KSP » Topics » Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007

These excerpts taken from the KSP 10-Q filed Feb 9, 2009.

Three Months Ended December 31, 2008 Compared to Three Months Ended December 31, 2007

 

Voyage Revenue and Voyage Expenses

 

Voyage revenue was $83.0 million for the three months ended December 31, 2008, an increase of $2.6 million, or 3.2%, as compared to voyage revenue of $80.4 million for the three months ended December 31, 2007.  Voyage expenses were $19.5 million for the three months ended December 31, 2008, a decrease of $0.1 million, or 0.5%, as compared to voyage expenses of $19.6 million for the three months ended December 31, 2007.

 

Net voyage revenue

 

Net voyage revenue was $63.6 million for the three months ended December 31, 2008, which exceeded net voyage revenue of $60.8 million for the three months ended December 31, 2007 by $2.8 million, or 4.6%.  In our coastwise trade, net voyage revenue was $50.1 million for the three months ended December 31, 2008, an increase of $1.9 million, or 3.9%, as compared to $48.2 million for the three months ended December 31, 2007.  Net utilization in our coastwise trade was 91% for the three months ended December 31, 2008 as compared to 89% for the three-month period ended December 31, 2007.  The net voyage revenue increase of $1.9 million for the three months ended December 31, 2008,  was attributable to the delivery of two of our newbuild barges (1) the DBL 77, which began operations in July 2008, and (2) the DBL 76, which began operations in November 2008. Net utilization during the three months ended December 31, 2008 increased as a result of decreased scheduled drydocking days.  Coastwise average daily rates decreased 3.0% to $13,151 for the three months ended December 31, 2008 from $13,556 for the three months ended December 31, 2007. The decrease in coastwise average daily rates is primarily due to a $1.2 million write-down in the carrying value of fuel inventory used to operate our tugboats in the second quarter of fiscal 2009.

 

Net voyage revenue in our local trade for the three months ended December 31, 2008 increased by $0.9 million, or 7.1%, to $13.5 million from $12.6 million for the three months ended December 31, 2007.  Local net voyage revenue increased by $1.0 million during the three months ended December 31, 2008 due to the increased number of working days for the newbuild barges, DBL 24 and DBL 25, which were delivered in December 2007 and March 2008, respectively. Net utilization in our local trade was 83% for the three months ended December 31, 2008, compared to 81% for the three months ended December 31, 2007. Average daily rates in our local trade increased 10.9% to $7,493 for the three months ended December 31, 2008 from $6,759 for the comparative prior year period as a result of higher spot market rates on certain clean oil vessels due to an earlier winter season than the comparative prior year period as well higher rates on certain newbuild vessels.

 

Bareboat Charter and Other Revenue

 

Bareboat charter and other revenue was $5.2 million for the three months ended December 31, 2008, compared to $3.3 million for the three months ended December 31, 2007.  Of this $1.9 million increase, $1.8 million was attributable to increased towing revenue from the purchase of eight tugboats in June 2008.

 

Vessel Operating Expenses

 

Vessel operating expenses were $38.3 million for the three months ended December 31, 2008 compared to $32.4 million for the three months ended December 31, 2007, an increase of $5.9 million. Voyage and vessel operating expenses as a percentage of total revenues were 65.4% for the three months ended December 31, 2008 and 62.2% for the three months ended December 31, 2007.  Vessel labor and related costs for the three months ended December 31, 2008 increased $5.5 million as a result of a contractual labor rate increase reflected in our new two year labor contract with certain of our vessel employees and a higher average number of employees due to the operation of the additional barges and tugboats described under “—Net voyage revenue” and “—Bareboat Charter and Other Revenue” above.  Other vessel operating costs increased $0.4 million for the three months ended December 31, 2008, which was attributable to an increase in vessel insurance premiums of $2.8 million due an increased number of vessels and rate increases, including $2.3 million relating to the additional insurance call described in “—Significant Events” above, and an increase of $0.1 million relating to fuel and other costs. Such increases were partially offset by a decrease of $1.9 million in outside towing expenses as a result of the purchase of eight additional tug boats in June 2008 and a decrease of $0.4 million for repairs, maintenance, supplies and parts.

