This summary highlights selected information from this proxy statement/prospectus. You are urged to carefully read the entire proxy statement/prospectus and the other documents referred to in this proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the merger agreement, the merger and the other matters being considered at the meeting. See “Where You Can Find More Information” beginning on page 120 of this proxy statement/prospectus. Each item in this summary refers to the page of this proxy statement/prospectus on which that subject is discussed in more detail.

 

Kirby Corporation

 

Kirby Corporation, a publicly traded company based in Houston, Texas, conducts its business operations in the marine transportation and diesel engine services industries. Through its marine transportation subsidiaries, Kirby operates inland tank barges and towing vessels, transporting petrochemicals, black oil products, refined petroleum products and agricultural chemicals throughout the United States inland waterway system. Kirby also owns and operates four ocean-going barge and tug units which transport dry-bulk commodities in United States coastwise trade. Through its diesel engine services subsidiaries, Kirby provides after-market service for medium-speed and high-speed diesel engines and reduction gears used in marine, power generation and railroad applications, distributes and services high-speed diesel engines, transmissions, pumps and compression products, and manufactures oilfield service equipment, including hydraulic fracturing equipment, for land-based pressure pumping and oilfield services markets. Kirby’s principal executive offices are located at 55 Waugh Drive, Suite 1000, Houston, Texas 77007, and its telephone number is (713) 435-1000.

 

Additional information about Kirby and its subsidiaries is included in documents incorporated by reference into this proxy statement/prospectus. For further information, please see the section titled “Where You Can Find More Information” beginning on page 120 of this proxy statement/prospectus.

 

KSP Merger Sub, LLC

 

KSP Merger Sub, LLC is an indirect wholly owned subsidiary of Kirby. Merger Sub has not carried on any activities to date, other than activities incidental to its formation or undertaken in connection with the transactions contemplated by the merger agreement. The principal executive offices of Merger Sub are located at 55 Waugh Drive, Suite 1000, Houston, Texas 77007, and its telephone number is (713) 435-1000.

 

K-Sea Transportation Partners L.P.

 

K-Sea Transportation Partners L.P. is a publicly traded limited partnership, the common units of which are listed on the NYSE under the ticker symbol “KSP.” K-Sea and its subsidiaries provide marine transportation, distribution and logistics services for refined petroleum products in the United States. As of December 31, 2010, K-Sea operated a fleet of 57 tank barges and 64 tugboats with approximately 3.7 million barrels of capacity that serve a wide range of customers, including major oil companies, oil traders and refiners. As of December 31, 2010, approximately 98% of K-Sea’s barrel-carrying capacity was double-hulled. As of December 31, 2010, all of K-Sea’s tank vessels except two operated under the U.S. flag, and all but three were qualified to transport cargo between U.S. ports under the federal statutes that restrict foreign owners from operating in the U.S. maritime transportation industry, referred to as the “Jones Act.” K-Sea’s principal executive office is located at One Tower Center Boulevard, 17th Floor, East Brunswick, New Jersey 08816, and its telephone number at that address is (732) 565-3818.

 

Additional information about K-Sea and its subsidiaries is included in documents incorporated by reference into this proxy statement/prospectus. For further information, please see the section titled “Where You Can Find More Information” beginning on page 120 of this proxy statement/prospectus.

 

Kirby and K-Sea agreed to the acquisition of K-Sea by Kirby under the terms of the merger agreement that is described in this proxy statement/prospectus. In the merger, Merger Sub will merge with and into K-Sea, which will survive the merger as an indirect wholly owned subsidiary of Kirby. Kirby LP Sub, a direct wholly owned subsidiary of Kirby, will be the sole limited partner of K-Sea, and Kirby Holding Sub, a direct wholly owned subsidiary of Kirby, will be the sole general partner of K-Sea.

 

The merger agreement is attached as Annex A to this proxy statement/prospectus, and both Kirby and K-Sea encourage you to read it carefully and in its entirety because it is the legal document that governs the merger.

