K-Sea Transportation Partners L.P. F3Q10 (Qtr End 03/31/10 Earnings Call Transcript
K-Sea Transportation Partners L.P. (KSP)
F3Q10 (Qtr End 03/31/10 Earnings Call
April 29, 2010 9:00 am ET
Executives
Jim Dowling - Chairman
Tim Casey - President and CEO
Terrence Gill - CFO
Analysts
Todd Fowler - KeyBanc Capital
Darren Horowitz -Raymond James
Erwin Levy - Henry Corp
Ron Londe - Wells Fargo
Selman Akyol - Stifel Nicolaus
Presentation
Operator
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Welcome to the fiscal third second quarter 2010 K-Sea Transportation Partners earnings call. My name is Solomon and I will be your event manager today. (Operator Instructions)
Now I would like to hand the conference over to your, Terrence Gill, Chief Financial Officer. Please proceed sir.
Terrence Gill
Good morning everyone and welcome to the K-Sea Transportation Partners third quarter fiscal 2010 investors and analysts call. Our Chairman, Jim Dowling, and our President and CEO, Tim Casey will join me today. Following a few comments by Tim and me, we will be available for questions.
As always, I must first remind you that this presentation contains forward-looking statements, which include any statements that are not historical facts and that these statements involve risks and uncertainties as detailed in our filings with the Securities and Exchange Commission that we suggest you read. If one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual outcomes may vary materially from those forecasted or expected. We disclaim any intention or obligation to update publicly or revise such statements whether as a result of new information, future events or otherwise.
Now, on to the fiscal 2010 third quarter results. Earnings before interest, taxes, depreciation and amortization or EBITDA was $9.1 million, for the quarter ended March 31, 2010 a $13.3 million decrease as compared to $22.4 million for the third fiscal quarter of 2009.
Seasonal demand for our services is always lowest during our third fiscal quarter due to the slowdown in the Alaskan and Great Lakes markets. EBITDA for the third quarter of fiscal 2010 was impacted negatively by a $16.9 decrease in net voyage revenue, resulting from 1182 fewer working days as compared to the prior year's third quarter.
As a reminder, we announced last fall we would be retiring our single-hull vessels and the decrease in single-hull working days accounted for 604 or more than half of the total decrease in days. As of today, we are down to only five single-hull vessels from 18 a year ago with any significant employment.
The net utilization on the remaining fleet decreased mainly attributable to sixteen fewer long-term time charters and plays as compared to the prior year’s third quarter. This amounted to approximately one million barrels of capacity or 25% of our fleet.
These vessels that can off charter were employed in a weak spot market and experienced reduced rates and far lower utilization. As market conditions continue to struggle and vessel availability within the industry remains ample, our customers are not seeking to commit to long-term charters at this time.
Net utilization for the quarter was also negatively impacted by an extensive number of drydocking days in which we lost 320 days due to shipyard, a 127 more days than the third fiscal quarter of 2009. More than 85% of these shipyard days took place in our larger coastwise vessels.
We expect to see a significant decrease in drydocking days in the fiscal 2010 fourth quarter and in line with the amount of days as compared to the prior year’s fourth fiscal quarter.
The average daily rate for the fiscal 2010 third quarter, which reflected the positive impact of our new build 185,000 barrel, ATB and the exclusion of recently retired single-hulls was 11,259 relatively flat from last quarter.
Our vessel operating expenses for the fiscal 2010 third quarter was lower than the fiscal 2009 third quarter by $3.4 million. This decrease occurred despite an additional $1.3 million in lease expense incurred from five sale-lease back transactions completed in June 2009.
We also experienced a general and administrative expense of $0.8 million as compared to the prior year's second quarter. Although there is some seasonality our quarterly general and administrative expenses peaked at $8 million in the September 30, 2008 quarter.
Fiscal 2010 third quarter, general and administrative expenses of $6.7 million are 16% below our peak level. The company continues its committed effort to reduce overall cost.
I’ll now turn the presentation over to our President and CEO, Tim Casey.
Tim Casey
Thank you, Terry, and good morning, everyone. In the second half of fiscal 2008 the slowing economies start to impact the slope of our long-term growth trajectory. However, with over 80% of our fleet on term contracts averaging 2.5 years we felt the company would be relatively insulated from the slow down and our growth path would [preserve]. Unfortunately we were wrong, for K-Sea’s business economic weakness in the energy market continued through o calendar 2009. Particularly in the last four months of the year and through the first calendar quarter of this year. For us the recession was very deep and prolonged and the decline in 2008 and 2009 wiped out about 10% of US petroleum demand or about 2 million barrels a day.
Across the board, petroleum refiner's margins came under severe pressure owing to the high price of crude oil and the inability to raise refined product prices efficiently to offset the price of crude. To ease their profit squeeze the refiners cut utilization and actually shut some capacity both temporarily and permanently.
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