exceeds $0.55 per unit. Under
EITF 03-6, the impact of these increasing percentages is reflected in the
calculation of the general partners interest in net income when such net
income exceeds $0.55 per unit.
3.
Acquisition of the Smith Maritime
Group
On August 14, 2007, the Partnership, through certain
wholly-owned subsidiaries, completed the acquisition of all of the equity
interests in Smith Maritime, Ltd. (Smith Maritime), Go Big Chartering, LLC (Go
Big), and Sirius Maritime, LLC (Sirius Maritime and together with Smith
Maritime and Go Big, the Smith Maritime Group). This transaction is part of the Partnership's
business strategy to expand its fleet through strategic and accretive
acquisitions. The Smith Maritime Group
provides marine transportation and logistics services to major oil companies,
oil traders and refiners in Hawaii and along the West Coast of the United
States. The aggregate purchase price was
$203,147, subject to certain closing balance sheet-related adjustments. As further described in note 5 below, the
Partnership financed the cash portion of the purchase through additional
borrowings under its revolving credit agreement and a bridge loan. In connection with the closing of the
acquisition, the Partnership entered into a registration rights agreement with
the sellers with respect to the resale of the common units.
Under the purchase method of accounting, the
Partnership has included the Smith Maritime Groups results of operations from
August 14, 2007, the acquisition date, through September 30, 2007. The aggregate recorded purchase price of
$203,147 consisted of $169,401 of cash, including $1,449 of direct expenses,
$23,511 of assumed debt, and $10,235 representing 250,000 common units valued
at their market value on the acquisition date.
The Partnership allocated the purchase price to the tangible assets,
intangible assets, and liabilities acquired based on their fair values, which
for the fixed assets and intangibles were based on consideration of independent
appraisals. The purchased identifiable
intangible assets are being amortized on a straight-line basis over their
respective estimated useful lives. The
excess of the purchase price over the fair value of the acquired net assets has
been recorded as goodwill, which is not amortized but which will be reviewed
annually for impairment. The Partnerships
preliminary allocation of the purchase price is as follows:
Current assets
|
|
$
|
8,477
|
|
Vessels and equipment, net
|
|
157,678
|
|
Intangible assets
|
|
19,750
|
|
Goodwill
|
|
36,186
|
|
Other assets
|
|
9
|
|
|
|
222,100
|
|
Current liabilities and capital lease obligations
|
|
18,953
|
|
Total purchase price
|
|
$
|
203,147
|
|
The identifiable
intangible assets purchased in the acquisition include customer relationships
and covenants not to compete, valued at $17,500, which the Partnership
estimates will be amortized over 20 and 3 years, respectively. An additional $2,250 of intangibles has been
allocated to the excess fair market value of a leased vessel over its purchase
option price, which option was exercised in October 2007. The annual amortization expense for the
identifiable intangibles is currently estimated at $903. A substantial portion of the goodwill is
expected to be deductible for tax purposes.
In connection with the acquisition, the Partnership assumed an excise
tax liability of $2,705 for which it has been indemnified by the sellers. This amount is included in prepaid expenses
and other current assets and accrued expenses and other current liabilities in
the consolidated balance sheet.
Pro Forma Financial Information
The unaudited pro forma financial information for the
three months ended September 30, 2007 combines the historical results of the
Partnership with the historical results of the Smith Maritime Group for the
period preceding the August 14, 2007 acquisition. The unaudited financial information in the
table below summarizes the combined results of operations of the Partnership
and the Smith Maritime Group, on a pro forma basis, as though the acquisition
had been completed as of the beginning of each period presented. This pro forma financial data is presented
for information purposes only and is not necessarily indicative of the results
of operations that would have been achieved had the acquisition actually taken
place at those dates. The unaudited pro
forma financial information combines the historical results of the Partnership
with the historical results of the Smith Maritime Group for the applicable
periods preceding the August 14, 2007 acquisition.
8
Credit Agreement
The Partnership maintains a
revolving credit agreement with a group of banks,
with KeyBank National Association as administrative
agent and lead arranger, to provide
financing for its operations. On
August 14, 2007, the Partnership amended and restated its revolving credit
agreement to provide for (1) an increase in availability to $175,000 under the
primary revolving facility, with an increase in the term to seven years, (2) an
additional $45,000 364-day senior secured revolving credit facility, (3)
amendments to certain financial covenants and (4) a reduction in interest rate
margins. Under certain conditions, the
Partnership has the right to increase the primary revolving facility by up to
$75,000, to a maximum total facility amount of $250,000. On November 7, 2007, the Partnership
exercised this right and increased the facility by $25,000 to $200,000. The primary revolving facility and the
364-day facility are collateralized by a first perfected security interest in
vessels having a total fair market value of approximately $275,000 and certain
equipment and machinery related to such vessels. These facilities bear interest at the London
Interbank Offered Rate, or LIBOR, plus a margin ranging from 0.7% to 1.5%
depending on the Partnerships ratio of total funded debt to EBITDA (as defined
in the agreement). On August 14, 2007,
the Partnership borrowed $67,000 under the primary revolving facility and
$45,000 under the 364-day facility to fund a portion of the purchase price of
the Smith Maritime Group (see note 3).
Also on August 14, 2007, the Partnership entered into
a bridge loan facility for up to $60,000 with an affiliate of KeyBank National
Association in connection with the Smith Maritime Group acquisition. While outstanding, the bridge loan facility
bore interest at an annual rate of LIBOR plus 1.5%, and was to mature on
November 12, 2007. During an event of
default, the bridge loan facility provided for interest at an annual rate of
LIBOR plus 7.5%.
Both the $45,000 364-day senior secured facility and
the $60,000 bridge loan were repaid on September 26, 2007 upon closing of an
offering of common units by the Partnership.
See Common Unit Offering below.
As of September 30, 2007, the Partnership had $152,350 outstanding on
the revolving facility. The Partnership
also has a separate revolver with a commercial bank to support its daily cash
management; the outstanding balance on this revolver at September 30, 2007 was
$2,609.
On August 14, 2007 in connection with the acquisition
of the Smith Maritime Group, the Partnership also assumed two term loans
totaling $23,511. The first, in the
amount of $19,464, bears interest at LIBOR plus 1.25% and is repayable in equal
monthly installments of $147 plus interest, through August 2018. The second, in the amount of $4,047, bears
interest at LIBOR plus 1.0% and is repayable in monthly installments ranging
from $59 to $81, plus interest, through May 2012. These loans are collateralized by three tank
barges. The Partnership also agreed with
the related lending institution to assume the two existing interest rate swaps
relating to these two loans. The LIBOR-based, variable rate interest payments
on these loans have been swapped for fixed payments at an average rate of
5.44%, plus a margin, over the same terms as the loans.