 

In the merger, each issued and outstanding K-Sea common unit (including each K-Sea phantom unit) will be cancelled and converted into the right to receive, at the election of the holder, either (a) $8.15 in cash, without interest, or (b) $4.075 in cash, without interest, and 0.0734 of a share of Kirby common stock (rounded to the nearest ten-thousandth of a share). Each outstanding preferred unit of K-Sea will be cancelled and converted into the right to receive $4.075 in cash, without interest, and 0.0734 of a share of Kirby common stock (rounded to the nearest ten-thousandth of a share). If the application of the applicable exchange ratio to all units in respect of which a K-Sea unitholder is to receive Kirby common stock would cause such unitholder to receive a fraction of a Kirby common share, such unitholder will receive, in lieu of such fractional share, cash, without interest, with a value equal to the value of the fractional Kirby common share. K-Sea phantom units will accelerate and be treated as common units under the merger agreement (that is, holders thereof will be entitled to make the same election referenced in the first sentence of this paragraph).

 

In addition, each outstanding general partner unit of K-Sea will be cancelled and converted into the right to receive $8.15 in cash, without interest, and the incentive distribution rights of K-Sea will be cancelled and converted into the right to receive an aggregate of $18.0 million in cash, without interest.

 

The merger is, and upon the completion of the merger, the combined company will be, subject to a number of risks, which are described in the section titled “Risk Factors” beginning on page 27 of this proxy statement/prospectus. You should carefully read and consider these risks in deciding whether to vote for the approval of the merger agreement and the merger.

 

Where and when:  The special meeting of K-Sea unitholders will take place at One Tower Center Boulevard, 17th Floor, East Brunswick, New Jersey 08816, on [ • ], 2011 at [ • ], local time.

 

What K-Sea’s unitholders are being asked to vote on:  At the special meeting and any adjournment or postponement thereof, K-Sea’s unitholders will be asked to consider and vote on the following matters:

 

 

Who may vote:  You may vote at the special meeting if you owned K-Sea common units or K-Sea preferred units at the close of business on the record date, [ • ], 2011. You may cast one vote for each unit that you owned on the record date.

How to vote:  Please complete and submit the enclosed proxy card as soon as possible or transmit your voting instructions by using the telephone or internet procedures described on your proxy card.

 

Vote needed to approve the merger agreement and the transactions contemplated thereby:  The merger agreement and the transactions contemplated thereby, including the merger, must receive the approval of the holders of a majority of the outstanding K-Sea common units and the outstanding K-Sea preferred units (voting on an as-converted to common units basis), voting together as a single class, and the approval of a majority of the holders of the outstanding K-Sea preferred units, voting separately as a class, in each case, by holders who are entitled to vote as of the record date to be effective. The approval of the merger agreement, including the merger, is a condition to consummation of the merger.

 

Vote needed to approve the Amended and Restated Incentive Plan:  The approval of the Amended and Restated Incentive Plan requires the affirmative vote of the holders of a majority of the outstanding K-Sea common units and the outstanding K-Sea preferred units (voting on an as-converted to common units basis), voting together as a single class, who are entitled to vote as of the record date.

 

Vote needed to approve the compensation to be received by K-Sea Management GP executive officers in connection with the merger:  The advisory vote on the compensation to be received by K-Sea Management GP executive officers in connection with the merger will be approved if the holders of a majority of the outstanding K-Sea common units and the outstanding K-Sea preferred units (voting on an as-converted to common units basis), voting together as a single class, vote “For” such proposal. The vote of K-Sea unitholders on the compensation to be received by K-Sea Management GP executive officers in connection with the merger is advisory in nature and will not be binding on K-Sea or the K-Sea Board of Directors and will not impact whether or not the compensation is paid.