 

Depreciation and Amortization

 

Depreciation and amortization was $13.8 million for the three months ended December 31, 2008, an increase of $1.7 million, or 14.0%, compared to $12.1 million for the three months ended December 31, 2007.  Of this $1.7

 

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million increase, $0.9 million was attributable to depreciation on newbuilds and purchased vessels during fiscal years 2008 and 2009, and $2.3 million relates to increased drydocking amortization, partially offset by a decrease of $1.6 million due to the change in estimated useful lives of our vessels and salvage values as described under “—Significant Events” above.

 

General and Administrative Expenses

 

General and administrative expenses were $7.4 million for the three months ended December 31, 2008, an increase of $0.1 million, or 1.4%, as compared to $7.3 million for the three months ended December 31, 2007.  The $0.1 million increase for the three months ended December 31, 2008 is primarily the result of increased personnel costs resulting from increased annual salaries.  As a percentage of total revenues, general and administrative expenses were 8.4% for the three month period ended December 31, 2008 and 8.7% for the three month period ended December 31, 2007.

 

Interest Expense, Net

 

Net interest expense was $5.5 million for the three months ended December 31, 2008, or $0.2 million higher than the $5.3 million incurred in the three months ended December 31, 2007.  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, offset by lower average interest rates.

 

Provision for Income Taxes

 

Our interim provisions for income taxes are based on our estimated annual effective tax rate.  For the three months ended December 31, 2008, our effective tax rate was 3.2% as compared to a rate of 3.0% for the three months ended December 31, 2007.  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 partnership’s corporate subsidiaries.  Our effective tax rate for the quarter ended December 31, 2008 was higher than the comparable prior year period primarily due to a discrete item related to unit compensation costs.

 

Net income

 

Net income was $3.6 million for the three months ended December 31, 2008; a decrease of $5.4 million compared to net income of $9.0 million for the three months ended December 31, 2007.  This decrease resulted primarily from a $3.0 million decrease in operating income, a $2.3 million decrease in other expense (income), and a $0.2 million increase in interest expense.

 

Six Months Ended December 31, 2008 Compared to Six Months Ended December 31, 2007

 

Voyage Revenue and Voyage Expenses

 

Voyage revenue was $167.7 million for the six months ended December 31, 2008; an increase of $18.3 million, or 12.2%, as compared to voyage revenue of $149.4 million for the six months ended December 31, 2007.  Voyage expenses were $43.0 million for the six months ended December 31, 2008, an increase of $7.6 million, or 21.5%, as compared to voyage expenses of $35.4 million for the six months ended December 31, 2007.

 

Net voyage revenue

 

Net voyage revenue was $124.7 million for the six months ended December 31, 2008, which exceeded net voyage revenue of $114.0 million for the six months ended December 31, 2007 by $10.7 million, or 9.4%.  In our coastwise trade, net voyage revenue was $98.0 million for the six months ended December 31, 2008, an increase of $9.6 million, or 10.9%, as compared to $88.4 million in the six months ended December 31, 2007.  The acquisition of the Smith Maritime Group in August 2007 resulted in increased coastwise net voyage revenue of $3.5 million.  Net voyage revenue increased by an additional $6.0 million for the six months ended December 31, 2008 due to an increase in the number of working days for (1) the DBL 77, which began operations in July 2008, (2) the DBL 101, which was in the shipyard for an extended period in fiscal 2008, (3) the DBL 76, which began operations in November 2008, and (4) the Washington, which was placed in service in July 2008.  Net utilization in our coastwise trade was 90% for each of the six-month periods ended December 31, 2008 and 2007.  Average daily rates in the coastwise trade decreased 3.0% to $13,090 for the six months ended December 31, 2008 from $13,497 for the six months ended December 31, 2007. The decrease in coastwise average daily rates in the six months ended December 31, 2008 is primarily due to lower average rates of certain vessels operated in the Gulf of

 

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Mexico as a result of lost time related to Hurricanes Gustav and Ike and a $2.0 million write-down in the carrying value of fuel inventory used to operate our tugboats.