Common Unit Offering
On September 26, 2007,
the Partnership closed a public offering of 3,500,000 common units representing
limited partner interests. The price to the public was $39.50 per unit. The net proceeds of $131,924 from the
offering, after payment of underwriting discounts and commissions and expenses,
were used to repay borrowings under the credit agreement.
Restrictive Covenants
The agreements
governing the credit agreement and the term loans contain restrictive covenants
that, among other things, (a) prohibit distributions under defined events of
default, (b) restrict investments and sales of assets, and (c) require the
Partnership to adhere to certain financial covenants, including defined ratios
of fixed charge coverage and funded debt to EBITDA (earnings before interest,
taxes, depreciation and amortization, as defined).
6.
Commitments and Contingencies
The European Union
is currently working toward a new directive for the insurance industry, called Solvency
2, that is expected to become law within four to five years and require
increases in the level of free, or unallocated, reserves required to be
maintained by insurance entities, including protection and indemnity clubs that
provide coverage for the maritime industry. The West of England Ship
Owners Insurance Services Ltd. (WOE), a mutual insurance association
based in Luxembourg, provides the Partnerships protection and indemnity
insurance coverage and would be impacted by the new directive. In
anticipation of these new regulatory requirements, the WOE has assessed its
members an additional capital call that it believes will contribute to achievement
of the projected required free reserve increases. The Partnerships
capital call of $1,119 was paid during calendar year
10
2007. A further
request for capital may be made in the future; however, the amount of such
further assessment, if any, cannot be reasonably estimated at this time.
As a shipowner member of the WOE, the Partnership has an interest in the WOEs
free reserves, and therefore has recorded the additional $1,119 capital call as
an investment, at cost, subject to periodic review for impairment. This
amount is included in other assets in the September 30, 2007 balance sheet.
EW Transportation
Corp., a predecessor to the Partnership, and many other marine transportation
companies operating in New York have come under audit with respect to the New
York State Petroleum Business Tax (PBT), which is a tax on vessel fuel
consumed while operating in New York State territorial waters. An industry group in which EW Transportation
Corp. and the Partnership participate has come to a final agreement with the
New York taxing authority on a calculation methodology for the PBT. Effective January 1, 2007, the Partnership
and the other marine transportation companies began rebilling this tax to customers. For applicable periods prior to 2007, the
Partnership has accrued an estimated liability using the agreed methodology
which is currently under final audit by the New York taxing authority. In accordance with the agreements entered
into in connection with the Partnerships initial public offering in January
2004, any liability resulting from the PBT prior to January 14, 2004 (the
effective date of the offering) is a retained liability of the Partnerships
predecessor companies.
The Partnership has
agreements with shipyards for the construction of one new articulated tug-barge
unit and nine additional new tank barges, which are expected to cost, in the
aggregate and after the addition of certain special equipment, approximately
$165,000, of which $20,209 has been spent as of September 30, 2007.
The Partnership is
the subject of various claims and lawsuits in the ordinary course of business
for monetary relief arising principally from personal injuries, collisions and
other casualties. Although the outcome of any individual claim or action cannot
be predicted with certainty, the Partnership believes that any adverse outcome,
individually or in the aggregate, would be substantially mitigated by
applicable insurance or indemnification from previous owners of the Partnerships
assets, and would not have a material adverse effect on the Partnerships
financial position, results of operations or cash flows. The Partnership is also subject to
deductibles with respect to its insurance coverage that range from $25 to $100
per incident and provides on a current basis for estimated payments thereunder.
7.
New Accounting Pronouncements
On February 16,
2006, the FASB issued FASB Statement No. 155, Accounting for Certain
Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and
140 (FAS 155). FAS 155 amends FASB Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities and FASB Statement No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities. The Partnership adopted
FAS 155 as of July 1, 2007, and such adoption did not have any impact on
its financial position, results of operations or cash flows.
In June 2006, the FASB
issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes
an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprises financial statements
in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and
measurement attribute for financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. The
Partnership adopted FIN 48 as of July 1, 2007, and such adoption had no
impact on its financial position, results of operations or cash flows.
At the date of the
adoption, there were no unrecognized tax benefits and consequently no related
interest and penalties. The significant
jurisdictions in which the Partnership files tax returns and is subject to tax
include New York City, Venezuela and Puerto Rico. The significant jurisdictions in which the
Partnerships corporate subsidiaries file tax returns and are subject to tax
include the United States and Canada.
The tax returns filed in the United States and state jurisdictions are
subject to examination for the years 2004 through 2007 and in foreign
jurisdictions for the years 2005 through 2007.
The Partnership has adopted a policy to record tax related interest and
penalties under interest expense and general and administrative expenses,
respectively.
In
September 2006, the FASB issued FASB Statement No. 157, Fair Value
Measurements (FAS 157). FAS 157
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. FAS 157 applies
under other accounting pronouncements that require or permit fair value
measurements. FAS 157 is effective for
fiscal years beginning after November 15, 2007, and the Partnership is
currently analyzing its impact, if any.
11
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations.
General
We are a leading provider of refined petroleum product
marine transportation, distribution and logistics services in the United States
domestic marine transportation business.
We currently operate a fleet of 73 tank barges, one tanker and 58
tugboats that serves a wide range of customers, including major oil companies,
oil traders and refiners. With
approximately 4.3 million barrels of capacity, we believe we operate the
largest coastwise tank barge fleet in the United States.
Demand for our services
is driven primarily by demand for refined petroleum products in the East, West
and Gulf Coast regions of the United States.
We generate revenue by charging customers for the transportation and
distribution of their products utilizing our tank vessels and tugboats. For the fiscal year ended June 30, 2007,
our fleet transported approximately 140 million barrels of refined petroleum
products for our customers, including BP, Chevron, ConocoPhillips, ExxonMobil
and Rio Energy. We do not assume
ownership of any of the products we transport.
During fiscal 2007, we derived approximately 79% of our revenue from
longer-term contracts that are generally for periods of one year or more.