 

In connection with the execution of the merger agreement, the Kirby Parties entered into support agreements with the K-Sea supporting unitholders. Pursuant to the support agreements, the K-Sea supporting unitholders, who own 3,790,000 K-Sea common units and 19,178,120 K-Sea preferred units, representing approximately 59.9% of the outstanding K-Sea common units (including the K-Sea preferred units on an as-converted to common units basis) and 100% of the outstanding K-Sea preferred units, have each agreed to vote the units of K-Sea beneficially owned by them (i) in favor of the approval of the merger agreement, any transactions contemplated by the merger agreement and any other action reasonably requested by Kirby in furtherance thereof submitted for the vote or written consent of K-Sea unitholders, (ii) against the approval or adoption of any acquisition proposal (as defined in the section of this proxy statement/prospectus titled “The Merger Agreement — No Solicitation of Offers by K-Sea” beginning on page 92) and any action, agreement, transaction or proposal that would result in a breach of any covenant, agreement, representation or warranty or any other obligation or agreement of K-Sea contained in the merger agreement, and (iii) against any action, agreement or transaction that would impede, interfere with, delay, postpone, discourage, frustrate the purposes of or adversely affect the merger or the transactions contemplated by the merger agreement. Each support agreement may be terminated upon, among other things, the termination of the merger agreement or a change in recommendation by the K-Sea Board of Directors.

 

The foregoing description of the support agreements is qualified in its entirety by reference to the full text of the support agreements, which are attached as Annexes B through E to this proxy statement/prospectus and are incorporated by reference into this proxy statement/prospectus.

 

The K-Sea Board of Directors, acting upon the unanimous recommendation of the K-Sea Conflicts Committee, which is comprised of independent directors, has unanimously (i) adopted and approved the merger agreement and the transactions contemplated thereby, including the merger, and (ii) determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair and reasonable to, and in the best interests of, K-Sea and K-Sea’s unitholders. Accordingly, the K-Sea Board of Directors

unanimously recommends that K-Sea’s unitholders vote “FOR” the proposal to approve the merger agreement and the transactions contemplated thereby, including the merger.

 

In determining whether to approve the merger agreement and the transactions contemplated thereby, including the merger, the K-Sea Board of Directors considered the factors described in the section titled “K-Sea’s Reasons for the Merger; Recommendation of the K-Sea Board of Directors and the K-Sea Conflicts Committee” beginning on page 50 of this proxy statement/prospectus.

 

Stifel Nicolaus delivered its written opinion to the K-Sea Conflicts Committee, dated March 12, 2011, that, as of the date of the opinion and subject to and based on the assumptions made, procedures followed, matters considered and limitations of the review undertaken in such opinion, (i) the consideration to be paid to the holders of K-Sea common units (other than Jefferies Capital Partners, KA First Reserve, LLC and their respective affiliates) in connection with the merger and, (ii) for those holders of K-Sea common units (other than Jefferies Capital Partners, KA First Reserve, LLC and their respective affiliates) that will receive shares of Kirby common stock as a part of such consideration, the exchange ratio used in determining the number of such shares of Kirby common stock to be received by such holders of K-Sea common units, in each case, is fair to such common unitholders from a financial point of view.

 

The full text of the written opinion of Stifel Nicolaus, dated March 12, 2011, which sets forth the procedures followed, assumptions made, other matters considered and limits of the review undertaken in connection with the opinion, is attached as Annex F to this proxy statement/prospectus. The holders of K-Sea common units should read the opinion in its entirety. Stifel Nicolaus provided its opinion to the K-Sea Conflicts Committee for its information and assistance in connection with its evaluation of the financial terms of the merger. Stifel Nicolaus’ opinion is not a recommendation as to how any holder of K-Sea units or any other person should vote with respect to the merger.

 

In considering the recommendations of the K-Sea Conflicts Committee and the K-Sea Board of Directors, K-Sea’s unitholders should be aware that some of the executive officers and directors of K-Sea Management GP have interests in the merger that may differ from, or may be in addition to, the interests of K-Sea’s unitholders. These interests may present such executive officers and directors with actual or potential conflicts of interest, and these interests, to the extent material, are described below:

 

 

 

Each of the K-Sea Conflicts Committee and the K-Sea Board of Directors was aware of these different and/or additional interests and considered them, among other matters, in their respective evaluations and negotiations of the merger agreement.