 

Net voyage revenue in our local trade for the six months ended December 31, 2008 increased by $1.1 million, or 4.3%, to $26.7 million from $25.6 million for the six months ended December 31, 2007.  Local net voyage revenue increased by $2.9 million during the six months ended December 31, 2008 due to the increased number of working days for the newbuild barges DBL 23, DBL 24 and DBL 25, which were delivered in September 2007, December 2007, and March 2008, respectively.  This increase was offset by a decrease in local net voyage revenue of $2.0 million due to the retirement of three single-hull vessels. Net utilization in our local trade was 82% for the six months ended December 31, 2008 as compared to 79% for the six months ended December 31, 2007; this increase was mainly due to fewer scheduled drydocking days.  Average daily rates in our local trade increased 7.7% to $7,355 for the six months ended December 31, 2008 from $6,832 for the comparative prior year due to higher spot market rates on certain clean oil vessels due to an earlier winter season than the comparative prior year period as well higher rates on certain newbuild vessels.

 

Bareboat Charter and Other Revenue

 

Bareboat charter and other revenue was $12.1 million for the six months ended December 31, 2008, compared to $6.1 million for the six months ended December 31, 2007.  Of this $6.0 million increase, $4.9 million was attributable to increased revenue from the purchase of eight tugboats in June 2008 and $1.1 million was a result of the Smith Maritime Group acquisition.

 

Vessel Operating Expenses

 

Vessel operating expenses were $75.3 million for the six months ended December 31, 2008 compared to $59.9 million for the six months ended December 31, 2007, an increase of $15.4 million.  Voyage and vessel operating expenses as a percentage of total revenues increased to 65.8% for the six months ended December 31, 2008 from 61.3% for the six months ended December 31, 2007.  Vessel labor and related costs for the six months ended December 31, 2008 increased $12.5 million as a result of a contractual labor rate increase reflected in our new two year labor contract with certain of our vessel employees and a higher average number of employees due to the operation of the additional barges and tugboats described under “—Net voyage revenue” and “—Bareboat Charter and Other Revenue” above.  Other vessel operating costs increased $2.9 million for the six months ended December 31, 2008. This increase is primarily comprised of a $1.2 million increase in repairs, maintenance, supplies and parts, a $1.0 million increase in fuel and other costs associated with the purchase of eight additional tug boats in June 2008 and a $3.7 million increase in vessel insurance premiums due to an increased number of vessels and rate increases, including $2.3 million relating to the additional insurance call described in “—Significant Events” above. Such increases were partially offset by a decrease of $3.4 million in outside towing expenses as a result of the purchase of eight additional tug boats in June 2008.

 

Depreciation and Amortization

 

Depreciation and amortization was $26.5 million for the six months ended December 31, 2008, an increase of $4.1 million, or 18.3%, compared to $22.4 million for the six months ended December 31, 2007.  Of this $4.1 million increase, $3.0 million was attributable to depreciation on newbuilds and purchased vessels during fiscal years 2008 and 2009 and $3.7 million relates to increased drydocking amortization, partially offset by a decrease of $3.3 million due to the change in estimated useful lives of our vessels and salvage values as described under “—Significant Events” above.

