................................    (1,412)       (427)       (355)
    Deferred scheduled maintenance costs..........................................        --          --       2,516
    Minority interest and earnings of unconsolidated subsidiary...................       (34)        (38)      1,592
  Increase (decrease) in cash flows resulting from changes in:
    Marine Transportation, Diesel Repair and Other assets and liabilities:
      Accounts and notes receivable...............................................    (2,048)     (6,803)    (12,833)
      Inventory...................................................................      (508)     (2,288)        158
      Other assets................................................................        --      (3,454)     (3,046)
      Accounts payable............................................................     1,510       1,195      (2,624)
      Accrued and other liabilities...............................................     1,540       3,745       6,255
    Insurance assets and liabilities:
      Reinsurance receivable on paid losses.......................................       271       1,346     (18,154)
      Deferred policy acquisition costs...........................................      (446)     (1,106)     (1,368)
      Losses, claims and settlement expenses......................................    (2,223)      4,692      14,342
      Unearned premiums...........................................................       802       7,322      19,349
      Reinsurance premiums payable................................................       (40)     (1,156)      1,616
      Receivables and accrued income..............................................    (1,730)        739        (873)
      Other liabilities...........................................................       750      (1,247)       (206)
                                                                                    --------    --------    --------
         Net cash provided by operating activities................................    26,498      38,372      61,614
                                                                                    --------    --------    --------
Cash flow from investing activities:
  Proceeds from sale and maturities of investments................................    27,916       8,730      12,097
  Purchase of investments.........................................................   (17,066)    (21,544)     (5,772)
  Net decrease (increase) in investments..........................................   (13,817)     13,589     (10,683)
  Capital expenditures............................................................   (33,607)    (32,747)    (22,320)
  Purchase of assets of marine and diesel repair companies:
    Property and equipment, net of assumed liabilities............................    (2,644)    (76,279)    (34,617)
    Intangible assets.............................................................    (1,050)     (8,668)     (7,138)
  Proceeds from disposition of assets.............................................     2,105         839       1,275
  Cash received upon mergers......................................................        --       3,110       1,733
  Other...........................................................................         9         (13)       (468)
                                                                                    --------    --------    --------
         Net cash used in investing activities....................................   (38,154)   (112,983)    (65,893)
                                                                                    --------    --------    --------
Cash flow from financing activities:
  Borrowings on bank revolving credit loan........................................    15,294      99,025     124,164
  Payments on bank revolving credit loan..........................................    (2,694)    (90,125)   (101,564)
  Increase in long-term debt......................................................        --      84,000          --
  Payments under long-term debt...................................................    (1,240)    (14,680)    (10,962)
  Proceeds from exercise of stock options.........................................        --         143         277
  Purchase of treasury stock......................................................      (475)         --          --
                                                                                    --------    --------    --------
         Net cash provided by financing activities................................    10,885      78,363      11,915
                                                                                    --------    --------    --------
         Increase (decrease) in cash and invested cash............................      (771)      3,752       7,636
Cash and invested cash, beginning of year.........................................     4,319       3,548       7,300
                                                                                    --------    --------    --------
Cash and invested cash, end of year...............................................  $  3,548       7,300      14,936
                                                                                    --------    --------    --------
                                                                                    --------    --------    --------
Supplemental disclosures of cash flow information:
  Cash paid during the year:
    Interest......................................................................  $  5,873      10,192       9,442
    Income taxes..................................................................  $  3,250       2,750       5,500
Noncash investing and financing activity:
  Assumption of liabilities in connection with mergers with and purchase of assets
    of marine and diesel repair companies.........................................  $    915      38,225      11,743
  Issuance of stock in connection with purchase of marine transportation
    companies.....................................................................  $     --      10,995      14,725
  Assets and liabilities charged to equity........................................  $     --          --      (2,136)
  Issuance of stock in connection with conversion of 7 1/4% convertible
    debentures....................................................................  $     --          --      50,000
</TABLE>

 
                See accompanying notes to financial statements.
 
                                       36

<PAGE>   38
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                         NOTES TO FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
 
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OPERATIONS
 
     Principles of Consolidation. The consolidated financial statements include
the accounts of Kirby Corporation and its subsidiaries ("the Company"). The
assets and liabilities for the insurance operations have not been classified as
current or noncurrent, in accordance with insurance practice. The Company's
equity in certain partnerships is reflected in the accounts at its pro rata
share of the assets, liabilities, revenues and expenses of the partnerships. The
purchase price of certain subsidiaries exceeded the equity in net assets of the
respective companies at dates of acquisition. The excess is being amortized over
10 to 25 year periods.
 
     All material intercompany accounts and transactions have been eliminated in
consolidation. Certain reclassifications have been made to reflect current
presentation of financial information.
 
     Operations. The Company is engaged in three industry segments as follows:
 
          Marine Transportation -- Marine transportation by United States flag
     vessels on the inland waterway system and in United States coastwise and
     foreign trade. The principal products transported include petrochemical
     feedstocks, processed chemicals, agricultural chemicals, refined petroleum
     products, coal, limestone, grain and sugar. Container and palletized cargo
     are also transported for United States Government aid programs and
     military.
 
          Diesel Repair -- Repair of diesel engines, reduction gear repair and
     sale of related parts and accessories, primarily for customers in the
     marine industry and beginning in 1994, for customers in the shortline and
     industrial railroad industry.
 
          Insurance -- Writing of property and casualty insurance in Puerto
     Rico. The insurance subsidiary operates under the provisions of the
     Insurance Code of the Commonwealth of Puerto Rico and is subject to
     regulations issued by the Commissioner of Insurance of the Commonwealth of
     Puerto Rico.
 
  General Accounting Policies:
 
     Accounting Principles. The consolidated financial statements have been
prepared in accordance with generally accepted accounting principles.
 
     Cash Equivalents. Cash equivalents consist of short-term, highly liquid
investments with maturities of three months or less at date of purchase.
 
     Depreciation. Property and equipment is depreciated on the straight-line
method over the estimated useful lives of the assets as follows: marine
transportation equipment, 6-22 years; buildings, 10-25 years; other equipment,
2-10 years; leasehold improvements, term of lease.
 
     Concentrations of Credit Risk. Financial instruments which potentially
subject the Company to concentrations of credit risk are primarily trade
accounts receivables. The Company's marine transportation customers include the
major oil refineries. The diesel repair customers are offshore well service
companies, inland and offshore marine transportation companies and the United
States Government. The insurance segment customers include agents and customers
who reside in Puerto Rico. In addition, credit risk exists through the placement
of certificates of deposits with local financial institutions by the insurance
segment.
 
  Marine Transportation, Diesel Repair and Other Accounting Policies:
 
     Property, Maintenance and Repairs. Property is recorded at cost.
Improvements and betterments are capitalized as incurred. When property items
are retired, sold, or otherwise disposed of, the related cost and accumulated
depreciation are removed from the accounts with any gain or loss on the
disposition included in operating income. Maintenance and repairs are charged to
operating expenses as incurred on an annual basis.
 
                                       37

<PAGE>   39
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OPERATIONS -- (CONTINUED)
     Taxes on Income. The Company follows the asset and liability method of
accounting for income taxes. Under the asset and liability method, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date. In
1991, the provision for deferred income taxes represents the tax effect of
differences in the timing of income and expense recognition for tax and
financial reporting purposes.
 
     The Company files a consolidated federal income tax return with its
domestic subsidiaries and Mariner Reinsurance Company Limited ("Mariner").
 
  Insurance Accounting Policies:
 
     Investments. Fixed maturity investments held as of December 31, 1993 are
primarily classified as available-for-sale securities and are reported at fair
market value, with unrealized gains and losses reported in the accompanying
balance sheet as unrealized net gains in value of investments. For 1992, the
investment in fixed maturities consisted of an investment and a trading account.
Investment account securities were recorded at cost, adjusted for the
amortization of premiums and accretion of discounts and trading account
securities were recorded at market value. The difference between the market
value and the amortized cost of trading securities was presented in the
accompanying balance sheets as unrealized net gains in value of investments.
 
     Short-term investments consisting of certificates of deposit, United States
Treasury bills and United States Treasury notes maturing within one year from
acquisition date, are recorded at amortized cost. Equity securities are recorded
at market value.
 
     Reinsurance. By reinsuring certain levels of risk in various areas with
reinsurers, the exposure of losses which may arise from catastrophes or other
events which may cause unfavorable underwriting results are reduced. Amounts
recoverable from reinsurance are estimated in a manner consistent with the claim
liability associated with the reinsured policy.
 
     Deferred Policy Acquisition Costs. Deferred policy acquisition costs
representing commissions paid to agents are deferred and amortized following the
daily pro rata method over the terms of the policies in 1993 (monthly pro rata
method in prior years), except for automobile physical damage single-interest
policies, which are amortized following the sum-of-the years method. Deferred
policy acquisition costs are written off when it is determined that future
policy revenues are not adequate to cover related future losses and loss
adjustments expenses. Earnings on investments are taken into account in
determining whether this condition exists. No deficiencies have been determined
in the periods presented.
 
     Accrued Losses, Claims and Settlement Expenses. Accrued losses, claims and
settlement expenses include estimates based on individual claims outstanding and
an estimated amount for losses incurred but not reported (IBNR) based on past
experience.
 
     Unearned Premiums. Unearned premiums are deferred and amortized following
the daily pro rata method over the terms of the policies in 1993 (monthly pro
rata method in prior years), except for automobile physical damage
single-interest policies, which are amortized to income following the
sum-of-the-years method.
 
     Guarantee Fund Assessment. The Company's Puerto Rican property and casualty
insurance subsidiary is a member of the Puerto Rico Insurance Guaranty
Association and is required to participate in losses payable
 
                                       38

<PAGE>   40
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OPERATIONS -- (CONTINUED)
to policyholders under risks underwritten by insolvent associated members.
Losses are estimated based on its share and accrued on a current basis.
 
  Changes In Accounting Principles:
 
     The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 113, "Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts," which changes the
accounting and disclosure requirements for reinsurance contracts entered into by
ceding insurance companies. Effective December 31, 1993, the Company adopted
SFAS No. 113, the effects of which are more fully described in Note 5, Insurance
Disclosure.
 
     The FASB issued SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," which establishes standards of financial accounting and
reporting for investments in equity securities that have readily determinable
fair values and for all investments in debt securities. Effective December 31,
1993, the Company adopted SFAS No. 115, the effects of which are more fully
described in Note 3, Investments.
 
     The FASB issued SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," which establishes a new accounting principle for
the cost of retiree health care and other postretirement benefits. Effective
January 1, 1992, the Company adopted SFAS No. 106, the effects of which are more
fully described in Note 10, Retirement Plans.
 
     The FASB issued SFAS No. 109, "Accounting for Income Taxes," which requires
a change from the deferred method of accounting for income taxes to the asset
and liability method of accounting for income taxes. Effective January 1, 1992,
the Company adopted SFAS No. 109, the effects of which are more fully described
in Note 7, Taxes on Income.
 
(2) ACQUISITIONS
 
  1992 YEAR:
 
     On March 13, 1992, a subsidiary of the Company completed the purchase of
certain assets of Sabine Towing & Transportation Co., Inc. ("Sabine"), a wholly
owned subsidiary of Sequa Corporation, for $36,950,000 in cash. Sabine, located
in Port Arthur, Texas was engaged in coastal and inland marine transportation of
petroleum products and harbor tug services. The purchased properties included
six United States flag tank ships, 33 owned and five leased inland tank barges,
11 owned and four leased inland towboats, three owned bowboats, eight owned
harbor tugboats, land and buildings. The Company has continued to use the assets
of Sabine in the same business that Sabine conducted prior to the purchase. The
purchase was financed through $9,950,000 of existing cash balances, borrowings
of $9,000,000 under the transportation segment's bank revolving credit
agreement, as well as an $18,000,000 bank term loan with a negative pledge of
the assets acquired from Sabine. Operations of the assets acquired from Sabine
are included as part of the Company's operations effective March 13, 1992, in
accordance with the purchase method of accounting.
 
     On April 2, 1992, a subsidiary of the Company completed the purchase of
substantially all of the operating assets of Ole Man River Towing, Inc. and
related entities ("Ole Man River") for $25,575,000 in cash. Ole Man River,
located in Vicksburg, Mississippi, was engaged in inland marine tank barge
transportation of petroleum products along the Mississippi River System and the
Gulf Intracoastal Waterway. The purchased properties included 24 owned and two
leased inland tank barges, eight owned inland towboats, land and buildings. The
Company has continued to use the assets of Ole Man River in the same business
that Ole Man River conducted prior to the purchase. The asset purchase was
funded by borrowings under the transportation segment's bank revolving credit
agreement. Operations of the assets acquired from Ole Man
 
                                       39

<PAGE>   41
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(2) ACQUISITIONS -- (CONTINUED)
River are included as part of the Company's operations effective April 2, 1992,
in accordance with the purchase method of accounting.
 
     On June 1, 1992, the Company completed the acquisition of Scott Chotin,
Inc. ("Scott Chotin") by means of a merger of Scott Chotin with and into a
subsidiary of the Company for an aggregate consideration of approximately
$34,900,000. Pursuant to the Agreement and Plan of Merger, the Company issued
870,892 shares of common stock, valued at $12.625 per share to certain Scott
Chotin shareholders and paid the shareholders of Scott Chotin approximately
$9,700,000 in cash in exchange for the working capital and all of the
outstanding common stock of Scott Chotin, discharged existing debt of Scott
Chotin of approximately $7,400,000 and paid to certain executives and
shareholders of Scott Chotin $5,000,000 for agreements not to compete. In
addition, the Company recorded a liability reserve for the issuance, over a
three-year period after the closing, of up to 170,000 additional shares of the
Company's common stock contingent upon the resolution of certain potential
liabilities resulting from operations of Scott Chotin prior to the merger. In
June, 1993, the Company issued 22,500 shares of common stock under the
contingent stock agreement. Scott Chotin, located in Mandeville, Louisiana was
engaged in inland marine tank barge transportation of industrial chemicals and
asphalt along the Mississippi River System and the Gulf Intracoastal Waterway.
Scott Chotin's inland fleet consisted of 29 owned tank barges, six of which
operate in the asphalt trade, 10 owned dry cargo barges, eight owned towboats,
land and buildings. The Company has continued to use the assets of Scott Chotin
in the same business that Scott Chotin conducted prior to the purchase. The cash
portion of the merger was financed through existing cash balances, borrowings
under the transportation segment's $20,000,000 acquisition line of credit, as
well as a $16,000,000 bank term loan with a negative pledge of the assets of
Scott Chotin. Scott Chotin's operations are included as part of the Company's
operations effective June 1, 1992, in accordance with the purchase method of
accounting.
 
     On September 25, 1992, the Company completed the acquisition of Eastern
America Insurance Company ("Eastern America"), a property and casualty insurance
company in Puerto Rico, by means of a merger of Eastern America with and into
the Company's insurance subsidiary, Universal Insurance Company ("Universal"),
with Universal being the surviving entity. Presently, the Company owns
approximately 70% of the voting common stock of Universal, with the remaining
approximately 30% owned by Eastern America Financial Group, Inc. ("Eastern
America Group"), the former parent of Eastern America. Through options and
redemption rights included in the merger transaction, Eastern America Group
could become the owner of up to 100% of Universal's stock over a period of up to
12 years. To date, Universal has redeemed a total 44,933 shares of their common
stock from the Company at a price of $8,000,000. In July, 1993, Universal
redeemed 39,128 shares for $7,000,000 and in December, 1992, Universal redeemed
5,805 shares for $1,000,000. Eastern America's operations are included as part
of the Company's operations effective September 25, 1992, in accordance with the
purchase method of accounting.
 
  1993 YEAR:
 
     On March 3, 1993, a subsidiary of the Company completed the purchase of
certain assets of TPT ("TPT"), a marine transportation division of Ashland Oil,
Inc., for $24,400,000 in cash. TPT, located in Freedom, Pennsylvania, was
engaged in the inland marine transportation of industrial chemicals and lube
oils by tank barges predominantly from the Gulf Intracoastal Waterway to
customers primarily on the upper Ohio River. The purchased properties included
61 owned and six leased double skin inland tank barges, four owned and one
leased single skin inland tank barges and five owned inland towboats. The
Company has continued to use the assets of TPT in the same business that TPT
conducted prior to the purchase. The asset purchase was funded by borrowings
under the transportation segment's bank revolving credit agreement. Based on
unaudited information, the acquired assets of TPT had total revenues for the
year ended September 30, 1992 of
 
                                       40

<PAGE>   42
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(2) ACQUISITIONS -- (CONTINUED)
$17,000,000. Operations of the assets acquired from TPT are included as part of
the Company's operations effective March 3, 1993, in accordance with the
purchase method of accounting.
 
     On May 14, 1993, the Company completed the acquisition of AFRAM Lines (USA)
Co., Ltd. ("AFRAM Lines") by means of a merger of AFRAM Lines with a subsidiary
of the Company for an aggregate consideration of $16,725,000. Additionally, the
merger provides for an earnout provision not to exceed $3,000,000 in any one
year and not to exceed a maximum of $10,000,000 over a four-year period. The
earnout provision will be recorded as incurred as an adjustment to the purchase
price. As of December 31, 1993, a $2,250,000 earnout provision, which accrues
from April 1 to March 31 of the following year, had been recorded. Pursuant to
the Agreement and Plan of Merger, the Company issued 1,000,000 shares of common
stock, valued at $14.725 per share, in exchange for all of AFRAM Lines'
outstanding stock and paid to certain executives and shareholders of AFRAM Lines
$2,000,000 for agreements not to compete. AFRAM Lines, located in Houston,
Texas, was engaged in the worldwide transportation of dry bulk, container and
palletized cargos, primarily for Departments and Agencies of the United States
Government. The Company has continued to use the assets of AFRAM Lines in the
same business that AFRAM Lines conducted prior to the merger. AFRAM Lines' fleet
consisted of three United States flag container and break-bulk ships which
specialize in the transportation of United States Government aid and military
cargos. The cash portion of the merger was financed through borrowings under the
Company's bank revolving credit agreement. Pursuant to the Agreement and Plan of
Merger, the effective date of the merger was April 1, 1993, and the merger was
accounted for in accordance with the purchase method of accounting. The
financial results for the 1993 year include the net earnings from the operations
of AFRAM Lines from May 14, 1993, as the net earnings from April 1, 1993 to May
14, 1993, were recorded as a reduction of the purchase price.
 
     On December 21, 1993, a subsidiary of the Company completed the purchase of
certain assets of Midland Enterprises Inc. and its wholly owned subsidiary,
Chotin Transportation Company ("Chotin Transportation") for $14,950,000 in cash.
Chotin Transportation, located in Cincinnati, Ohio, was engaged in the inland
marine transportation of refined products by tank barge primarily from the lower
Mississippi River to the Ohio River under a long-term contract with a major oil
company. The Company has continued to use the assets of Chotin Transportation in
the same business that Chotin Transportation conducted prior to the purchase.
The purchased properties included 50 single skin and three double skin inland
tank barges and the transportation contract, which expires in the year 2000. The
asset purchase was funded by borrowings under the transportation segment's bank
revolving credit agreement. Operations of the assets acquired from Chotin
Transportation are included as part of the Company's operations effective
December 21, 1993, in accordance with the purchase method of accounting.
 
                                       41

<PAGE>   43
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(2) ACQUISITIONS -- (CONTINUED)
     The following unaudited pro forma financial information for the year ended
December 31, 1991 is based on adjusted historical financial statements of the
Company, Sabine, Ole Man River, Scott Chotin and Eastern America. The unaudited
pro forma financial information for the year ended December 31, 1992 is based on
adjusted historical financial statements of the Company, Sabine, Ole Man River,
Scott Chotin, Eastern America and AFRAM Lines. The unaudited pro forma financial
information for the year ended December 31, 1993 is based on adjusted historical
financial statements of the Company and AFRAM Lines. The financial information
assumes the acquisitions and mergers were completed as of the beginning of the
periods indicated. The pro forma financial information is not necessarily
indicative of the results of operations that would have been achieved had the
asset purchases and mergers been consummated as of the periods indicated. In
addition, the pro forma information is not necessarily indicative of the results
of operations that may be obtained in the future.
 

<TABLE>
<CAPTION>
                                                          FOR THE YEARS ENDED DECEMBER 31,
                                                         ----------------------------------
                                                           1991         1992         1993
                                                         --------     --------     --------
                                                                  (IN THOUSANDS, 
                                                             EXCEPT PER SHARE AMOUNTS)
    <S>                                                  <C>          <C>          <C>
    Revenues...........................................  $299,659      349,266      395,491
    Earnings before taxes on income....................  $ 29,026       26,931       38,999
    Earnings before cumulative effect of accounting
      changes..........................................  $ 20,985       19,096       25,191
    Earnings per common share before cumulative effect
      of accounting changes:
      Primary..........................................  $    .92          .81          .93
      Fully diluted....................................  $    .86          .81          .93
</TABLE>

 
(3) INVESTMENTS
 
     With the adoption of SFAS No. 115 effective December 31, 1993 that
established new criteria for the accounting and reporting of investments in debt
and equity securities that have readily determinable fair value, management
revaluated its investment strategy in accordance with the new provisions. Under
the provisions of SFAS No. 115, investments are to be classified under one of
three categories.
 
     Management determined that substantially all debt and equity securities
held at December 31, 1993 qualify as available-for-sale securities. The adoption
of SFAS No. 115 increased the carrying value of investment account securities by
approximately $4,100,000 and stockholders' equity by $3,075,000, net of
applicable deferred income taxes. SFAS No. 115 precludes restatement of prior
year financial statements.
 