We believe we have a high-quality, well-maintained
fleet. Approximately 74% of our
barrel-carrying capacity is double-hulled, and we are permitted to continue to
operate our single-hull tank vessels until January 1, 2015 in
compliance with the Oil Pollution Act of 1990, or OPA 90, which mandates the
phase-out of all single-hull tank vessels transporting petroleum and petroleum
products in U.S. waters. All of our tank vessels except two operate under the
U.S. flag, and all but four are qualified to transport cargo between U.S. ports
under the Jones Act, the federal statutes that restrict foreign owners from
operating in the U.S. maritime transportation industry.
We operate our tank
vessels in markets that exhibit seasonal variations in demand and, as a result,
in charter rates. For example, movements
of clean oil products, such as motor fuels, generally increase during the
summer driving season. In certain
regions, movements of black oil products and distillates, such as heating oil,
generally increase during the winter months, while movements of asphalt
products generally increase in the spring through fall months. Unseasonably cold winters result in
significantly higher demand for heating oil in the northeastern United
States. Meanwhile, our operations along
the West Coast and in Alaska historically have been subject to seasonal
variations in demand that vary from those exhibited in the East Coast and Gulf
Coast regions. The summer driving season
can increase demand for automobile fuel in all of our markets and, accordingly,
the demand for our services. A decline
in demand for, and level of consumption of, refined petroleum products could
cause demand for tank vessel capacity and charter rates to decline, which would
decrease our revenues and cash flows.
Our West Coast operations provide seasonal diversification primarily as
a result of its services to our Alaskan markets, which experience the greatest
demand for petroleum products in the summer months, due to weather
conditions. Considering the above, we
believe seasonal demand for our services is lowest during our third fiscal
quarter. We do not see any significant
seasonality in the Hawaiian market.
Significant Events
Acquisition of
the Smith Maritime Group
On August 14,
2007, we, through certain wholly-owned subsidiaries, completed the acquisition
of all of the equity interests in Smith Maritime, Ltd. (Smith Maritime). Go
Big Chartering, LLC (Go Big), and Sirius Maritime, LLC (Sirius Maritime
and, together with Smith Maritime and Go Big the Smith Maritime Group). This transaction is part of our business
strategy to expand our fleet through strategic and accretive acquisitions. The Smith Maritime Group provides marine
transportation and logistics services to major oil companies, oil traders and
refiners in Hawaii and along the West Coast of the United States. The aggregate purchase price was $203.1
million, consisting of $169.4 million of cash, including $1.4 million of
direct expenses, $23.5 million of assumed debt and common units valued at
approximately $10.2 million. As further
described below, we financed the cash portion of the purchase through
additional borrowings under our revolving credit agreement and a bridge
loan. The common units were issued in a
transaction not involving any public offering pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended. In connection with the closing of the
acquisition, we entered into a registration rights agreement with the sellers
with respect to the resale of the common units.
12
The acquisition of the
Smith Maritime Group added eleven petroleum tank barges and ten tugboats, aggregating
777,000 barrels of capacity (of which 669,000 barrels, or 86%, are
double-hulled) to our fleet, representing a 22% increase in our barrel-carrying
capacity as of the acquisition date.
Under the purchase method of accounting, we allocated
the aggregate purchase price of $203.1 million to the tangible assets, intangible
assets, and liabilities acquired based on their fair values, which for the
fixed assets and intangibles were based on consideration of independent
appraisals. The purchased identifiable
intangible assets are being amortized on a straight-line basis over their
respective estimated useful lives. The
excess of the purchase price over the fair value of the acquired net assets has
been recorded as goodwill, which is not amortized but which will be reviewed
annually for impairment. In connection
with the acquisition, we assumed an excise tax liability of $2.7 million
for which we have been indemnified by the sellers.
Acquisition Financing
To finance the acquisition, on August 14, 2007 we
amended and restated our revolving credit agreement with KeyBank National
Association, as administrative agent and lead arranger, to provide for (1) an
increase in availability to $175.0 million under our senior secured revolving
credit facility, with an increase in the term to seven years, (2) a $45.0
million 364-day senior secured revolving credit facility, (3) amendments to
certain financial covenants and (4) a reduction in interest rate margins. We also entered into a bridge loan facility
for up to $60.0 million with an affiliate of KeyBank National Association. On August 14, 2007, we borrowed $67.0 million
under the revolving facility, $45.0 million under the 364-day facility, and
$60.0 million under the bridge loan facility to fund the cash portion of the
purchase price of the Smith Maritime Group.
See Credit Agreement below for further discussion of these
facilities.
Common Unit Offering
On September 26, 2007, we
closed a public offering of 3,500,000 common units representing limited partner
interests. The price to the public was $39.50 per unit. The net proceeds of $131.9 million from the
offering, after payment of underwriting discounts and commissions and expenses,
were used to repay borrowings under our credit agreement.
Definitions
In order to understand our discussion of our results
of operations, it is important to understand the meaning of the following terms
used in our analysis and the factors that influence our results of operations:
Voyage revenue
. Voyage revenue includes revenue from time charters, contracts of
affreightment and voyage charters. Voyage revenue is impacted by changes in
charter and utilization rates and by the mix of business among the types of
contracts described in the preceding sentence.
Voyage expenses
. Voyage expenses include items such as fuel, port charges, pilot fees,
tank cleaning costs and canal tolls, which are unique to a particular voyage.
Depending on the form of contract and customer preference, voyage expenses may
be paid directly by customers or by us. If we pay voyage expenses, they are
included in our results of operations when they are incurred. Typically when we
pay voyage expenses, we add them to our freight rates at an approximate cost.
Vessel operating expenses
. The most significant direct vessel operating
expenses are wages paid to vessel crews, routine maintenance and repairs and
marine insurance. We may also incur
outside towing expenses during periods of peak demand and in order to maintain
our operating capacity while our tugs are drydocked or otherwise out of service
for scheduled and unscheduled maintenance.
Please refer to Managements Discussion and Analysis of Financial
Condition and Results of Operations - Definitions included in our Annual
Report on Form 10-K for the fiscal year ended June 30, 2007 for definitions of
certain other terms used in our discussion of results of operations.
