EDISON, NJ (the "Partnership") today reported its results for
the fourth quarter and year ended December 31, 2007.
The Partnership had voyage revenue of $43.5 million, operating
income of $4.9 million and a net loss of $1.4 million for the three
months ended December 31, 2007 compared to voyage revenue of $36.8
million, operating income of $3.3 million and a net loss of $0.9
million for the same period in 2006.
Earnings before interest, taxes and depreciation and
amortization ("EBITDA"), a non-GAAP measure explained in greater
detail below under "Use of Non-GAAP Financial Information," was
$14.7 million for the three months ended December 31, 2007 compared
to $11.7 million for the comparable period in 2006.
The Partnership had voyage revenue of $176.7 million, operating
income of $25.4 million and net income of $4.8 million for the year
ended December 31, 2007 compared to voyage revenue of $150.1
million, operating income of $18.3 million and net income of $5.9
million for the year ended December 31, 2006.
EBITDA was $63.8 million for 2007 compared to $49.5 million for
2006.
As previously announced, the Partnership declared a distribution
of $0.45 per common unit in respect of the fourth quarter, or $1.80
per common unit for full year 2007. In addition, the Partnership
announced that United States Shipping Master LLC, the holder of the
Partnership's subordinated units and general partner units,
requested that the Partnership not pay the fourth quarter
distribution on the subordinated units and general partner units
and instead retain the cash for working capital purposes; to
increase reserves available for payment of future quarterly
distributions on its common units; for the completion of its
capital construction program; and to strengthen coverage with
respect to the Partnership's financial covenants under its credit
facility in future periods.
Paul Gridley, CEO of U.S. Shipping Partners, said:
"Operationally, the Partnership had a good fourth quarter and year.
We have taken steps to buttress our liquidity in light of the
uncertain economic and market conditions we and our industry face.
As a result of our projected utilization and charter rates for our
fleet in 2008 (including the expected on-time and on-budget
delivery in 2008 of our two ATBs currently under construction),
along with the cash we will preserve by not paying distributions on
our subordinated and general partner units, we are confident that
we will have sufficient liquidity in 2008 to continue to pay the
minimum $0.45 quarterly distribution on our common units and be in
compliance with all financial covenants under our credit
facilities."
Three Months Ended December 31, 2007
For the three months ended December 31, 2007, voyage revenues
were $43.5 million, an increase of $6.7 million from $36.8 million
for the same period in 2006, despite the fact that the ITB
Baltimore was out of service for the 25 days during the quarter
that were required to complete the repair of damages it sustained
during Hurricane Dean while in the shipyard after completing its
regularly scheduled drydocking. The increase in voyage revenues and
operating income was due primarily to the addition of the ATB
Freeport, which was placed in service in July 2007 and contributed
$4.5 million in voyage revenues in the fourth quarter of 2007.
Additionally, an increase in charter rates and the number of days
worked (due to a lower number of drydocks in 2007), contributed an
additional $2.2 million of voyage revenues in the three months
ended December 31, 2007, compared to the same period in 2006. On
December 14, 2007, the ITB Philadelphia commenced a single voyage
to transport grain from the U.S. to Africa for various humanitarian
organizations. In addition to transporting the grain to the east
coast of Africa, the Partnership is required to bag all of the
grain following discharge and transport a portion of the grain via
truck to points inland. In accordance with US GAAP, the Partnership
will not recognize voyage revenue or voyage expenses on this voyage
until the grain is delivered to its final destination in February
2008. At this time the grain has been discharged from the vessel
and is being transported to its final destination. At December 31,
2007, total deferred costs for this voyage were approximately $1.4
million.
During the three months ended December 31, 2007, voyage expenses
increased $2.0 million, depreciation and amortization expense
increased $1.6 million and vessel operating expenses increased $1.5
million. The addition of the ATB Freeport accounted for additional
voyage expenses of $1.2 million and an increase in fuel charges for
the remaining fleet increased voyage expenses by $1.1 million
(although our chartering contracts generally protect us from
increased fuel costs); these increases were offset by lower port
charges and commission expenses aggregating $0.3 million. The
increase in depreciation and amortization expense is primarily due
to additional amortization of drydock expenditures of $1.2 million,
principally resulting from drydocks completed in 2006 and early
2007, and $0.8 million attributable to the addition of the ATB
Freeport. These increases to depreciation and amortization expense
were offset by a decrease of $0.4 million resulting from an
adjustment to the values assigned to the vessels in the original
purchase of the ITBs due to net payments made to us under the Hess
Support Agreement, which were considered an adjustment to the
original purchase price. The increase in vessel operating expenses
is primarily due to the addition of the ATB Freeport, which
increased vessel operating expenses by $1.4 million. Additionally,
repairs and maintenance expense and crew wages and benefits each
increased by $0.6 million. The increase in crew wages and benefits
resulted from a new collective bargaining agreement with the union
that covers the officers of the Partnership's vessels. These
increases were offset by a $1.1 million net decrease in all other
vessel operating expenses.