                                       42

<PAGE>   44
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(3) INVESTMENTS -- (CONTINUED)
     A summary of the insurance subsidiaries' investments as of December 31,
1992 is as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                                                                  AMOUNT
                                                                                                 AT WHICH
                                                                                                 SHOWN ON
                                                          QUOTED       GROSS         GROSS         THE
                                             AMORTIZED    MARKET     UNREALIZED    UNREALIZED    BALANCE
            TYPE OF INVESTMENT                 COST        VALUE       LOSSES        GAINS        SHEET
            ------------------               ---------    -------    ----------    ----------    --------
<S>                                          <C>          <C>        <C>           <C>           <C>
Fixed maturities:
  Trading account:
     United States Treasury bills..........  $  44,078     45,693         --          1,615        45,693
                                             ---------    -------        ---       ----------    --------
  Investment account:
     Bonds and notes:
       United States Government and
          government agencies and
          authorities......................     55,594     57,789        133          2,329        55,594
       States, municipalities and political
          subdivisions.....................      1,285      1,359         --             74         1,285
       All other...........................        304        308          1              5           304
                                             ---------    -------        ---       ----------    --------
          Total investment account.........     57,183     59,456        134          2,408        57,183
                                             ---------    -------        ---       ----------    --------
Short-term investments.....................     12,962     12,962         --             --        12,962
                                             ---------    -------        ---       ----------    --------
          Total investments................  $ 114,223    118,111        134          4,023       115,838
                                             ---------    -------        ---       ----------    --------
                                             ---------    -------        ---       ----------    --------
</TABLE>

 
     A summary of the insurance subsidiaries' investments as of December 31,
1993 is as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                                                         FAIR VALUE AS
                                                             GROSS          GROSS          SHOWN IN
                                             AMORTIZED     UNREALIZED     UNREALIZED      THE BALANCE
              TYPE OF INVESTMENT               COST          LOSSES         GAINS            SHEET
              -------------------            ---------     ----------     ----------     -------------
    <S>                                      <C>           <C>            <C>            <C>
    Available-for-sale securities:
      Bonds and notes:
         United States Government and
           government agencies and
           authorities.....................  $  91,761         362           7,849           99,248
         States, municipalities and
           political subdivisions..........      1,035          --              27            1,062
         All other.........................      1,816          --              49            1,865
                                             ---------         ---        ----------     -------------
              Total available-for-sale
                securities.................     94,612         362           7,925          102,175
    Short-term investments.................     25,128          --              --           25,128
                                             ---------         ---        ----------     -------------
              Total investments............  $ 119,740         362           7,925          127,303
                                             ---------         ---        ----------     -------------
                                             ---------         ---        ----------     -------------
</TABLE>

 
                                       43

<PAGE>   45
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(3) INVESTMENTS -- (CONTINUED)
     A summary of the available-for-sale securities by maturities as of December
31, 1993 is as follows (in thousands):
 

<TABLE>
<CAPTION>
                   INVESTMENTS MATURING WITHIN                 AMORTIZED COST     MARKET VALUE
                   ---------------------------                 --------------     ------------
    <S>                                                        <C>                <C>
    One year.................................................     $  3,295             3,320
    One to five years........................................       36,807            39,489
    Five to ten years........................................       16,451            17,712
    Ten years and over.......................................       38,059            41,654
                                                               --------------     ------------
                                                                  $ 94,612           102,175
                                                               --------------     ------------
                                                               --------------     ------------
</TABLE>

 
     Short-term and all other investments primarily consist of United States
Treasury obligations, certificates of deposits, commercial paper and banker's
acceptances. The Company does not invest in high-yield securities judged to be
below investment grade.
 
     Investment income for the years ended December 31, 1991, 1992 and 1993 is
summarized as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                                  1991      1992      1993
                                                                 ------     -----     -----
    <S>                                                          <C>        <C>       <C>
    Available-for-sale securities..............................  $   --        --     7,175
    Trading account securities.................................   2,175     2,602        --
    Investment account securities..............................   2,972     3,272        --
    Short-term investments.....................................   1,727       921       735
                                                                 ------     -----     -----
                                                                 $6,874     6,795     7,910
                                                                 ------     -----     -----
                                                                 ------     -----     -----
</TABLE>

 
     Realized net gains on investments for the years ended December 31, 1991,
1992 and 1993 are summarized as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                                  1991      1992      1993
                                                                 ------     -----     -----
    <S>                                                          <C>        <C>       <C>
    Available-for-sale securities..............................  $   --        --     1,164
    Trading account securities.................................     (82)      437        --
    Investment account securities..............................     935     1,041        --
                                                                 ------     -----     -----
                                                                 $  853     1,478     1,164
                                                                 ------     -----     -----
                                                                 ------     -----     -----
</TABLE>

 
     Changes in unrealized net gains (losses) in value of investments for the
years ended December 31, 1991, 1992 and 1993 are summarized as follows (in
thousands):
 

<TABLE>
<CAPTION>
                                                                   1991      1992     1993
                                                                  ------     ----     -----
    <S>                                                           <C>        <C>      <C>
    Available-for-sale securities...............................  $   --       --     5,948
    Trading account securities..................................   1,660     (775)       --
    Investment account securities...............................     581       --        --
                                                                  ------     ----     -----
                                                                   2,241     (775)    5,948
    Less deferred income taxes..................................     560     (156)    1,487
                                                                  ------     ----     -----
                                                                   1,681     (619)    4,461
    Minority interest portion...................................      --       --     1,232
                                                                  ------     ----     -----
                                                                  $1,681     (619)    3,229
                                                                  ------     ----     -----
                                                                  ------     ----     -----
</TABLE>

 
                                       44

<PAGE>   46
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(4) PROPERTY AND EQUIPMENT
 
     The following is a summary of property and equipment and the related
allowance for depreciation at December 31, 1992 and 1993 (in thousands):
 

<TABLE>
<CAPTION>
                                                                        1992        1993
                                                                      --------     -------
    <S>                                                               <C>          <C>
    Property and equipment:
      Marine Transportation, Diesel Repair and Other:
         Marine transportation equipment............................  $326,011     387,494
         Land, buildings and equipment..............................    12,583      19,181
                                                                      --------     -------
                                                                       338,594     406,675
      Insurance:
         Land, buildings and equipment..............................     2,467       3,320
                                                                      --------     -------
                                                                      $341,061     409,995
                                                                      --------     -------
                                                                      --------     -------
    Allowance for depreciation:
      Marine Transportation, Diesel Repair and Other:
         Marine transportation equipment............................  $ 98,646     119,832
         Land, buildings and equipment..............................     4,026       5,627
                                                                      --------     -------
                                                                       102,672     125,459
      Insurance:
         Land, buildings and equipment..............................       794       1,123
                                                                      --------     -------
                                                                      $103,466     126,582
                                                                      --------     -------
                                                                      --------     -------
</TABLE>

 
(5) INSURANCE DISCLOSURE
 
     The financial results of the Company's insurance subsidiaries, Universal, a
property and casualty insurance subsidiary located in Puerto Rico, and Mariner,
a wholly owned subsidiary located in Bermuda, are consolidated with the
Company's other operations.
 
                                       45

<PAGE>   47
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(5) INSURANCE DISCLOSURE -- (CONTINUED)
     As of December 31, 1992 and 1993, the Company owned 75% and 70% of
Universal's voting common stock and 100% of Universal's non-voting common and
preferred stocks, respectively (see Note 2). Condensed combined statements of
earnings of the insurance subsidiaries which are reflected in the consolidated
financial statements are as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                                    FOR THE YEARS ENDED
                                                                       DECEMBER 31,
                                                                ---------------------------
                                                                 1991       1992      1993
                                                                -------    ------    ------
    <S>                                                         <C>        <C>       <C>
    Revenues:
      Premiums written........................................  $36,481    52,830    80,993
                                                                -------    ------    ------
                                                                -------    ------    ------
      Reinsurance assumed.....................................  $ 1,068       327        27
                                                                -------    ------    ------
                                                                -------    ------    ------
      Net premiums earned.....................................  $23,561    29,552    48,243
      Investment income.......................................    5,994     6,454     7,741
      Commissions earned on reinsurance.......................    4,387     5,108     4,632
      Realized gains on investments...........................      853     1,478     1,164
      Other...................................................      (82)      (72)     (169)
                                                                -------    ------    ------
                                                                 34,713    42,520    61,611
                                                                -------    ------    ------
    Costs and expenses:
      Losses, claims and settlement expenses..................   18,103    26,289    37,496
      Policy acquisition costs................................    7,181     8,649    11,085
      General and administrative and other expenses...........    4,538     6,474     6,868
      Minority interest expense...............................       --        --     1,623
                                                                -------    ------    ------
                                                                 29,822    41,412    57,072
                                                                -------    ------    ------
              Earnings before taxes on income.................    4,891     1,108     4,539
    Benefit for taxes on income...............................       --     1,034       391
                                                                -------    ------    ------
              Earnings before cumulative effect of
                accounting change.............................    4,891     2,142     4,930
    Cumulative effect on prior years of accounting change
      for income taxes........................................       --      (157)       --
                                                                -------    ------    ------
              Net earnings....................................  $ 4,891     1,985     4,930
                                                                -------    ------    ------
                                                                -------    ------    ------
</TABLE>

 
     Policy acquisition costs deferred and amortized against earnings during the
years ended December 31, 1991, 1992 and 1993 are summarized as follows (in
thousands):
 

<TABLE>
<CAPTION>
                                                                1991       1992      1993
                                                               -------    ------    -------
    <S>                                                        <C>        <C>       <C>
    Balance, beginning of year...............................  $ 3,039     3,485      5,912
    Amount deferred during year..............................    7,627     9,756     12,452
    Amount acquired upon merger..............................       --     1,320         --
    Amount amortized against earnings during year............   (7,181)   (8,649)   (11,085)
                                                               -------    ------    -------
    Balance, end of year.....................................  $ 3,485     5,912      7,279
                                                               -------    ------    -------
                                                               -------    ------    -------
</TABLE>

 
     In 1993, the insurance subsidiaries adopted SFAS No. 113, which specifies
the accounting by insurance enterprises for the reinsurance of insurance
contracts and eliminates the practice by insurance enterprises of reporting
assets and liabilities relating to reinsured contracts net of the effects of
reinsurance. The adoption of SFAS No. 113 increased the assets and liabilities
by approximately $15,510,000 as of December 31, 1993. The transfer of risk
provisions of SFAS No. 113 did not affect the accounting for reinsurance
contracts presently in place.
 
                                       46

<PAGE>   48
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(5) INSURANCE DISCLOSURE -- (CONTINUED)
     The insurance subsidiary participated in the international reinsurance
market by assuming participations in risks originally undertaken by other
underwriters. Effective January 1, 1991, the insurance subsidiary ceased
accepting participations in the international reinsurance market. During 1992,
the Company's Bermudian reinsurance subsidiary received certain delayed and
certain timely large loss advises, the receipt of which caused the Company to
increase the reinsurance subsidiary's loss reserves by $2,500,000 to cover both
known and unknown losses.
 
     The Company is currently pursuing strategies to withdraw from the runoff of
Mariner's reinsurance business at the earliest possible date. Such strategies
include the possible commutation of Mariner's open book of reinsurance business
in exchange for a portion of, or all of, Mariner's assets. As of December 31,
1993, the Company had net equity in Mariner of approximately $1,500,000.
 
     Net earnings and stockholders' equity of only the Company's Puerto Rican
property and casualty insurance subsidiary as determined in accordance with
Puerto Rican statutory accounting practices and generally accepted accounting
principles for the years ended December 31, 1991, 1992 and 1993 are as follows
(in thousands):
 

<TABLE>
<CAPTION>
                                                                 1991       1992      1993
                                                                -------    ------    ------
    <S>                                                         <C>        <C>       <C>
    Statutory accounting practice:
      Net earnings............................................  $ 4,255     4,809     7,099
      Stockholders' equity....................................  $35,534    46,943    47,011
    Generally accepted accounting principles:
      Net earnings............................................  $ 4,870     3,958     6,553
      Stockholders' equity....................................  $42,838    54,341    58,354
</TABLE>

 
     The net assets of the insurance subsidiary available for transfer to the
parent company are limited to the amount that its stockholders' equity, as
determined in accordance with statutory accounting practices, exceeds minimum
statutory capital requirements.
 
(6) LONG-TERM DEBT
 
     Long-term debt at December 31, 1992 and 1993 consisted of the following (in
thousands):
 

<TABLE>
<CAPTION>
                                                                        1992        1993
                                                                      --------     -------
    <S>                                                               <C>          <C>
    Long-term debt:
      7 1/4% convertible subordinated debentures, due October 1,
         2014.......................................................  $ 50,000          --
      Revolving credit loans, due May 1, 1994.......................    21,500          --
      Revolving credit loans, due June 30, 1996.....................        --      44,100
      Bank term loan, $667,000 due quarterly through December 31,
         1996, remaining balance of $5,333,000 due March 6, 1997....    16,000      13,333
      Bank term loan, $571,000 due quarterly through March 31, 1997,
         remaining balance of $5,144,000 due June 1, 1997...........    14,857      12,571
      8.22% senior notes, $5,000,000 due annually through June 30,
         2002.......................................................    50,000      45,000
      7.18% nonrecourse debt, $505,000 due semiannually through
         February 1, 1999...........................................     6,565       5,555
                                                                      --------     -------
                                                                      $158,922     120,559
                                                                      --------     -------
                                                                      --------     -------
</TABLE>

 
                                       47

<PAGE>   49
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(6) LONG-TERM DEBT -- (CONTINUED)
     The aggregate payments due on the long-term debt in each of the next five
years are as follows (in thousands):
 

<TABLE>
    <S>                                                                          <C>
    1994.......................................................................  $10,962
    1995.......................................................................   10,962
    1996.......................................................................   55,062
    1997.......................................................................   17,058
    1998.......................................................................    6,060
</TABLE>

 
     On May 4, 1993, the Company called for redemption on June 4, 1993, the
entire $50,000,000 aggregate principal amount of its 7 1/4% Convertible
Subordinated Debentures due 2014 ("Debentures") issued in October, 1989 at
redemption price of 105.075% of the principal amount of the Debentures, plus
accrued interest on the principal of the Debentures from April 1, 1993 to the
date fixed for redemption. Prior to, or on May 27, 1993, the fifth business day
prior to the date set for redemption, under the terms of the October, 1989
offering, the holders of the entire $50,000,000 of Debentures elected to convert
such Debentures into common stock of the Company at a conversion price of
$11.125 per share. The conversion of the Debentures increased the issued and
outstanding Common Stock of the Company by 4,494,382 shares. The carrying amount
and unamortized premium on the Debentures were accounted for as a decrease in
stockholders' equity.
 
     On April 23, 1993, the Company and the Company's principal marine
transportation subsidiary, entered into two separate revolving credit agreements
(the "Credit Agreements") with Texas Commerce Bank National Association ("TCB"),
as agent bank, providing for aggregate borrowings of up to $30,000,000 and
$50,000,000, respectively, maturing on June 30, 1996. On August 12, 1993, the
Company amended its Credit Agreement with TCB and increased the Company's
provision for aggregate borrowings from $30,000,000 to $50,000,000. The Credit
Agreements are unsecured; however, the Company's Credit Agreement contains a
negative pledge with respect to the capital stock of certain subsidiaries of the
Company and the marine transportation subsidiary's Credit Agreement contains a
negative pledge with respect to certain scheduled assets. In addition, the
Credit Agreements provide for the grant to TCB of a first priority lien on the
capital stock or assets, as applicable, subject to the negative pledge,
generally in the event of the occurrence and continuation of a default. Interest
on the Credit Agreements, subject to an applicable margin ratio and type of
loan, is floating prime rate or, at the Company and the marine transportation
subsidiary's option, rates based on an Eurodollar interbank rate or certificate
of deposit rate. Proceeds under the Credit Agreements may be used for general
corporate purposes, the purchase of existing or new equipment or for possible
business acquisitions. The Credit Agreements contain covenants that require the
maintenance of certain financial ratios and certain other covenants that are
substantially similar to the covenants contained in the marine transportation
subsidiary's prior $60,000,000 revolving credit agreement, which was terminated
in connection with the new Credit Agreements. These covenants cover, among other
things, the disposal of capital stock of subsidiaries and assets outside the
ordinary course of business. The Credit Agreements also contain usual and
customary events of default. The Company and the marine transportation
subsidiary were in compliance with the matters as of December 31, 1993. At
December 31, 1993, the Company and the marine transportation subsidiary had
$32,000,000 and $23,900,000 respectively, available for takedown under the
Credit Agreements.
 
     On March 6, 1992, the Company entered into a $18,000,000 credit agreement
with TCB which matures on March 6, 1997. The purchase of Sabine, on March 13,
1992, was financed with the $18,000,000 credit agreement, existing cash
balances, and borrowings under the marine transportation subsidiary's credit
agreement. The $18,000,000 credit agreement has a negative pledge of the assets
acquired from Sabine. Principal payments of $667,000 are due quarterly up
through December 31, 1996. Interest on the credit agreement, subject to an
applicable margin ratio and type of loan, is floating prime rate, or at the
Company's
 
                                       48

<PAGE>   50
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(6) LONG-TERM DEBT -- (CONTINUED)
option, rates based on a Eurodollar interbank rate or certificate of deposit
rates. The remaining principal balance of $5,333,000 is fully due and payable on
March 6, 1997, together with any unpaid interest accrued thereon. At December
31, 1993, $13,333,000 was outstanding under the loan agreement and the weighted
average interest rate was 4.32%.
 
     On May 28, 1992, the Company entered into a $16,000,000 credit agreement
with TCB which matures on June 1, 1997. The purchase of Scott Chotin, on June 1,
1992, was financed with the $16,000,000 credit agreement, existing cash
balances, and borrowings under a $20,000,000 acquisition credit facility with
TCB. The credit agreement has a negative pledge of the assets acquired from
Scott Chotin. Principal payments of $571,000 are due quarterly up through March
31, 1997. Interest on the credit agreement, subject to an applicable margin
ratio and type of loan, is floating prime rate, or at the Company's option,
rates based on an Eurodollar interbank rate or certificate of deposit rates. The
remaining principal balance of $5,143,000 is fully due and payable on June 1,
1997, together with any unpaid interest accrued thereon. At December 31, 1993,
$12,571,000 was outstanding under the loan agreement and the weighted average
interest rate was 4.57%.
 
     On August 13, 1992, the Company's transportation segment sold $50,000,000
of 8.22% senior notes due June 30, 2002, in a private placement. Proceeds from
these notes were used to retire the $20,000,000 acquisition credit facility with
TCB and the retirement of two $5,000,000, 10% subordinated promissory notes
originally issued as part of the purchase of the assets of a marine
transportation company on May 23, 1989, with the balance of the proceeds used to
reduce the amount outstanding under the marine transportation subsidiary's
credit agreement with TCB. Principal payments of $5,000,000, plus interest, are
due annually through June 30, 2002. At December 31, 1993, $45,000,000 was
outstanding under the senior notes.
 
     The Company is of the opinion that the terms of the outstanding debt
represents the fair value of such debt as of December 31, 1993.
 
(7) TAXES ON INCOME
 
     Earnings before taxes on income and details of the provision (benefit) for
taxes on income for United States and Puerto Rico operations for the years ended
December 31, 1991, 1992 and 1993 are as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                               1991        1992       1993
                                                              -------     ------     ------
    <S>                                                       <C>         <C>        <C>
    Earnings before taxes on income:
      United States.........................................  $12,939     14,635     30,785
      Foreign...............................................    4,909      4,094      4,539
                                                              -------     ------     ------
                                                              $17,848     18,729     35,324
                                                              -------     ------     ------
                                                              -------     ------     ------
    Provision (benefit) for taxes on income:
      United States:
         Current............................................  $ 1,950      3,236      6,216
         Deferred...........................................    2,600      1,915      4,387
         State and Municipal................................       --         --        533
                                                              -------     ------     ------
                                                                4,550      5,151     11,136
                                                              -------     ------     ------
      Puerto Rico:
         Current............................................       --         --      1,754
         Deferred...........................................       --        (20)      (395)
                                                              -------     ------     ------
                                                                   --        (20)     1,359
                                                              -------     ------     ------
                                                              $ 4,550      5,131     12,495
                                                              -------     ------     ------
                                                              -------     ------     ------
</TABLE>

 
                                       49

<PAGE>   51
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(7) TAXES ON INCOME -- (CONTINUED)
     For the years ended December 31, 1992 and 1993, taxes on income were
accounted for under the asset and liability method required by SFAS No. 109. The
cumulative effect on prior years of the adoption of SFAS No. 109 decreased net
earnings by $10,659,000, or $.47 per share, and is reported separately in the
statement of earnings for the year ended December 31, 1992. In addition to the
impact of the cumulative effect on prior years, the effect of the adoption of
SFAS No. 109 decreased the net earnings for the 1992 year by $916,000, or $.04
per share. Prior year financial statements were not restated.
 
     Under SFAS No. 109, a change in tax rates is required to be recognized in
income in the period that includes the enactment date. The 1993 Revenue
Reconciliation Act included an increase in the corporate federal income tax rate
from 34% to 35%, thereby requiring an increase in the Company's tax expense for
the 1993 year of $1,131,000. Of the total tax adjustment, $779,000 applied to a
one-time, non-cash, federal deferred tax charge for prior years and $352,000
reflects the 1% tax rate increase on earnings for the 1993 year.
 