13
Results of Operations
The following table
summarizes our results of operations for the periods presented (dollars in
thousands, except average daily rates).
|
|
Three Months Ended
September 30,
|
|
|
|
2007
|
|
2006
|
|
Voyage revenue
|
|
$
|
68,945
|
|
$
|
52,747
|
|
Bareboat charter and other revenue
|
|
2,816
|
|
2,163
|
|
Total revenues
|
|
71,761
|
|
54,910
|
|
Voyage expenses
|
|
15,743
|
|
11,581
|
|
Vessel operating expenses
|
|
27,517
|
|
23,336
|
|
% of total revenues
|
|
38.3
|
%
|
42.5
|
%
|
General and administrative expenses
|
|
6,344
|
|
4,807
|
|
% of total revenues
|
|
8.8
|
%
|
8.8
|
%
|
Depreciation and amortization
|
|
9,656
|
|
7,685
|
|
Net gain on disposal of vessels
|
|
(221
|
)
|
(16
|
)
|
Operating income
|
|
12,722
|
|
7,517
|
|
% of total revenues
|
|
17.7
|
%
|
13.7
|
%
|
Interest expense, net
|
|
5,820
|
|
3,322
|
|
Other expense (income), net
|
|
(5
|
)
|
(16
|
)
|
Income before provision for income taxes
|
|
6,907
|
|
4,211
|
|
Provision for income taxes
|
|
236
|
|
125
|
|
Net income
|
|
$
|
6,671
|
|
$
|
4,086
|
|
|
|
|
|
|
|
Net voyage revenue by trade
|
|
|
|
|
|
Coastwise
|
|
|
|
|
|
Total tank vessel days
|
|
3,290
|
|
2,760
|
|
Days worked
|
|
2,991
|
|
2,517
|
|
Scheduled drydocking days
|
|
144
|
|
113
|
|
Net utilization
|
|
91
|
%
|
91
|
%
|
Average daily rate
|
|
$
|
13,427
|
|
$
|
11,744
|
|
Total coastwise net voyage revenue (a)
|
|
$
|
40,160
|
|
$
|
29,560
|
|
Local
|
|
|
|
|
|
Total tank vessel days
|
|
2,484
|
|
2,280
|
|
Days worked
|
|
1,889
|
|
1,685
|
|
Scheduled drydocking days
|
|
39
|
|
73
|
|
Net utilization
|
|
76
|
%
|
74
|
%
|
Average daily rate
|
|
$
|
6,904
|
|
$
|
6,888
|
|
Total local net voyage revenue (a)
|
|
$
|
13,042
|
|
$
|
11,606
|
|
|
|
|
|
|
|
Tank vessel fleet
|
|
|
|
|
|
Total tank vessel days
|
|
5,774
|
|
5,040
|
|
Days worked
|
|
4,880
|
|
4,202
|
|
Scheduled drydocking days
|
|
183
|
|
186
|
|
Net utilization
|
|
85
|
%
|
83
|
%
|
Average daily rate
|
|
$
|
10,902
|
|
$
|
9,797
|
|
Total fleet net voyage revenue (a)
|
|
$
|
53,202
|
|
$
|
41,166
|
|
(a)
Net voyage revenue is equal to voyage
revenue less voyage expenses. Net voyage
revenue is a non-GAAP measure and is reconciled to voyage revenue, the nearest
GAAP measure, under Voyage Revenue and Voyage Expenses in the
period-to-period comparison below.
14
Three
Months Ended September 30, 2007 Compared to Three Months Ended September 30,
2006
Voyage Revenue and Voyage
Expenses
Voyage revenue was $68.9
million for the three months ended September 30, 2007, an increase of $16.2
million, or 31%, as compared to voyage revenue of $52.7 million for the three
months ended September 30, 2006. Voyage
expenses were $15.7 million for the three months ended September 30, 2007, an
increase of $4.1 million, or 35%, as compared to voyage expenses of $11.6
million incurred for the three months ended September 30, 2006.
Net voyage revenue
Net voyage revenue was $53.2 million for the three
months ended September 30, 2007, which exceeded net voyage revenue of $41.2
million for the three months ended September 30, 2006 by $12.0 million, or 29
%. In our coastwise trade, net voyage
revenue was $40.2 million, an increase of $10.6 million, or 36%, as compared to
$29.6 million for the three months ended September 30, 2006. Net utilization in our coastwise trade was
91% for each of the three-month periods
ended September 30, 2007 and 2006.
The acquisition of the Smith Maritime Group in August 2007 resulted in increased
coastwise net voyage revenue of $5.8 million.
Net voyage revenue increased by an additional $3.1 million due to an
increase in the number of working days for (1) the DBL 104, which began
operations in April 2007 and (2) the DBL 151, which was in shipyard for the
entire fiscal 2007 first quarter.
Coastwise average daily rates increased 14% to $ 13,427 for the three
months ended September 30, 2007 from $11,744 for the three months ended
September 30, 2006, which accounted for approximately $3.9 million of increased
net voyage revenue.
Net voyage revenue in our local trade for the three
months ended September 30, 2007 increased by $1.4 million, or 12%, to $13.0
million from $11.6 million for the three months ended September 30, 2006. Local
net voyage revenue increased by $2.4 million during the three months
ended September 30, 2007 due to the increased number of work days for the new-build barges DBL 26, DBL 27 and
DBL 22, which were delivered in August 2006, January 2007, and June 2007,
respectively. Net utilization in our
local trade was 76% for the three months ended September 30, 2007, compared to
74% for the three months ended September 30, 2006. Average daily rates in our local trade
increased to $6,904 for the three months ended September 30, 2007 from $6,888
for the comparative prior year period.
Bareboat Charter and Other Revenue
Bareboat charter and other revenue was $2.8 million
for the three months ended September 30, 2007, compared to $2.2 million for the
three months ended September 30, 2006.
Of this $0.6 million increase, $0.4 million resulted from a small lube
oil operation purchased in the fall of 2006, $0.7 million was a result of the
Smith Maritime Group acquisition, and $0.5 million was attributable to
increased revenue from our water treatment plant in Norfolk. This was partially
offset by a $1.0 million decrease in outside chartering of tank barges.
Vessel Operating Expenses
Vessel operating expenses were $27.5 million for the
three months ended September 30, 2007 compared to $23.3 million for the three
months ended September 30, 2006, an increase of $4.2 million. Vessel operating
expenses as a percentage of total revenues decreased to 38.3% for the three
months ended September 30, 2007 from 42.5% for the three months ended September
30, 2006. Vessel labor and related costs
increased $2.7 million as a result of contractual labor
rate increases and a higher average number of employees due to the
operation of the additional barges described under Net voyage revenue
above. Our acquisition of the Smith
Maritime Group resulted in a $2.5 million increase in vessel operating
expenses. This increase was offset by a $1.2 million decrease in outside towing
expenses as a result of the purchase of four tugboats.