General and administrative expenses were unchanged in the three
months ended December 31, 2007 compared to the same period in 2006.
Employee compensation decreased by $0.2 million for the three
months ended December 31, 2007 compared to the same period in 2006
due to a reduction in incentive compensation. Professional fees,
including those incurred by the joint venture entered into by the
Partnership in 2006 to construct new product tankers (the "Joint
Venture"), increased by $0.2 million. Interest expense increased by
$0.9 million for the three months ended December 31, 2007 compared
to the same period in 2006 due primarily to increased borrowings.
Interest income earned by the Partnership decreased by $1.2
million, primarily due to reduced balances in the Partnership's
restricted cash accounts as funds were released in connection with
the construction of the Articulated Tug Barges (the "ATBs") and the
Joint Venture tankers. The restricted cash accounts consist of two
escrow accounts which were established as part of the Partnership's
2006 debt and equity financings to fund the construction of three
new ATBs and the Partnership's remaining committed equity
contributions to the Joint Venture. Interest income will continue
to decrease as funds in these escrow accounts are used to fund the
construction of the three new ATBs and the Partnership's equity
contributions to the Joint Venture. The Joint Venture also recorded
$0.5 million of losses on derivative financial instruments during
the three months ended December 31, 2007.
The net loss per basic and diluted limited partnership unit for
the three months ended December 31, 2007 was $0.07 compared to a
net loss of $0.05 for the three months ended December 31, 2006.
EBITDA increased by $3.0 million to $14.7 million for the three
months ended December 31, 2007 from $11.7 million for the
comparable period in 2006. The increase was primarily due to the
increase in voyage revenues of $6.7 million, offset by increases in
vessel operating expenses and voyage expenses of $1.5 million and
$2.0 million, respectively. EBITDA for the 2007 period reflects a
$0.5 million loss on derivative financial instruments recorded by
the Joint Venture, partially offset by the $0.4 million minority
interest in the loss of the Joint Venture. The EBITDA for the
comparable 2006 period reflects a $0.1 million increase due to
recording the minority interest in the loss of the Joint Venture.
EBITDA is a non-GAAP measure explained in greater detail below
under "Use of Non-GAAP Financial Information."
Year Ended December 31, 2007
The financial results for 2007 were impacted favorably by higher
net voyage revenues of $18.3 million compared to 2006 and by a $3.5
million contract settlement received by the Partnership and
included in "Other Income" during 2007. The increase in net voyage
revenues in 2007 was principally the result of the Sea Venture
being in service for a full year compared to six months in 2006,
the addition of the ATB Freeport to the fleet in July 2007, as well
as increased charter rates and days worked due to fewer drydocks in
2007, partially offset by increased voyage expenses due to higher
fuel prices. These favorable items were partially offset by an
increase in interest expense of $14.2 million due primarily to
increases in borrowings to finance the Partnership's newbuild
program, an increase in depreciation and amortization of $6.5
million due primarily to depreciation related to the timing of
drydocks and the addition of the ATB Freeport to the Partnership's
fleet in July 2007, higher vessel operating expenses of $6.2
million relating primarily to the inclusion of a full year of
operations for the Sea Venture and the addition of the ATB
Freeport. Net income per basic and diluted limited partnership unit
for was $0.26 for 2007 compared to $0.37 for 2006.
EBITDA increased by $14.3 million to $63.8 million for 2007 from
$49.5 million for 2006. The increase was primarily due to the
increase in voyage revenues of $26.6 million, offset by increases
in vessel operating expenses, voyage expenses and general and
administrative expenses of $6.2 million, $8.3 million and $2.0
million, respectively. EBITDA for the 2007 period reflects a
contract settlement of $3.5 million, a $0.2 million gain on
derivative financial instruments recorded and the recording of the
$0.4 million minority interest in the loss of the Joint Venture.