     The Company's effective income tax rate for United States federal income
taxes varied from the statutory tax rate for the years ended December 31, 1991,
1992 and 1993 due to the following:
 

<TABLE>
<CAPTION>
                                                               1991        1992        1993
                                                               ----        ----        ----
    <S>                                                        <C>         <C>         <C>
    United States income tax statutory rate..................  34.0%       34.0%       35.0%
    Foreign earnings.........................................   1.9          --          --
    Credit for foreign withholding tax paid..................    --          --        (4.9)
    Other....................................................   (.7)        1.1         (.1)
                                                               ----        ----        ----
                                                               35.2%       35.1%       30.0%
                                                               ----        ----        ----
                                                               ----        ----        ----
</TABLE>

 
     The Company's effective income tax rate for Puerto Rico income taxes varied
from the statutory tax rate for the years ended December 31, 1991, 1992 and 1993
due to the following:
 

<TABLE>
<CAPTION>
                                                             1991       1992        1993
                                                             -----      -----       -----
    <S>                                                      <C>        <C>         <C>
    Puerto Rico income tax statutory rate...................  42.0%      42.0%       42.0%
    Tax-exempt interest on certain investments.............. (39.0)     (42.0)      (48.4)%
    Utilization of capital loss carryforwards...............  (3.3)        --          --
    Other...................................................    .3        (.5)        1.7
                                                             -----      -----       -----
                                                                --%       (.5)%      (4.7)%
                                                             -----      -----       -----
                                                             -----      -----       -----
</TABLE>

 
     The significant components of deferred United States taxes on income
attributable to earnings from operations for the years ended December 31, 1992
and 1993 are as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                                        1992        1993
                                                                       -------     -------
    <S>                                                                <C>         <C>
    Tax depreciation over financial depreciation.....................  $ 2,677       5,616
    Tax leases.......................................................      541          --
    Financial gain on disposals different from tax...................     (887)        (41)
    Utilization of tax net operating loss carryforwards..............    1,265      (1,044)
    Utilization of tax credits.......................................    1,076       1,841
    Alternative minimum taxes........................................   (2,897)       (200)
    Self insurance reserves..........................................       --      (1,221)
    Other............................................................      140        (564)
                                                                       -------     -------
                                                                       $ 1,915       4,387
                                                                       -------     -------
                                                                       -------     -------
</TABLE>

 
                                       50

<PAGE>   52
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(7) TAXES ON INCOME -- (CONTINUED)
     For the year ended December 31, 1991, the deferred income tax provision
results from the timing differences in the recognition of income and expense for
tax and financial reporting purposes. The sources and tax effect of the timing
differences related to the United States operations for the year ended December
31, 1991 is as follows (in thousands):
 

<TABLE>
    <S>                                                                           <C>
    Tax depreciation over financial depreciation................................  $1,762
    Amortization................................................................    (129)
    Tax leases..................................................................     267
    Allowance for uncollectible accounts........................................     398
    Other.......................................................................     302
                                                                                  ------
                                                                                  $2,600
                                                                                  ------
                                                                                  ------
</TABLE>

 
     Deferred Puerto Rico income taxes arise from the recognition of certain
income and expense items in different periods for income tax and for financial
reporting purposes. Such items consist principally of deferred acquisition
costs, salvage and subrogation recoveries, provision for doubtful accounts and
accrual for guarantee fund assessments.
 
     The tax effects of temporary differences that give rise to significant
portions of the current deferred tax assets and non-current deferred tax
liabilities at December 31, 1992 and 1993 are as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                                        1992        1993
                                                                      --------     -------
    <S>                                                               <C>          <C>
    Current deferred tax assets:
      Compensated absences, principally due to accrual for financial
         reporting purposes.........................................  $    440         410
      Self-insurance reserves.......................................        --       1,983
      Other.........................................................        65         375
                                                                      --------     -------
                                                                      $    505       2,768
                                                                      --------     -------
                                                                      --------     -------
    Non-current deferred tax liabilities:
      Deferred tax assets:
         Tax credit carryforwards...................................  $  2,206         365
         Alternative minimum tax credit carryforwards...............     7,197       7,397
         Postretirement health care benefits........................     1,410       1,590
         Dual consolidated net operating loss.......................        --       1,044
         Other......................................................       482         767
                                                                      --------     -------
                                                                        11,295      11,163
           Less valuation allowance.................................       488          --
                                                                      --------     -------
                                                                        10,807      11,163
                                                                      --------     -------
      Deferred tax liabilities:
         Property and equipment, principally due to differences in
           depreciation and basis...................................   (22,571)    (35,577)
         Undistributed earnings from foreign subsidiaries...........   (15,241)    (15,321)
                                                                      --------     -------
                                                                       (37,812)    (50,898)
                                                                      --------     -------
                                                                      $(27,005)    (39,735)
                                                                      --------     -------
                                                                      --------     -------
</TABLE>

 
     As of December 31, 1993, there was no valuation allowance.
 
                                       51

<PAGE>   53
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(7) TAXES ON INCOME -- (CONTINUED)
     Subsequently recognized tax benefits relating to the valuation allowance
for deferred tax assets as of December 31, 1992 were allocated as follows (in
thousands):
 

<TABLE>
<CAPTION>
                                                                                    1992
                                                                                    ----
    <S>                                                                             <C>
    Income tax benefits that would be reported in the statement of earnings.......  $441
    Other.........................................................................    47
                                                                                    ----
                                                                                    $488
                                                                                    ----
                                                                                    ----
</TABLE>

 
     At December 31, 1993, the Company has alternative minimum tax credit
carryforwards of approximately $7,397,000 which are available to reduce future
federal regular income taxes, if any, over an indefinite period.
 
(8) LEASES
 
     The Company and its subsidiaries currently lease various facilities and
equipment under a number of cancelable and noncancelable operating leases. Total
rental expense for the years ended December 31, 1991, 1992 and 1993 follows (in
thousands):
 

<TABLE>
<CAPTION>
                                                                  1991      1992      1993
                                                                 ------     -----     -----
    <S>                                                          <C>        <C>       <C>
    Rental expense.............................................  $1,043     3,014     3,519
    Sublease rental............................................      92        93        90
                                                                 ------     -----     -----
      Net rental expense.......................................  $  951     2,921     3,429
                                                                 ------     -----     -----
                                                                 ------     -----     -----
</TABLE>

 
     Rental commitments under noncancelable leases are as follows (in
thousands):
 

<TABLE>
<CAPTION>
                                                                       LAND
                                                                      BUILDINGS
                                                                       AND
                                                                      EQUIPMENT
                                                                      ------
                <S>                                                   <C>
                1994................................................  $1,298
                1995................................................   1,013
                1996................................................     833
                1997................................................     653
                1998................................................     160
                Thereafter..........................................       9
                                                                      ------
                                                                      $3,966
                                                                      ------
                                                                      ------
</TABLE>

 
(9) STOCK OPTION PLANS
 
     The Company has three stock option plans, which were adopted in 1976, 1982
and 1989 for selected officers and other key employees. The 1976 Employee Plan,
as amended, provided for the issuance until 1986 of incentive and non-qualified
stock options to purchase up to 1,000,000 shares of common stock. The 1982
Employee Plan provided for the issuance until 1992 of incentive and
non-qualified stock options to purchase up to 600,000 shares of common stock.
The 1989 Employee Plan provides for the issuance of incentive and nonincentive
stock options to purchase up to 600,000 shares of common stock. All three of the
stock option plans authorize the granting of limited stock appreciation rights.
 
                                       52

<PAGE>   54
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(9) STOCK OPTION PLANS -- (CONTINUED)
     Changes in options outstanding under the employee plans described above for
the 1991, 1992 and 1993 years are summarized as follows:
 

<TABLE>
<CAPTION>
                                                                   NON-QUALIFIED OR
                                                                     NONINCENTIVE
                                INCENTIVE STOCK OPTIONS              STOCK OPTIONS
                              ---------------------------     ---------------------------      OPTION PRICE
                              OUTSTANDING     EXERCISABLE     OUTSTANDING     EXERCISABLE     RANGE PER SHARE
                              -----------     -----------     -----------     -----------     ---------------
<S>                           <C>             <C>             <C>             <C>             <C>
Outstanding December 31,
  1990......................     59,362          56,862         539,744          215,744      $ 2.88 - $29.63
  Granted...................         --              --              --               --
  Became exercisable........         --           2,500              --          106,500      $ 3.69 - $ 8.19
  Exercised.................    (18,181)        (18,181)         (1,150)          (1,150)     $ 6.56 - $ 8.19
  Canceled or expired.......     (3,000)         (3,000)             --               --               $29.63
                              -----------     -----------     -----------     -----------
Outstanding December 31,
  1991......................     38,181          38,181         538,594          321,094      $ 2.88 - $14.95
  Granted...................         --              --         151,000               --      $12.94 - $13.88
  Became exercisable........         --              --              --          106,500      $ 3.69 - $ 8.19
  Exercised.................         --              --         (33,404)         (33,404)     $ 2.88 - $ 9.29
  Canceled or expired.......         --              --         (17,821)          (4,071)     $ 6.56 - $14.95
                              -----------     -----------     -----------     -----------
Outstanding December 31,
  1992......................     38,181          38,181         638,369          390,119      $ 2.89 - $13.88
  Granted...................         --              --         368,000               --      $12.84 - $18.19
  Became exercisable........         --              --              --          106,500      $ 5.68 - $13.88
  Exercised.................    (10,000)        (10,000)        (47,750)         (47,750)     $ 2.89 - $13.88
  Canceled or expired.......         --              --         (14,750)          (2,000)     $ 8.19 - $12.94
                              -----------     -----------     -----------     -----------
Outstanding December 31,
  1993......................     28,181          28,181         943,869          446,869      $ 2.88 - $18.19
                              -----------     -----------     -----------     -----------
                              -----------     -----------     -----------     -----------
</TABLE>

 
     At December 31, 1993, 94,714 shares were available for future grants under
the employee plans and 478,014 shares under the employee plans were issued with
limited stock appreciation rights.
 
     The 1989 Director Stock Option Plan provides for the issuance of options to
purchase up to 150,000 shares of common stock to the Company's directors, who
are not employees of the Company. Stock options totaling 60,000 shares were
granted to non-employee directors during the year ended December 31, 1989, at an
option price of $7.5625 per share, and remain outstanding as of December 31,
1991, 1992 and 1993. During the year ended December 31, 1993, an additional
10,000 shares were granted at an option price of $18.625 per share and remain
outstanding as of December 31, 1993.
 
     In July, 1993, the Board of Directors of the Company adopted, subject to
stockholder approval at the 1994 Annual Meeting of Stockholders, the granting of
25,000 shares of non-qualified stock options to Robert G. Stone, Jr. at an
option price of $18.625. Such price represents the fair market value of the
Company's common stock on the date of grant. The grant serves as an incentive to
retain the optionee as Chairman of the Board of the Company or as a member of
the Board of Directors of the Company.
 
     In January, 1994, the Board of Directors of the Company adopted, subject to
stockholder approval at the 1994 Annual Meeting of Stockholders, the 1994
Employee Stock Option Plan, providing for the issuance of options to key
employees of the Company to purchase up to 1,000,000 shares of common stock. No
options have been granted under the 1994 Employee Plan.
 
     In January, 1994, the Board of Directors of the Company adopted, subject to
stockholders approval at the 1994 Annual Meeting of Stockholders, the 1994
Nonemployee Director Stock Option Plan, providing for the issuance of options to
Directors of the Company, including Advisory Directors, to purchase up to
100,000 shares of common stock. The 1994 Nonemployee Director Stock Option Plan
is intended as an incentive to
 
                                       53

<PAGE>   55
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(9) STOCK OPTION PLANS -- (CONTINUED)
attract and retain qualified, independent Directors. To date, 12,000 shares have
been granted under the 1994 Director Plan, subject to shareholder approval at
the 1994 Annual Meeting of Stockholders.
 
     Also, in January, 1994, the Board of Directors of the Company adopted,
subject to stockholder approval at the 1994 Annual Meeting of Stockholders, an
amendment to the 1989 Director Stock Option Plan. Such amendment would reduce
the number of stock options automatically granted to future directors from
10,000 shares of the Company's common stock to 5,000 shares of the Company's
common stock.
 
(10) RETIREMENT PLANS
 
     The transportation subsidiaries sponsor defined benefit plans for certain
ocean-going personnel. The plan benefits are based on an employee's years of
service. The plans' assets primarily consist of fixed income securities and
corporate stocks. Funding of the plans is based on actuarial computations that
are designed to satisfy minimum funding requirements of applicable regulations
and to achieve adequate funding of projected benefit obligations.
 
     Net periodic pension cost of the defined benefit plans as determined by
using the projected unit credit actuarial method was $174,000, $908,000 and
$1,080,000 in 1991, 1992 and 1993, respectively. The components of net periodic
pension cost are as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                                 1991      1992      1993
                                                                 -----     ----     ------
    <S>                                                          <C>       <C>      <C>
    Service cost -- benefits earned during the year............  $ 154      707        794
    Interest cost..............................................    125      528        638
    Actual return on plan assets...............................   (237)    (179)      (343)
    Net amortization and deferrals.............................    149      (39)        29
    Less partnerships' allocation..............................    (17)     (39)       (38)
    Less amount allocated to prior employer....................     --      (70)        --
                                                                 -----     ----     ------
    Net periodic pension cost..................................  $ 174      908      1,080
                                                                 -----     ----     ------
                                                                 -----     ----     ------
</TABLE>

 
     The funding status of the plans as of December 31, 1992 and 1993 was as
follows (in thousands):
 

<TABLE>
<CAPTION>
                                                                        1992         1993
                                                                       -------      ------
    <S>                                                                <C>          <C>
    Actuarial present value of benefit obligations:
         Vested.....................................................   $ 5,370       7,529
         Non-vested.................................................       539         787
                                                                       -------      ------
    Accumulated benefit obligation..................................     5,909       8,316
    Impact of future salary increases...............................       827       1,047
                                                                       -------      ------
    Projected benefit obligation....................................     6,736       9,363
    Plan assets at fair value.......................................     4,566       6,172
    Plan assets in excess of (less than) projected benefit
      obligation....................................................    (2,170)     (3,191)
    Unrecognized transition obligation..............................       136         142
    Unrecognized prior service cost.................................     1,558       1,407
    Unrecognized net loss...........................................       133       1,630
    Additional minimum liability....................................    (1,129)     (2,132)
                                                                       -------      ------
    Prepaid (accrued) pension cost..................................   $(1,472)     (2,144)
                                                                       -------      ------
                                                                       -------      ------
                                                       (Table continued on following page)
</TABLE>

 
                                       54

<PAGE>   56
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(10) RETIREMENT PLANS -- (CONTINUED)
 

<TABLE>
<CAPTION>
                                                                       1992        1993
                                                                       -----       -----
    <S>                                                                <C>          <C>
    Actuarial assumptions:
      Discount rate..................................................   8.5%        7.25%
      Return on assets...............................................  9.25%        9.25%
      Salary increase rate...........................................     5%           4%
</TABLE>

 
     The Company, transportation subsidiaries and the diesel repair subsidiary
sponsor defined contribution plans for all shore-based employees and certain
ocean-going personnel. Maximum contributions to these plans equal the lesser of
15% of the aggregate compensation paid to all participating employees, or up to
20% of each subsidiary's earnings before federal income tax after certain
adjustments for each fiscal year. The aggregate contributions to the plans were
approximately $1,948,000, $2,124,000 and $1,484,000 in 1991, 1992 and 1993,
respectively.
 
     The insurance subsidiary sponsors a qualified, non-contributory
profit-sharing plan which provides retirement benefits to eligible employees.
Voluntary contributions to the plan equal no less than 1% of the annual
participant's compensation, as defined, plus a portion of the administration
expenses of the plan during the first 10 years. The insurance subsidiary's
contributions to the plan were approximately $227,000, $231,000 and $269,000 in
1991, 1992 and 1993, respectively.
 
     In addition to the Company's defined benefit pension plans, the Company
sponsors an unfunded defined benefit health care plan that provides limited
postretirement medical benefits to employees, who meet minimum age and service
requirements, and eligible dependents. The plan is contributory, with retiree
contributions adjusted annually.
 
     As discussed in Note 1, the Company adopted SFAS No. 106 effective January
1, 1992. The cumulative effect on prior years of the adoption of SFAS No. 106
decreased net earnings by $2,258,000, net of applicable income taxes of
$1,163,000, or $.10 per share, and is reported separately in the statement of
earnings for the year ended December 31, 1992. In addition to the impact of the
cumulative effect on prior years, the effect of the adoption of SFAS No. 106
decreased the net earnings for the 1992 year by $355,000, net of applicable
income taxes of $183,000 or $.02 per share. Prior year financial statements were
not restated.
 
     The following table presents the plan's funded status reconciled with
amounts recognized in the Company's consolidated balance sheet at December 31,
1993 (in thousands):
 

<TABLE>
    <S>                                                                           <C>
    Accumulated postretirement benefit obligation:
      Retirees..................................................................  $  788
      Fully eligible active plan participants...................................     627
      Other active plan participants............................................   3,219
      Partnership's allocation..................................................    (151)
      Unrecognized gains........................................................      60
                                                                                  ------
      Accrued postretirement benefit cost included in other long-term
         liabilities............................................................  $4,543
                                                                                  ------
                                                                                  ------
    Net periodic postretirement benefit cost for 1993 includes the following
      components:
      Service cost..............................................................  $  289
      Interest cost.............................................................     320
      Less partnerships' allocation.............................................     (15)
                                                                                  ------
      Net periodic postretirement benefit cost..................................  $  594
                                                                                  ------
                                                                                  ------
</TABLE>

 
     The Company's unfunded defined benefit health care plan, which provides
limited postretirement medical benefits, limits cost increases in the Company's
contribution to 4% per year. For measurement purposes, a 4% annual rate of
increase in the per capita cost of covered benefits (i.e., health care cost
trend
 
                                       55

<PAGE>   57
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(10) RETIREMENT PLANS -- (CONTINUED)
rate) was assumed for future periods. Accordingly, health care cost trend rate
assumption would have no effect on the amounts reported.
 
     The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% at December 31, 1993.
 
     SFAS No. 112, "Employers' Accounting for Postemployment Benefits," issued
in November, 1992, which is required to be applied in the first quarter of 1994,
is not expected to have a material effect on the Company's financial statements.
 
(11) EARNINGS PER SHARE OF COMMON STOCK
 
     Primary earnings per share of common stock for the year ended December 31,
1991, 1992 and 1993 were based on the weighted average number of common stock
and common stock equivalent shares outstanding of 21,952,000, 22,607,000 and
26,527,000 respectively.
 
     Fully diluted earnings per share of common stock for the year ended
December 31, 1991 assume the conversion of the 7 1/4% debentures (see Note 6)
and the exercise of stock options using the treasury stock method. Net earnings
for the computation were increased by the interest expense, net of federal
income taxes, on the debentures. The weighted average number of shares used in
the computation of fully diluted earnings per common share for 1991 was
26,454,000.
 