 

General and Administrative Expenses

 

General and administrative expenses were $15.4 million for the six months ended December 31, 2008, an increase of $1.8 million, as compared to general and administrative expenses of $13.6 million for the six months ended December 31, 2007.  The $1.8 million increase for the six months ended December 31, 2008 is primarily the result of increased personnel costs resulting from increased headcount to support our growth and the additional facilities costs of our new offices in Hawaii and Seattle. As a percentage of total revenues, general and administrative expenses decreased to 8.5% for the six months ended December 31, 2008 from 8.7% for the six months ended December 31, 2007.

 

Interest Expense, Net

 

Net interest expense was $11.4 million for the six months ended December 31, 2008, or $0.2 million higher than the $11.2 million incurred in the six months ended December 31, 2007.  The increase resulted from higher average

 

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debt balances resulting from increased credit line and term loan borrowings in connection with our acquisitions and newbuild vessels, offset by lower average interest rates.

 

Provision for Income Taxes

 

Our interim provisions for income taxes are based on our estimated annual effective tax rate.  For each of the six month periods ended December 31, 2008 and 2007, our effective tax rate was 3.3%. 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 partnership’s corporate subsidiaries.

 

Net Income

 

Net income was $7.5 million for the six months ended December 31, 2008, a decrease of $7.5 million compared to net income of $15.0 million for the six months ended December 31, 2007.  This decrease resulted primarily from a $5.2 million decrease in operating income, a $2.3 million decrease in other (income) expense and a $0.2 million increase in interest expense, partially offset by a $0.2 million decrease in income taxes.

 

This excerpt taken from the KSP 10-Q filed Nov 10, 2008.

Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007

 

Voyage Revenue and Voyage Expenses

 

Voyage revenue was $84.6 million for the three months ended September 30, 2008, an increase of $15.7 million, or 23%, as compared to voyage revenue of $68.9 million for the three months ended September 30, 2007.  Voyage expenses were $23.5 million for the three months ended September 30, 2008, an increase of $7.8 million, or 50%, as compared to voyage expenses of $15.7 million for the three months ended September 30, 2007.

 

Net voyage revenue

 

Net voyage revenue was $61.1 million for the three months ended September 30, 2008, which exceeded net voyage revenue of $53.2 million for the three months ended September 30, 2007 by $7.9 million, or 15%.  In our coastwise trade, net voyage revenue was $47.9 million, an increase of $7.7 million, or 19%, as compared to $40.2 million for the three months ended September 30, 2007, $5.8 million of which was due to the inclusion of the Smith Maritime Group for a full quarter.  Net utilization in our coastwise trade was 89% and 91% for the three-month periods ended September 30, 2008 and 2007, respectively.  Net voyage revenue in our coastwise trade for the three months ended September 30, 2008  increased by $1.3 million due to the DBL 77, which began operations in July 2008. Coastwise average daily rates decreased 3% to $13,027 for the three months ended September 30, 2008 from $13,427 for the three months ended September 30, 2007. The decrease in coastwise average daily rates is primarily due to lower average rates of certain vessels operated in the Gulf of Mexico as a result of Hurricanes Gustav and Ike.

 

Net voyage revenue in our local trade for the three months ended September 30, 2008 increased by $0.2 million, or 2%, to $13.2 million from $13.0 million for the three months ended September 30, 2007.  Local net voyage revenue increased by $1.7 million during the three months ended September 30, 2008 due to the increased number of working days for the new-build barges DBL 23, DBL 24 and DBL 25, which were delivered in September 2007, December 2007, and March 2008, respectively. This increase was offset by a decrease in local net voyage revenue of $1.7 million due to the retiring of three single-hull vessels. Net utilization in our local trade was 81% for the three months ended September 30, 2008, compared to 76% for the three months ended September 30, 2007.  Average daily rates in our local trade increased 5% to $7,219 for the three months ended September 30, 2008 from $6,904 for the comparative prior year period.