EBITDA in the 2006 period was negatively impacted by a
non-recurring $2.4 million loss on debt extinguishment, offset by a
$1.9 million gain on derivative financial instruments and the
recording of the $0.4 million minority interest in the loss of the
Joint Venture. EBITDA is a non-GAAP measure explained in greater
detail below under "Use of Non-GAAP Financial Information."
Distributable Cash Flow
Distributable cash flow ("DCF") for the year ended December 31,
2007 was $42.0 million, or 1.39 times the cash distribution of
$30.2 million actually declared in respect of the year. For the
quarter ended December 31, 2007, DCF was $8.2 million, or 1.62
times the cash distribution of $5.1 million declared in respect of
the period. DCF for the year and fourth quarter would have been
1.26 and 0.98 times, respectively, the distributions that would
have been paid if a distribution had been made on the subordinated
units in respect of the fourth quarter of 2007. As permitted by the
Partnership agreement, the calculation of DCF includes two addbacks
for financing costs incurred relative to the Partnership's
construction projects. The distribution addback represents the
distributions on units issued to finance the funding of the
Partnership's commitment to the Joint Venture entered into by the
Partnership in 2006. The additional interest adjustment is
attributable to interest expense incurred on borrowings used to
fund the construction of three ATBs. DCF varies from quarter to
quarter based on the timing of drydocks. DCF is a non-GAAP
financial measure explained in greater detail below under "Use of
Non-GAAP Financial Information."
Financial Position, Liquidity and Other
As previously noted, the Partnership's ITB fleet is currently
its largest source of voyage revenue and EBITDA. As such, the
expiration of the Hess Support Agreement in September 2007, under
which the Partnership was assured minimum charter rates for its ITB
fleet, the fact that more of the ITBs are expected to operate in
the spot market rather than under long-term charters, increased
volatility in rates in the spot market due to an increasing supply
of vessels, and higher operating expenses of its ITBs due to their
age and the new union contracts will negatively impact the
operating income and EBITDA provided by the ITBs over the next
several years.
Based on the Partnership's projected utilization and charter
rates for its fleet in 2008 in light of expected increases in the
number of vessels operating in the spot market, the projected
delivery of two articulated tug barges currently under construction
on-time and on-budget in the second half of 2008, and current
economic and market conditions, management currently anticipates
that in 2008 the Partnership will continue to pay the minimum $0.45
quarterly distribution on the common units and will remain in
compliance with all financial covenants under its credit
facility.
With regard to the fifth ATB in the Partnership's ATB newbuild
series, the Partnership has secured from Manitowoc Marine Group an
extension of its option to cancel the contract for the construction
of the fifth barge until June 30, 2008. Additionally, the
Partnership has negotiated an amendment of its contract with
Eastern Shipbuilding Group, Inc. to extend the option to construct
the fifth tug of the series until June 30, 2008 as well.
Earnings Conference Call
We have scheduled a conference call for Monday, February 11,
2008 at 8:30 am Eastern time, to review the Partnership's fourth
quarter results. Dial-in information for this call is
1-866-713-8395 (Domestic) and 1-617-597-5309 (International). The
participant passcode is 14934724. The conference call can also be
accessed by webcast, which will be available at www.usslp.com.
About U.S. Shipping Partners L.P.
U.S. Shipping Partners L.P. is a leading provider of long-haul
marine transportation services, principally for refined petroleum
products, in the U.S. domestic "coastwise" trade. U.S. Shipping
Partners L.P. is also involved in the coastwise transportation of
petrochemical and commodity chemical products. The Partnership's
existing fleet consists of eleven tank vessels: six integrated tug
barge units; one product tanker; three chemical parcel tankers and
one ATB that was delivered in June 2007 and entered service in July
2007. The Partnership has embarked on a capital construction
program to build additional ATBs and, through a joint venture,
additional tank vessels that upon completion will result in the
Partnership having one of the most modern fleets in service. For
additional information about U.S. Shipping Partners L.P., please
visit www.usslp.com.
Use of Non-GAAP Financial Information
U.S. Shipping Partners L.P. reports its financial results in
accordance with generally accepted accounting principles. However,
we also present certain non-GAAP financial measures, such as EBITDA
and distributable cash flow, which we use in our business.