 

Kirby and K-Sea have agreed to use their reasonable best efforts to obtain all governmental and regulatory approvals required to complete the transactions contemplated by the merger agreement. These approvals include approval under, or notices pursuant to, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which is referred to in this proxy statement/prospectus as the HSR Act. Under the HSR Act and the rules promulgated by the Federal Trade Commission (the “FTC”), the merger may not be completed until (1) certain information and materials are furnished to the Department of Justice (the “DOJ”) and the FTC, and (2) the applicable waiting period under the HSR Act is terminated or expires. Kirby and K-Sea each filed the required HSR notification and report forms on April 1, 2011, commencing a 30-day statutory waiting period. On April 13, 2011, the FTC granted early termination of such statutory waiting period. Despite the early termination of the statutory waiting period under the HSR Act, the DOJ, the FTC and others may still challenge the merger on antitrust grounds. Accordingly, at any time before or after the completion of the merger, the DOJ, the FTC or others could take action under the antitrust laws as deemed necessary or desirable in the public interest, including without limitation seeking to enjoin the completion of the merger or to permit completion only subject to regulatory concessions or conditions.

 

Kirby and K-Sea also intend to make all required filings under the Securities Act and the Exchange Act relating to the merger and obtain all other approvals and consents which may be necessary to give effect to the merger.

 

K-Sea unitholders do not have and are not entitled to exercise appraisal rights in connection with the merger under Delaware law or K-Sea’s partnership agreement.

 

Shares of Kirby common stock currently trade on the New York Stock Exchange, or the NYSE, under the stock symbol “KEX.” It is a condition to completion of the merger that the shares of Kirby common stock to be issued by Kirby to K-Sea unitholders in connection with the merger be approved for listing on the NYSE, subject to official notice of issuance. Kirby has agreed to use its commercially reasonable efforts to cause the shares of Kirby common stock issuable in connection with the merger to be authorized for listing on the NYSE and expects to obtain the NYSE’s approval to list such shares prior to completion of the merger, subject to official notice of issuance.

 

K-Sea’s common units currently trade on the NYSE under the stock symbol “KSP.” If the merger is completed, K-Sea common units will cease to be listed on the NYSE and will be deregistered under the Exchange Act.

 

The obligations of each of Kirby and Merger Sub, on one hand, and K-Sea, on the other hand, to complete the merger are subject to the satisfaction (or waiver) of the following conditions:

 

 

 

In addition, Kirby’s and Merger Sub’s obligations to complete the merger are further subject to the following conditions:

 

 

The merger agreement does not contain any condition to the closing of the merger relating to Kirby’s ability to obtain financing for the transaction.

 

Neither Kirby nor K-Sea can give any assurance that all of the conditions to the merger will either be satisfied or waived or that the merger will occur.

 

Kirby and K-Sea currently expect to complete the merger in June or July 2011, subject to the receipt of required K-Sea unitholder and regulatory approvals and the satisfaction or waiver of the other conditions to completion of the merger. Because many of the conditions to completion of the merger are beyond the control of Kirby and K-Sea, exact timing for completion of the merger cannot be predicted with any amount of certainty.

 

The merger agreement contains detailed provisions that restrict the K-Sea Parties, their subsidiaries and their respective officers, partners, managers, directors, employees and other representatives from, directly or indirectly, soliciting, initiating or knowingly encouraging, or taking other actions intended to facilitate, the submission of any other acquisition proposal (as defined in the section of this proxy statement/prospectus titled “The Merger Agreement — No Solicitation of Offers by K-Sea” on page 92). The merger agreement also contains restrictions on the K-Sea Parties, their subsidiaries and their respective officers, partners, managers, directors, employees and other representatives from participating in any discussions or negotiations regarding any other acquisition proposal. The merger agreement does not, however, prohibit the K-Sea Board of Directors from considering and recommending to K-Sea unitholders an alternative transaction with a third party if specified conditions are met, including the payment of the termination fee required by the merger agreement to Kirby.

 

The merger agreement may be terminated at any time prior to the completion of the merger by mutual consent of Kirby and K-Sea. The merger agreement may also be terminated by either Kirby or K-Sea if:

 

 

Kirby may also terminate the merger agreement if:

 

 

K-Sea may also terminate the merger agreement:

 

 

K-Sea has agreed to pay up to $3.0 million of Kirby’s fees and expenses paid or incurred in connection with the preparation and negotiation of the merger agreement, the support agreements or any of the other

transactions contemplated thereby, if the merger agreement is terminated under any of the following circumstances:

 

 

In addition to any payment to Kirby for its fees and expenses, K-Sea has agreed to pay Kirby a termination fee of $12.0 million if:

 

 

In accordance with accounting principles generally accepted in the United States, or GAAP, Kirby will account for the merger using the acquisition method of accounting for business combinations.

