Wednesday, K-Sea Transportation Partners LP (KSP) slipped to a loss for the first quarter from a profit in the year-ago period due primarily to lower voyage revenue and higher depreciation and amortization expenses. K-Sea shares are trading down more than 30% after the company said it will not be complying with its financial covenants for the second and third quarter of fiscal 2010.
Net loss was $5.2 million or $0.29 per unit, compared to net income of $3.9 million or $0.19 per unit in the year-ago period. Analysts polled by Thomson Reuters expected earnings of $0.29 for the quarter. Analysts' estimates typically exclude one-time items.
Revenue from voyages, transporting petroleum products, decreased to $66.42 million from $84.64 million; bringing down total revenue to $70.60 million from $91.49 million in the prior-year period. Wall Street analysts expected revenues of $80.63 million.
Total operating expenses declined to $71.87 million from $81.60 million in the prior-year period. General and administrative expenses decreased to $6.97 million from $7.96 million in the year-ago period. However, depreciation and amortization expenses were higher at $18.92 million compared with $12.77 million in the year-earlier quarter.
The company reported an operating loss of $1.3 million, including an asset impairment charge of $5.9 million on commercially-obsolete single-hulls, which will be phased out by 2014 as customers prefer double-hulled vessels. Operating income, before asset impairment charges, was $4.6 million, a decrease of $5.3 million, or 54%, from $9.89 million in the year-ago period.
The absence of any meaningful recovery in petroleum demand is causing further reductions in refinery utilization and waterborne product movements, including a reduction in the number of new term charters, said the company.
While K-Sea would pay future obligations on its debt and leases, it said that it would not be in compliance with its financial covenants at the end of second or third quarter of fiscal 2010 and would try to amend these covenants.
The company has also announced quarterly distribution of $0.45 per unit or $1.80 per unit annualized, compared to the previous distribution of $0.77 per unit; payable om November 16, 2009 to unitholders on record as of November 9, 2009.
KSP is currently trading at $14.86, down $7.59, on the NYSE.
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