EBITDA is used as a supplemental financial measure by management
and by external users (including our lenders) of our financial
statements to assess (a) the financial performance of our assets,
and our ability to generate cash sufficient to pay interest on our
indebtedness and make distributions to partners, (b) our operating
performance and return on invested capital as compared to other
companies in our industry, and (c) our compliance with certain
financial covenants in our debt agreements. The calculation of
EBITDA is detailed in the table below. Distributable cash flow is
another non-GAAP financial measure we use in our business to
indicate our ability to generate cash and pay distributions to
partners. The calculation of distributable cash flow is detailed in
the table below. Neither EBITDA nor distributable cash flow should
be considered an alternative to net income, operating income, cash
flow from operating activities, or any other measure of financial
performance or liquidity under GAAP. EBITDA and distributable cash
flow, as presented herein, may not be comparable to similarly
titled measures of other companies.
The Partnership has presented in the tables below a
reconciliation of each of these measures to the most directly
comparable GAAP measurement.
This press release may include "forward-looking statements" as
defined by the Securities and Exchange Commission. All statements,
other than statements of historical facts, included in this press
release that address activities, events or developments that the
Partnership expects, believes or anticipates will or may occur in
the future are forward-looking statements. These statements are
based on certain assumptions made by the Partnership based on its
experience and perception of historical trends, current conditions,
expected future developments and other factors it believes are
appropriate in the circumstances. Such statements are subject to a
number of assumptions, risks and uncertainties, many of which are
beyond the control of the Partnership, which may cause our actual
results to differ materially from those implied or expressed by the
forward-looking statements. Such assumptions, risks and
uncertainties are discussed in detail in the Partnership's filings
with the SEC and include, among other things, future charter rates,
demand in the spot market for vessels and timely and on budget
delivery in the second half of 2008 of two ATBs currently under
construction.
U.S. Shipping Partners L.P.
Consolidated Statements of Operations
(in thousands, except for per unit data) (unaudited)
For the Three Months Ended For the Year Ended
December 31, December 31,
---------------------- ----------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
Voyage revenue $ 43,467 $ 36,792 $ 176,729 $ 150,133
---------- ---------- ---------- ----------
Vessel operating expenses 16,569 15,032 65,656 59,493
% of voyage revenue 38.1% 40.9% 37.2% 39.6%
Voyage expenses 8,315 6,353 35,824 27,506
% of voyage revenue 19.1% 17.3% 20.3% 18.3%
General and administrative
expenses 3,840 3,815 15,533 13,539
% of voyage revenue 8.8% 10.4% 8.8% 9.0%
Depreciation and
amortization 9,862 8,271 37,795 31,305
Other expense (income) - - (3,486) -
---------- ---------- ---------- ----------
Total operating
expenses, net 38,586 33,471 151,322 131,843
---------- ---------- ---------- ----------
Operating income 4,881 3,321 25,407 18,290
% of voyage revenue 11.2% 9.0% 14.4% 12.2%
Interest expense 8,461 7,573 30,881 16,634
Interest income (1,913) (3,076) (9,631) (5,413)
Loss on debt extinguishment - - - 2,451
Loss (gain) on derivative
financial instruments 470 - (199) (1,913)
---------- ---------- ---------- ----------
(Loss) income before
income taxes and
minority interest (2,137) (1,176) 4,356 6,531
(Benefit) provision for
income taxes (352) (131) (94) 1,077
---------- ---------- ---------- ----------
(Loss) income before
minority interest (1,785) (1,045) 4,450 5,454
Minority interest in Joint
Venture loss 422 120 366 421
---------- ---------- ---------- ----------
Net (loss) income $ (1,363) $ (925) $ 4,816 $ 5,875
========== ========== ========== ==========
General partner's interest
in net (loss) income $ (27) $ (18) $ 96 $ 118
Limited partners' interest in:
Net (loss) income $ (1,336) $ (907) $ 4,720 $ 5,757
Net (loss) income per
unit - basic and diluted $ (0.07) $ (0.05) $ 0.26 $ 0.37
Weighted average units
outstanding - basic 18,234 18,234 18,234 15,586
Weighted average units
outstanding - diluted 18,234 18,234 18,236 15,586
U.S. Shipping Partners L.P.
