K-Sea Transportation Partners L.P. (NYSE:KSP) today announced
operating results for its third fiscal quarter ended March 31,
2011. The Company reported operating income of $0.8 million for the
quarter ended March 31, 2011, excluding gains on asset sales and
certain one-time items described below, compared to an operating
loss of $3.6 million, excluding asset impairment charges, for the
third fiscal quarter ended March 31, 2010. Earnings before
interest, taxes, depreciation and amortization (“EBITDA”) for the
third quarter of fiscal 2011 was $13.0 million excluding the below
mentioned gains on asset sales and one-time items, compared to $9.1
million for the third quarter ended March 31, 2010. EBITDA,
Adjusted EBITDA and Adjusted operating income are non-GAAP
financial measures that are reconciled to net income and operating
income, the most directly comparable GAAP measures, in the tables
below.
President and CEO Timothy J. Casey said, “Our third fiscal
quarter results were in line with our expectations. The third
fiscal quarter is always our weakest quarter seasonally, and the
prior year’s third quarter was particularly affected by the poor
state of the refining industry at that time. Our fourth fiscal
quarter ended June 30, 2011 should improve sequentially. At March
31, 2011, our fleet’s contract cover of at least one year, measured
by barrel-carrying capacity, was 54%; we expect our contract cover
to approximate this percentage at the end of our June 2011 fiscal
year. We and Kirby Corporation ("Kirby") continue to address the
normal procedural matters involved in a merger, and expect to
schedule a K-Sea unitholder vote in the early third quarter of
calendar 2011. As details become available, we will advise everyone
accordingly.”
Three Months Ended March 31, 2011
For the three months ended March 31, 2011, the Company reported
operating income of $0.8 million, excluding gains on asset sales
and certain one-time items. Gains on asset sales were $2.4 million
and one-time items included a $1.1 million write-down of our
ownership interest in our mutual insurance carrier as a result of
changing our mutual club, and $1.8 million of costs relating to the
proposed merger with Kirby. This year’s operating income represents
an increase of $4.4 million compared to an operating loss of $3.6
million for the three months ended March 31, 2010, excluding a $1.7
million asset impairment charge relating to assets sold below book
value. Operating income, inclusive of the gains on asset sales and
one-time items, were $0.3 million for the three months ended March
31, 2011 and an operating loss of $5.3 million for the three months
ended March 31, 2010. EBITDA, excluding the gains on asset sales,
$1.3 million of costs related to a possible debt refinancing we
postponed in light of the proposed merger with Kirby, and other
one-time items mentioned above, was $13.0 million for the three
months ended March 31, 2011 as compared to $9.1 million for the
three months ended March 31, 2010.
EBITDA and operating income for the third fiscal quarter of 2011
was positively impacted by improved spot market rates as compared
to the March 2010 quarter, which suffered from a very weak refining
market. This was offset by fewer total working days owing to the
sale or retirement of fourteen single-hull tank barges and three
older double-hull tank barges during the last twelve months. The
average daily rate for the three months ended March 31, 2011
increased to $12,973 as compared to $11,259 for the three months
ended March 31, 2010. In addition to the improved spot market
rates, average daily rates benefited from the commencement of
operations of three coastwise new-build barges placed into service
in March 2010, April 2010, and February 2011. Vessel operating
expenses decreased by $1.9 million during the three months ended
March 31, 2011, as compared to the same period last year, resulting
mainly from the operation of fewer vessels. General and
administrative expenses increased to $7.1 million for the three
months ended March 31, 2011, as compared to $6.7 million for the
three months ended March 31, 2010, resulting mainly from increased
stock compensation costs from newly issued grants and other
incentive compensation.
Including all gains on asset sales and one-time items, net loss
for the three months ended March 31, 2011 was $5.9 million, or a
loss of $0.49 per fully diluted limited partner common unit. This
represents an improvement of $5.5 million compared to a net loss of
$11.4 million, or $0.59 per fully diluted limited partner common
unit, for the three months ended March 31, 2010. The increase was
primarily a result of a $5.6 million increase in operating income,
including gains on asset sales and the one-time items mentioned
above, and a $1.5 million decrease in interest expense resulting
from lower average debt balances; partially offset by the $1.3
million of debt refinancing costs mentioned above and a $0.3
million increase in provision for income taxes.