 

For U.S. federal income tax purposes, a K-Sea common unitholder who is a U.S. holder (as defined below) that receives cash or cash and Kirby shares in exchange for such unitholder’s K-Sea common units pursuant to the merger will generally recognize capital gain or loss in an amount equal to the difference between (i) the sum of (A) the amount of cash received, (B) the fair market value of any Kirby shares received, and (C) such K-Sea common unitholder’s share of K-Sea’s nonrecourse debt immediately prior to the merger, and (ii) such K-Sea common unitholder’s adjusted tax basis in the K-Sea common units exchanged therefor. However, a portion of this gain or loss will be separately computed and taxed as ordinary income or loss under Section 751 of the Code (as defined below) to the extent attributable to assets giving rise to “unrealized receivables” or to “inventory items” of K-Sea. Please read the sections entitled “Risk Factors — Tax Risks Related to the Merger” beginning on page 33, and “Material U.S. Federal Income Tax Consequences of the Merger and of Owning and Disposing of Shares of Kirby Common Stock Received in the Merger,” beginning on page 79.

 

The rights of K-Sea unitholders are currently governed by K-Sea’s partnership agreement and applicable Delaware law. K-Sea common unitholders who elect to receive a portion of the merger consideration in Kirby common stock and K-Sea preferred unitholders will become stockholders of Kirby upon completion of the merger. Thereafter, their rights will be governed by Kirby’s restated articles of incorporation, as amended, Kirby’s bylaws and Nevada law. As a result, these K-Sea unitholders will have different rights once they become stockholders of Kirby due to the differences in the governing documents of and laws applicable to Kirby and K-Sea. The key differences are described in the section titled “Comparison of Rights of Kirby Stockholders and K-Sea Unitholders” beginning on page 102 of this proxy statement/prospectus.

 

As of April 28, 2011, nine class action complaints have been filed in connection with the proposed merger. Five of these complaints were filed in the Court of Chancery of the State of Delaware, all of which have been consolidated into one action. Four complaints were filed in the Superior Court of New Jersey; however, the first filed complaint in New Jersey was subsequently withdrawn. These complaints generally allege, among other things, that K-Sea, K-Sea GP, K-Sea Management GP, K-Sea IDR Holdings, Kirby, Merger Sub and the directors of K-Sea Management GP have either breached their fiduciary duties and/or aided and abetted in these alleged breaches of fiduciary duty in connection with the proposed merger. The complaints seek to enjoin the proposed merger or, alternatively, if the merger is consummated, to rescind the merger or to obtain rescissory damages. K-Sea and Kirby cannot predict the outcome of these or any other lawsuits that might be filed subsequent to the date of the filing of this proxy statement/prospectus, nor can K-Sea and Kirby predict the amount of time and expense that will be required to resolve these lawsuits. K-Sea and Kirby intend to vigorously defend against these and any other actions.

 

On December 14, 2010, the compensation committee of the K-Sea Board of Directors approved and adopted the Amended and Restated Incentive Plan. The Amended and Restated Incentive Plan includes an increase in the number of common units of K-Sea authorized for issuance in connection with the Amended and Restated Incentive Plan from 440,000 common units to 940,000 common units (such amounts to be increased by adjustments, if any, made pursuant to the Amended and Restated Incentive Plan). K-Sea is submitting the Amended and Restated Incentive Plan to its unitholders for approval as required by the NYSE. The K-Sea Board of Directors unanimously recommends that you vote “FOR” the proposal to approve the Amended and Restated Incentive Plan.

 

The terms of the merger agreement generally restrict K-Sea from issuing any awards under the Amended and Restated Incentive Plan other than the 112,194 K-Sea phantom units granted to certain executive officers

of K-Sea Management GP and certain members of the K-Sea Board of Directors. Moreover, if the merger is completed, no additional awards will be issued pursuant to the Amended and Restated Incentive Plan and the Amended and Restated Incentive Plan will be terminated. In the event that the merger is not completed, K-Sea may grant additional awards under the Amended and Restated Incentive Plan, subject to the terms thereof.

