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This excerpt taken from the KSP 10-Q filed Feb 10, 2005. Six Months Ended December 31, 2004 Compared to Six Months Ended December 31, 2003
Net Voyage Revenue
Voyage revenue was $56.0 million for the six months ended December 31, 2004, an increase of $12.6 million, or 29%, as compared to voyage revenue of $43.4 million for the six months ended December 31, 2003. Voyage expenses were $11.1 million for the six-months ended December 31, 2004, an increase of $3.6 million (47%) compared to voyage expenses of $7.5 million incurred for the six-months ended December 31, 2003.
Net voyage revenue was $44.9 million for the six months ended December 31, 2004, which exceeded net voyage revenue of $35.9 million for the six months ended December 31, 2003 by $9.0 million, or 25%. In our coastwise trade, net voyage revenue was $33.7 million for the six months ended December 31, 2004, an increase of $8.6 million, or 34%, as compared to $25.1 million for the six months ended December 31, 2003. Net utilization in our coastwise trade was 89% for the six-months ended December 31, 2004 compared to 88% for the six-months ended December 31, 2003. Increases in coastwise net voyage revenue were positively impacted by an increase in days worked by our vessels, as follows: (1) a full quarter’s operation of the DBL 102, construction of which was completed and the vessel placed in service in January 2004, (2) a full quarter’s operation of the DBL 140, which was purchased in January 2004, (3) a full quarter’s operation of the DBL 105, which completed its modification for petroleum transportation and was placed in service in May 2004, and (4) the return of the KTC 80 from bareboat charter in November 2003. These increases were partially offset by the sale of the KTC 135 in April 2004 in anticipation of its OPA 90 phase-out, almost two months of drydocking of one integrated tug/barge unit in anticipation of its entering into a new three-year time charter that commenced in January 2005, and a longer than anticipated break-in period for a recently delivered barge. Coastwise net voyage revenue also benefited from a 13% increase in average daily rates to $11,123 for the six months ended December 31, 2004 from $9,833 for the six
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months ended December 31, 2003. Average daily rates were positively impacted by the continuing strong demand for petroleum products, increasing oil prices, and the addition of the several larger vessels described above, which generate higher average daily rates.
Net voyage revenue in our local trade for the six months ended December 31, 2004 increased by $0.4 million, or 4%. Net utilization in our local trade was 77% for the six-months ended December 31, 2004 compared to 85% for the six-months ended December 31, 2003, adversely impacted by higher unscheduled repair days for one of our small tankers. Average daily rates in our local trade, however, improved 8% to $5,535 for the six months ended December 31, 2004 from $5,105 for the six-months ended December 31, 2003, positively impacted by additional short-term work for a customer in the Northeast and strong overall customer demand.
Bareboat Charter and Other Revenue
Bareboat charter and other revenue was $0.9 million for the six months ended December 31, 2004, compared to $1.1 million for the six months ended December 31, 2003. The fiscal 2004 period included $0.3 million of revenue generated from chartering out the KTC 80, which was redelivered to us in November 2003.
Vessel Operating Expenses
Vessel operating expenses were $23.5 million for the six months ended December 31, 2004, an increase of $4.5 million, or 23%, as compared to $19.0 million for the six months ended December 31, 2003. Vessel operating expenses as a percentage of net voyage revenue decreased to 52.3% for the six months ended December 31, 2004 from 53.0% for the six months ended December 31, 2003. Vessel labor and related costs increased 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, and an additional tugboat purchased in January 2004. Outside towing expense increased by $2.1 million due to the need for additional tugboats to satisfy increased demand for our tank vessels, and to replace certain tugboats during re-powering projects.
Depreciation and Amortization
Depreciation and amortization was $10.3 million for the six months ended December 31, 2004, an increase of $2.0 million compared to $8.3 million for the six months ended December 31, 2003. The increase resulted from additional depreciation on our newbuild and purchased vessels as described above, plus additional depreciation to reduce the salvage value for the two single-hull vessels which phased out on December 31, 2004.
General and Administrative Expenses
General and administrative expenses were $4.5 million for the six months ended December 31, 2004, an increase of $0.7 million, or 20%, as compared to general and administrative expenses of $3.8 million for the six months ended December 31, 2003. As a percentage of net voyage revenue, general and administrative expenses decreased to 10.1% for the six months ended December 31, 2004 from 10.6% for the first half of fiscal 2004. The fiscal 2005 second quarter included $0.7 million in additional expenses relating to our new reporting and other requirements as a publicly traded partnership that we did not incur in the comparative prior year period.
Interest Expense, Net
Net interest expense was $2.7 million for the six months ended December 31, 2004, or first quarter of fiscal 2005, or $1.6 million lower than the six months ended December 31, 2003. The decrease resulted from the significant reduction of higher cost debt in connection with our initial public offering in January 2004.
Provision For Income Taxes
Our interim provisions for income taxes are based on our estimated annual effective tax rate. For the six months ended December 31, 2004, this rate was 6.0% as compared to a rate of 15.0% for the six months ended December 31, 2003, which related to the Predecessor. Our effective tax rate comprises the New York City Unincorporated Business Tax on our operating partnership, plus federal, state and local corporate income taxes on
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the taxable income of our operating partnership’s corporate subsidiary. Our effective tax rate for the quarter ended December 31, 2004 was lower than the Predecessor’s for the comparable prior year period because a smaller portion of our pretax income was provided by our operating partnership’s corporate subsidiaries.
Net Income
Net income was $4.5 million for the six months ended December 31, 2004, an increase of $3.0 million compared to net income of $1.5 million for the six months December 31, 2003. The increase resulted primarily from the $1.5 million increase in operating income and the $1.6 million decrease in interest expense described above.
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