Supplemental Operating Statistics
For the Three Months Ended For the Year Ended
December 31, December 31,
---------------------- ----------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
Total fleet
Vessel days 1,012 920 3,834 3,490
Days worked (1) 899 816 3,585 3,233
Drydocking days 79 98 146 219
Net utilization (1) (2) 89% 89% 94% 93%
Average time charter
equivalent rate (3) (4) $ 39,906 $ 37,277 $ 39,504 $ 37,928
(1) Does not include 25 days and 61 days of unscheduled off-hire in the
fourth quarter of 2007 and full year 2007 that were required to
repair damages the ITB Baltimore sustained during Hurricane Dean
while in the shipyard after completing its regularly scheduled
drydocking. As a result days worked is reduced by these amounts and
net utilization is negatively affected.
(2) Net utilization is equal to the total number of days worked by our
vessels during a defined period, divided by total vessel days
(number of vessels x calendar days) for that period.
(3) Average time charter equivalent rate is equal to net voyage revenue
earned by our vessels during a defined period, divided by the total
number of actual days worked by those vessels during that period.
Net voyage revenue is calculated by subtracting voyage expenses from
voyage revenue.
(4) The 2007 calculations of average time charter equivalent rate do not
include approximately eighteen days worked by the ITB Philadelphia
for which no net voyage revenue was recorded in 2007.
U.S. Shipping Partners L.P.
Reconciliation of Non-GAAP Financial Measures to GAAP Measures
(in thousands) (unaudited)
Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA)
For the Three Months Ended For the Year Ended
December 31, December 31,
---------------------- ----------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
Net (loss) income $ (1,363) $ (925) $ 4,816 $ 5,875
Adjustments to reconcile net
(loss) income to EBITDA:
Depreciation and
amortization 9,862 8,271 37,795 31,305
Interest expense, net 6,548 4,497 21,250 11,221
(Benefit) provision for
income taxes (352) (131) (94) 1,077
---------- ---------- ---------- -----------
EBITDA $ 14,695 $ 11,712 $ 63,767 $ 49,478
========== ========== ========== ===========
U.S. Shipping Partners L.P.
Distributable Cash Flow (1)
(in thousands) (unaudited)
For the For the
Three Months Year
Ended Ended
December 31, 2007 December 31, 2007
----------------- -----------------
Net (loss) income $ (1,363) $ 4,816
Adjustments to reconcile net
(loss) income to
distributable cash flow:
Add: Depreciation and amortization (2) 10,328 39,517
Distribution addback (3) 1,996 8,103
Additional interest adjustment (3) 2,581 13,840
Benefit for income taxes (352) (94)
Partnership interest in Joint
Venture loss (4) 281 244
Less: Estimated maintenance capital
expenditures (5) 5,225 20,900
Payments to Hess under support
agreement - 3,298
Gain on derivative financial
instruments - 173
Income taxes paid - 9
----------------- -----------------
Distributable cash flow $ 8,246 $ 42,046
================= =================
Expected cash distribution in
respect of the period (6) $ 8,374 $ 33,490
Distribution coverage 0.98 1.26
Actual cash distribution in
respect of the period $ 5,102 $ 30,218
Distribution coverage 1.62 1.39
(1) Distributable Cash Flow provides additional information for
evaluating our ability to pay the minimum quarterly distributions
on the outstanding common and subordinated units and the 2% general
partner interest.
(2) Includes amortization of deferred financing costs, which is included
in interest expense in the Consolidated Statements of Operations.
(3) Our partnership agreement allows us to addback interest paid on debt
incurred and distributions paid on equity issued to finance the
construction of a capital improvement or replacement asset and paid
during the period beginning on the date the Partnership enters into
a binding obligation to commence construction of such capital
improvement and ending on the date the capital improvement is placed
in service, abandoned, or sold.
(4) The income and expenses incurred by the Joint Venture are excluded
from the Partnership's distributable cash flow.
(5) Our partnership agreement requires us to subtract an estimate of the
average annual maintenance capital expenditures necessary to
maintain the operating capacity of our capital assets over the long
term as opposed to the actual amounts spent. This estimate was
$20.9 million for 2007.
(6) Represents the total distributions that would have been paid if
distributions were paid on both the subordinated units and the 2%
general partner interest in the fourth quarter of 2007.
Contact Information: Albert Bergeron Chief Financial Officer
U.S. Shipping Partners L.P. 1-866-467-2400
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