Nine Months Ended March 31, 2011
For the nine months ended March 31, 2011, the Company reported
operating income of $12.9 million, including $8.8 million of net
gains on sale of assets, a $1.1 million write-down of our ownership
interest in our mutual insurance carrier as a result of changing
our mutual club, $1.8 million of costs relating to the proposed
merger with Kirby, and $1.2 million of lease termination costs.
Excluding these items, operating income was $8.1 million for the
nine months ended March 31, 2011. This represents an increase of
$4.1 million compared to $4.0 million (before asset impairment
charges of $7.6 million and loss on acquisition of land and
building of $1.7 million) of operating income for the nine months
ended March 31, 2010. The $8.8 million gain was comprised of the
sale of our waste water treatment facility in Norfolk, Virginia,
the previously announced sale of two tugboats and our two oldest
double-hull barges, the sale of five single-hull barges and the
sale of one other older double-hull barge. EBITDA, excluding the
gains on asset sales, the $1.3 million of costs related to a
possible debt refinancing we postponed in light of the proposed
merger with Kirby, and other one-time items mentioned above, was
$45.9 million for the nine months ended March 31, 2011 as compared
to $43.2 million for the nine months ended March 31, 2010,
excluding the write-down on acquisition of land and building.
EBITDA and operating income for the nine months ended March 31,
2011 were positively impacted by higher average daily rates
described below; partially offset by fewer total working days owing
to the sale or retirement of seventeen tank barges during the last
twelve months, as mentioned above. The average daily rate for the
nine months ended March 31, 2011 increased to $12,543 as compared
to $11,100 for the nine months ended March 31, 2010. Average daily
rates benefited from the commencement of operations of four
coastwise new-build barges placed into service in November 2009,
March 2010, April 2010, and February 2011, the retirement of the
single-hull vessels from our recurring business, the higher rates
earned on the vessels deployed in the U.S. Gulf as part of the oil
spill clean-up effort last summer, and some recent strengthening of
spot market rates. Additionally, the nine months ended March 31,
2010 experienced a reduction in the average daily rate due to
operating several of our vessels under storage contracts in our
waste water treatment facility at lower rates. Vessel operating
expenses decreased by $5.8 million during the nine months ended
March 31, 2011, as compared to the same period last year, resulting
mainly from the operation of fewer vessels. General and
administrative expenses remained relatively flat at $20.3 million
for the nine months ended March 31, 2011, as compared to $20.2
million for the nine months ended March 31, 2010.
Including all the gains on asset sales and one-time items, net
loss for the nine months ended March 31, 2011 was $7.2 million, or
a loss of $0.77 per fully diluted limited partner common unit. This
represents an increase of $13.6 million compared to a net loss of
$20.8 million, or $1.10 per fully diluted limited partner common
unit, for the nine months ended March 31, 2011. The increase was
primarily a result of an $18.2 million increase in operating
income, including all the gains on asset sales and one-time items
mentioned above. The increase was partially offset by a $2.3
million increase in interest expense resulting mainly from
increased interest rate margins due to the previously announced
December 2009 and September 2010 amendments of our revolving credit
facility and a term loan, the $1.3 million of debt refinancing
costs mentioned above, and a $0.4 million increase in provision for
income taxes.
Earnings Conference Call
The Company has scheduled a conference call for Monday, May 2,
2011, at 9:00 am Eastern time, to review the fiscal 2011 third
quarter results. Dial-in information for this call is (866)
730-5762 (Domestic) and (857) 350-1586 (International). The
Passcode is 98583639. The conference call can also be accessed by
webcast, which will be available at www.k-sea.com. Additionally, a
replay of the call will be available by telephone until May 9,
2011; the dial-in number for the replay is (888) 286-8010
(Domestic) and (617) 801-6888 (International). The Passcode is
22004470.
About K-Sea Transportation Partners
K-Sea Transportation Partners is one of the largest coastwise
tank barge operators in the United States. The Company provides
refined petroleum products transportation, distribution and
logistics services in the U.S. domestic marine transportation
market, and its common units trade on the New York Stock Exchange
under the symbol KSP. For additional information, please visit the
Company’s website, including the Investor Relations section, at
www.k-sea.com.
