K-Sea Transportation Partners L.P. Announces Operating Results and Net Income for Second Quarter of Fiscal 2008; Increases Dividend

Business Wire, Jan 31, 2008

NEW YORK -- K-Sea Transportation Partners L.P. (NYSE: KSP) today announced operating results and net income for the second fiscal quarter ended December 31, 2007. The Company also announced that its distribution to unitholders for the second quarter will increase by $0.02, or 2.8%, to $0.74 per unit, or $2.96 per unit annualized. This is the eleventh consecutive quarter of increased distributions, and the thirteenth increase since the Company's IPO in January 2004. The distribution will be payable on February 14, 2008 to unitholders of record on February 8, 2008.

The second quarter of fiscal 2008 included a non-recurring gain of $2.1 million, or $0.12 per fully diluted limited partner unit, representing proceeds from the settlement of legal proceedings relating to the Company's previously reported November 2005 incident involving the barge DBL 152. Fully diluted earnings including and excluding this gain were $0.68 and $0.56 per limited partner unit, respectively, compared to $0.39 per limited partner unit in the second quarter of fiscal 2007.

President and CEO Timothy J. Casey said: "During the second quarter of fiscal 2008, we made significant progress in integrating the Smith Maritime Group, and our fleet expansion and upgrade program continues to provide us new and more efficient vessels. Our operating income, EBITDA, and net income per unit are markedly ahead of last year. Our growth plans remain on target. During the second quarter of fiscal 2008, we took delivery of two new 28,000 barrel tank barges, and we have ten additional units under construction. Nine new tank barges are scheduled to be delivered, approximately one per quarter, over the next two years, and we have also begun construction on the previously announced 185,000-barrel articulated tug-barge unit, which is scheduled for delivery in the fourth quarter of calendar 2009 and will then begin work under a multi-year charter with a major customer.

"Demand for our services continues to be strong, as evidenced by the extension of several contracts with existing customers and long-term commitments from new customers. Our average daily rates are higher in both our coastwise and local trades, reflecting overall market strength and the impact of an increase in our average vessel size. I would also remind our investors that our third fiscal quarter ending in March is generally our lowest seasonally, due mainly to winter slowdowns in Alaska and the Great Lakes.

"In light of our results and expectations, our Board of Directors has approved a two cent per unit increase in our quarterly distribution, the eleventh consecutive distribution increase and thirteenth increase since our initial public offering in January 2004. At our current annualized rate of $2.96 per unit, K-Sea's distribution is approximately 12% higher than at this time last year. We remain optimistic about continuing our growth for the balance of fiscal 2008 and beyond."

Three Months Ended December 31, 2007

For the three months ended December 31, 2007, the Company reported operating income of $13.4 million, an increase of $5.6 million, or 72%, compared to $7.8 million of operating income for the three months ended December 31, 2006. This increase resulted primarily from inclusion of the recently acquired Smith Maritime Group, for which results are included from the acquisition date of August 14, 2007, and also from the continuing addition of new barges from the Company's expansion and upgrade program. Since January 1, 2007, the Company has taken delivery of five new tank barges, and has also purchased three tugboats that have reduced reliance on more expensive chartered-in towing. Results for the second quarter of fiscal 2008 were also affected by continued strong rates, which were partially offset by lower vessel utilization, increases of $2.9 million in depreciation and amortization due to the Smith acquisition and the expanded fleet, and $2.0 million in higher general and administrative expenses as a result of the acquisition and the Company's continued growth. Vessel utilization was lower due to higher scheduled drydocking days and lower utilization of certain lower-valued, single-hull vessels. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by $10.7 million, or 67%, to $26.6 million for the three months ended December 31, 2007, compared to $15.9 million for the three months ended December 31, 2006. EBITDA is a non-GAAP financial measure that is reconciled to net income, the most directly comparable GAAP measure, in the table below.

Net income for the three months ended December 31, 2007 was $9.9 million, or $0.68 per fully diluted limited partner unit, an increase of $6.0 million compared to net income of $3.9 million, or $0.39 per fully diluted limited partner unit, for the three months ended December 31, 2006. The fiscal 2008 second quarter benefited from the $5.6 million increase in operating income, and from the $2.1 million non-recurring gain on final settlement of the DBL 152 legal proceedings mentioned above. These increases were partially offset by a $1.9 million increase in interest expense resulting from debt incurred to finance the Smith acquisition and vessel newbuildings over the past year.