(12) QUARTERLY RESULTS (UNAUDITED)
 
     The unaudited quarterly results for the year ended December 31, 1992 are as
follows (in thousands, except per share amounts):
 

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED
                                               -----------------------------------------------
                                                MARCH 31,      JUNE 30,     SEPTEMBER 30,   DECEMBER 31,
                                                   1992         1992            1992            1992
                                                ---------      --------     -------------   ------------ 
<S>                                            <C>              <C>             <C>             <C>
Revenues....................................   $ 49,156         69,314          73,181          77,851
Costs and expenses..........................     43,943         60,847          63,235          73,338
                                               --------         ------          ------          ------
  Operating income..........................      5,213          8,467           9,946           4,513
Interest expense............................      1,614          2,329           2,756           2,712
                                               --------         ------          ------          ------
  Earnings before taxes on income...........      3,599          6,138           7,190           1,801
Provisions for taxes on income..............        662          1,781           2,225             461
                                               --------         ------          ------          ------
  Earnings before cumulative effect of
     accounting changes.....................      2,937          4,357           4,965           1,340
Cumulative effect on prior years of                                                          
  accounting changes........................    (12,917)            --              --              --
                                               --------         ------          ------          ------
          Net earnings (loss)...............   $ (9,980)         4,357           4,965           1,340
                                               ========         ======          ======          ======
      
Earnings (loss) per share of common stock:
  Primary:
     Earnings before cumulative effect of                                                       
       accounting changes...................   $    .13            .20             .22             .06
     Cumulative effect on prior years of
       accounting changes...................       (.57)            --              --              --
                                               --------         ------          ------          ------
          Net earnings (loss)...............   $   (.44)           .20             .22             .06
                                               ========         ======          ======          ======
        
</TABLE>

 
                                       56

<PAGE>   58
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(12) QUARTERLY RESULTS (UNAUDITED) -- (CONTINUED)
     The unaudited quarterly results for the year ended December 31, 1992 have
been restated for the effect of the adoption of SFAS No. 106, more fully
described in Note 10 and the adoption of SFAS No. 109, more fully described in
Note 7. The adoption of SFAS No. 106 and SFAS No. 109,, effective January 1,
1992, reduced the net earnings (loss) before the cumulative effect of the
accounting changes for the four quarters of 1992 as follows (in thousands,
except per share amounts):
 

<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED
                                                   ------------------------------------------------------
                                                   MARCH 31,    JUNE 30,    SEPTEMBER 30,    DECEMBER 31,
                                                     1992         1992          1992             1992
                                                   ---------    --------    -------------    ------------
<S>                                                <C>          <C>         <C>              <C>
SFAS No. 106:
  Earnings (loss) before taxes on income.........    $ (79)       (148)          (158)           (153)
  Provision for taxes on income..................       27          50             54              52
                                                   ---------    --------       ------          ------
     Earnings (loss) before cumulative effect of
       accounting changes........................    $ (52)        (98)          (104)           (101)
                                                   ---------    --------       ------          ------
                                                   ---------    --------       ------          ------
SFAS No. 109:
  Earnings (loss) before cumulative effect of
     accounting changes..........................    $  11         (15)           (78)           (834)
                                                   ---------    --------       ------          ------
                                                   ---------    --------       ------          ------
Earnings (loss) per share of common stock:
  Earnings (loss) before cumulative effect of
     accounting changes:
     SFAS No. 106................................    $  --          --           (.01)           (.01)
     SFAS No. 109................................    $  --          --             --            (.04)
</TABLE>

 
     The unaudited quarterly results for the year ended December 31, 1993 are as
follows (in thousands, except per share amounts):
 

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED
                                                     ----------------------------------------------------
                                                     MARCH 31,    JUNE 30,   SEPTEMBER 30,   DECEMBER 31,
                                                       1993         1993         1993            1993
                                                     ---------    --------   -------------   ------------
<S>                                                  <C>          <C>        <C>             <C>
Revenues...........................................   $74,383      94,347        97,939         111,735
Costs and expenses.................................    65,804      82,767        86,511          99,582
                                                     ---------    --------   -------------   ------------
  Operating income.................................     8,579      11,580        11,428          12,153
Interest expense...................................     2,740       2,011         1,871           1,794
                                                     ---------    --------   -------------   ------------
  Earnings before taxes on income..................     5,839       9,569         9,557          10,359
Provision for taxes on income......................     1,994       3,070         4,511           2,920
                                                     ---------    --------   -------------   ------------
          Net earnings.............................   $ 3,845       6,499         5,046           7,439
                                                     ---------    --------   -------------   ------------
                                                     ---------    --------   -------------   ------------
Earnings per share of common stock.................   $   .17         .26           .18             .26
                                                     ---------    --------   -------------   ------------
                                                     ---------    --------   -------------   ------------
</TABLE>

 
(13) CONTINGENCIES AND COMMITMENTS
 
     The Company's Puerto Rican insurance subsidiary has appealed to the Supreme
Court of Puerto Rico, a July 5, 1989 Superior Court judgment of approximately
$1,100,000, plus interest of approximately $1,935,000 as of December 31, 1993,
resulting from a civil suit claiming damages. The Supreme Court of Puerto Rico
decided during 1992 to review the case. Management is of the opinion, based on
consultation with its legal counsel, that the judgment will be reversed or at
least substantially reduced, however, reserves have been established for the
entire amount of the judgment plus accrued interest.
 
                                       57

<PAGE>   59
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(13) CONTINGENCIES AND COMMITMENTS -- (CONTINUED)
     There are various other suits and claims against the Company, none of which
in the opinion of management will have a material effect on the Company.
 
     Management has recorded necessary reserves and believes that it has
adequate insurance coverage or has meritorious defenses for the foregoing claims
and contingencies.
 
(14) INDUSTRY SEGMENT DATA
 
     The Company conducts operations in three industry segments as follows:
 
          Marine Transportation -- Marine transportation by United States flag
     vessels on the inland waterway system and in United States coastwise and
     foreign trade. The principal products transported include petrochemical
     feedstocks, processed chemicals, agricultural chemicals, refined petroleum
     products, coal, limestone, grain and sugar. Container and palletized cargo
     are also transported for United States Government aid programs and
     military.
 
          Diesel Repair -- Repair of diesel engines, reduction gear repair and
     sale of related parts and accessories, primarily for customers in the
     marine industry and beginning in 1994, for customers in the shortline and
     industrial railroad industry.
 
          Insurance -- Writing of property and casualty insurance in Puerto
     Rico.
 
     The following table sets forth by industry segment the combined gross
revenues, operating profits (before general corporate expenses, interest expense
and income taxes), identifiable assets (including goodwill),
depreciation and amortization and capital expenditures attributable to the
continuing principle activities of the Company for the years ended December 31,
1991, 1992 and 1993 (in thousands):
 

<TABLE>
<CAPTION>
                                                             1991        1992        1993
                                                           --------     -------     -------
    <S>                                                    <C>          <C>         <C>
    Gross revenues from unaffiliated customers:
      Transportation.....................................  $118,573     191,007     284,761
      Diesel repair......................................    34,386      35,889      32,025
      Insurance..........................................    34,713      42,520      61,611
                                                           --------     -------     -------
                                                            187,672     269,416     378,397
      General corporate revenues.........................     1,361          87           7
                                                           --------     -------     -------
              Consolidated revenues......................  $189,033     269,503     378,404
                                                           --------     -------     -------
                                                           --------     -------     -------
    Operating profits:
      Transportation.....................................  $ 17,689      28,034      42,208
      Diesel repair......................................     2,482       2,561       1,904
      Insurance..........................................     4,891       1,108       4,539
                                                           --------     -------     -------
                                                             25,062      31,703      48,651
      General corporate expenses, net....................    (1,249)     (3,563)     (4,911)
      Interest expense...................................    (5,965)     (9,411)     (8,416)
                                                           --------     -------     -------
              Earnings before taxes on income............  $ 17,848      18,729      35,324
                                                           --------     -------     -------
                                                           --------     -------     -------
</TABLE>

 
                                             (Table continued on following page)
 
                                       58

<PAGE>   60
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(14) INDUSTRY SEGMENT DATA -- (CONTINUED)
 

<TABLE>
<CAPTION>
                                                             1991        1992        1993
                                                           --------     -------     -------
    <S>                                                    <C>          <C>         <C>
    Identifiable assets:
      Transportation.....................................  $150,477     275,616     344,488
      Diesel repair......................................    15,353      18,897      20,259
      Insurance..........................................   106,401     145,246     184,868
                                                           --------     -------     -------
                                                            272,231     439,759     549,615
      Investment in unconsolidated affiliate.............       134         146         177
      General corporate assets...........................    13,637       6,515      13,461
                                                           --------     -------     -------
              Consolidated assets........................  $286,002     446,420     563,253
                                                           --------     -------     -------
                                                           --------     -------     -------
    Depreciation and amortization:
      Transportation.....................................  $ 14,239      20,332      26,331
      Diesel repair......................................       373         565         658
      Insurance..........................................       260         277         395
                                                           --------     -------     -------
                                                           $ 14,872      21,174      27,384
                                                           --------     -------     -------
                                                           --------     -------     -------
    Capital expenditures and business acquisitions:
      Transportation.....................................  $ 35,769     123,700      71,236
      Diesel repair......................................     1,192         944       1,229
      Insurance..........................................       202         630       1,086
                                                           --------     -------     -------
                                                           $ 37,163     125,274      73,551
                                                           --------     -------     -------
                                                           --------     -------     -------
</TABLE>

 
     Identifiable assets are those assets that are used in the operation of each
segment. General corporate assets are principally cash, short-term investments,
accounts receivable, furniture and equipment.
 
                                       59

<PAGE>   61
 

 
                                   PART IV
 

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
 
 (a) 1. Financial Statements:
 
        Included in Part III of this report:
 
        Report of KPMG Peat Marwick, Independent Public Accountants, on the
         financial statements of Kirby Corporation and Consolidated Subsidiaries
         for the years ended December 31, 1992 and 1993.
 
        Report of Deloitte and Touche, Independent Public Accountants, on the
         financial statements of Kirby Corporation and Consolidated Subsidiaries
         for the year ended December 31, 1991.
 
        Balance Sheets, December 31, 1992 and 1993.
 
        Statements of Earnings, for the years ended December 31, 1991, 1992 and
         1993
 
        Statements of Stockholders' Equity, for the years ended December 31,
         1991, 1992 and 1993
 
        Statements of Cash Flows, for the years ended December 31, 1991, 1992
         and 1993
 
        Notes to Financial Statements, for the years ended December 31, 1991,
         1992 and 1993
 
 (a) 2. Financial Statement Schedules:
 
        Included in Part IV of this report:
 

<TABLE>
<S>   <C>
      V -- Plant, Property and Equipment, for the years ended December 31, 1991, 1992 and
           1993
     VI -- Accumulated Depletion, Depreciation and Amortization of Plant, Property and
           Equipment, for the years ended December 31, 1991, 1992 and 1993
      X -- Supplementary Income Statement Information, for the years ended December 31,
           1991, 1992 and 1993
      V -- Supplemental Insurance Information, for the years ended December 31, 1991, 1992
           and 1993
     VI -- Reinsurance, for the years ended December 31, 1991, 1992 and 1993
</TABLE>

 
        All other schedules are omitted as the required information is
        inapplicable or the information is presented in the consolidated
        financial statements or related notes.
 
  (a) 3. Exhibits
 

<TABLE>
<CAPTION>
     EXHIBIT NO.                              DESCRIPTION OF EXHIBIT
     -----------                              ----------------------
<S>        <C>       <C>
           3.1       -- Restated Articles of Incorporation of Kirby Exploration Company, Inc.
                        (the "Company"), as amended (incorporated by reference to Exhibit 3.1
                        of the Registrant's 1989 Registration Statement on Form S-3 (Reg. No.
                        33-30832)).
           3.2       -- Certificate of Amendment of Restated Articles of Incorporation of the
                        Company filed with the Secretary of State of Nevada April 30, 1990
                        (incorporated by reference to Exhibit 3.2 of the Registrant's Annual
                        report on Form 10-K for the year ended December 31, 1990).
           3.3       -- Bylaws of the Company, as amended (incorporated by reference to
                        Exhibit 3.2 of the Registrant's 1989 Registration Statement on Form
                        S-3 (Reg. No. 33-30832)).
           3.4       -- Amendment to Bylaws of the Company effective April 24, 1990
                        (incorporated by reference to Exhibit 3.4 of the Registrant's Annual
                        Report on Form 10-K for the year ended December 31, 1990).
          10.1+      -- 1976 Stock Option Plan of Kirby Exploration Company, as amended, and
                        forms of option agreements provided for thereunder and related
                        documents (incorporated by reference to Exhibit 10.1 of the
                        Registrant's Annual Report on Form 10-K for the year ended December
                        31, 1981).
</TABLE>

 
                                       60

<PAGE>   62
 

<TABLE>
<CAPTION>
     EXHIBIT NO.                              DESCRIPTION OF EXHIBIT
- ---------------------------------------------------------------------------------------------
<S>                  <C>
          10.2+      -- 1982 Stock Option Plan for Kirby Exploration Company, and forms of
                        option agreements provided for thereunder and related documents
                        (incorporated by reference to Exhibit 10.5 of the Registrant's Annual
                        Report on Form 10-K for the year ended December 31, 1982).
          10.3+      -- Amendment to 1982 Stock Option Plan for Kirby Exploration Company
                        (incorporated by reference to Exhibit 10.5 of the Registrant's Annual
                        Report on Form 10-K for the year ended December 31, 1986).
          10.4       -- Indemnification Agreement, dated April 29, 1986, between the Company
                        and each of its Directors and certain key employees (incorporated by
                        reference to Exhibit 10.11 of the Registrant's Annual Report on Form
                        10-K for the year ended December 31, 1986).
          10.5+      -- 1989 Employee Stock Option Plan for the Company, as amended
                        (incorporated by reference to Exhibit 10.11 of the Registrant's
                        Annual Report on Form 10-K for the year ended December 31, 1989).
          10.6+      -- 1989 Director Stock Option Plan for the Company, as amended
                        (incorporated by reference to Exhibit 10.12 of the Registrant's
                        Annual Report on Form 10-K for the year ended December 31, 1989).
          10.7       -- Loan Agreement, dated as of July 31, 1990, by and between Dixie
                        Carriers, Inc. and Texas Commerce Bank National Association
                        (incorporated by reference to Exhibit 10.10 of the Registrant's
                        Annual Report on Form 10-K for the year ended December 31, 1990).
          10.8       -- Loan Agreement between Dixie Fuels Limited and NCNB Leasing
                        Corporation, dated as of February 4, 1992 (incorporated by reference
                        to Exhibit 10.10 of the Registrant's Annual Report on Form 10-K for
                        the year ended December 31, 1991).
          10.9       -- Agreement of Purchase and Sale, dated January 24, 1992, by and among
                        Sabine Transportation Company, Kirby Corporation, Sabine Towing &
                        Transportation Co., Inc. and Sequa Corporation, as amended
                        (incorporated by reference to Exhibit 10.11 of the Registrant's
                        Annual Report on Form 10-K for the year ended December 31, 1991).
          10.10      -- Credit Agreement, dated as of March 6, 1992, among Sabine
                        Transportation Company, Kirby Corporation, Texas Commerce Bank
                        National Association and The First National Bank of Boston
                        (incorporated by reference to Exhibit 10.12 of the Registrant's
                        Annual Report on Form 10-K for the year ended December 31, 1991).
          10.11      -- Agreement of Purchase and Sale, dated March 12, 1992, by and between
                        Ole Man River Towing, Inc. and related entities, OMR Transportation
                        Company and Dixie Carriers, Inc. (incorporated by reference to
                        Exhibit 2.1 of the Registrant's Current Report on Form 8-K dated as
                        of April 10, 1992).
          10.12      -- Credit Agreement, dated as of March 18, 1992, among Dixie Carriers,
                        Inc., Kirby Corporation and Texas Commerce Bank National Association
                        (incorporated by reference to Exhibit 10.13 of the Registrant's
                        Annual Report on Form 10-K for the year ended December 31, 1991).
          10.13      -- Agreement and Plan of Merger, dated April 15, 1992, among Kirby
                        Corporation, Chotin Carriers, Inc., Scott Chotin, Inc. and Certain
                        Shareholders of Scott Chotin, Inc. (incorporated by reference to
                        Exhibit 2.1 of the Registrant's Current Report on Form 8-K dated as
                        of June 11, 1992).
</TABLE>

 
                                       61

<PAGE>   63
 

<TABLE>
<CAPTION>
     EXHIBIT NO.                              DESCRIPTION OF EXHIBIT
     -----------                              ----------------------
<S>                  <C>
          10.14      -- Credit Agreement, dated as of May 28, 1992, among Chotin Carriers,
                        Inc., Kirby Corporation, Texas Commerce Bank National Association and
                        The First National Bank of Boston (incorporated by reference to
                        Exhibit 2.2 of the Registrant's Current Report on Form 8K dated as of
                        June 11, 1992).
          10.15      -- Note Purchase Agreement, dated as of August 12, 1992, among Dixie
                        Carriers, Inc., The Variable Annuity Life Insurance Company,
                        Provident Mutual Life and Annuity Company of America, among other
                        (incorporated by reference to Exhibit 10.1 of the Registrant's
                        Quarterly Report on Form 10-Q for the quarter ended September 30,
                        1992).
          10.16      -- Asset Sale and Purchase Agreement, dated January 22, 1993, by and
                        among Ashland Oil, Inc., TPT Transportation Company and Dixie
                        Carriers, Inc. (incorporated by reference to Exhibit 10.18 of the
                        Registrant's Annual Report on Form 10-K for the year ended December
                        31, 1992).
          10.17      -- Deferred Compensation Agreement dated August 12, 1985 between Dixie
                        Carriers, Inc., and J.H. Pyne (incorporated by reference to Exhibit
                        10.19 of the Registrant's Annual Report on Form 10-K for the year
                        ended December 31, 1992).
          10.18      -- Agreement and Plan of Merger, dated April 1, 1993, among Kirby
                        Corporation, AFRAM Carriers, Inc. and AFRAM Lines (USA) Co., Ltd. and
                        the shareholders of AFRAM Lines (USA) Co., Ltd. (incorporated by
                        reference to Exhibit 2.1 of the Registrant's Current Report on Form
                        8-K dated May 3, 1993).
          10.19      -- Credit Agreement, dated April 23, 1993, among Kirby Corporation, the
                        Banks named therein, and Texas Commerce Bank National Association as
                        Agent and Fund Administrator (incorporated by reference to Exhibit
                        10.1 of the Registrant's Quarterly Report on Form 10-Q for the
                        quarter ended March 31, 1993).
          10.20      -- Credit Agreement, dated April 23, 1993, among Dixie Carriers, Inc.,
                        the Banks named therein, and Texas Commerce Bank National
                        Association, as Agent and Fund Administrator (incorporated by
                        reference to Exhibit 10.02 of the Registrant's Quarterly Report on
                        Form 10-Q for the quarter ended March 31, 1993).
          10.21*+    -- 1994 Employee Stock Option Plan for Kirby Corporation.
          10.22*+    -- 1994 Nonemployee Director Stock Option Plan for Kirby Corporation.
          10.23*+    -- 1993 Stock Option of Kirby Corporation for Robert G. Stone, Jr.
          10.24*+    -- Amendment to 1989 Director Stock Option Plan for Kirby Exploration
                        Company, Inc.
          21.1*      -- Principal Subsidiaries of the Registrant.
          23.1*      -- Consent of Deloitte & Touche.
          23.2*      -- Consent of KPMG Peat Marwick.
          28.1*      -- Independent Auditors' Report of Deloitte & Touche.
</TABLE>

 
- ---------------
 
* Filed herewith
 
+ Management contract, compensatory plan or arrangement
 
                                       62

<PAGE>   64
 
                                                                      SCHEDULE V
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                         PLANT, PROPERTY AND EQUIPMENT
              FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
 

<TABLE>
<CAPTION>
===============================================================================================
                                                                            OTHER
                                     BALANCE AT                            CHANGES     BALANCE
                                      BEGINNING    ADDITIONS                 ADD        AT END
          CLASSIFICATION              OF PERIOD     AT COST     RETIREMENTS (DEDUCT)  OF PERIOD
- -----------------------------------------------------------------------------------------------
<S>                                  <C>           <C>          <C>        <C>        <C>
For the year ended December 31,
  1991:
  Transportation, Diesel Repair and
     Other:
     Marine transportation
       equipment...................  $173,660,708  34,949,481   3,377,143             205,233,046
     Land, buildings and
       equipment...................    5,302,687    2,014,394     40,402               7,276,679
                                     -----------   ----------   --------   --------   ----------
                                     178,963,395   36,963,875   3,417,545        --   212,509,725
  Insurance:
     Equipment.....................    1,733,378      201,950     19,352               1,915,976
                                     -----------   ----------   --------   --------   ----------
                                     $180,696,773  37,165,825   3,436,897        --   214,425,701
                                     -----------   ----------   --------   --------   ----------
                                     -----------   ----------   --------   --------   ----------
For the year ended December 31,
  1992:
  Transportation, Diesel Repair and
     Other:
     Marine transportation
       equipment...................  $205,233,046  121,722,409   654,943   (289,288)  326,011,224
     Land, buildings and
       equipment...................    7,276,679    5,184,042    166,802    289,288   12,583,207
                                     -----------   ----------   --------   --------   ----------
                                     212,509,725   126,906,451   821,745         --   338,594,431
  Insurance:
     Equipment.....................    1,915,976      630,469    203,932    124,267    2,466,780
                                     -----------   ----------   --------   --------   ----------
                                     $214,425,701  127,536,920  1,025,677   124,267   341,061,211
                                     -----------   ----------   --------   --------   ----------
                                     -----------   ----------   --------   --------   ----------
For the year ended December 31,
  1993:
  Transportation, Diesel Repair and
     Other:
     Marine transportation
       equipment...................  $326,011,224  63,357,279   2,022,649   148,438   387,494,292
     Land, buildings and
       equipment...................   12,583,207    6,796,068    198,559         --   19,180,716
                                     -----------   ----------   --------   --------   ----------
                                     338,594,431   70,153,347   2,221,208   148,438   406,675,008
  Insurance:
     Equipment.....................    2,466,780    1,085,855    232,913         --    3,319,722
                                     -----------   ----------   --------   --------   ----------
                                     $341,061,211  71,239,202   2,454,121   148,438   409,994,730
                                     -----------   ----------   --------   --------   ----------
                                     -----------   ----------   --------   --------   ----------
</TABLE>

 
                                       63

<PAGE>   65
 
                                                                   SCHEDULE VI 
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
            ACCUMULATED DEPLETION, DEPRECIATION AND AMORTIZATION OF
                         PLANT, PROPERTY AND EQUIPMENT
              FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
 