 

The full text of the Amended and Restated Incentive Plan is attached as Annex G to this proxy statement/prospectus and is incorporated by reference into this proxy statement/prospectus.

 

In accordance with Section 14A of the Exchange Act, K-Sea is providing unitholders with the opportunity to cast an advisory vote on the compensation that may be payable to the K-Sea Management GP named executive officers in connection with the merger as reported on the Golden Parachute Compensation table on page 73. The K-Sea Board of Directors unanimously recommends that you vote “FOR” the proposal to approve the executive compensation payable in connection with the merger.

 

On April 15, 2011, Kirby Engine Systems, Inc., a wholly owned subsidiary of Kirby, completed its purchase of United Holdings LLC, a privately held distributor and service provider of engine and transmission related products for the oil and gas services, power generation and transportation industries, and manufacturer of oilfield service equipment. The base purchase price was $270.0 million in cash, before post-closing adjustments, plus a three-year earnout provision for up to an additional $50.0 million payable in 2014.

 

The following tables show Kirby’s selected consolidated historical financial data as of and for each of the fiscal years ended December 31, 2010, 2009, 2008, 2007 and 2006 and are derived from Kirby’s consolidated financial statements. You should read the following data in connection with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto set forth in Kirby’s Annual Report on Form 10-K for the year ended December 31, 2010, which is incorporated by reference into this document. See “Where You Can Find More Information” beginning on page 120 of this proxy statement/prospectus. See also the pro forma information set forth elsewhere in this proxy statement/prospectus regarding the proposed merger with K-Sea. The following information is only a summary and is not necessarily indicative of the results of future operations of Kirby.

 

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF EARNINGS DATA

 

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

 

BALANCE SHEET DATA

 

 

The following tables show K-Sea’s selected consolidated historical financial data as of and for the six months ended December 31, 2010 and as of and for each of the fiscal years ended June 30, 2010, 2009, 2008, 2007 and 2006 and are derived from K-Sea’s consolidated financial statements. You should read the following data in connection with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto set forth in K-Sea’s Annual Report on Form 10-K for the year ended June 30, 2010, which is incorporated by reference into this document. See “Where You Can Find More Information” beginning on page 120 of this proxy statement/prospectus. See also the pro forma information set forth elsewhere in this proxy statement/prospectus regarding the proposed merger with Kirby. The following information is only a summary and is not necessarily indicative of the results of future operations of K-Sea.

 

K-SEA TRANSPORTATION PARTNERS L.P.

 

CONSOLIDATED STATEMENT OF OPERATIONS DATA

 

 

 

 

K-SEA TRANSPORTATION PARTNERS L.P.

 

CONSOLIDATED BALANCE SHEET DATA

 

 

The following selected unaudited pro forma condensed combined statement of earnings data of Kirby for the year ended December 31, 2010 have been prepared to give effect to the merger as if the merger had occurred on January 1, 2010. The unaudited pro forma condensed combined balance sheet data as of December 31, 2010 of Kirby has been prepared to give effect to the merger as if the merger had occurred on December 31, 2010.

 

The following selected unaudited pro forma condensed combined financial information is not necessarily indicative of the results that might have occurred had the merger taken place on January 1, 2010 for statement of earnings purposes, and on December 31, 2010 for balance sheet purposes, and is not intended to be a projection of future results. Future results may vary significantly from the results reflected because of various factors, including those discussed in the section titled “Risk Factors.” The following selected unaudited pro forma condensed combined financial information should be read in conjunction with the “Unaudited Pro Forma Condensed Combined Financial Statements” and related notes included elsewhere in this proxy statement/prospectus.

 

PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS DATA

 

 

PRO FORMA CONDENSED COMBINED BALANCE SHEET DATA

 

 

On March 13, 2011, Kirby and K-Sea entered into a merger pursuant to which, subject to the conditions set forth therein, Merger Sub will merge with and into K-Sea, with K-Sea surviving the merger as an indirect wholly owned subsidiary of Kirby.

