April 29, 2005
Maritrans reports record revenues
Maritrans Inc. (NYSE:TUG) has announced record first quarter revenues and declared its quarterly dividend.
CEO Jonathan Whitworth commented, "The first quarter was a significant one for the Company. We achieved the highest quarterly revenue in Maritrans' history, highlighting the strong demand for our vessels and the earnings power of our fleet. Our ability to post record results is directly related to the company's on-going initiatives to optimize its fleet deployment strategy and build an OPA compliant fleet that meets stringent operational standards. We remain committed to focusing on these important areas while implementing our previously announced growth strategy for the benefit of our customers, stockholders and employees."
Net income for the quarter ended March 31, 2005 was $3.7 million, or $0.43 diluted earnings per share, on revenues of $43.5 million. This compares with net income of $1.8 million, or $0.21 diluted earnings per share, on revenues of $34.7 million for the quarter ended March 31, 2004. Results included a $2.4 million charge related to the early retirement of the company's former Executive Chairman of the Board, Stephen A. Van Dyck, equivalent to approximately $0.18, net of tax, diluted earnings per share. Results for the quarter also included a $0.6 million gain, equivalent to $0.05, net of tax, diluted earnings per share, resulting from the sale of a vessel that was not part of the Company's 15 unit core fleet. Operating income for the quarter ended March 31, 2005 was $6.3 million compared to $3.2 million for the quarter ended March 31, 2004.
The increase in operating income for the quarter ended March 31, 2005 was due to strength in both of the company's primary markets. High refinery utilization by Delaware River refinery customers again resulted in strong demand for the company's crude-oil lightering services. During the quarter, the Maritrans once again lightered incremental barrels for a customer who previously used chartered tonnage for its crude delivery requirements. Maritrans reports that it also continued to earn stronger average daily rates on vessels than it had in the clean product spot market, reflecting the company's higher proportion of vessels traded in the spot market as compared to prior periods.
On a Time Charter Equivalent basis, TCE revenue was $34.6 million for the quarter ended March 31, 2005 compared to $28.7 million for the quarter ended March 31, 2004.
Utilization for the first quarter of 2005 was 81.8 percent compared to 80.0mpercent in the first quarter of 2004. Operating expenses increased to $37.9 million in the quarter ended March 31, 2005 from $31.5 million in the quarter ended March 31, 2004, primarily because of increases in operations and general and administrative costs. Operations costs increased due to significantly higher fuel costs compared to first quarter of 2004 and higher port charges incurred with more West Cost moves. Crew expenses, shoreside support expenses and the cost of insurance also increased operations costs. General and administrative costs increased as a result of expenses related to the retirement of the company's former Executive Chairman of the Board, increased audit fees primarily related to additional services necessary to comply with Section 404 of the Sarbanes-Oxley Act of 2002, additional litigation expenses and higher personnel related expenses.
FLEET AND MARKET REPORT
Maritrans owns and operates a fleet of 15 units consisting of four oil tankers and 11 oceangoing married tug/barge units. While historically the company has had a majority of its fleet deployed on contract business, in the second half of 2004 the company made a decision to deploy more of its fleet in the spot market in an effort to take advantage of the higher spot rate environment. The company intends to maintain a similar spot market exposure in the remainder of 2005 to that of the first quarter of 2005.
The stronger spot market in the first quarter of 2005 was driven primarily by the combination of increased demand for the Company's transportation services and reduced supply of Jones Act vessels. During the first quarter, reduced imports, increased activity on the West Coast and growth in the economy all increased demand for the Company's services. In addition, two competitor Jones Act vessels in the 160,000 to 400,000 barrel size range either reached their OPA retirement dates or were scrapped in 2004, which resulted in a decrease in supply during the first quarter of 2005.
Also during the first quarter of 2005, the company sold a vessel, the Port Everglades, that was no longer considered to be a part of the company's core operations, which led to a gain of $0.6 million. The Port Everglades was a tugboat that had been idle and was not being utilized as part of the Company's petroleum transportation or lightering services and was not included in the company's core fleet of 15 units that it owns and operates.
Mr. Whitworth added, "Maritrans' focus on achieving an optimal balance between spot and contract coverage continued to serve the company well during the first quarter. By maintaining our spot exposure at approximately 35 percent, the company remained the largest spot owner in the Jones Act trade in its vessel size range, enabling the Company to earn significantly higher day rates for the quarter. We believe our strong position in the U.S. spot market bodes well for the company to further take advantage of a rate environment that remains robust. As we did with the recently signed Sunoco contract, the company will seek to complement its spot market leadership and look for opportunities to renew contracts at higher rates. The company's deployment decisions will continue to be driven by the goal of realizing the full earnings potential of our fleet and meeting our customers' needs."
DOUBLE-HULL REBUILDING PROGRAM
Since 1998, Maritrans has been actively engaged in a double-hull rebuilding program aimed at ensuring that the Company's Jones Act fleet is compliant with the U.S. Oil Pollution Act of 1990 ("OPA"). Maritrans says that its patented process enables it to convert its vessels for significantly less cost than building new vessels. To date, Maritrans has successfully rebuilt five of its original nine single-hull barges to double-hull structures. At the end of 2004, approximately 64 percent of theMaritrans fleet capacity was double-hulled, which compares to a Jones Act fleet average of 45 percent.
During the first quarter of 2005, the company made further progress on its rebuilding program. It continued the rebuilding of the M209 (formerly the OCEAN 193), which is expected to cost approximately $27 million, of which $21.1 million had been paid to the shipyard contractor for the project through the first quarter of 2005. The rebuild will include the insertion of a midbody, which will increase its cargo-carrying capacity by approximately 30,000 barrels. The barge is expected to re-enter the fleet in the second quarter of 2005. At that time the company will have approximately 70% of its fleet's capacity double-hulled. Simultaneously, the Company continued to make progress refurbishing the tugboat ENTERPRISE which currently works with the M209. The refurbishment is also expected to be completed in the second quarter of 2005, at a cost of approximately $4.5 million, of which $3.0 million was incurred through the first quarter. Maritrans intends to convert its remaining single-hull barges and continues to evaluate converting its two single-hull tank ships into double-hull vessels. Maritrans estimates that the total cost of its barge rebuilding program will exceed $200 million, of which $112 million had been spent through March 31, 2005.
Mr. Whitworth concluded, "We look forward to the redelivery of our sixth double-hull vessel in the second quarter, which will further increase our double-hull leadership and strengthen our position for taking advantage of strong industry fundamentals. Building on the recent success we have had increasing our spot coverage and re-entering an important geographic market, we will continue to look for opportunities to accelerate our earnings growth in both the near-term and long-term. In pursuing this crucial objective, we will maintain focused on seeking profitable opportunities that meet our strict requirements and positions the company to further solidify its leadership in the Jones Act industry."
Maritrans' Board of Directors declared a quarterly dividend of $0.11 per share, payable on June 1, 2005, to shareholders of record on May 18, 2005. The ex-dividend date will be May 16, 2005.