<TABLE>
<CAPTION>
===================================================================================================
 
                                        BALANCE     ADDITIONS                  OTHER
                                          AT         CHARGED                  CHANGES     BALANCE
                                       BEGINNING       TO                       ADD        AT END
            DESCRIPTION                OF PERIOD    EXPENSES    RETIREMENTS   (DEDUCT)   OF PERIOD
- ---------------------------------------------------------------------------------------------------
<S>                                   <C>           <C>         <C>           <C>        <C>
For the year ended December 31,
  1991:
  Transportation, Diesel Repair and
     Other:
     Marine transportation
       equipment....................  $71,842,254   12,308,071   2,697,005     (26,208)  81,427,112
     Land, buildings and
       equipment....................    1,968,741     744,448       28,256      26,208    2,711,141
                                      -----------   ---------   -----------   --------   ----------
                                       73,810,995   13,052,519   2,725,261          --   84,138,253
  Insurance:
     Equipment......................      448,527     241,562       19,352          --      670,737
                                      -----------   ---------   -----------   --------   ----------
                                      $74,259,522   13,294,081   2,744,613          --   84,808,990
                                      -----------   ---------   -----------   --------   ----------
                                      -----------   ---------   -----------   --------   ----------
For the year ended December 31,
  1992:
  Transportation, Diesel Repair and
     Other:
     Marine transportation
       equipment....................  $81,427,112   17,856,393     348,731    (289,288)  98,645,486
     Land, buildings and
       equipment....................    2,711,141   1,154,346      128,294     289,288    4,026,481
                                      -----------   ---------   -----------   --------   ----------
                                       84,138,253   19,010,739     477,025          --   102,671,967
  Insurance:
     Equipment......................      670,737     258,965      136,091          --      793,611
                                      -----------   ---------   -----------   --------   ----------
                                      $84,808,990   19,269,704     613,116          --   103,465,578
                                      -----------   ---------   -----------   --------   ----------
                                      -----------   ---------   -----------   --------   ----------
For the year ended December 31,
  1993:
  Transportation, Diesel Repair and
     Other:
     Marine transportation
       equipment....................  $98,645,486   22,399,327   1,300,266     148,438   119,892,985
     Land, buildings and
       equipment....................    4,026,481   1,709,736      169,876          --    5,566,341
                                      -----------   ---------   -----------   --------   ----------
                                      102,671,967   24,109,063   1,470,142     148,438   125,459,326
  Insurance:
     Equipment......................      793,611     393,508       63,812          --    1,123,307
                                      -----------   ---------   -----------   --------   ----------
                                      $103,465,578  24,502,571   1,533,954     148,438   126,582,633
                                      -----------   ---------   -----------   --------   ----------
                                      -----------   ---------   -----------   --------   ----------
</TABLE>

 
                                       64

<PAGE>   66
 
                                                                      SCHEDULE X
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                   SUPPLEMENTARY INCOME STATEMENT INFORMATION
              FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
 

<TABLE>
<CAPTION>
                                                                CHARGED TO COSTS AND EXPENSES
                                                          -----------------------------------------
                             ITEM                            1991            1992           1993
                             ----                         -----------     ----------     ----------
<S>   <C>                                                 <C>             <C>            <C>
1.    Maintenance and repairs...........................  $11,217,347     20,508,459     24,213,505
2.    Depreciation and amortization of intangible
      assets, pre-operating costs and similar
      deferrals.........................................    1,564,854      2,153,642      3,599,928
3.    Taxes, other than payroll and income taxes........    2,583,771      3,949,209      5,707,662
</TABLE>

 
                                       65

<PAGE>   67
 
                                                                      SCHEDULE V
 
                KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                       SUPPLEMENTAL INSURANCE INFORMATION
              FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
 

<TABLE>
<CAPTION>
=================================================================================================================================
                           FUTURE
                           POLICY                                                    BENEFITS,    AMORTI-
                          BENEFITS,                 OTHER                             CLAIMS,    ZATION OF
              DEFERRED     LOSSES,                 POLICY                             LOSSES     DEFERRED
               POLICY      CLAIMS                  CLAIMS                   NET         AND       POLICY      OTHER
              ACQUISITION AND LOSS    UNEARNED       AND       PREMIUM    INVESTMENT SETTLEMENT  ACQUISITION OPERATING  PREMIUMS
   SEGMENT      COSTS      EXPENSE    PREMIUMS    BENEFITS     REVENUE    INCOME(1)  EXPENSES      COSTS     EXPENSES(2)  WRITTEN
- ---------------------------------------------------------------------------------------------------------------------------------
<S>           <C>         <C>         <C>         <C>         <C>         <C>        <C>         <C>         <C>        <C>
Insurance:
  December
     31,
     1991.... $3,484,872  21,342,796  27,935,649         --   23,560,720  5,993,799  18,103,129  7,181,257   4,519,637  24,362,283
              ---------   ---------   ---------   ---------   ---------   --------   ---------   ---------   --------   ---------
              ---------   ---------   ---------   ---------   ---------   --------   ---------   ---------   --------   ---------
  December
     31,
     1992.... $5,911,428  35,587,938  42,209,108         --   29,552,387  6,453,850  26,289,141  8,648,507   6,475,497  36,874,702
              ---------   ---------   ---------   ---------   ---------   --------   ---------   ---------   --------   ---------
              ---------   ---------   ---------   ---------   ---------   --------   ---------   ---------   --------   ---------
  December
     31,
     1993.... $7,279,291  46,740,836  61,558,357         --   47,874,013  7,550,114  37,119,811  11,084,959  6,853,834  61,450,445
              ---------   ---------   ---------   ---------   ---------   --------   ---------   ---------   --------   ---------
              ---------   ---------   ---------   ---------   ---------   --------   ---------   ---------   --------   ---------
</TABLE>

 
- ---------------
 
(1) Reconciliation of net investment income to investment income amount
reflected in the statements of earnings is as follows:
 

<TABLE>
<CAPTION>
                                                                                     FOR THE YEARS ENDED DECEMBER 31,
                                                                                    -----------------------------------
                                                                                      1991          1992         1993
                                                                                    ---------     --------     --------
        <S>                                                                         <C>           <C>          <C>
        Net investment income as stated above -- Insurance segment.................  $5,993,799    6,453,850    7,550,114
        Investment income -- Marine transportation segment, diesel repair segment
          and parent company.......................................................     880,774      341,399      360,069
                                                                                     ----------    ---------    ---------
                                                                                     $6,874,573    6,795,249    7,910,183
                                                                                     -----------   ---------    ---------
                                                                                     -----------   ---------    ---------
</TABLE>

 
(2) Included as part of selling, general and administrative expenses, taxes,
    other than on income, and depreciation and amortization in the statements of
    earnings.
 
                                       66

<PAGE>   68
 
                                                                     SCHEDULE VI
 
                  KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
 
                                     REINSURANCE
                FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
 

<TABLE>
<CAPTION>
                                                                                            PERCENTAGE
                                                CODED TO       ASSUMED                      OF AMOUNT
                                  GROSS          OTHER        FROM OTHER                     ASSUMED
                                 AMOUNT        COMPANIES      COMPANIES      NET AMOUNT       TO NET
                               -----------     ----------     ----------     ----------     ----------
<S>                            <C>             <C>            <C>            <C>            <C>
December 31, 1991:
  Life insurance in force....  $        --             --             --             --           --
                               -----------     ----------     ----------     ----------     ----------
                               -----------     ----------     ----------     ----------     ----------
  Premiums:
     Life insurance..........  $
     Accident and health
       insurance.............
     Property and liability
       insurance.............   36,480,715     13,186,223      1,067,791     24,362,283        4.38%
                               -----------     ----------     ----------     ----------     ----------
          Total premiums.....  $36,480,715     13,186,223      1,067,791     24,362,283*       4.38%
                               -----------     ----------     ----------     ----------     ----------
                               -----------     ----------     ----------     ----------     ----------
December 31, 1992:
  Life insurance in force....  $        --             --             --             --           --
                               -----------     ----------     ----------     ----------     ----------
                               -----------     ----------     ----------     ----------     ----------
  Premiums:
     Life insurance..........  $
     Accident and health
       insurance.............
     Property and liability
       insurance.............   52,830,321     16,282,557        326,938     36,874,702         .89%
                               -----------     ----------     ----------     ----------     ----------
          Total premiums.....  $52,830,321     16,282,557        326,938     36,874,702*        .89%
                               -----------     ----------     ----------     ----------     ----------
                               -----------     ----------     ----------     ----------     ----------
December 31, 1993:
  Life insurance in force....  $        --             --             --             --           --
                               -----------     ----------     ----------     ----------     ----------
                               -----------     ----------     ----------     ----------     ----------
  Premiums:
     Life insurance..........  $
     Accident and health
       insurance.............
     Property and liability
       insurance.............   80,623,816     19,200,056         26,685     61,450,445         .04%
                               -----------     ----------     ----------     ----------     ----------
          Total premiums.....  $80,623,816     19,200,056         26,685     61,450,445         .04%
                               -----------     ----------     ----------     ----------     ----------
                               -----------     ----------     ----------     ----------     ----------
</TABLE>

 
- ---------------
* Reconciliation of total premiums to net premiums earned, the amount reflected
  in the statements of earnings is as follows.
 

<TABLE>
<CAPTION>
                                                       FOR THE YEARS ENDED DECEMBER 31,
                                                  -------------------------------------------
                                                     1991            1992            1993
                                                  -----------     ----------     ------------
    <S>                                           <C>             <C>            <C>
    Total premiums..............................  $24,362,283     36,874,702       61,450,445
    Increase in unearned premiums...............     (801,563)    (7,322,315)     (13,576,432)
                                                  -----------     ----------     ------------
              Net premiums earned...............  $23,560,720     29,552,387       47,874,013
                                                  -----------     ----------     ------------
                                                  -----------     ----------     ------------
</TABLE>

 
                                       67

<PAGE>   69
 

                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
 
                                            KIRBY CORPORATION
                                              (Registrant)
 
                                            By:      BRIAN K. HARRINGTON
                                                    Brian K. Harrington
                                                   Senior Vice President
 
Dated: March 14, 1994
 
     Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
 

<TABLE>
<CAPTION>
                  SIGNATURE                               CAPACITY                   DATE
- ---------------------------------------------   ----------------------------    ---------------
          <C>                                   <S>                             <C>
          ROBERT G. STONE, JR.                  Chairman of the Board and        March 14, 1994
          Robert G. Stone, Jr.                    Director of the Company

          GEORGE A. PETERKIN, JR.               President, Director of the       March 14, 1994
          George A. Peterkin, Jr.                 Company and Principal
                                                  Executive Officer
          J. H. PYNE                            Executive Vice President and     March 14, 1994
          J. H. Pyn                               Director of the Company
                 
          BRIAN K. HARRINGTON                   Senior Vice President,           March 14, 1994
          Brian K. Harrington                     Treasurer, Assistant
                                                  Secretary of the Company
                                                  and Principal Financial
                                                  Officer

          G. STEPHEN HOLCOMB                    Vice President, Controller,      March 14, 1994
          G. Stephen Holcomb                      Assistant Treasurer,
                                                  Assistant Secretary of the
                                                  Company and Principal
                                                  Accounting Officer

                                                Director of the Company          March   , 1994
          P. T. Bee

          GEORGE F. CLEMENTS, JR.               Director of the Company          March 14, 1994
          George F. Clements, Jr.

          J. PETER KLEIFGEN                     Director of the Company          March 14, 1994
          J. Peter Kleifgen

          WILLIAM M. LAMONT, JR.                Director of the Company          March 14, 1994
          William M. Lamont, Jr.

                                                Director of the Company          March   , 1994
          C. W. Murchison, III

          J. VIRGIL WAGGONER                    Director of the Company          March 14, 1994
          J. Virgil Waggoner
</TABLE>

 
                                       68





<PAGE>   1
 
                        1994 EMPLOYEE STOCK OPTION PLAN
                                      FOR
                               KIRBY CORPORATION
 
     Section 1. Purpose. The purpose of this 1994 Employee Stock Option Plan for
Kirby Corporation is to advance the interests of Kirby Corporation, a Nevada
corporation (the "Company"), by providing an additional incentive to attract and
retain qualified and competent employees for the Company and its subsidiaries,
upon whose efforts and judgment the success of the Company is largely dependent,
through the encouragement of stock ownership in the Company by such persons.
 
     Section 2. Definitions. As used herein, the following terms shall have the
meaning indicated:
 
          (a) "Act" shall mean the Securities Exchange Act of 1934, as amended.
 
          (b) "Board" shall mean the Board of Directors of the Company.
 
          (c) "Business Day" shall mean (i) if the Shares trade on a national
     exchange, any day that the national exchange on which the Shares trade is
     open or (ii) if the Shares do not trade on a national exchange, any day
     that commercial banks in the City of New York are open.
 
          (d) "Commission" shall mean the Securities and Exchange Commission.
 
          (e) "Committee" shall mean the Compensation Committee of the Board or
     other committee, if any, appointed by the Board pursuant to Section 14
     hereof.
 
          (f) "Company"
 shall mean Kirby Corporation, a Nevada corporation.
 
          (g) "Date of Grant" shall mean the date on which the Committee takes
     formal action to grant an Option to an Eligible Person, provided it is
     followed, as soon as reasonably possible, by written notice to the Eligible
     Person of the grant.
 
          (h) "Director" shall mean a member of the Board.
 
          (i) "Disinterested Person" shall mean a person who, at the time he or
     she acts on the granting of any Option is not eligible, and within one year
     prior thereto has not been eligible, to receive Shares, stock options or
     stock appreciation rights under (i) this Plan or (ii) any other plan of the
     Company or any of its affiliates in which administrators of such plan use
     discretion in granting stock, stock options, stock appreciation rights or
     any other rights to such person. Persons who are eligible to receive stock
     options under the 1989 Director Stock Option Plan of Kirby Exploration
     Company, Inc. or the 1994 Director Stock Option Plan of Kirby Corporation,
     are deemed "Disinterested Persons" for purposes of this Plan.
 
          (j) "Eligible Person(s)" shall mean those persons who are Employees or
     members of the Board of Directors of any Subsidiary, but excluding
     Directors who are not Employees.
 
          (k) "Employee(s)" shall mean those persons who are employees of the
     Company or who are employees of any Subsidiary.
 
          (l) "Fair Market Value" shall mean:
 
             (i) If Shares are listed on a national securities exchange at the
        date of determining the Fair Market Value,
 
                (A) The mean of the high and low sales price on such exchange on
           the date of reference as reported in any newspaper of general
           circulation, or
 
                (B) If the Shares shall not have traded on such exchange on such
           date, the mean of the high and low sales price on such exchange on
           the next day prior thereto on which the Shares were so traded as
           reported in any newspaper of general circulation; or
 
             (ii) If Shares shall not be listed as provided in Subsection
        2(l)(i), a value determined by any fair and reasonable means prescribed
        by the Committee.
 
                                       A-1

<PAGE>   2
 
          (m) "Incentive Stock Option" shall mean an option that is an incentive
     stock option as defined in Section 422 of the Internal Revenue Code.
 
          (n) "Internal Revenue Code" or "Code" shall mean the Internal Revenue
     Code of 1986, as it now exists or may be amended from time to time.
 
          (o) "Nonqualified Stock Option" or "Nonincentive Stock Option" shall
     mean an option that is not an incentive stock option as defined in Section
     422 of the Internal Revenue Code.
 
          (p) "Option" (when capitalized) shall mean any option granted under
     this Plan.
 
          (q) "Optionee" shall mean a person to whom an Option is granted or any
     successor to the rights of such Option under this Plan by reason of the
     death of such person.
 
          (r) "Plan" shall mean this 1994 Employee Stock Option Plan for Kirby
     Corporation.
 
          (s) "Share(s)" shall mean a share or shares of the Common Stock , par
     value ten cents ($0.10) per share, of the Company.
 
          (t) "Subsidiary" shall mean any corporation (other than the Company)
     in any unbroken chain of corporations beginning with the Company if, at the
     time of the granting of the Option, each of the corporations other than the
     last corporation in the unbroken chain owns stock possessing 50% or more of
     the total combined voting power of all classes of stock in one of the other
     corporations in such chain.
 
     Section 3. Shares and Options.
 
     (a) The Committee may grant to Eligible Persons from time to time Options
to purchase an aggregate of up to one million (1,000,000) Shares from Shares
held in the Company's treasury or from authorized and unissued Shares. If any
Option granted under the Plan shall terminate, expire, or be canceled or
surrendered as to any Shares, new Options may thereafter be granted covering
such Shares. An Option granted hereunder shall be either an Incentive Stock
Option or a Nonqualified Stock Option as determined by the Committee at the Date
of Grant of such Option and shall clearly state whether it is an Incentive Stock
Option or a Nonqualified Stock Option. Incentive Stock Options may only be
granted to persons who are employees of the Company or a Subsidiary.
 
     (b) The aggregate Fair Market Value (determined at the Date of Grant of the
Option) of the Shares with respect to which any Incentive Stock Option is
exercisable for the first time by an Optionee during any calendar year under the
Plan and all such plans of the Company and any parent and subsidiary of the
Company (as defined in Section 425 of the Code) shall not exceed $100,000.
 
     Section 4. Conditions for Grant of Options.
 
     (a) Each Option shall be evidenced by an option agreement that may contain
any term deemed necessary or desirable by the Committee, provided such terms are
not inconsistent with this Plan or any applicable law. Optionees shall be those
persons selected by the Committee from Eligible Persons. Any person who files
with the Committee, in a form satisfactory to the Committee, a written waiver of
eligibility to receive any Option under this Plan shall not be eligible to
receive any Option under this Plan for the duration of such waiver.
 
     (b) In granting Options, the Committee shall take into consideration the
contribution the person has made or may make to the success of the Company or
its Subsidiaries and such other factors as the Committee shall determine. The
Committee shall also have the authority to consult with and receive
recommendations from officers and other personnel of the Company and its
Subsidiaries with regard to these matters. The Committee may from time to time
in granting Options under the Plan prescribe such other terms and conditions
concerning such Options as it deems appropriate, including, without limitation,
relating an Option to achievement of specific goals established by the Committee
or the continued employment of the Optionee for a specified period of time,
provided that such terms and conditions are not more favorable to an Optionee
than those expressly permitted herein.
 
                                       A-2

<PAGE>   3
 
     (c) The Committee in its sole discretion shall determine in each case
whether periods of military or government service shall constitute a
continuation of employment for the purposes of this Plan or any Option.
 
     Section 5. Exercise Price. The exercise price per Share of any Option shall
be any price determined by the Committee; provided, however, that the exercise
price for any Incentive Stock Option shall not be less than one hundred percent
(100%) of the Fair Market Value per Share on the Date of Grant.
 
     Section 6. Exercise of Options. An Option shall be deemed exercised when
(i) the Company has received written notice of such exercise in accordance with
the terms of the Option, (ii) full payment of the aggregate exercise price of
the Shares as to which the Option is exercised has been made, and (iii)
arrangements that are satisfactory to the Committee in its sole discretion have
been made for the Optionee's payment to the Company of the amount, if any, that
the Committee determines to be necessary for the Company or Subsidiary employing
the Optionee to withhold in accordance with applicable federal or state income
tax withholding requirements. Unless further limited by the Committee in any
Option, the Exercise price of any Shares purchased shall be paid solely in cash,
by certified or cashier's check, by money order, by personal check or with
Shares (but with Shares only if permitted by an Option agreement or otherwise
permitted by the Committee in its sole discretion at the time of exercise and
provided that if the Optionee acquired such stock to be surrendered directly or
indirectly from the Company, he shall have owned such stock for six months prior
to using such stock to exercise an Option) or by a combination of the above. If
the exercise price is paid in whole or in part with Shares, the value of the
Shares surrendered shall be their Fair Market Value on the date received by the
Company.
 
     Section 7. Exercisability of Options.
 
     (a) Any Option shall become exercisable in such amounts and at such
intervals as the Committee shall provide in any Option, except as otherwise
provided in this Section 7; provided in each case that the Option has not
expired on the date of exercise.
 
     (b) The expiration date of an Option shall be determined by the Committee
at the Date of Grant, but in no event shall an Option be exercisable after the
expiration of ten (10) years from the Date of Grant.
 
     (c) An Option shall not be exercisable prior to the six-month anniversary
of its Date of Grant.
 
     (d) The Committee may in its sole discretion accelerate the date on which
any Option may be exercised.
 
     (e) On the date thirty (30) days prior to any occurrence described in
Subsections (7)(e)(i), (ii) or (iii), but only where such anticipated occurrence
actually takes place, notwithstanding the exercise schedule in an Option, each
Option shall immediately become exercisable in full where there (i) is any
transaction (which shall include a series of transactions occurring within 60
days or occurring pursuant to a plan) that has the result that shareholders of
the Company immediately before such transaction cease to own at least 51% of (x)
the voting stock of the Company or (y) of any entity that results from the
participation of the Company in a reorganization, consolidation, merger,
liquidation or any other form of corporate transaction; (ii) is a merger,
consolidation, reorganization, liquidation or dissolution in which the Company
does not survive; (iii) is a sale, lease, exchange or other disposition of all
or substantially all the property and assets of the Company.
 
     (f) Notwithstanding any provisions hereof to the contrary, if any Option is
accelerated under Subsection 7(d) or (e), the portion of such Option that may be
exercised to acquire Shares that the Optionee would not be entitled to acquire
but for such acceleration (the "Acceleration Shares"), is limited to that number
of Acceleration Shares that can be acquired without causing the Optionee to have
an "excess parachute payment" as determined under Section 280G of the Internal
Revenue Code, determined by taking into account all of the Optionee's "parachute
payments" determined under Section 280G of the Code. If as a result of this
Subsection 7(f), the Optionee may not acquire all of the Acceleration Shares,
then the Acceleration Shares that the Optionee may acquire shall be the last
shares that the Optionee would have been entitled to acquire had this Option not
been accelerated.
 
                                       A-3

<PAGE>   4
 
     Section 8. Termination of Option Period.
 
