K-Sea plans to apply all available cash flow toward debt reduction

By Jennifer Lanning Drey

Portland, Ore., Jan. 28 - K-Sea Transportation Partners LP will apply all of its available cash flow toward reducing debt until the company sees clear evidence that an upturn is at hand, Timothy Casey, chief executive officer of K-Sea, said Thursday during the company's earnings conference call for the second quarter of fiscal 2010.

Accordingly, the company did not declare a distribution for the period.

"This was not an easy decision but one we believe is in the best interest of our partnership and unit holders," Casey said.

"Our issue right now is just that we do not have a lot of long-term visibility into how the markets are going to treat us," he later added during the question-and-answer session.

K-Sea will reinstate the distribution when it believes there is more visibility into its markets, he said.

For the second quarter, K-Sea posted $15.9 million of EBITDA, excluding a non-recurring charge of $1.7 million on the purchase of its Norfolk wastewater treatment facility. The figure was down 31% from EBITDA of $23.1 million posted in the same period of 2008.

Operating income was $1.3 million for the second quarter, a decrease of $8.1 million, compared to operating income of $9.4 million for the prior-year period.

K-Sea said declining refinery utilization caused its vessel usage in the second quarter to be at about the lowest level seen in the last 10 years.

The company's short-term strategy looks to employ its vessels in adjacent markets that the company has not serviced in several years, further rationalize its asset base and eliminate unproductive assets, Casey said during the call.

K-Sea will also continue to focus on reducing expenses, he said.

As previously reported, K-Sea announced on Jan. 22 that it had amended its revolving credit facility, reducing the size to $175 million from $200 million, revising the maturity to July 1, 2012 from Aug. 14, 2014, raising pricing and modifying covenants.

K-Sea is an East Brunswick, N.J.-based tank barge operator.

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