 

Bareboat Charter and Other Revenue

 

Bareboat charter and other revenue was $6.9 million for the three months ended September 30, 2008, compared to $2.8 million for the three months ended September 30, 2007.  Of this $4.1 million increase, $1.2 million was a result of the Smith Maritime Group acquisition, and $3.1 million was attributable to increased revenue from the purchase of eight tugboats in June 2008. This was partially offset by a $0.3 million decrease relating to our water treatment plant in Norfolk.

 

Vessel Operating Expenses

 

Vessel operating expenses were $37.1 million for the three months ended September 30, 2008 compared to $27.5 million for the three months ended September 30, 2007, an increase of $9.6 million. Vessel labor and related costs for the three months ended September 30, 2008 increased $7.0 million as a result of a contractual labor rate increase reflected in our new two year labor contract with certain of our vessel employees and a higher average number of employees due to the operation of the additional barges and tugboats described under “—Net voyage revenue” and “—Bareboat Charter and Other Revenue” above.  Other vessel operating costs increased $2.6 million for the three months ended September 30, 2008. This increase is primarily comprised of a $1.6 million increase in repairs and maintenance,  supplies and parts which is due to the inclusion of the Smith Maritime Group for a full quarter, a $0.9 million increase in fuel and other costs associated with the purchase of eight additional tug boats in June 2008 and a $0.8 million increase in vessel insurance premiums due to both rate increases and the increased number of vessels under the policies relating to the aforementioned acquisitions. Such increases were partially offset by a decrease of $1.5 million in outside towing expenses as a result of the purchase of eight additional tug boats in June 2008.

 

Due to the factors described above, voyage and vessel operating expenses as a percentage of total revenues increased to 66.2% for the three months ended September 30, 2008 from 60.3% for the three months ended September 30, 2007.

 

Depreciation and Amortization

 

Depreciation and amortization was $12.8 million for the three months ended September 30, 2008, an increase of $2.5 million, or 24%, compared to $10.3 million for the three months ended September 30, 2007.  Depreciation and drydocking amortization on our newbuild and purchased vessels increased by $4.1 million, which was partially offset by $1.6 million due to the change in estimated useful lives of our vessels and salvage values as described under “—Significant Events”  above.

 

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General and Administrative Expenses

 

General and administrative expenses were $8.0 million for the three months ended September 30, 2008, an increase of $1.7 million, or 27%, as compared to general and administrative expenses of $6.3 million for the three months ended September 30, 2007.  As a percentage of total revenues, general and administrative expenses were 8.7% and 8.8% for the three month periods ended September 30, 2008 and 2007, respectively.  The $1.7 million increase for the three months ended September 30, 2008 is primarily the 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 $5.9 million for the three months ended September 30, 2008, or $0.1 million higher than the $5.8 million incurred in the three months ended September 30, 2007.  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, offset by lower average interest rates.

 

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, 2008, this rate was 3.4% as compared to a rate of 3.7% for the three months ended September 30, 2007.  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 partnership’s corporate subsidiaries.  Our effective tax rate for the quarter ended September 30, 2008 was lower than the comparable prior year period primarily due to a smaller portion of our pre-tax income for the three months ended September 30, 2008 being attributable to our foreign subsidiaries, which are taxed at a higher rate than our effective tax rate.

 

Net income

 

Net income was $3.9 million for the three months ended September 30, 2008, a decrease of $2.1 million, or 35%, compared to net income of $6.0 million for the three months ended September 30, 2007.  This decrease resulted from the $2.1 million decrease in operating income.

 

This excerpt taken from the KSP 10-Q filed Aug 12, 2008.

Nine Months Ended March 31, 2008 Compared to Nine Months Ended March 31, 2007

 

Voyage Revenue and Voyage Expenses

 

Voyage revenue was $227.0 million for the nine months ended March 31, 2008, an increase of $67.5 million, or 42%, as compared to voyage revenue of $159.5 million for the nine months ended March 31, 2007.  Voyage expenses were $55.9 million for the nine months ended March 31, 2008, an increase of $23.3 million, or 71%, as compared to voyage expenses of $32.6 million incurred for the nine months ended March 31, 2007.