     (a) Unless otherwise provided in any Option, the unexercised portion of an
Option shall automatically and without notice terminate and become null and void
at the time of the earliest to occur of the following:
 
          (i) except as provided in Subsection 8(a)(iii), thirty (30) days after
     the date that Optionee ceases to be employed by the Company or a Subsidiary
     regardless of the reason therefor other than as a result of such
     termination by reason of (x) death, (y) mental or physical disability of
     Optionee as determined by a medical doctor satisfactory to the Committee or
     (z) termination of Optionee's employment with the Company or a Subsidiary
     for cause;
 
          (ii) except as provided in Subsection 8(a)(iii), one (1) year after
     the date on which the Optionee suffers a mental or physical disability as
     determined by a medical doctor satisfactory to the Committee;
 
          (iii) (y) one (1) year after the date that Optionee ceases to be
     employed by the Company by reason of death of the Optionee, or (z) six (6)
     months after the date on which the Optionee shall die, if the Optionee's
     death shall occur during the thirty-day period described in Subsection
     8(a)(i) or the one-year period described in Subsection 8(a)(ii);
 
          (iv) the date that Optionee ceases to be employed by the Company or a
     Subsidiary as a result of a termination for cause;
 
          (v) with respect to Options held by a person who is a member of the
     Board of Directors of a Subsidiary who is not also an Employee, thirty (30)
     days after the date that Optionee ceases to be a member of such Board of
     Directors; provided that if Optionee ceases to be a member of such Board of
     Directors because of the death of the Optionee, or if Optionee shall die
     within thirty (30) days after the date that Optionee ceases to be a member
     of such Board of Directors, such Option shall terminate one (1) year after
     the date on which Optionee shall cease to be a member of such Board of
     Directors; and
 
          (vi) the tenth (10th) anniversary of the Date of Grant of the Option.
 
     (b) If provided in an Option, the Committee in its sole discretion may, by
giving written notice (a "Cancellation Notice") cancel, effective upon the date
of the consummation of any of the transactions described in Subsection 7(e), all
or any portion of such Option that remains unexercised on such date. Such
Cancellation Notice shall be given a reasonable period of time (but not less
than 15 days) prior to the proposed date of such cancellation, and may be given
either before or after shareholder approval of such transaction.
 
     Section 9. Adjustment of Shares.
 
     (a) If at any time while the Plan is in effect or unexercised Options are
outstanding, there shall be any increase or decrease in the number of issued and
outstanding Shares through the declaration of a stock dividend or through any
recapitalization resulting in a stock split-up, combination or exchange of
Shares, then and in such event:
 
          (i) appropriate adjustment shall be made in the maximum number of
     Shares then subject to being optioned under the Plan, so that the same
     proportion of the Company's issued and outstanding Shares shall continue to
     be subject to being so optioned; and
 
          (ii) appropriate adjustment shall be made in the number of Shares and
     the exercise price per Share thereof then subject to outstanding Options,
     so that the same proportion of the Company's issued and outstanding Shares
     shall remain subject to purchase at the same aggregate exercise price.
 
     (b) The Committee may change the terms of Options outstanding under this
Plan, with respect to the exercise price or the number of Shares subject to the
Options, or both, when, in the Committee's sole discretion, such adjustments
become appropriate by reason of any corporate transaction.
 
                                       A-4

<PAGE>   5
 
     (c) Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to the number of Shares reserved for issuance under the
Plan or the number of or exercise price of Shares then subject to outstanding
Options granted under the Plan.
 
     (d) Without limiting the generality of the foregoing, the existence of
outstanding Options granted under the Plan shall not affect in any manner the
right or power of the Company to make, authorize or consummate (1) any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; (2) any merger or consolidation of
the Company; (3) any issue by the Company of debt securities, or preferred or
preference stock that would rank above the Shares subject to outstanding
Options; (4) the dissolution or liquidation of the Company; (5) any sale,
transfer or assignment of all or any part of the assets or business of the
Company; or (6) any other corporate act or proceeding, whether of a similar
character or otherwise.
 
     Section 10. Transferability of Options. Each Option shall provide that such
Option shall not be transferrable by the Optionee otherwise than by will or the
laws of descent and distribution and that so long as an Optionee lives, only
such Optionee or his guardian or legal representative shall have the right to
exercise such Option.
 
     Section 11. Issuance of Shares. No person shall be, or have any of the
rights or privileges of, a stockholder of the Company with respect to any of the
Shares subject to an Option unless and until certificates representing such
Shares shall have been issued and delivered to such person. As a condition of
any transfer of the certificate for Shares, the Committee may obtain such
agreements or undertakings, if any, as it may deem necessary or advisable to
assure compliance with any provision of the Plan, the agreement evidencing the
Option or any law or regulation including, but not limited to, the following:
 
          (i) A representation, warranty or agreement by the Optionee to the
     Company at the time any Option is exercised that he or she is acquiring the
     Shares to be issued to him or her for investment and not with a view to, or
     for sale in connection with, the distribution of any such Shares;
 
     and
 
          (ii) A representation, warranty or agreement to be bound by any
     legends that are, in the opinion of the Committee, necessary or appropriate
     to comply with the provisions of any securities laws deemed by the
     Committee to be applicable to the issuance of the Shares and are endorsed
     upon the Share certificates.
 
     Section 12. Options for 10% Shareholder. Notwithstanding any other
provisions of the Plan to the contrary, an Incentive Stock Option shall not be
granted to any person owning directly (or indirectly through attribution under
Section 425(d) of the Code) at the Date of Grant, stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company (or of
its parent or subsidiary [as defined in Section 425 of the Internal Revenue
Code] at the Date of Grant) unless the exercise price of such Incentive Stock
Option is at least 110% of the Fair Market Value of the Shares subject to such
Incentive Stock Option on the Date of Grant, and the period during which the
Incentive Stock Option may be exercised does not exceed five (5) years from the
Date of Grant.
 
     Section 13. Nonqualified Stock Options. Nonqualified Stock Options may be
granted hereunder and shall be subject to all terms and provisions hereof except
that each such Nonqualified Stock Option (i) must be clearly designated as a
Nonqualified Stock Option; (ii) may be granted for Shares in excess of the
limits contained in Subsection 3(b) of this Plan; and (iii) shall not be subject
to Section 12 of this Plan. If both Incentive Stock Options and Nonqualified
Stock Options are granted to an Optionee, the right to exercise, to the full
extent thereof, Options of either type shall not be contingent in whole or in
part upon the exercise of, or failure to exercise, Options of the other type.
Persons who are members of the Board of Directors of a Subsidiary who are not
also Employees shall only be eligible to receive Nonqualified Stock Options.
 
                                       A-5

<PAGE>   6
 
     Section 14. Administration of the Plan.
 
     (a) The Plan shall be administered by the Compensation Committee of the
Board or other committee thereof as appointed by the Board (herein called the
"Committee") consisting of not less than three (3) members of the Board all of
whom are Disinterested Persons. Any member of the Committee may be removed at
any time, with or without cause, by resolution of the Board and any vacancy
occurring in the membership of the Committee may be filled by appointment by the
Board.
 
     (b) The Committee, from time to time, may adopt rules and regulations for
carrying out the purposes of the Plan. The determinations and the interpretation
and construction of any provision of the Plan by the Committee shall be final
and conclusive.
 
     (c) Any and all decisions or determinations of the Committee shall be made
either (i) by a majority vote of the members of the Committee at a meeting or
(ii) without a meeting by the written approval of a majority of the members of
the Committee.
 
     (d) Subject to the express provisions of this Plan, the Committee shall
have the authority, in its sole and absolute discretion (i) to adopt, amend, and
rescind administrative and interpretive rules and regulations relating to this
Plan or any Option; (ii) to construe the terms of this Plan or any Option; (iii)
as provided in Subsection 9(a), upon certain events to make appropriate
adjustments to the exercise price and number of Shares subject to this Plan and
Option; and (iv) to make all other determinations and perform all other acts
necessary or advisable for administering this Plan, including the delegation of
such ministerial acts and responsibilities as the Committee deems appropriate.
The Committee may correct any defect or supply any omission or reconcile any
inconsistency in this Plan or any Option in the manner and to the extent it
shall deem expedient to carry it into effect, and it shall be the sole and final
judge of such expediency. The Committee shall have full discretion to make all
determinations on the matters referred to in this Subsection 14(d), and such
determinations shall be final, binding and conclusive.
 
     Section 15. Government Regulations.
 
     This Plan, Options and the obligations of the Company to sell and deliver
Shares under any Options, shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
 
     Section 16. Miscellaneous.
 
     (a) The proceeds received by the Company from the sale of Shares pursuant
to an Option shall be used for general corporate purposes.
 
     (b) The grant of an Option shall be in addition to any other compensation
paid to the Optionee or other stock option plans of the Company or other
benefits with respect to Optionee's position with the Company or its
Subsidiaries. The grant of an Option shall not confer upon the Optionee the
right to continue as an Employee, or interfere in any way with the rights of the
Company to terminate his or her status as an Employee.
 
     (c) Neither the members of the Board nor any member of the Committee shall
be liable for any act, omission, or determination taken or made in good faith
with respect to this Plan or any Option, and members of the Board and the
Committee shall, in addition to all other rights of indemnification and
reimbursement, be entitled to indemnification and reimbursement by the Company
in respect of any claim, loss, damage, or expense (including attorneys' fees,
the costs of settling any suit, provided such settlement is approved by
independent legal counsel selected by the Company, and amounts paid in
satisfaction of a judgment, except a judgment based on a finding of bad faith)
arising from such claim, loss, damage, or expense to the full extent permitted
by law and under any directors' and officers' liability or similar insurance
coverage that may from time to time be in effect.
 
     (d) Any issuance or transfer of Shares to an Optionee, or to his legal
representative, heir, legatee, or distributee, in accordance with the provisions
of this Plan or the applicable Option, shall, to the extent thereof,
 
                                       A-6

<PAGE>   7
 
be in full satisfaction of all claims of such persons under the Plan. The
Committee may require any Optionee, legal representative, heir, legatee or
distributee as a condition precedent to such payment or issuance or transfer of
Shares, to execute a release and receipt for such payment or issuance or
transfer of Shares in such form as it shall determine.
 
     (e) Neither the Committee nor the Company guarantees Shares from loss or
depreciation.
 
     (f) All expenses incident to the administration, termination, or protection
of this Plan or any Option, including, but not limited to, legal and accounting
fees, shall be paid by the Company; provided, however, the Company may recover
any and all damages, fees, expenses and costs arising out of any actions taken
by the Company to enforce its rights under this Plan or any Option.
 
     (g) Records of the Company shall be conclusive for all purposes under this
Plan or any Option, unless determined by the Committee to be incorrect.
 
     (h) The Company shall, upon request or as may be specifically required
under this Plan or any Option, furnish or cause to be furnished all of the
information or documentation that is necessary or required by the Committee to
perform its duties and functions under this Plan or any Option.
 
     (i) The Company assumes no liability to any Optionee or his legal
representatives, heirs, legatees or distributees for any act of, or failure to
act on the part of, the Committee.
 
     (j) Any action required of the Company relating or the Committee to this
Plan or any Option shall be by resolution of its Board, the Committee or by a
person authorized to act by resolution of the Board or the Committee.
 
     (k) If any provision of this Plan or any Option is held to be illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions of this Plan or any Option, but such provision shall be
fully severable, and the Plan or Option, as applicable, shall be construed and
enforced as if the illegal or invalid provision had never been included in the
Plan or Option, as applicable.
 
     (l) Whenever any notice is required or permitted under this Plan or any
Option, such notice must be in writing and personally delivered or sent by mail
or delivery by a nationally recognized courier service. Any notice required or
permitted to be delivered under this Plan or any Option shall be deemed to be
delivered on the date on which it is personally delivered, or, if mailed,
whether actually received or not, on the third Business Day after it is
deposited in the United States mail, certified or registered, postage prepaid,
addressed to the person who is to receive it at the address that such person has
previously specified by written notice delivered in accordance with this
Subsection 16(l) or, if by courier, seventy-two (72) hours after it is sent,
addressed as described in this Subsection 16(l). The Company or the Optionee may
change, at any time and from time to time, by written notice to the other, the
address that it or he had previously specified for receiving notices. Until
changed in accordance with this Plan or any Option, the Company and the Optionee
shall specify as its and his address for receiving notices the address set forth
in the Option pertaining to the Shares to which such notice relates.
 
     (m) Any person entitled to notice under this Plan may waive such notice.
 
     (n) This Plan or any Option shall be binding upon the respective Optionee,
his legal representatives, heirs, legatees and distributees upon the Company,
its successors, and assigns, and upon the Board, the Committee and its
successors.
 
     (o) The titles and headings of Sections are included for convenience of
reference only and are not to be considered in construction of this Plan's
provisions.
 
     (p) All questions arising with respect to the provisions of this Plan shall
be determined by application of the laws of the State of Texas except to the
extent Texas law is preempted by federal law or Nevada corporate law that is
controlling. The obligation of the Company to sell and deliver Shares under this
Plan is subject to applicable laws and to the approval of any governmental
authority required in connection with the authorization, issuance, sale, or
delivery of such Shares.
 
                                       A-7

<PAGE>   8
 
     (q) Words used in the masculine shall apply to the feminine where
applicable, and wherever the context of this Option dictates, the plural shall
be read as the singular and the singular as the plural.
 
     Section 17. Amendment and Discontinuation of the Plan. The Committee may
from time to time amend, suspend or terminate the Plan or any Option; provided,
however, that, except to the extent provided in Section 9, no such amendment
may, without approval by the stockholders of the Company, (a) increase the
number of Shares reserved for Options or change the class of employees eligible
to receive Options, (b) permit the granting of Options that expire beyond the
maximum 10-year period described in Subsection 7(b), or (c) extend the
termination date of the Plan as set forth in Section 18; and provided, further,
that, except to the extent provided in Section 8, no amendment or suspension of
the Plan or any Option issued hereunder shall, except as specifically permitted
in any Option, substantially impair any Option previously granted to any
Optionee without the consent of such Optionee.
 
     Section 18. Effective Date and Termination Date. The effective date of the
Plan is the date set forth below, on which the date the Board adopted this Plan;
provided, however, if the Plan is not approved by the stockholders of the
Company within twelve (12) months after the effective date then, in such event,
the Plan and all Options granted pursuant to the Plan shall be null and void.
The Plan shall terminate on the tenth anniversary of the effective date.
 
ADOPTED BY THE BOARD:             January 18, 1994
EFFECTIVE DATE:                        January 18, 1994
RATIFIED BY THE STOCKHOLDERS: April   , 1994
 
     Executed to evidence the 1994 Employee Stock Option Plan of Kirby
Corporation adopted by the Board on January 18, 1994 and the Stockholders on
April   , 1994.
 
                                          KIRBY CORPORATION
 
                                          By:    /s/  G. STEPHEN HOLCOMB
                                               G. Stephen Holcomb, Assistant
                                                          Secretary
 
                                       A-8



<PAGE>   1
 
                  1994 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
                                      FOR
                               KIRBY CORPORATION
 
     Section 1. Purpose.
 
     This 1994 Nonemployee Director Stock Option Plan of Kirby Corporation is
intended as an incentive to attract and retain as independent directors on the
Board of Directors of Kirby Corporation, a Nevada corporation (the "Company"),
persons of training, experience and ability, to encourage the sense of
proprietorship of such persons, and to stimulate the active interest of such
persons in the development and financial success of the Company for the benefit
of the stockholders of the Company.
 
     Section 2. Definitions.
 
          As used herein, the following terms shall have the meaning indicated:
 
          (a) "Advisory Director" shall mean any person designated as an
     Advisory Director by the Board of Directors as provided in the Company's
     Bylaws.
 
          (b) "Agreement" shall mean the agreement between the Company and the
     Optionee that evidences the Option.
 
          (c) "Business Day" shall mean (i) if the Common Stock trades on a
     national exchange, any day that the national exchange on which the Common
     Stock trades is open or (ii) if the Common Stock does not trade on a
     national exchange, any day that commercial banks in the City of New York
     are open.
 
          (d) "Board" shall mean
 the Board of Directors of the Company.
 
          (e) "Committee" shall mean the committee designated in Section 5 to
     administer this Plan.
 
          (f) "Common Stock" shall mean the Common Stock, par value ten cents
     ($0.10) per share, of the Company.
 
          (g) "Date of Grant" shall mean the date on which an Option is granted
     to an Eligible Person pursuant to Section 7(b) hereof.
 
          (h) "Director" shall mean a member of the Board.
 
          (i) "Effective Date" shall mean the date this Plan is approved by the
     Board of Directors.
 
          (j) "Eligible Person(s)" shall mean those persons who are Directors or
     Advisory Directors of the Company and are not Employees.
 
          (k) "Employee(s)" shall mean those persons who are employees of the
     Company or who are employees of any Subsidiary.
 
          (l) "ERISA" shall mean the Employee Retirement Income Security Act and
     the rules thereunder, as they now exist or may be amended from time to
     time.
 
          (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
     amended.
 
          (n) "Fair Market Value" shall mean:
 
             (i) If Shares are listed on a national securities exchange at the
        date of determining the Fair Market Value,
 
                (A) The mean of the high and low sales price on such exchange on
           the Date of Grant as reported in any newspaper of general
           circulation, or
 
                (B) If the Shares shall not have traded on such exchange on such
           date, the mean of the high and low sales price on such exchange on
           the next day prior thereto on which the Shares were so traded as
           reported in any newspaper of general circulation; or
 
                                       B-1

<PAGE>   2
 
             (ii) If Shares shall not be listed as provided in Subsection
        2(n)(i), a value determined by any fair and reasonable means prescribed
        by the Committee.
 
          (o) "Internal Revenue Code" or "Code" shall mean the Internal Revenue
     Code of 1986 as it now exists or may be amended from time to time and the
     rules thereunder.
 
          (p) "Nonqualified Stock Option" shall mean a stock option that is not
     an incentive stock option as defined in Section 422 of the Internal Revenue
     Code.
 
          (q) "Option" (when capitalized) shall mean any stock option granted
     under this Plan.
 
          (r) "Optionee" shall mean a person to whom an Option is granted under
     this Plan or any person who succeeds to the rights of such person under
     this Plan by reason of the death of such person.
 
          (s) "Plan" shall mean this 1994 Nonemployee Director Stock Option Plan
     of Kirby Corporation.
 
          (t) "Share(s)" shall mean a share or shares of the Common Stock.
 
          (u) "Subsidiary" shall mean any corporation (other than the Company)
     in any unbroken chain of corporations beginning with the Company if, at the
     time of the granting of the Option, each of the corporations other than the
     last corporation in the unbroken chain owns stock possessing 50% or more of
     the total combined voting power of all classes of stock in one of the other
     corporations in such chain.
 
     Section 3. Total Aggregate Shares.
 
     Subject to adjustments provided in Section 14 hereof, a total of One
Hundred Thousand (100,000) Shares shall be subject to the Plan. The Shares
subject to the Plan shall consist of unissued Shares or previously issued Shares
reacquired and held by the Company and such number of Shares shall be and hereby
is reserved for sale for such purpose. Any of such Shares that may remain unsold
and that are not subject to outstanding Options at the termination of the Plan
shall cease to be reserved for the purpose of the Plan, but until termination of
the Plan, the Company shall at all times reserve a sufficient number of Shares
to meet the requirements of the Plan. Should any Option expire or be canceled
prior to its exercise in full, the Shares theretofore subject to such Option may
again be the subject of an Option under the Plan.
 
     Section 4. Rule 16b-3 Plan and Shareholder Approval.
 
     The Company intends for this Plan to comply with the requirements of Rule
16b-3 promulgated by the Securities and Exchange Commission pursuant to the
Exchange Act. Accordingly, this Plan and any Options shall terminate and become
null and void unless this Plan is approved by the stockholders of the Company
within one (1) year after the Effective Date at a meeting of stockholders of the
Company at which a quorum is present by stockholders of the Company owning a
majority of the issued and outstanding shares of Common Stock represented at
such meeting.
 
     Section 5. Administration of the Plan.
 
     (a) The Plan shall be administered by the Compensation Committee of the
Board or other committee thereof as appointed by the Board (the "Committee")
consisting of not less than three members of the Board.
 
     (b) Subject to the express provisions of this Plan, the Committee shall
have the authority, in its sole and absolute discretion (i) to adopt, amend, and
rescind administrative and interpretive rules and regulations relating to the
Plan; (ii) to determine the terms and provisions of the respective Agreements
(which need not be identical); provided, however, such terms and provisions
shall not be inconsistent with this Plan, including the extent to which the
transferability of Shares issued upon the exercise of Options is restricted;
(iii) to construe the terms of any Agreement and the Plan; (iv) as provided in
Subsection 14(a), upon certain events to make appropriate adjustments to the
exercise price and number of Shares subject to outstanding Options, the number
of Shares reserved under the Plan and the number of Shares subject to Options
granted subsequently; and (v) to make all other determinations and perform all
other acts necessary or advisable for administering the Plan, including the
delegation of such ministerial acts and responsibilities as the Committee
 
                                       B-2

<PAGE>   3
 
deems appropriate. The Committee may correct any defect or supply any omission
or reconcile any inconsistency in the Plan or in any Agreement in the manner and
to the extent it shall deem expedient to carry it into effect, and it shall be
the sole and final judge of such expediency. The Committee shall have full
discretion to make all determinations on the matters referred to in this
Subsection 5(b), and such determinations shall be final, binding and conclusive.
 
     Section 6. Type of Options.
 
     All Options granted under the Plan shall be Nonqualified Stock Options.
 
     Section 7. Automatic Grant of Options.
 
     (a) Options shall be granted only to Eligible Persons. Each Option shall be
evidenced by an Agreement, which shall contain such terms as the Committee deems
advisable and that are not inconsistent with this Plan or applicable laws.
 
     (b) Options shall automatically be granted to each Eligible Person as
follows:
 
          (i) on the Effective Date, each Eligible Person shall be granted an
     Option to purchase 1,500 Shares; and
 
          (ii) on the first Business Day immediately following the date of each
     Annual Meeting of Stockholders of the Company occurring subsequent to the
     Effective Date, each Eligible Person shall be granted an Option to purchase
     an additional 1,500 Shares.
 
