April 29 2010
Red ink at K-Sea
Coastwise tank barge operator K-Sea Transportation Partners L.P. (NYSE:KSP - News) today reported an operating loss of $5.3 million for the quarter ended March 31, 2010-- a decrease of $14.2 million, compared to $8.9 million of operating income for the same quarter in 2009. EBITDA decreased by $13.3 million, or 59 percent, to $9.1 million for the period compared to $22.4 million for the three months ended March 31, 2009.
The company believes it currently is in full compliance with all provisions of its debt and lease agreements and expects to pay when due all future debt and lease obligations. But it warns that it "expects it will not be in compliance with all its financial covenants in certain of these agreements as of the end of its current fiscal year ending June 30, 2010 and has commenced discussions toward amending these covenants."
President and CEO Timothy J. Casey commented, "The decline in U.S. refinery utilization we reported in our late-January press release continued through February. As a result, our third fiscal quarter vessel utilization fell to 71 percent, a level not seen by us in 20 years, and versus 80 percent in the immediately preceding quarter and 84 percent in the comparable quarter last year. With a significantly high drydocking quarter and the fact that our third fiscal quarter generally experiences a winter slowdown in the Alaskan and Great Lakes markets, the impact on our EBITDA was exacerbated."
"As we stated in January," said Mr. Casey, "we have continued to reduce costs, streamline operations, rationalize assets, and use available capacity to enter adjacent markets, and we are achieving tangible progress on all fronts. We have reached agreements in principle to sell several assets and are in various stages of negotiation on several additional asset sales. We are working through the unfortunate confluence of a severe drop in demand at a time when vessel capacity is coming off a peak caused by a combination of new, double-hull deliveries and the slow phase-out of single-hull equipment. As we have mentioned several times over the past six months, single-hull vessels are all but economically obsolete and we believe should be eliminated from the market by the end of 2011, regardless of their mandated retirement age. As demand for our services rebounds, albeit slowly initially, and the amount of available industry vessel capacity comes into balance, a more normal and profitable operating environment should prevail. We foresee this taking place over the next 12-18 months."