Depreciation and Amortization
Depreciation and
amortization was $9.7 million for the three months ended September 30, 2007, an
increase of $2.0 million, or 26%, compared to $7.7 million for the three months
ended September 30, 2006. The increase
resulted from additional depreciation and drydocking amortization on our
newbuild and purchased vessels described above in addition to the acquisition
of the Smith Maritime Group.
General and Administrative Expenses
General and administrative expenses were $6.3 million
for the three months ended September 30, 2007, an increase of $1.5 million, or
31%, as compared to general and administrative expenses of $4.8 million for the
three
15
months ended September 30, 2006.
As a percentage of total revenues, general and administrative expenses
were 8.8% for each the three month periods ended September 30, 2007 and
2006. The $1.5 million increase is a
result of increased personnel costs resulting from increased headcount to
support our growth and the additional facilities costs of our new offices in
Philadelphia, Hawaii, and Seattle.
Interest Expense, Net
Net interest expense was $5.8 million for the three
months ended September 30, 2007, or $2.5 million higher than the $3.3 million
incurred in the three months ended September 30, 2006. The increase resulted from higher average
debt balances resulting from increased credit line and term loan borrowings in
connection with our acquisitions and newbuild vessels, and higher average
interest rates. In addition, $1.5
million of interest expense was directly related to the acquisition of the
Smith Maritime Group, including $1.1 million for bridge financing.
Provision for Income Taxes
Our interim provisions for income taxes are based on
our estimated annual effective tax rate.
For the three months ended September 30, 2007, this rate was 3.4% as
compared to a rate of 3.0% for the three months ended September 30, 2006. Our effective tax rate comprises the New York
City Unincorporated Business Tax and foreign taxes on our operating
partnership, plus federal, state, local and foreign corporate income taxes on
the taxable income of our operating partnerships corporate subsidiaries. Our effective tax rate for the quarter ended
September 30, 2007 was higher than the comparable prior year period primarily
due to changes in certain state tax apportionment factors which reduced the
rate for the quarter ended September 30, 2006.
Net income
Net income was $6.7 million for the three months ended
September 30, 2007, an increase of $2.6 million compared to net income of $4.1
million for the three months ended September 30, 2006. This increase resulted primarily from a $5.2
million increase in operating income partially offset by a $2.5 million increase
in interest expense and a $0.1 million increase in the provision for income
taxes.
Liquidity and Capital Resources
Operating Cash Flows
. Net cash
provided by operating activities was $12.3 million for the three months ended
September 30, 2007, an increase of $4.9 million compared to $7.4 million for
the three months ended September 30, 2006.
The increase resulted from $4.6 million of improved operating results,
after adjusting for non-cash expenses such as depreciation and amortization,
and by a $0.3 million positive impact from working capital changes. During the three-month period ended September
30, 2007, our working capital decreased due primarily to an increase in
accounts payable primarily as a result of an increase in operating expenditures
for our expanded fleet, offset by increased accounts receivable as a result of
increased revenues.
Investing Cash Flows
. Net cash used
in investing activities totaled $189.1 million for the three months ended
September 30, 2007, compared to $8.4 million used during the three months ended
September 30, 2006. The three months
ended September 30, 2007 included the $168.7 million cash portion of the
purchase price for the Smith Maritime Group.
Vessel acquisitions for the three months ended September 30, 2007
included a $3.0 million cash payment in connection with an acquired barge; the
seller also issued a $3.0 million note which is due in November 2007. Vessel acquisitions totaled $1.6 million for
the three months ended September 30, 2006 related to the purchase of certain
small tank vessels and tugboats for a lube oil operation in Philadelphia. Tank vessel construction in the three months
ended September 30, 2007 aggregated $12.1 million and included progress payments
on construction of three 80,000-barrel tank barges, three new 28,000-barrel
tank barges and a new 50,000-barrel tank barge.
Tank vessel construction of $4.3 million in the comparative prior year
period included progress payments on construction of a new 100,000-barrel tank
barge and two 28,000-barrel tank barges, which were delivered in fiscal
2007. Other capital expenditures,
relating primarily to coupling tugboats to our newbuild tank barges, totaled
$4.2 million in the three months ended September 30, 2007 and $2.9 million in
the three months ended September 30, 2006.
Financing
Cash Flows
. Net cash provided by financing activities was
$177.4 million for the three months ended September 30, 2007 compared to $0.8
million of net cash provided by financing activities for the three months ended
September 30, 2006. The primary
financing activities for the three month period ended September 30, 2007 were
$138.3 million in gross proceeds from the issuance of 3.5 million of new common
units in September 2007, $105.0 million of borrowings related to the Smith
Maritime Group acquisition which were repaid with the equity offering
proceeds. We also increased our credit
line borrowings by $57.9 million relating to the Smith Maritime Group
acquisition and for progress payments on barges under construction, and $7.5
million in
16
distributions to partners
as described under Payment of Distributions below. In the three months ended September 30, 2006,
the primary financing activities were $4.3 million of borrowings on term loans
to finance the construction of new tank barges, a $4.2 million increase in our
credit line borrowings, and $6.4 million in distributions to partners.
Payment of Distributions
.
The board of directors of K-Sea General Partner GP LLC declared a
quarterly distribution to unitholders of $0.70 per unit in respect of the
quarter ended June 30, 2007, which was paid on July 24, 2007 to unitholders of
record on July 18, 2007. Additionally,
the board declared a quarterly distribution to unitholders of $0.72 per unit in
respect of the quarter ended September 30, 2007, payable on November 14, 2007
to unitholders of record on November 8, 2007.
Oil
Pollution Act of 1990.
Tank vessels are subject to the
requirements of OPA 90, which mandates that all single-hull tank vessels
operating in U.S. waters be removed from petroleum product transportation
services at various times through January 1, 2015, and provides a schedule for
the phase-out of the single-hull vessels based on their age and size. At September 30, 2007, approximately 74% of
the barrel-carrying capacity of our tank vessel fleet was double-hulled
in compliance with OPA 90, and the remainder will be in compliance with OPA 90
until January 2015.
Ongoing
Capital Expenditures.