Use of Non-GAAP Financial Information
The Company reports its financial results in accordance with
generally accepted accounting principles (“GAAP”). However, we also
present EBITDA, Adjusted EBITDA and Adjusted operating income,
which are non-GAAP financial measures. EBITDA, Adjusted EBITDA and
Adjusted operating income are used as a supplemental financial
measures by management and by external users of financial
statements to assess (a) the financial performance of the Company’s
assets and the Company’s ability to generate cash sufficient to pay
interest on indebtedness and make distributions to partners, (b)
the Company’s operating performance and return on invested capital
as compared to other companies in the industry, and (c) compliance
with certain financial covenants in the Company’s debt
agreements.
EBITDA, Adjusted EBITDA and Adjusted operating income should not
be considered as alternatives to net income, operating income, cash
flow from operating activities or any other measure of financial
performance or liquidity under GAAP. EBITDA, Adjusted EBITDA and
Adjusted operating income presented herein may not be comparable to
similarly titled measures of other companies. A reconciliation of
EBITDA, Adjusted EBITDA and Adjusted operating income to net income
and operating income, the most directly comparable GAAP measures,
are presented in the tables below.
Cautionary Statements
This press release contains forward-looking statements, which
include any statements that are not historical facts, including
statements relating to business outlook, expected contract
coverage, expectations on timing of closing of the merger, future
earnings, and future results of operations. These statements
involve risks and uncertainties, including, but not limited to,
insufficient cash from operations, a decline in demand for refined
petroleum products, a decline in demand for tank vessel capacity,
the effects of the recent economic recession, intense competition
in the domestic tank barge industry, the occurrence of marine
accidents or other hazards, the loss of any of the Company’s
largest customers, fluctuations in charter rates, failure to comply
with the Jones Act, modification or elimination of the Jones Act
and adverse developments in the marine transportation business and
other factors detailed in the Company’s Annual Report on Form 10-K
and other filings with the Securities and Exchange Commission. If
one or more of these risks or uncertainties materialize (or the
consequences of such a development changes), or should underlying
assumptions prove incorrect, actual outcomes may vary materially
from those forecasted or expected. The Company disclaims any
intention or obligation to update publicly or revise such
statements, whether as a result of new information, future events
or otherwise.
K-SEA TRANSPORTATION PARTNERS L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit
data)
Three months ended
Nine months ended March 31, March 31,
2011 2010
2011 2010
Voyage revenue $ 59,325 $ 56,177 $ 187,584 $ 187,061 Other revenue
3,979 3,406
11,105 11,710
Total revenues 63,304 59,583 198,689 198,771 Voyage
expenses 13,180 11,872 35,988 33,584 Vessel operating expenses
30,003 31,917 96,596 102,364 General and administrative expenses
7,149 6,702 20,258 20,223 Depreciation and amortization 12,144
14,389 37,714 46,194 Loss on acquisition of land and building - - -
1,697
Net gain on sale of assets
(2,368 ) - (8,803 ) (36 ) Other operating expenses 2,869
- 4,027 -
Total operating expenses 62,977
64,880 185,780
204,026 Operating income (loss) 327
(5,297 ) 12,909 (5,255 )
Interest expense, net 4,750 6,283 18,051 15,800 Other expense
(income), net 1,313 2 1,284
(527 )
Income (loss) before income
taxes
(5,736 ) (11,582 ) (6,426 ) (20,528 ) Provision for (benefit of)
income taxes 55 (274 ) 432
24
Net income (loss) $ (5,791 ) $ (11,308 ) $
(6,858 ) $ (20,552 ) Less net income attributable to
non-controlling interests 129 98
372 297
Net income (loss) attributable to
K-Sea unitholders $ (5,920 ) $
(11,406 ) $ (7,230 ) $
(20,849 ) General partner's interest in
net income (loss) $ (99 ) $ (120 ) $ (156 ) $ (219 ) Limited
partners' interest in:
Net income (loss) - Preferred unit
holders
$ 3,515 $ - $ 7,652 $ -
-
Common unit holders
$ (9,336 ) $ (11,286 ) $ (14,726 ) $ (20,630 )
Net income (loss) per unit - basic
$ (0.49 ) $ (0.59 ) $ (0.77 ) $ (1.10 )
-
diluted
$ (0.49 ) $ (0.59 ) $ (0.77 ) $ (1.10 )
Weighted average common units outstanding
- basic
19,195 19,191 19,193 18,674
-
diluted
19,195 19,191 19,193 18,674
Supplemental Operating Statistics Three months ended
Nine months ended March 31, March 31,
2011 2010
2011 2010 Local Trade:
Average daily rate (1) $ 7,394 $ 7,280 $ 7,467 $ 7,290 Net
utilization (2) 70 % 73 % 73 % 77 % Coastwise Trade: Average
daily rate $ 15,801 $ 13,440 $ 14,990 $ 13,033 Net utilization 76 %
71 % 82 % 80 % Total Fleet Average daily rate $ 12,973 $
11,259 $ 12,543 $ 11,100 Net utilization 74 % 71 % 79 % 79 %
(1)
Average daily rate is equal to the net
voyage revenue earned by a group of tank vessels during the period,
divided by the number of days worked by that group of tank vessels
during the period.