     (c) Except for the automatic grants of Options under Subsection 7(b), no
Options shall otherwise be granted hereunder, and the Board or the Committee
shall not have any discretion with respect to the grant of Options within the
meaning of Rule 16b-3 promulgated under the Exchange Act, or any successor rule.
 
     (d) Any person who files with the Committee, in a form satisfactory to the
Committee, a written waiver of eligibility to receive any Option under this Plan
shall not be eligible to receive any Option under this Plan for the duration of
such waiver.
 
     Section 8. Exercise Price.
 
     The exercise or option price of each Share issuable upon exercise of an
Option shall be the Fair Market Value of such Share on the Date of Grant.
 
     Section 9. Vesting Schedule.
 
     (a) Shares subject to an Option shall vest in accordance with Subsection
9(b) and (d) hereof.
 
     (b) Option Shares subject to an Option shall fully vest on the six-month
anniversary of the Date of Grant.
 
     (c) Notwithstanding the foregoing, Shares subject to an Option shall vest
as to all Shares then subject to the Option upon the occurrence of any of the
following events:
 
          (i) a transaction (or series of transactions occurring within a 60-day
     period or pursuant to a plan approved by the Board or stockholders of the
     Company) occurs that has the result that stockholders of the Company
     immediately before such transaction cease to own directly or indirectly at
     least 51% of the voting stock of the Company or of any entity that results
     from the participation of the Company in a reorganization, consolidation,
     merger, liquidation or any other form of corporate transaction;
 
          (ii) all or substantially all of the assets of the Company shall be
     sold or otherwise disposed of, except that an Option shall not vest as to
     all Shares then subject to such Option if, after such sale or disposition:
     (i) the stockholders of the Company immediately prior to such transaction
     continue to own at least 51% of the voting stock of the entities that
     acquired 50% or more in value of the assets of the
 
                                       B-3

<PAGE>   4
 
     Company so sold or conveyed; and, (ii) the acquiring entity agrees to
     assume the obligations of the Company under this Plan and the respective
     Agreements; or,
 
          (iii) the occurrence of a merger, consolidation or other
     reorganization of the Company under the terms of which the surviving entity
     does not assume the obligations of the Company under this Plan and the
     respective Agreements.
 
     Section 10. Exercise of Options.
 
     (a) An Option shall not be exercisable prior to the vesting of such Option.
After the six-month anniversary of the Date of Grant of an Option, such Option
may be exercised at any time and from time to time during the term of such
Option, in whole or in part, with respect to Shares that have vested in
accordance with Section 9 hereof. If any Optionee exercises an Option prior to
stockholder approval of this Plan as provided in Section 19 hereof, the Optionee
must tender the exercise price at the time of exercise and the Company shall
hold the exercise price and the Shares to be issued pursuant to such exercise
until the stockholders approve the Plan. If the Plan is approved by the
stockholders, the Company shall issue and deliver the Shares as to which the
Option has been exercised. If the Plan is not approved by the stockholders, the
Company shall return the exercise price to the Optionee and no Shares will be
issued.
 
     (b) Options may be exercised: (i) during the Optionee's lifetime, solely by
the Optionee; or (ii) after the Optionee's death, by the personal representative
of the Optionee's estate or the person or persons entitled thereto under his
will or under the laws of descent and distribution.
 
     (c) An Option shall be deemed exercised when: (i) the Company has received
written notice of such exercise delivered to the Company in accordance with the
notice provisions of the applicable Agreement; (ii) full payment of the
aggregate exercise price of the Shares as to which the Option is exercised has
been tendered to the Company; and (iii) arrangements that are satisfactory to
the Board in its sole discretion have been made for the Optionee's payment to
the Company of the amount, if any, that the Company determines to be necessary
for the Company to withhold in accordance with the applicable federal or state
income tax withholding requirements.
 
     (d) The exercise price of any Shares purchased shall be paid (i) solely in
cash, by certified or cashier's check, by money order or by personal check, or
(ii) at the option of the Optionee, in Common Stock theretofore owned by such
Optionee (or by a combination of the above); provided, however, that if the
Optionee acquired such stock to be surrendered directly or indirectly from the
Company, he shall have owned such stock for six months prior to using such stock
to exercise an Option. For purposes of determining the amount, if any, of the
exercise price satisfied by payment in Common Stock, such Common Stock shall be
valued at its Fair Market Value on the date of exercise. Any Common Stock
delivered in satisfaction of all or a portion of the exercise price shall be
appropriately endorsed for transfer and assignment to the Company.
 
     (e) The Optionee shall not be, nor have any of the rights or privileges of,
a stockholder of the Company with respect to any Shares purchasable upon the
exercise of any part of an Option unless and until certificates representing
such Shares shall have been issued by the Company to the Optionee.
 
     Section 11. Termination of Option Period.
 
     (a) The unexercised portion of an Option shall automatically and without
notice terminate and become null and void and be forfeited upon the earliest to
occur of the following:
 
          (i) except as provided in Subsection 11(a)(ii), if the Optionee's
     position as a Director of the Company terminates for any reason, one year
     after the date the Optionee ceases to be a Director.
 
          (ii) one (1) year after the date on which the Optionee shall die, if
     the Optionee's death shall occur during the one-year period described in
     Subsection 11(a)(i); or
 
          (iii) ten (10) years after the Date of Grant of such Option.
 
                                       B-4

<PAGE>   5
 
     (b) The Committee in its sole discretion may, by giving written notice to
an Optionee ("Cancellation Notice"), cancel, effective upon the date of the
consummation of any corporate transaction described in Section 9(d) hereof, any
portion of an Option that remains unexercised on such date. Such cancellation
notice shall be given to Optionee at least ten (10) days prior to the date of
cancellation.
 
     Section 12. Terms of Option.
 
     Each Option granted under this Plan shall have a term of ten (10) years
from the Date of Grant of such Option.
 
     Section 13. Assignability of Options.
 
     No Option shall be assignable or otherwise transferable, except by will or
the laws of descent and distribution.
 
     Section 14. Adjustments.
 
     (a) If at any time there shall be an increase or decrease in the number of
issued and outstanding Shares, through the declaration of a stock dividend or
through any recapitalization resulting in a stock split-up, combination or
exchange of Shares, then appropriate proportional adjustment shall be made in
the number of Shares (and with respect to outstanding Options, the exercise
price per Share): (i) subject to outstanding Options; (ii) reserved under the
Plan; and (iii) subject to Options granted subsequently. In the event of a
dispute concerning such adjustment, the Committee has full discretion to
determine the resolution of such dispute. Such determination shall be final,
binding and conclusive.
 
     (b) In the event of a merger, consolidation or other reorganization of the
Company under the terms of which the Company is not the surviving corporation,
but the surviving corporation elects to assume an Option, the respective
Agreement and this Plan, the Optionee shall be entitled to receive, upon the
exercise of such Option, with respect to each Share issuable upon exercise of
such Option, the number of shares of stock of the surviving corporation (or
equity interest in any other entity) and any other notes, evidences of
indebtedness or other property that Optionee would have received in connection
with such merger, consolidation or other reorganization had he exercised the
Option with respect to such Share immediately prior to such merger,
consolidation or other reorganization.
 
     (c) Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of or exercise price of Shares then subject
to outstanding Options granted under the Plan.
 
     (d) Without limiting the generality of the foregoing, the existence of
outstanding Options granted under the Plan shall not affect in any manner the
right or power of the Company to make, authorize or consummate: (i) any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; (ii) any merger or consolidation of
the Company; (iii) any issuance by the Company of debt securities or preferred
or preference stock that would rank above the Shares subject to outstanding
Options; (iv) the dissolution or liquidation of the Company; (v) any sale,
transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
 
     Section 15. Purchase for Investment.
 
     As a condition of any issuance of a stock certificate for Shares upon the
exercise of an Option, the Committee may obtain such agreements or undertakings,
if any, as it may deem necessary or advisable to
 
                                       B-5

<PAGE>   6
 
assure compliance with any provision of this Plan or any law or regulation,
including, but not limited to, the following:
 
          (a) a representation and warranty by the Optionee to the Company at
     the time his Option is exercised that he is acquiring the Shares to be
     issued to him for investment and not with a view to, or for sale in
     connection with, the distribution of any such Shares; and
 
          (b) a representation, warranty or agreement to be bound by any legends
     that are, in the opinion of the Committee, necessary or appropriate to
     comply with the provisions of any securities law deemed by the Committee to
     be applicable to the issuance of the Shares and are endorsed upon the
     certificates representing the Shares.
 
     Section 16. Amendment, Modification, Suspension or Discontinuance of this
Plan.
 
     For the purpose of complying with changes in the Code or ERISA, the
Committee may amend, modify, suspend or terminate the Plan at any time. For the
purpose of meeting or addressing any other changes in legal requirements or any
other purpose, the Committee may amend, modify, suspend or terminate the Plan
only once every six months. Subject to changes in law or other legal
requirements, including any change in the provisions of Rule 16b-3 that would
permit otherwise, the Plan may not be amended without the consent of the holders
of a majority of the shares of Common Stock represented at a meeting at which a
quorum is present to: (i) increase the aggregate number of shares of Common
Stock that may be issued under the Plan (except for adjustments pursuant to
Section 14 of the Plan); (ii) increase materially the benefits accruing to
Optionees under the Plan; or, (iii) modify materially the requirements as to
eligibility for participation in the Plan.
 
     Section 17. Governmental Regulations.
 
     This Plan, and the granting of Options and the exercise of Options
hereunder and the obligation of the Company to sell and deliver Shares under
such Options shall be subject to all applicable laws, rules and regulations, and
to such approvals by any governmental agencies or national securities exchanges
as may be required.
 
     Section 18. Miscellaneous.
 
     (a) The proceeds received by the Company from the sale of Shares pursuant
to Options shall be used for general corporate purposes.
 
     (b) The Options granted to Directors under this Plan shall be in addition
to regular director's fees, stock options granted pursuant to the Company's 1989
Director Stock Option Plan or other stock option plans of the Company or other
benefits with respect to the Director's position with the Company or its
Subsidiaries. Nothing contained in the Plan, or in any Agreement, shall confer
upon any Optionee the right to continue as a director of the Corporation, or
interfere in any way with the rights to terminate his status as a director.
 
     (c) Neither the members of the Board nor any member of the Committee shall
be liable for any act, omission, or determination taken or made in good faith
with respect to the Plan or any Option granted under it, and members of the
Board and the Committee shall be entitled to indemnification and reimbursement
by the Company in respect of any claim, loss, damage, or expense (including
attorneys' fees, the costs of settling any suit (provided such settlement is
approved by independent legal counsel selected by the Company) and amounts paid
in satisfaction of a judgment, except a judgment based on a finding of bad
faith) arising from such claim, loss, damage, or expense to the full extent
permitted by law and under any directors' and officers' liability or similar
insurance coverage that may from time to time be in effect.
 
     (d) Any payment of cash or any issuance or transfer of Shares to the
Optionee, or to his legal representative, heir, legatee, distributee or
permitted assign, in accordance with the provisions of the Plan, shall, to the
extent thereof, be in full satisfaction of all claims of such persons under the
Plan. The Committee may require any Optionee, legal representative, heir,
legatee, distributee or permitted assign, as a condition
 
                                       B-6

<PAGE>   7
 
precedent to such payment or issuance or transfer of Shares, to execute a
release and receipt for such payment or issuance or transfer of Shares in such
form as it shall determine.
 
     (e) Neither the Committee nor the Company guarantees Shares from loss or
depreciation.
 
     (f) All expenses incident to the administration, termination, or protection
of the Plan, including, but not limited to, legal and accounting fees, shall be
paid by the Company; provided, however, the Company may recover any and all
damages, fees, expenses and costs arising out of any actions taken by the
Company to enforce its rights under the Plan.
 
     (g) Records of the Company shall be conclusive for all purposes under the
Plan, unless determined by the Committee to be incorrect.
 
     (h) The Company shall, upon request or as may be specifically required
under the Plan, furnish or cause to be furnished all of the information or
documentation that is necessary or required by the Committee to perform its
duties and functions under the Plan.
 
     (i) The Company assumes no liability to the Optionee or his legal
representatives, heirs, legatees, distributees or permitted assigns for any act
of, or failure to act on the part of, the Committee.
 
     (j) Any action required of the Company relating to the Plan shall be by
resolution of its Board, the Committee or by a person authorized to act by
resolution of the Board or the Committee.
 
     (k) If any provision of this Plan is held to be illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining provisions
of the Plan, but such provision shall be fully severable, and the Plan shall be
construed and enforced as if the illegal or invalid provision had never been
included in the Plan.
 
     (l) Whenever any notice is required or permitted under the Plan or any
Option, such notice must be in writing and personally delivered or sent by mail
or next day delivery by a nationally recognized courier service. Any notice
required or permitted to be delivered under this Plan or any Option shall be
deemed to be delivered on the date on which it is personally delivered, or, if
mailed, whether actually received or not, on the third Business Day after it is
deposited in the United States mail, certified or registered, postage prepaid,
addressed to the person who is to receive it at the address which such person
has previously specified by written notice delivered in accordance with this
Subsection 18(l) or, if by courier, twenty-four (24) hours after it is sent,
addressed as described in this Subsection 18(l). The Company or an Optionee may
change, at any time and from time to time, by written notice to the other, the
address which it or he had previously specified for receiving notices. Until
changed in accordance with the Plan or any Option, the Company and each Optionee
shall specify as its and his address for receiving notices the address set forth
in the Option pertaining to the Shares to which such notice relates.
 
     (m) Any person entitled to notice under the Plan may waive such notice.
 
     (n) The Plan or any Option shall be binding upon the respective Optionee,
his legal representatives, heirs, legatees, distributees and permitted assigns,
upon the Corporation, its successors, and assigns, and upon the Board, the
Committee and its successors.
 
     (o) The titles and headings of Sections are included for convenience of
reference only and are not to be considered in construction of the Plan's
provisions.
 
     (p) All questions arising with respect to the provisions of the Plan shall
be determined by application of the laws of the State of Texas except to the
extent Texas law is preempted by federal law or Nevada corporate law that is
controlling. Questions arising with respect to the provisions of an Agreement
that are matters of contract law shall be governed by the laws of the state
specified in the Agreement, except to the extent preempted by federal law and
except to the extent that Nevada corporate law conflicts with the contract law
of such state, in which event Nevada corporate law shall govern. The obligation
of the Company to sell and deliver Shares under the Plan is subject to
applicable laws and to the approval of any governmental authority required in
connection with the authorization, issuance, sale, or delivery of such Shares.
 
                                       B-7

<PAGE>   8
 
     (q) Words used in the masculine shall apply to the feminine where
applicable, and wherever the context of this Plan dictates, the plural shall be
read as the singular and the singular as the plural.
 
     Section 19. Effective Date and Termination Date.
 
     The Effective Date of the Plan is January 18, 1994, the date on which the
Board adopted this Plan, but is subject to the approval of the Plan by at least
a majority of the votes cast by the stockholders of the Company at the next
meeting of stockholders at which a quorum is present. All grants made under the
Plan prior to such approval shall be effective when made, but shall be
conditioned upon and subject to such approval of the Plan. This Plan shall
terminate on the tenth (10th) anniversary of the Effective Date.
 

<TABLE>
<S>                                           <C>
ADOPTED BY THE BOARD OF DIRECTORS:            January 18, 1994
APPROVED BY THE STOCKHOLDERS:                 April 19, 1994
</TABLE>

 
                                          KIRBY CORPORATION
 
                                          By:   /s/  G. STEPHEN HOLCOMB
                                             -----------------------------
                                              G. Stephen Holcomb,
                                              Assistant Secretary
 
                                       B-8



<PAGE>   1
 
                         1993 NONQUALIFIED STOCK OPTION
                                       OF
                               KIRBY CORPORATION
                                      FOR
                              ROBERT G. STONE, JR.
                              DATED JULY 20, 1993
 
     Section 1. Purpose.
 
     On July 20, 1993, the Board of Directors of Kirby Corporation, a Nevada
corporation (the "Company"), adopted resolutions granting Robert G. Stone, Jr.
("Optionee") Nonqualified Stock Options to purchase 25,000 shares of Common
Stock on the terms and conditions herein provided as an incentive to retain the
Optionee as Chairman of the Board of the Company or as a member of the Board of
Directors of the Company.
 
     Section 2. Definitions.
 
     As used herein, the following terms shall have the meaning indicated:
 
          (a) "Board" shall mean the Board of Directors of the Company.
 
          (b) "Business Day" shall mean (i) if the Common Stock trades on a
     national exchange, any day that the national exchange on which the Common
     Stock trades is open or (ii) if the Common Stock does not trade on a
     national exchange, any day that commercial banks in the City of New York
     are open.
 
          (c) "Committee" shall mean the committee designated in Section 16 to
     administer this Plan.
 
          (d) "Common Stock" shall mean the Company's common stock, $0.10 par
     value per share.
 
          (e) "Date of Grant" shall be the Effective Date.
 
          (f) "Effective Date" shall mean the date first written above, which is
     the date
 this Option is approved by the Board.
 
          (g) "ERISA" shall mean the Employee Retirement Income Security Act, as
     amended.
 
          (h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
     amended.
 
          (i) "Fair Market Value" shall mean:
 
             (i) If Shares are listed on a national securities exchange at the
        date of determining the Fair Market Value,
 
                (A) The mean of the high and low sales price on such exchange on
           the Date of Grant as reported in any newspaper of general
           circulation, or
 
                (B) If the Shares shall not have traded on such exchange on such
           date, the mean of the high and low sales price on such exchange on
           the next day prior thereto on which the Shares were so traded as
           reported in any newspaper of general circulation; or
 
             (ii) If Shares shall not be listed as provided in Subsection
        2(h)(i), a value determined by any fair and reasonable means prescribed
        by the Committee.
 
          (j) "Internal Revenue Code" or "Code" shall mean the Internal Revenue
     Code of 1986, as it now exists or may be amended from time to time.
 
          (k) "Nonqualified Stock Option" shall mean a stock option that is not
     an incentive stock option as defined in Section 422 of the Internal Revenue
     Code.
 
          (l) "Option" (when capitalized) shall mean this Nonqualified Stock
     Option exercisable for 25,000 shares of Common Stock granted to Robert G.
     Stone, Jr., which is deemed to be a Plan pursuant to Rule 16b-3 under the
     Exchange Act.
 
                                       C-1

<PAGE>   2
 
          (m) "Option Period" shall mean the period commencing on the date
     hereof and ending on July 20, 2003, or such earlier dates as the Option may
     terminate under Section 9 hereof.
 
          (n) "Optionee" shall mean Robert G. Stone, Jr.
 
          (o) "Share(s)" shall mean a share or shares of the Common Stock.
 
          (p) "Subsidiary" shall mean any corporation (other than the Company)
     in any unbroken chain of corporations beginning with the Company if, at the
     time of the granting of the Option, each of the corporations other than the
     last corporation in the unbroken chain owns stock possessing 50% or more of
     the total combined voting power of all classes of stock in one of the other
     corporations in such chain.
 
     Section 3. Grant of Option.
 
     The Company hereby grants to the Optionee on the date hereof an option to
purchase 25,000 shares of Common Stock on the terms and conditions herein
provided.
 
     Section 4. Rule 16b-3 Plan and Stockholder Approval.
 
     The Company intends for this Option to comply with the requirements of Rule
16b-3 promulgated by the Securities and Exchange Commission pursuant to the
Exchange Act. Accordingly, this Option shall terminate and become null and void
unless this Option is approved by the stockholders of the Company within one (1)
year after the Effective Date at a meeting of stockholders of the Company at
which a quorum is present by stockholders of the Company owning a majority of
the issued and outstanding shares of Common Stock represented at such meeting.
 
     Section 5. Exercise Price.
 
     The exercise price per share of Common Stock subject to this Option is
$18.625, which price was the mean of the high and low sales price of Common
Stock on the American Stock Exchange on July 20, 1993 as reported by The Wall
Street Journal, Southwest Edition.
 
     Section 6. Vesting Schedule.
 
     (a) The Option to purchase Shares of Common Stock shall vest 20% of the
total number of Shares initially subject to such Option (as such number may be
adjusted pursuant to Section 11) on January 20, 1994 and 20% on the date of the
annual stockholders meeting beginning in 1994, if following such meeting the
Optionee is a member of the Board.
 
     (b) Notwithstanding the foregoing, the Option shall vest as to all Shares
then subject to this Option upon the occurrence of any of the following events:
 
          (1) a transaction (or series of transactions occurring within a 60-day
     period or pursuant to a plan approved by the Board or the shareholders of
     the Company) occurs which has the result that stockholders of the Company
     immediately before such transaction cease to own directly or indirectly at
     least 51% of the voting stock of the Company or of any entity which results
     from the participation of the Company, in a reorganization, consolidation,
     merger, liquidation or any other form of corporate transaction;
 
          (2) all or substantially all of the assets of the Company shall be
     sold or otherwise disposed of except that this Option shall not vest as to
     all Shares then subject to this Option if after such sale or disposition
     (i) the stockholders of the Company immediately prior to such transaction
     continue to own at least 51% of the voting stock of the entities which
     acquired 50% or more in value of the assets of the Company so sold or
     conveyed and (ii) the acquiring entity agrees to assume the obligations of
     the Company under this Agreement; or
 
          (3) the occurrence of a merger, consolidation or other reorganization
     of the Company under the terms of which the surviving entity does not
     assume the obligations of the Company under this Agreement.
 