Marine transportation of
refined petroleum products is a capital intensive business, requiring
significant investment to maintain an efficient fleet and to stay in regulatory
compliance. We estimate that, over the next five years, we will spend an
average of approximately $20.5 million per year to drydock and maintain
our fleet. We expect such expenditures
to approximate $21.5 million in fiscal 2008. In addition, we anticipate that we will spend
$1.0 million annually for other general capital expenditures. Periodically, we also make expenditures to
acquire or construct additional tank vessel capacity and/or to upgrade our
overall fleet efficiency.
We define
maintenance capital expenditures as capital expenditures required to maintain,
over the long term, the operating capacity of our fleet, and expansion capital
expenditures as those capital expenditures that increase, over the long term,
the operating capacity of our fleet.
Examples of maintenance capital expenditures include costs related to
drydocking a vessel, retrofitting an existing vessel or acquiring a new vessel
to the extent such expenditures maintain the operating capacity of our
fleet. Generally, expenditures for
construction in progress are not included as capital expenditures until such
vessels are completed. Capital
expenditures associated with retrofitting an existing vessel, or acquiring a
new vessel, which increase the operating capacity of our fleet over the long
term, whether through increasing our aggregate barrel-carrying capacity,
improving the operational performance of a vessel or otherwise, are classified
as expansion capital expenditures.
Drydocking expenditures are more extensive in nature than normal routine
maintenance and, therefore, are capitalized and amortized over three years.
The following
table summarizes total maintenance capital expenditures, including drydocking
expenditures, and expansion capital expenditures for the periods presented (in
thousands):
|
|
Three months ended
September 30,
|
|
|
|
2007
|
|
2006
|
|
Maintenance capital expenditures
|
|
$4,548
|
|
$6,640
|
|
Expansion capital expenditures (including
acquisitions)
|
|
175,955
|
|
2,469
|
|
Total capital expenditures
|
|
$180,503
|
|
$9,109
|
|
Construction of tank vessels
|
|
$12,147
|
|
$4,260
|
|
In September 2007, we
took delivery of a 28,000-barrel tank barge, the DBL 23. In October 2007, we entered into an agreement
with a shipyard to construct a 185,000-barrel articulated tug-barge unit which
is expected to be delivered in the fourth quarter of calendar 2009 at a cost of
$68.0-$70.0 million. We also have an
agreement for a long-term charter for the unit with a major customer that is
expected to commence upon delivery. The agreement
includes an option to build a second unit of similar design and cost. We also have agreements with shipyards for
the construction of nine additional new tank barges. Deliveries are expected as
follows:
17
Date of
Agreement
|
|
Vessels
|
|
Expected Delivery
|
|
|
|
|
|
June 2006
|
|
Two 28,000-barrel tank barges
|
|
2nd Q fiscal 20083rd Q fiscal 2008
|
|
|
|
|
|
August 2006
|
|
Two 80,000-barrel tank barges
|
|
4th Q fiscal 20081st Q fiscal 2009
|
|
|
|
|
|
December 2006
|
|
One 80,000-barrel tank barge
|
|
1st Q fiscal 2009
|
|
|
|
|
|
June 2007
|
|
Four 50,000-barrel tank barges
|
|
2
nd
Q fiscal 2010 2
nd
Q
fiscal 2011
|
|
|
|
|
|
October 2007
|
|
One 185,000-barrel articulated tug-barge unit
|
|
2
nd
Q fiscal 2010
|
The above tank barges are expected to cost, in the
aggregate and after the addition of certain special equipment, approximately
$165.0 million, of which $20.2 million has been spent as of September 30,
2007. We expect to spend approximately
$22.0 million during fiscal 2008 on these contracts.
Additionally, we intend to retire, retrofit or replace
28 (including four chartered-in) single-hull tank vessels by December 2014,
which at September 30, 2007 represented approximately 26% of our
barrel-carrying capacity. The capacity
of certain of these single-hulled vessels has already been effectively replaced
by double-hulled vessels placed into service in the past two years. We estimate that the current cost to replace
the remaining capacity with newbuildings and by retrofitting certain of our
existing vessels will range from $78.0 million to $80.0 million. This capacity can also be replaced by
acquiring existing double-hulled tank vessels as opportunities arise. We evaluate the most cost-effective means to
replace this capacity on an ongoing basis.
Liquidity Needs.
Our primary short-term liquidity needs are to fund general working
capital requirements, distributions to unitholders and drydocking expenditures,
while our long-term liquidity needs are primarily associated with expansion and
other maintenance capital expenditures.
Expansion capital expenditures are primarily for the purchase of
vessels, while maintenance capital expenditures include drydocking expenditures
and the cost of replacing tank vessel operating capacity. Our primary sources of funds for our
short-term liquidity needs are cash flows from operations and borrowings under
our credit facility, while our long-term sources of funds are cash from
operations, long-term bank borrowings and other debt or equity financings.
We believe that cash flows from operations and
borrowings under our credit agreement, described below, will be sufficient to
meet our liquidity needs for the next 12 months.
Credit Agreement
.
We maintain a revolving credit
agreement with a group of banks, with KeyBank National Association as
administrative agent and lead arranger, to
provide financing for our operations. On
August 14, 2007, we amended and restated our revolving credit agreement to provide
for (1) an increase in availability to $175.0 million under the primary
revolving facility, with an increase in the term to seven years, (2) an
additional $45.0 million 364-day senior secured facility, (3) amendments to
certain financial covenants and (4) a reduction in interest rate margins. Under certain conditions, we have the right
to increase the primary revolving facility by up to $75.0 million, to a maximum
total facility amount of $250.0 million.
On November 7, 2007, we exercised this right and increased the
facility by $25.0 million to $200.0 million. The primary revolving facility and the
364-day facility (when outstanding) are collateralized by a first perfected
security interest, subject to permitted liens, on certain of our vessels having
a fair market value equal to at least 1.25 times the amount of the obligations
(including letters of credit) outstanding.
These facilities bear interest at the London Interbank Offered Rate, or
LIBOR, plus a margin ranging from 0.7% to 1.5% depending on our ratio of total
funded debt to EBITDA (as defined in the agreement). We also incur commitment fees, payable
quarterly, on the unused amount of the facility. On August 14, 2007, we borrowed $67.0 million
under the primary revolving facility and $45.0 million under the 364-day
facility to fund a portion of the purchase price of the Smith Maritime Group
(see Significant Events above).