(2)
Net utilization is equal to the total
number of days worked by a group of tank vessels during the period,
divided by total calendar days for that group of tank vessels
during the period.
K-SEA TRANSPORTATION PARTNERS L.P.
Reconciliation of Unaudited Non-GAAP
Financial Measures to GAAP Measures (in thousands)
Earnings before Interest, Taxes, Depreciation and
Amortization (EBITDA) Three months ended
Nine months ended March 31, March 31,
2011 2010
2011 2010 Net income
(loss) $ (5,791 ) $ (11,308 ) $ (6,858 ) $ (20,552 ) Adjustments to
reconcile net income (loss) to EBITDA : Depreciation and
amortization 12,144 14,389 37,714 46,194 Interest expense, net
4,750 6,283 18,051 15,800 Provision for (benefit of) income taxes
55 (274 ) 432 24
EBITDA
$ 11,158
$ 9,090 $
49,339 $ 41,466
Loss on acquisition of land and building - - - 1,697
Net gain on sale of assets
(2,368 ) - (8,803 ) - Lease termination costs - - 1,158 -
Write-off of ownership interest in mutual
insurance association
1,119 - 1,119 - Write-off of fees related to debt restructuring
1,325 - 1,325 - Merger related expenses
1,750
- 1,750
- Adjusted EBITDA $ 12,984
$ 9,090 $ 45,888 $ 43,163
Adjusted Operating Income Three
months ended Nine months ended March 31, March
31, 2011 2010
2011 2010 Operating
income $ 327 $ (5,297 ) $ 12,909 $ (5,255 ) Asset impairment
charges - 1,703 - 7,556 Loss on acquisition of land and building -
- - 1,697
Net gain on sale of assets
(2,368 ) - (8,803 ) - Lease termination costs - - 1,158 -
Write-off of ownership interest in mutual
insurance association
1,119 - 1,119 - Merger related expenses
1,750
- 1,750
- Adjusted operating
income $ 828 $ (3,594 ) $ 8,133 $ 3,998
K-SEA TRANSPORTATION PARTNERS L.P.
CONSOLIDATED CONDENSED BALANCE SHEETS (in
thousands) March 31, June 30,
2011 2010
Assets Current assets: Cash and cash equivalents $
875 $ 1,896 Accounts receivable, net 27,049 33,206 Prepaid expenses
and other current assets
21,683
20,506 Total current assets 49,607 55,608
Vessels and equipment, net 575,694 604,197 Construction in
progress - 730 Other assets 33,537 36,096
Total
assets $ 658,838 $ 696,631
Liabilities and Partners'
Capital Current liabilities: Current portion of
long-term debt $ 16,601 $ 19,024 Accounts payable and accrued
expenses 48,732 49,327 Deferred revenue
7,789
12,005 Total current liabilities 73,122
80,356 Term loans 195,035 219,461 Credit line borrowings
45,300 144,450 Other liabilities 10,342 13,869 Deferred income
taxes
3,813 3,486 Total
liabilities 327,612
461,622 Commitments and contingencies
Partners' Capital 331,226 235,009
Total liabilities and partners'
capital
$ 658,838 $ 696,631
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