Barge operator
K-Sea Transportation Partners L.P. has announced operating results and net income for the first fiscal quarter ended September 30, 2008. The company reported operating income of $9.9 million, a decrease of $2.1 million, or 18 percent, compared to $12.0 million of operating income for the same period last year.
K-Sea also announced that its distribution to unitholders for the first quarter will remain at $0.77 per unit, or $3.08 per unit annualized.
Commenting on the results, President and CEO
Timothy J. Casey said "Our first quarter results were satisfactory in light of the exceptional developments in the energy markets which disrupted demand in certain of our markets. There were also several factors that affected us which we believe are transitory in nature and which should ease as we progress in fiscal 2009.
"Our results for the first quarter reflected certain higher operating costs that will be increasingly offset by built-in contractual revenue escalators in our charter contracts which will go into effect at various times during the year.
Casey pointed out that the value of the marine fuel used on its tugboats had had a negative effect on the company balance sheet during the quarter ended September 30, 2008.
"The sharp decline in the price of oil in September resulted in our recording a loss on the carrying value of the diesel fuel used to power our tugboats. We also had a negative swing, compared to last year's first quarter, on the disposition of equipment. The total of these items approximated $3.5 million."
K-Sea's President said the vessel utilization and average daily rates remain solid, aided by the large percentage of long-term charter contracts which have an average remaining duration of approximately 2.5 years.
The company also expects to take delivery in November of two new 80,000 barrel tank barges that are committed to long-term contracts. Casey noted that "distribution coverage ratio is negatively skewed this quarter because we will pay the full distribution on the two million new units we issued in the middle of the quarter; however, we did not receive the benefit of a full quarter's reduction in interest expense."
"We believe our balance sheet and liquidity remain solid and the structure of our debt is a major advantage. Debt maturities total only $17 million for the next twelve months, and $19 million in fiscal 2010, which will be covered by availability of over $70 million under our various loan agreements. Our bank revolver is non-amortizing and does not mature until 2014," Casey added.
K-Sea said the decrease in operating income had resulted from increased labor, insurance, and general and administrative expenses, and from higher depreciation and amortization resulting from the acquisition of the Smith Maritime Group in August 2007, the delivery of four newbuild tank barges since September 30, 2007, and the acquisition of eight tugboats in June 2008.
"The higher costs more than offset the impact of continued strong rates and solid vessel utilization," the company said.
Utilization was positively impacted by a smaller number of scheduled drydockings compared to the prior year's quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by $0.3 million, or 1%, to $22.7 million for the three months ended September 30, 2008, compared to $22.4 million for the three months ended September 30, 2007.
Net income for the three months ended September 30, 2008 was $3.9 million, or $0.26 per fully diluted limited partner unit, a decrease of $2.1 million compared to net income of $6.0 million, or $0.56 per fully diluted limited partner unit, for the three months ended September 30, 2007.
Earlier this month, K-Sea annnounced the withdrawal of the proposed initial public offering of
K-Sea GP Holdings LP due to 'the current state of the financial markets'.
Commenting at the time of the announcement, Timothy Casey said "The fundamentals of our business remain solid and we are confident in our prospects. The possible general partner IPO would have had no impact on our results of operations or financial condition, and its withdrawal also has no impact on us."