Also on August 14, 2007, we entered into a bridge loan
facility for up to $60 million with an affiliate of KeyBank National
Association, also in connection with the Smith Maritime Group acquisition. While outstanding, the bridge loan facility
bore interest at an annual rate of LIBOR plus 1.5%, and was to mature on
November 12, 2007. During an event of
default, the bridge loan facility provided for interest at an annual rate of
LIBOR plus 7.5%.
Both the $45 million 364-day senior secured facility
and the $60 million bridge loan were repaid on September 26, 2007 upon our
closing of an offering of common units.
See Common Unit Offering below.
As of September 30, 2007, we had $152.4 million outstanding on the
revolving facility. We also have a
separate revolver with a commercial bank to support our daily cash management;
the outstanding balance on this revolver at September 30, 2007 was $2.6
million.
18
On August 14, 2007 in connection with our acquisition
of the Smith Maritime Group, we also assumed two term loans totaling $23.5
million. The first, in the amount of $19.5
million, bears interest at the same LIBOR-based variable rate as the credit
agreement (see Credit Agreement above) and is repayable in equal monthly
installments of $147,455 plus interest,
through August 2018. The second, in the
amount of $4.0 million, bears interest at LIBOR plus 1.0% and is repayable in
monthly installments ranging from $59,269 to $81,320, plus interest, through
May 2012. These loans are collateralized
by three tank barges. We also agreed
with the related lending institution to assume the two existing interest rate
swaps relating to these two loans. The LIBOR-based, variable rate interest payments
on these loans have been swapped for fixed payments at an average rate of
5.44%, plus a margin, over the same terms as the loans.
Restrictive Covenants.
The agreements governing the credit agreement and our term loans contain
restrictive covenants that, among other things, (a) prohibit distributions
under defined events of default, (b) restrict investments and sales of assets,
and (c) require the Partnership to adhere to certain financial covenants,
including defined ratios of fixed charge coverage and funded debt to EBITDA
(earnings before interest, taxes, depreciation and amortization, as
defined). As of September 30, 2007, we
were in compliance with all of our debt covenants.
Common Unit Offering.
On
September 26, 2007, the Partnership closed a public offering of 3,500,000
common units representing limited partner interests. The price to the public
was $39.50 per unit. The net proceeds of
$131.9 million from the offering, after payment of underwriting discounts and
commissions and expenses, were used to repay borrowings under the credit
agreement.
Contingencies
.
We are a party to various claims and lawsuits in the ordinary course of
business for monetary relief arising principally from personal injuries,
collision or other casualty and to claims arising under vessel charters. All of these personal injury, collision and
casualty claims are fully covered by insurance, subject to deductibles ranging
from $25,000 to $100,000. We accrue on a
current basis for estimated deductibles we expect to pay.
The European Union
is currently working toward a new directive for the insurance industry, called Solvency
2, that is expected to become law within four to five years and require
increases in the level of free, or unallocated, reserves required to be
maintained by insurance entities, including protection and indemnity clubs that
provide coverage for the maritime industry. The West of England Ship
Owners Insurance Services Ltd. (WOE), a mutual insurance association
based in Luxembourg, provides our protection and indemnity insurance coverage
and would be impacted by the new directive. In anticipation of these new
regulatory requirements, the WOE has assessed its members an additional capital
call which it believes will contribute to achievement of the projected required
free reserve increases. Our capital call was $1.1 million and was paid
during calendar year 2007. A further
request for capital may be made in the future; however, the amount of such
further assessment, if any, cannot be reasonably estimated at this time.
As a shipowner member of the WOE, we have an interest in the WOEs free
reserves, and therefore have recorded the additional $1.1 million capital call
as an investment, at cost, subject to periodic review for impairment.
This amount is included in other assets in the September 30, 2007 balance
sheet.
EW Transportation Corp., a predecessor to our
Partnership, and many other marine transportation companies operating in New
York have come under audit with respect to the New York State Petroleum
Business Tax (PBT), which is a tax on vessel fuel consumed while operating in
New York State territorial waters. An
industry group in which we and EW Transportation Corp. participate has come to
a final agreement with the New York taxing authority on a calculation
methodology for the PBT. Effective
January 1, 2007, we and the other marine transportation companies began
rebilling this tax to customers. For
applicable periods prior to 2007, we have accrued an estimated liability using
the agreed methodology which is currently under final audit by the New York
taxing authority. In accordance with the
agreements entered into in connection with our initial public offering in
January 2004, any liability resulting from the PBT prior to January 14, 2004
(the effective date of the offering) is a retained liability of our predecessor
companies.
Off-Balance Sheet
Arrangements.
There were no off-balance sheet
arrangements as of September 30, 2007.
Seasonality
See discussion under General above.
19
Critical Accounting Policies
There have been no
material changes in our Critical Accounting
Policies as disclosed in our Annual
Report on Form 10-K for the
fiscal year ended June 30, 2007.
New Accounting Pronouncements
On February 16,
2006, the FASB issued FASB Statement No. 155, Accounting for Certain
Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and
140 (FAS 155). FAS 155 amends FASB Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities and FASB Statement No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities. We adopted FAS 155 as
of July 1, 2007, and such adoption did not have any impact on our
financial position, results of operations or cash flows.
In June 2006, the FASB
issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes
an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprises financial statements
in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and
measurement attribute for financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. We
adopted FIN 48 as of July 1, 2007, and such adoption had no impact on our
financial position, results of operations or cash flows.
At the date of the
adoption, there were no unrecognized tax benefits and consequently no related
interest and penalties. The significant
jurisdictions in which we file tax returns and are subject to tax include New
York City, Venezuela and Puerto Rico.
The significant jurisdictions in which our corporate subsidiaries file
tax returns and are subject to tax include the United States and Canada. The tax returns filed in the United States
and state jurisdictions are subject to examination for the years 2004 through
2007 and in foreign jurisdictions for the years 2005 through 2007. We have adopted a policy to record tax
related interest and penalties under interest expense and general and
administrative expenses, respectively.
In September 2006, the
FASB issued FASB Statement No. 157, Fair Value Measurements (FAS 157). FAS 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles,
and expands disclosures about fair value measurements. FAS 157applies under other accounting
pronouncements that require or permit fair value measurements. FAS 157 is effective for fiscal years
beginning after November 15, 2007, and we are currently analyzing its impact,
if any.
Forward-looking Statements
Statements included in this Form 10-Q that are not
historical facts (including statements concerning plans and objectives of
management for future operations or economic performance, or assumptions
related thereto) are forward-looking statements. In addition, we may from time to time make
other oral or written statements that are also forward-looking statements.
