January 31, 2005
K-Sea reports strong second quarter
K-Sea Transportation Partners L.P. (NYSE: KSP)) reports record results of operations for its fiscal 2005 second quarter ended December 31, 2004. The company also announced that its distribution to unitholders in respect of the second quarter will be $0.54 per unit, or $2.16 per unit annualized. The distribution will be payable on February 14, 2005 to unitholders of record on February 8, 2005.
For the three months ended December 31, 2004, the company reported operating income of $2.9 million, an increase of $0.7 million, or 32 percent, compared to $2.2 million of operating income for the three months ended December 31, 2003.
Due to seasonal factors, the second fiscal quarter is the slowest of the year in terms of earnings. The company took advantage of this slower period to advance the scheduled required drydockings for two larger vessels, one of which prepared the vessel for a new three-year charter that began this month.
Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 21 percent to $7.9 million in the fiscal 2005 second quarter, compared to $6.5 million in the fiscal 2004 second quarter. This $1.4 million increase in EBITDA resulted primarily from the operation of a newbuild tank barge, the DBL 102, that was delivered in January 2004, the acquisition of the DBL 140 in January 2004, and the delivery of the DBL 105 in May 2004.
Higher average daily rates in K-Sea's coastwise trade, resulting from continued strong demand for petroleum products, increasing oil prices, and a higher proportion of larger vessels, were partially offset by lower vessel utilization in the company's local trade resulting primarily from an increase in unscheduled repair time for one vessel.
EBITDA was also reduced by $0.3 million due to a longer than anticipated break-in period for a recently delivered tank barge.
The fiscal 2005 second quarter also reflected increased general and administrative expenses of $0.3 million due to additional professional fees, insurance and other costs incurred in connection with being a public company that were not incurred in the second quarter of fiscal 2004, which was the last quarter before K-Sea's January 2004 initial public offering.
Net income for the three months ended December 31, 2004 increased to $1.4 million, from $0.2 million for the three months ended December 31, 2003, due to the improvement in operating income and a reduction of $0.6 million in net interest expense resulting from the repayment of higher cost debt in connection with the initial public offering. Net income per fully diluted limited partner unit in the second fiscal quarter of 2005 was $0.16 per unit.
For the six months ended December 31, 2004, the company reported operating income of $7.4 million, an increase of $1.5 million, or 26 percent, compared to $5.9 million of operating income for the six months ended December 31, 2003.
EBITDA increased by 24% to $17.8 million in the fiscal 2005 first half compared to $14.3 million in the fiscal 2004 first half, due mainly to the additional larger vessels described above, which also positively impacted the first half fiscal 2005 average daily rates. The six months ended December 31, 2004 reflected increased general and administrative expenses of $0.8 million, including $0.7 million of additional professional fees, insurance and other costs incurred in connection with being a public company that were not incurred in the comparable fiscal 2004 period.
Net income for the six months ended December 31, 2004 increased to $4.5 million, from $1.5 million for the six months ended December 31, 2003, due to the improvement in operating income and a reduction of $1.6 million in net interest expense. Net income per fully diluted limited partner unit for the first six months of fiscal 2005 was $0.53 per unit.
On December 8, 2004, the company announced the acquisition of ten tank barges and seven tugboats from affiliates of Bay Gulf Trading of Norfolk, Virginia.
The total purchase price was $21 million.
The addition of this capacity represented a 10.6 percent increase in the barrel-carrying capacity of the K-Sea fleet. K-sea says it expects these vessels to be fully integrated into its clean oil transportation and bunkering businesses during the quarter ended March 31, 2005, after completion of certain required modifications. The results of operations for the second quarter and first half of fiscal 2005 included $0.1 million in non-recurring expenses relating to this acquisition.
Other capital expenditures for the six months ended December 31, 2004, including the double-hulling of the DBL 155 and the re-powering and modification of certain tugboats, totaled $11.3 million. Included in this amount is the first progress payment for a new 100,000 barrel tank barge which was ordered in September 2004. Delivery of this vessel is expected in the fall of 2005.
President and CEO Timothy J. Casey said "We are pleased with our fiscal second quarter results, recognizing that they are seasonally lower as we prepare our fleet for the upcoming winter season. Average daily rates have remained strong. We are working hard to effectively integrate into our operations the ten barges and seven tugboats we purchased in December, and look forward to a strong winter season."