 

Subject to the terms and conditions of the merger agreement, upon the consummation of the merger (i) each outstanding K-Sea common unit (including each K-Sea phantom unit) will be converted into the right to receive, at the election of the holder, either (a) $8.15 in cash or (b) $4.075 in cash and 0.0734 of a share of Kirby’s common stock, (ii) each outstanding preferred unit of K-Sea will be converted into the right to receive $4.075 in cash and 0.0734 of a share of Kirby’s common stock and (iii) each outstanding general partner unit of K-Sea will be converted into the right to receive $8.15 in cash. The incentive distribution rights of K-Sea, which are owned by K-Sea IDR Holdings, will be converted into the right to receive $18.0 million in cash.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

December 31, 2010

 

 

See accompanying notes to unaudited pro forma condensed combined financial statements.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS

FOR THE YEAR ENDED DECEMBER 31, 2010

 

 

See accompanying notes to unaudited pro forma condensed combined financial statements.

Accounting Treatment

 

Kirby prepares its financial statements in accordance with GAAP. The merger will be accounted for using the acquisition method of accounting with Kirby identified as the acquirer of K-Sea. Under the acquisition method of accounting, Kirby will record all assets acquired and liabilities assumed at their respective acquisition date fair values with the excess purchase price being recorded as goodwill. Under the acquisition method of accounting, goodwill is not amortized but is tested for impairment at least annually.

 

Basis of Pro Forma Presentation

 

The following unaudited pro forma condensed combined financial statements and related notes combine the historical consolidated balance sheet and results of operations of Kirby and of K-Sea. The pro forma balance sheet gives effect to the merger as if it had occurred on December 31, 2010. The pro forma statement of earnings for the fiscal year ended December 31, 2010, gives effect to the merger as if the merger had occurred on January 1, 2010. The pro forma statement of earnings for fiscal year 2010 was prepared by combining the Kirby historical consolidated statement of earnings for the fiscal year ended December 31, 2010 and the K-Sea unaudited condensed historical consolidated statements of operations for the three months ended March 31, 2010, the three months ended June 30, 2010, the three months ended September 30, 2010 and the three months ended December 31, 2010. The historical consolidated financial statements of K-Sea have been adjusted to reflect certain reclassifications in order to conform to Kirby’s financial statement presentation.

 

The unaudited pro forma condensed combined financial statements reflect the estimated merger consideration expected to be transferred, which does not purport to represent what the actual merger consideration transferred will be at the effective time of the closing. In accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 805, Business Combinations, as amended, the fair value of equity securities issued as part of the consideration transferred will be measured on the closing date of the merger at the then current market price.

 

Kirby has estimated the total consideration expected to be issued and paid in the merger to be approximately $603.1 million, consisting of approximately $523.3 million to be paid in cash and approximately $79.8 million to be paid through the issuance of approximately 1.4 million shares of Kirby common stock valued at the April 28, 2011 closing share price of $56.70 per share, the latest practicable trading day before the date of this proxy statement/prospectus. The value of the merger consideration will fluctuate based upon changes in the price of shares of Kirby common stock and the number of K-Sea’s common and phantom unitholders who elect to take Kirby common stock as part of the merger consideration. K-Sea’s common unitholders and the holders of K-Sea phantom units will have the option to receive for each unit either $8.15 in cash or $4.075 in cash and .0734 of a share of Kirby common stock. The estimated merger consideration below assumes the common and phantom unitholders take the all cash option. Under FASB ASC Topic 805, acquisition-related transaction costs (i.e., investment banking, legal, accounting, valuation and other professional fees) are not included as a component of consideration transferred but are accounted for as expenses in the periods in which the costs are incurred.