Forward-looking statements appear in a number of
places in this Form 10-Q and include statements with respect to, among other
things:
our ability to pay distributions;
planned capital expenditures and availability of
capital resources to fund capital expenditures;
our expected cost of complying with OPA 90;
estimated future expenditures for drydocking and
maintenance of our tank vessels operating capacity;
our plans for the retirement or retrofitting of tank
vessels and the expected delivery, and cost, of newbuild or retrofitted
vessels;
the integration of acquisitions of tank barges and
tugboats, including the timing, cost and effects thereof;
20
expected demand in the domestic tank vessel market in
general and the demand for our tank vessels in particular;
the adequacy and availability of our insurance and the
amount of any capital calls;
expectations regarding litigation;
the effect of new or existing regulations or
requirements on our financial position;
our future financial condition or results of
operations and our future revenues and expenses;
our business strategies and other plans and objectives
for future operations;
our future financial exposure to lawsuits currently
pending against EW Transportation LLC and its predecessors; and
any other statements that are not historical facts.
These forward-looking statements are made based upon
managements current plans, expectations, estimates, assumptions and beliefs
concerning future events and, therefore, involve a number of risks and
uncertainties. We caution that
forward-looking statements are not guarantees and that actual results could
differ materially from those expressed or implied in the forward-looking
statements.
Important factors that could cause our actual results
of operations or our actual financial condition to differ include, but are not
limited to:
insufficient cash from operations;
a decline in demand for refined petroleum
products;
a decline in demand for tank vessel
capacity;
intense competition in the domestic tank
vessel industry;
the occurrence of marine accidents or
other hazards;
the loss of any of our largest customers;
fluctuations in voyage charter rates;
delays or cost overruns in the
construction of new vessels or the retrofitting or modification of older
vessels;
difficulties in integrating acquired
vessels into our operations;
failure to comply with the Jones Act;
modification or elimination of the Jones
Act;
adverse developments in our marine
transportation business; and
the other factors set forth under the
caption Item 1A. Risk Factors in our Annual Report on Form 10-K for the
fiscal year ended June 30, 2007.
Item 3. Quantitative and Qualitative Disclosures
about Market Risk.
Our
primary market risk is the potential impact of changes in interest rates on our
variable rate borrowings. After
considering the interest rate swap agreements discussed below, as of September
30, 2007 approximately $132.5 million of our long-term debt bears interest at
fixed interest rates ranging from 5.87% to 6.81%. Borrowings under our credit agreement and
certain other term loans, totaling $200.9 million at September 30, 2007, bear interest
21
at a floating rate based on LIBOR which will subject
us to increases or decreases in interest expense resulting from movements in
that rate. Based on our total
outstanding floating rate debt as of September 30, 2007, the impact of a 1%
change in interest rates would result in a change in interest expense, and a
corresponding impact on income before income taxes, of approximately
$2.0 million annually.
As of September 30, 2007,
we had three outstanding interest rate swap agreements which expire over the
periods from 2012 to 2018, concurrently with the hedged loans. As of September 30, 2007, the notional amount
of the swaps was $98.2 million, we were paying a weighted average fixed rate of
6.63%, and we were receiving a weighted average variable rate of 6.48%. The primary objective of these contracts is
to reduce the aggregate risk of higher interest costs associated with variable
rate debt. The interest rate swap
contracts we hold have been designated as cash flow hedges and, accordingly,
gains and losses resulting from changes in the fair value of these contracts
are recognized as other comprehensive income as required by Statement of
Financial Accounting Standards No. 133.
We are exposed to credit related losses in the event of non-performance
by counterparties to this instrument; however, the counterparties are major
financial institutions and we consider such risk of loss to be minimal. We do not hold or issue derivative financial
instruments for trading purposes.
Item 4. Controls
and Procedures.
In accordance with Exchange Act Rules 13a-15 and
15d-15, we carried out an evaluation, under the supervision and with the
participation of management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of September 30, 2007.
There has been no change in our internal control over
financial reporting that occurred during the three months ended September 30,
2007 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
PART II
OTHER INFORMATION
Item 1. Legal
Proceedings.
There have been no material changes to our legal
proceedings as disclosed in Part I Item 3. Legal Proceedings in our Annual
Report on Form 10-K for the fiscal year ended June 30, 2007.
Item 1A. Risk Factors.
In
addition to the other information set forth in this report, you should
carefully consider the factors discussed in Part I - Item 1A. Risk Factors in our Annual Report on Form
10-K for the fiscal year ended June 30, 2007, which could materially affect our
business, financial condition, results of operations, cash flows or
prospects. The risks described in our
Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not
currently known to us or that we currently deem to be immaterial also may
materially adversely affect our business, financial condition, results of
operations, cash flows or prospects.
Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults
Upon Senior Securities.
Not applicable.
Item 4. Submission
of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other
Information.
Not applicable.
22
Item 6.
|
Exhibits.
|
|
|
Exhibit
Number
|
|
Description
|
31.1
|
|
Sarbanes-Oxley
Act Section 302 Certification of Timothy J. Casey.
|
|
|
|
31.2
|
|
Sarbanes-Oxley
Act Section 302 Certification of John J. Nicola.
|
|
|
|
32.1
|
|
Sarbanes-Oxley
Act Section 906 Certification of Timothy J. Casey.
|
|
|
|
32.2
|
|
Sarbanes-Oxley
Act Section 906 Certification of John J. Nicola.
|
|
|
|
|
* Incorporated by reference, as
indicated.
23
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
|
K-SEA
TRANSPORTATION PARTNERS L.P.
|
|
|
|
|
By:
|
K-SEA GENERAL
PARTNER L.P.,
|
|
|
|
its general
partner
|
|
|
|
|
By:
|
K-SEA GENERAL
PARTNER GP LLC,
|
|
|
|
its general
partner
|
|
|
Date: November 9,
2007
|
|
By:
|
/s/ Timothy J.
Casey
|
|
|
|
Timothy J. Casey
|
|
|
|
President and
Chief Executive
|
|
|
|
Officer
(Principal Executive Officer)
|
|
|
Date: November 9,
2007
|
|
By:
|
/s/ John J.
Nicola
|
|
|
|
John J. Nicola
|
|
|
|
Chief Financial
Officer (Principal
|
|
|
|
Financial and
Accounting Officer)
|
|
|
|
|
|
|
|
24
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