                                       C-2

<PAGE>   3
 
     Section 7. Type of Option.
 
     The Option granted hereunder shall be a Nonqualified Stock Option.
 
     Section 8. Exercise of the Option.
 
     (a) This Option shall not be exercisable prior to January 20, 1994. After
January 20, 1994, this Option may be exercised at any time and from time to time
during the Option Period, in whole or in part, with respect to Shares that have
vested in accordance with Section 6 hereof. If the Optionee exercises this
Option prior to stockholder approval of this Plan as provided in Section 4
hereof, the Optionee must tender the exercise price at the time of exercise and
the Company shall hold the exercise price and the Shares to be issued pursuant
to such exercise until the stockholders approve the Plan. If the Plan is
approved by the stockholders, the Company shall issue and deliver the Shares as
to which the Option has been exercised. If the Plan is not approved by the
stockholders, the Company shall return the exercise price to the Optionee and no
Shares will be issued.
 
     (b) This Option may be exercised (i) during the Optionee's lifetime, solely
by the Optionee or (ii) after the Optionee's death, by the personal
representative of the Optionee's estate or the person or persons entitled
thereto under his will or under the laws of descent and distribution.
 
     (c) This Option shall be deemed exercised when (i) the Company has received
written notice of such exercise delivered to the Company in accordance with the
terms of Subsection 17(l) hereof, (ii) full payment of the aggregate exercise
price of the Shares as to which the Option is exercised has been tendered to the
Company, and (iii) arrangements that are satisfactory to the Committee in its
sole discretion have been made for the Optionee's payment to the Company of the
amount, if any, that the Company determines to be necessary for the Company to
withhold in accordance with applicable federal or state income tax withholding
requirements.
 
     (d) The exercise price of any Shares purchased shall be paid (i) solely in
cash, by certified or cashier's check, by money order or by personal check or
(ii) at the option of the Optionee, in Common Stock theretofore owned by such
Optionee (or by a combination of the above); provided, however, that if the
Optionee acquired such stock to be surrendered directly or indirectly from the
Company, he shall have owned such stock for six months prior to using such stock
to exercise this Option. For purposes of determining the amount, if any, of the
exercise price satisfied by payment in Common Stock, such Common Stock shall be
valued at its Fair Market Value on the date of exercise. Any Common Stock
delivered in satisfaction of all or a portion of the exercise price shall be
appropriately endorsed for transfer and assignment to the Company.
 
     (e) The Optionee shall not be, nor have any of the rights or privileges of,
a stockholder of the Company with respect to any Shares purchasable upon the
exercise of any part of this Option unless and until certificates representing
such Shares shall have been issued by the Company to the Optionee.
 
     Section 9. Termination of Option Period.
 
     (a) The unexercised portion of this Option shall automatically and without
notice terminate and become null and void upon the earliest to occur of the
following:
 
          (i) one (1) year after the death of the Optionee; or
 
          (ii) July 20, 2003.
 
     (b) The Committee in its sole discretion may, by giving written notice to
the Optionee ("Cancellation Notice"), cancel, effective upon the date of the
consummation of any corporate transaction described in Subsection 6(b) hereof,
any portion of this Option which remains unexercised on such date. Such
cancellation notice shall be given to Optionee at least ten (10) days prior to
the date of cancellation.
 
                                       C-3

<PAGE>   4
 
     Section 10. Assignability.
 
     This Option is not assignable or otherwise transferable except by will or
the laws of descent and distribution.
 
     Section 11. Adjustments.
 
     (a) If at any time while any unexercised portion of this Option is
outstanding there shall be an increase or decrease in the number of issued and
outstanding Shares through the declaration of a stock dividend or through any
recapitalization resulting in a stock split-up, combination or exchange of
Shares, then appropriate adjustment shall be made in the number of Shares and
the exercise price per Share subject to such outstanding portion of this Option,
so that the same proportion of the Company's issued and outstanding Shares shall
remain subject to purchase at the same aggregate exercise price.
 
     (b) In the event of a merger, consolidation or other reorganization of the
Company under the terms of which the Company is not the surviving corporation,
but the surviving corporation elects to assume this Option, the Optionee shall
be entitled to receive, upon the exercise of this Option, with respect to each
Share (i) the number of shares of stock of the surviving corporation (or equity
interest in any other entity) and (ii) any other notes, evidences of
indebtedness or other property, that Optionee would have received in connection
with such merger, consolidation or other reorganization had he executed the
Option with respect to such Share immediately prior to such merger,
consolidation or other reorganization.
 
     (c) Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of or exercise price of Shares then subject
to this Option.
 
     (d) Without limiting the generality of the foregoing, the existence of this
Option shall not affect in any manner the right or power of the Company to make,
authorize or consummate (i) any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business; (ii) any merger or consolidation of the Company; (iii) any issue by
the Company of debt securities, or preferred or preference stock that would rank
above the Shares subject to this Option; (iv) the dissolution or liquidation of
the Company; (v) any sale, transfer or assignment of all or any part of the
assets or business of the Company; or (vi) any other corporate act or
proceeding, whether of a similar character or otherwise.
 
     Section 12. Purchase for Investment.
 
     As a condition of any issuance of a stock certificate for Shares, the
Committee may obtain such agreements or undertakings, if any, as it may deem
necessary or advisable to assure compliance with any provision of this Option or
any law or regulation, including, but not limited to, the following:
 
          (a) a representation and warranty by the Optionee to the Company, at
     the time this Option is exercised, that he is acquiring the Shares to be
     issued to him for investment and not with a view to, or for sale in
     connection with, the distribution of any such Shares; and
 
          (b) a representation, warranty or agreement to be bound by any legends
     that are, in the opinion of the Committee, necessary or appropriate to
     comply with the provisions of any securities law deemed by the Committee to
     be applicable to the issuance of the Shares and are endorsed upon the
     certificates representing the Shares.
 
     Section 13. Amendment, Modification, Suspension or Discontinuance of this
Plan.
 
     For the purpose of complying with changes in the Code or ERISA, the
Committee may amend, modify, suspend or terminate the Option any time without
the consent of the Optionee and for the purpose of meeting or addressing any
other changes in legal requirements or any other purpose, the Committee may
amend,
 
                                       C-4

<PAGE>   5
 
modify, suspend or terminate the Option only once every six months; provided
that no such amendment, modification, suspension or termination shall materially
impair the Option without the consent of the Optionee.
 
     Section 14. Government Regulations.
 
     This Option, and the obligation of the Company to sell and deliver Shares
under this Option, shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
 
     Section 15. Withholding.
 
     Prior to the issuance of any Shares to Optionee under this Option, Optionee
shall pay to the Company in a form satisfactory to the Company the amount (if
any) which the Company reasonably determines to be necessary for the employer of
the Optionee to withhold in accordance with applicable federal or state tax
withholding requirements.
 
     Section 16. Administration of the Plan.
 
     (a) This Option shall be administered by the Committee. The Committee shall
be the Compensation Committee of the Board excluding Optionee (if he is a member
of the Compensation Committee); provided, however, that for purposes of this
Option, the Committee shall consist of not less than two individuals; provided
further, however, that if no Compensation Committee is appointed, the Board (if
a majority of which and a majority of the Directors acting on any matter are
Disinterested Persons) shall administer the Option and in such case all
references to the Committee shall be deemed to be references to the Board. The
Committee shall have all of the powers of the Board with respect to the Option.
 
     (b) The Committee, from time to time, may adopt rules and regulations for
carrying out the purposes of the Option. The determinations and the
interpretation and construction of any provision of the Option by the Committee
shall be final and conclusive.
 
     (c) Any and all decisions or determinations of the Committee shall be made
either (i) by a majority vote of the members of the Committee at a meeting, or
(ii) without a meeting by the written approval of a majority of the members of
the Committee.
 
     (d) Subject to the express provisions of this Option, the Committee shall
have the authority, in its sole and absolute discretion (i) to adopt, amend, and
rescind administrative and interpretive rules and regulations relating to this
Option; (ii) to construe the terms of this Option; (iii) as provided in
Subsection 11, upon certain events to make appropriate adjustments to the
exercise price and number of Shares subject to this Option; and (iv) to make all
other determinations and perform all other acts necessary or advisable for
administering this Option, including the delegation of such ministerial acts and
responsibilities as the Committee deems appropriate. The Committee may correct
any defect or supply any omission or reconcile any inconsistency in this Option
in the manner and to the extent it shall deem expedient to carry it into effect,
and it shall be the sole and final judge of such expediency. The Committee shall
have full discretion to make all determinations on the matters referred to in
this Subsection 16(d), and such determinations shall be final, binding and
conclusive.
 
     Section 17. Miscellaneous.
 
     (a) The proceeds received by the Company from the sale of Shares pursuant
to this Option shall be used for general corporate purposes.
 
     (b) This Option shall be in addition to regular director's fees paid to the
Optionee and stock options granted to the Optionee pursuant to the Company's
1989 Director Stock Option Plan or other stock option plans of the Company or
other benefits with respect to Optionee's position with the Company or its
Subsidiaries. Nothing contained in this Option shall confer upon the Optionee
the right to continue as a
 
                                       C-5

<PAGE>   6
 
director or Chairman of the Board of the Company, or interfere in any way with
the rights of the Company to terminate his status as a director or Chairman of
the Board.
 
     (c) Neither the members of the Board nor any member of the Committee shall
be liable for any act, omission, or determination taken or made in good faith
with respect to this Option, and members of the Board and the Committee shall,
in addition to all other rights of indemnification and reimbursement, be
entitled to indemnification and reimbursement by the Company in respect of any
claim, loss, damage, or expense (including attorneys' fees, the costs of
settling any suit, provided such settlement is approved by independent legal
counsel selected by the Company, and amounts paid in satisfaction of a judgment,
except a judgment based on a finding of bad faith) arising from such claim,
loss, damage, or expense to the full extent permitted by law and under any
directors' and officers' liability or similar insurance coverage that may from
time to time be in effect.
 
     (d) Any payment of cash or any issuance or transfer of Shares to the
Optionee, or to his legal representative, heir, legatee, or distributee, in
accordance with the provisions of this Option, shall, to the extent thereof, be
in full satisfaction of all claims of such persons under the Plan. The Committee
may require any Optionee, legal representative, heir, legatee or distributee as
a condition precedent to such payment or issuance or transfer of Shares, to
execute a release and receipt for such payment or issuance or transfer of Shares
in such form as it shall determine.
 
     (e) Neither the Committee nor the Company guarantees Shares from loss or
depreciation.
 
     (f) All expenses incident to the administration, termination, or protection
of this Option, including, but not limited to, legal and accounting fees, shall
be paid by the Company; provided, however, the Company may recover any and all
damages, fees, expenses and costs arising out of any actions taken by the
Company to enforce its rights under this Option.
 
     (g) Records of the Company shall be conclusive for all purposes under this
Option, unless determined by the Committee to be incorrect.
 
     (h) The Company shall, upon request or as may be specifically required
under this Option, furnish or cause to be furnished all of the information or
documentation that is necessary or required by the Committee to perform its
duties and functions under this Option.
 
     (i) The Company assumes no liability to the Optionee or his legal
representatives, heirs, legatees, distributees or permitted assigns for any act
of, or failure to act on the part of, the Committee.
 
     (j) Any action required of the Company relating to this Option shall be by
resolution of its Board, the Committee or by a person authorized to act by
resolution of the Board or the Committee.
 
     (k) If any provision of this Option is held to be illegal or invalid for
any reason, the illegality or invalidity shall not affect the remaining
provisions of this Option, but such provision shall be fully severable, and this
Option shall be construed and enforced as if the illegal or invalid provision
had never been included in this Option.
 
     (l) Whenever any notice is required or permitted under this Option, such
notice must be in writing and personally delivered or sent by mail or delivery
by a nationally recognized courier service. Any notice required or permitted to
be delivered under this Option shall be deemed to be delivered on the date on
which it is personally delivered, or, if mailed, whether actually received or
not, on the third Business Day after it is deposited in the United States mail,
certified or registered, postage prepaid, addressed to the person who is to
receive it at the address which such person has previously specified by written
notice delivered in accordance with this Subsection 17(l) or, if by courier,
seventy-two (72) hours after it is sent, addressed as described in this
Subsection 17(l). The Company or the Optionee may change, at any time and from
time to time, by written notice to the other, the address which it or he had
previously specified for receiving notices. Until changed in accordance with
this Option, the Company and the Optionee shall specify as its and his address
for receiving notices the address set forth in this Option pertaining to the
Shares to which such notice relates.
 
     (m) Any person entitled to notice under this Option may waive such notice.
 
                                       C-6

<PAGE>   7
 
     (n) This Option shall be binding upon the Optionee, his legal
representatives, heirs, legatees and distributees upon the Company, its
successors, and assigns, and upon the Board, the Committee and its successors.
 
     (o) The titles and headings of Sections are included for convenience of
reference only and are not to be considered in construction of the Option's
provisions.
 
     (p) All questions arising with respect to the provisions of this Option
shall be determined by application of the laws of the State of Texas except to
the extent Texas law is preempted by federal law or Nevada corporate law that is
controlling. The obligation of the Company to sell and deliver Shares under this
Option is subject to applicable laws and to the approval of any governmental
authority required in connection with the authorization, issuance, sale, or
delivery of such Shares.
 
     (q) Words used in the masculine shall apply to the feminine where
applicable, and wherever the context of this Option dictates, the plural shall
be read as the singular and the singular as the plural.
 

<TABLE>
<S>                                     <C>
ADOPTED BY THE BOARD OF DIRECTORS:      July 20, 1993
APPROVED BY THE STOCKHOLDERS:           April   , 1994
Address:  1775 St. James Place          KIRBY CORPORATION
           Suite 300
           Houston, Texas 77056
                                        By        /s/  GEORGE A. PETERKIN, JR.
                                            -------------------------------------------    
                                                George A. Peterkin, Jr., President


Address:  39th Floor, Chrysler Bldg.    By          /s/  ROBERT G. STONE, JR.
           405 Lexington Avenue             -------------------------------------------
           New York, NY 1017                      Robert G. Stone, Jr., Optionee

4
</TABLE>

 
                                       C-7



<PAGE>   1
 
                                AMENDMENT NO. 1
                                     TO THE
                        1989 DIRECTOR STOCK OPTION PLAN
                                      FOR
                        KIRBY EXPLORATION COMPANY, INC.
                            (NOW KIRBY CORPORATION)
 
     The Board of Directors of Kirby Corporation, formerly Kirby Exploration
Company, Inc. (the "Company"), amends prospectively as of January 18, 1994 the
1989 Director Stock Option Plan for Kirby Exploration Company, Inc., now Kirby
Corporation (the "Plan") in the following respect only:
 
          First:  The designation and name of the Plan is hereby amended and
     changed to: 1989 Director Stock Option Plan for Kirby Corporation.
 
          Second:  Section 4(c)(i) of the Plan is hereby amended and restated in
     its entirely as follows:
 
             (i) Each Eligible Person who is elected a Director (not previously
        being a Director) shall be granted an Option for FIVE THOUSAND (5,000)
        Shares on the date of such Eligible Person's election as a Director,
        such date being the Date of Grant for such Option; and
 
          Third:  The foregoing amendment to the Plan be effective prospectively
     only as of January 18, 1994 and that any stock options granted under the
     Plan prior to January 18, 1994 shall be governed by the Plan as it existed
     prior to the foregoing amendment.
 
          Fourth:  The foregoing amendment, along with the prospective nature of
     the foregoing amendment, be submitted
 for approval to the Company's
     stockholders at the 1994 Annual Meeting of Stockholders or at some other
     meeting of stockholders.
 
          Fifth:  If the stockholders of the Company do not approve the
     foregoing amendment within one (1) year after January 18, 1994, the
     foregoing amendment shall be null and void and any stock options granted
     subsequent January 18, 1994 shall be increased to such amount as if such
     grants had occurred pursuant to the Plan as it existed prior to January 18,
     1994.
 
     The Board of Directors of the Company approved the foregoing amendment on
January 18, 1994 and the stockholders of the Company approved the foregoing
amendment on April 19, 1994.
 
                                          KIRBY CORPORATION
 
                                          By:    /s/  G. STEPHEN HOLCOMB
                                              ---------------------------------
                                                      G. Stephen Holcomb,
                                                      Assistant Secretary
 
                                       D-1



<PAGE>   1
 
                                                                    EXHIBIT 21.1
 
                               KIRBY CORPORATION
                    PRINCIPAL SUBSIDIARIES OF THE REGISTRANT
 

<TABLE>
<CAPTION>
                                                                                    PLACE OF
                                                                                  INCORPORATION
                                                                                  ------------
<S>                                                                                 <C>
KIRBY CORPORATION -- PARENT AND REGISTRANT......................................    Nevada
SUBSIDIARIES OF THE PARENT AND REGISTRANT
  Dixie Carriers, Inc.(1).......................................................    Delaware
  General Energy Corporation(1).................................................    Delaware
  Kirby Exploration Company of Texas(1).........................................    Delaware
  Kirby Terminals, Inc.(1)......................................................    Texas
  Sabine Transportation Company(1)..............................................    Delaware
  Chotin Carriers, Inc.(1)......................................................    Delaware
  Kirby Pioneer, Inc.(1)........................................................    Delaware
  AFRAM Carriers, Inc.(1).......................................................    Delaware
  Rail Systems, Inc.(1).........................................................    Delaware
  Americas Marine Express, Inc.(1)..............................................    Delaware
  Universal Insurance Company(1)................................................    Puerto Rico
  Mariner Reinsurance Company Limited(1)........................................    Bermuda
  Oceanic Insurance Limited(3)..................................................    Bermuda
CONTROLLED CORPORATIONS
  Dixie Bulk Transport, Inc. (subsidiary of Dixie Carriers, Inc.)(1)............    Delaware
  Western Towing Company (subsidiary of Dixie Carriers, Inc.)(1)................    Texas
  Marine Systems, Inc. (subsidiary of Dixie Carriers, Inc.)(1)..................    Louisiana
  Bolivar Terminal Company, Inc. (subsidiary of Dixie Carriers, Inc.)(2)........    Texas
  Dixie Marine, Inc. (subsidiary of Dixie Carriers, Inc.)(1)....................    Delaware
  Brent Transportation Corporation (subsidiary of Dixie Carriers, Inc.)(1)......    Delaware
  Dixie Security Corporation (subsidiary of Dixie Carriers, Inc.)(1)............    Texas
  OMR Transportation
 Company (subsidiary of Dixie Carriers, Inc.)...............    Delaware
  TPT Transportation Company (subsidiary of Dixie Carriers, Inc.)(1)............    Delaware
  Richport Insurance Company (subsidiary of Universal Insurance Company)(1).....    Puerto Rico
  Richport Bermuda Company, Ltd.
     (subsidiary of Universal Insurance Company)(1).............................    Bermuda
</TABLE>

 
- ---------------
 
(1) Included in the consolidated financial statements.
 
(2) Financial statements are not filed since the company is not a "significant
subsidiary."
 
(3) Incorporated in 1994.



<PAGE>   1
 
                                                                    EXHIBIT 23.1
 
                         INDEPENDENT AUDITORS' CONSENT
 
     We consent to the incorporation by reference in Registration Statements No.
2-67954, No. 2-84789 and No. 33-68140 of Kirby Corporation on Form S-8 of our
reports dated March 2, 1992, except for Note 2 as to which the date is March 18,
1992, (Kirby Corporation and subsidiaries) and February 28, 1994 (Universal
Insurance Company and subsidiaries) appearing in this Annual Report on Form 10-K
of Kirby Corporation for the year ended December 31, 1993.
 
                                            DELOITTE & TOUCHE
 
Houston, Texas
March 14, 1994





<PAGE>   1
 
                                                                    EXHIBIT 23.2
 
                         INDEPENDENT AUDITORS' CONSENT
 
     We consent to incorporation by reference in the Registration Statements
(No. 33-62116) on Form S-3 and (No. 33-68140), (No. 2-67954), (No. 2-84789) on
Form S-8 of Kirby Corporation and consolidated subsidiaries of our report dated
February 21, 1994, relating to the consolidated balance sheet of Kirby
Corporation and consolidated subsidiaries as of December 31, 1993, and the
related consolidated statements of earnings, stockholders' equity, cash flows
and related schedules for the year then ended, which report appears in the
December 31, 1993 Annual Report on Form 10-K of Kirby Corporation and
consolidated subsidiaries.
 
                                            KPMG PEAT MARWICK
 
Houston, Texas
March 14, 1994





<PAGE>   1
 
                                                                    EXHIBIT 28.1
 

                          INDEPENDENT AUDITORS' REPORT
 
To the Board of Directors
  and Stockholders of
Universal Insurance Company
San Juan, Puerto Rico
 
     We have audited the consolidated balance sheets of Universal Insurance
Company and its subsidiaries as of December 31, 1992 and 1993, and the related
consolidated statements of earnings, stockholders' equity and cash flows for the
years then ended (not presented separately herein). Our audits also included
financial statement schedules V and VI (supplemental insurance information and
reinsurance) for the years ended December 31, 1992 and 1993 listed in Part IV,
Item 14. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement schedules based on
our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures
 in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Universal Insurance Company and
its subsidiaries at December 31, 1992 and 1993, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles. Also, in our opinion such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
 
     As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for income taxes effective January 1,
1992, for reissuance of short duration and long duration contracts effective
January 1, 1993 and for the carrying value of its investments effective December
31, 1993, to conform with new accounting standards.
 
                                            DELOITTE & TOUCHE
 
San Juan, Puerto Rico
February 28, 1994