 

As of the date of this proxy statement/prospectus, Kirby has not completed the final valuation analysis and calculations in sufficient detail necessary to arrive at the final required estimates of the fair market value of the K-Sea assets to be acquired and liabilities to be assumed and the related allocations to such items, including goodwill, of the merger consideration. A preliminary valuation analysis of the vessels has been conducted and its results are incorporated into the pro forma condensed combined financial statements. Kirby has retained a third party advisor to assist in its valuation of certain assets and liabilities and their final valuation report will not be completed until shortly after the completion of the merger when final valuations will be performed. Accordingly, assets and liabilities are presented at their respective carrying amounts, with the exception of the preliminary determination of the fair value of the vessels, and should be treated as preliminary values. In addition, Kirby has not identified the adjustments necessary to conform the K-Sea financial records to Kirby’s accounting policies with the exception of the preliminary adjustments to the pro forma condensed combined financial statements to confirm to Kirby’s accounting policy related to vessel

equipment maintenance and capitalization. As a result, actual results will differ from this unaudited pro forma condensed combined financial information once Kirby has determined the final merger consideration, completed the detailed valuation analysis and calculations necessary to finalize the required purchase price allocations, and identified and finalized any necessary conforming accounting policy changes for K-Sea. Accordingly, the final allocations of merger consideration, which will be determined subsequent to the closing of the merger, and their effects on the results of operations, may differ materially from the estimated allocations and unaudited pro forma combined amounts included herein.

 

The unaudited pro forma condensed combined financial statements are provided for illustrative purposes only and are not intended to represent or be indicative of the consolidated results of operations or financial position of Kirby that would have been recorded had the merger been completed as of the dates presented, and should not be taken as representative of future results of operations or financial position of the combined company. The unaudited pro forma condensed combined financial statements do not reflect the impacts of any potential operational efficiencies, cost savings or economies of scale that Kirby may achieve with respect to the combined operations of Kirby and K-Sea. Additionally, the pro forma statements of operations do not include any non-recurring charges or credits and the related tax effects which result directly from the transaction nor do they include any costs of integration activities.

 

The unaudited pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes contained in the Kirby and K-Sea Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.

 

 

The estimated merger consideration is approximately $603,075 based on a Kirby share price of $56.70, which is the closing price of Kirby’s common stock on the NYSE on April 28, 2011, the latest practicable trading day before the day of this proxy statement/prospectus. The value of the merger consideration will fluctuate based upon changes in the price of shares of Kirby common stock and the number of K-Sea’s common unitholders and holders of K-Sea phantom units who elect to take a portion of the consideration in Kirby common stock. K-Sea’s common and phantom unitholders will have the option to receive for each unit either $8.15 in cash or $4.075 in cash and .0734 of a share of Kirby common stock. The estimated merger consideration below assumes the common and phantom unitholders take the all cash option.

 

The following table summarizes the components of the estimated merger consideration:

 

 

In order to fund the cash portion of the merger consideration, Kirby expects to enter into a five-year term loan of up to $540,000. A 10% increase or decrease in Kirby’s share price as of April 28, 2011 of $56.70 would result in an increase or decrease in the merger consideration of $7,975.

The estimated goodwill included in the pro forma adjustments is calculated as the difference between the estimated merger consideration to be transferred and the carrying values assigned to the assets acquired and liabilities assumed. The following table summarizes the estimated goodwill calculation as of December 31, 2010:

 

 

Kirby has not completed the final valuation analysis and calculations in sufficient detail necessary to arrive at the final required estimates of the fair market value of the K-Sea assets to be acquired and liabilities to be assumed and the related allocations to such items, including goodwill, of the merger consideration. Accordingly, assets and liabilities, with the exception of net deferred financing costs and net vessel property, are presented at their respective carrying amounts and should be treated as preliminary values. This preliminary allocation of the merger consideration is based upon management’s estimates. These estimates and assumptions are subject to change upon final valuation. The final allocation of consideration may include (1) changes in historical carrying values of property and equipment, (2) allocations to intangible assets, including but not limited to customer related assets, and (3) other changes to assets and liabilities. Any changes to the initial estimates of fair value of assets and liabilities will be recorded as adjustments to those assets and liabilities and the residual amounts will be allocated to goodwill. As a result, actual results may differ once Kirby has determined the final merger consideration and completed the final detailed valuation analysis and calculations necessary to finalize the required purchase price allocations. Accordingly, the final allocations of merger consideration, which will be determined subsequent to the closing of the merger, may differ materially from the estimated allocations and unaudited pro forma combined amounts included herein.