 

Net voyage revenue

 

Net voyage revenue was $171.1 million for the nine months ended March 31, 2008, which exceeded net voyage revenue of $126.8 million for the nine months ended March 31, 2007 by $44.3 million, or 35%.  In our coastwise trade, net voyage revenue was $132.5 million for the nine months ended March 31, 2008, an increase of $41.4 million, or 45%, as compared to $91.1 million in the nine months ended March 31, 2007.  The acquisition of the Smith Maritime Group in August 2007 resulted in increased coastwise net voyage revenue of $30.5 million.  Net voyage revenue increased by an additional $10.5 million due to an increase in the number of working days for (1) the DBL 104, which began operations in April 2007, (2) the DBL 151, which was in the shipyard for an extended stay in the prior fiscal period, (3) the DBL 134, which was in shipyard being coupled with the Irish Sea in the prior fiscal period and (4) the Columbia, which was purchased and placed in service in September 2007.  Net utilization in our coastwise trade was 87% for the nine-month period ended March 31, 2008 compared to 91% for the nine month period ended March 31, 2007.  Net utilization for the nine month period ended March 31, 2008 decreased as a result of a larger-than-normal drydocking schedule, and an increase in unscheduled repair days, in the third fiscal 2008 quarter.  Average daily rates in the coastwise trade increased 12% to $13,591 for the nine months ended March 31, 2008 from $12,155 for the nine months ended March 31, 2007.

 

Net voyage revenue in our local trade for the nine months ended March 31, 2008 increased by $2.9 million, or 8%, to $38.6 million from $35.7 million for the nine months ended March 31, 2007.  Local net voyage revenue increased by $5.6 million during the nine months ended March 31, 2008 due to the increased number of work days for the new-build barges DBL 27, DBL 22, DBL 23 and DBL 24, which were delivered in January 2007,  June 2007, September 2007 and December 2007, respectively. This was partially offset by lower net utilization in our local trade of 79% for the nine months ended March 31, 2008 compared to 80% for the nine months ended March 31, 2007.

 

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The net utilization for the nine months ended March 31, 2008 was impacted by some weakness in the market for certain older, smaller units and an unseasonably warm winter in the northeast, which reduced demand for heating oil.  Average daily rates in our local trade increased 3% to $6,947 for the nine months ended March 31, 2008 from $6,763 for the comparative prior year.

 

Bareboat Charter and Other Revenue

 

Bareboat charter and other revenue was $9.2 million for the nine months ended March 31, 2008, compared to $7.1 million for the nine months ended March 31, 2007.  Of this $2.1 million increase, the Smith Maritime Group contributed $3.3 million, $0.3 million was contributed by a small lube oil operation purchased in the fall of 2006 and $0.4 million was contributed by our water treatment plant in Norfolk. This was partially offset by a $1.9 million decrease in chartering of tank barges to third parties.

 

Vessel Operating Expenses

 

Vessel operating expenses were $91.0 million for the nine months ended March 31, 2008 compared to $71.4 million for the nine months ended March 31, 2007, an increase of $19.6 million.  Voyage and vessel operating expenses as a percentage of total revenues decreased to 62.2% for the nine months ended March 31, 2008 from 62.4% for the nine months ended March 31, 2007.  Vessel labor and related costs increased $12.7 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.   Insurance costs and vessel repairs and supplies increased $6.9 million as a result of the operation of the larger number of vessels.

 

Depreciation and Amortization

 

Depreciation and amortization was $34.6 million for the nine months ended March 31, 2008, an increase of $10.4 million, or 43%, compared to $24.2 million for the nine months ended March 31, 2007.  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 $21.2 million for the nine months ended March 31, 2008, an increase of $5.9 million, as compared to general and administrative expenses of $15.3 million for the nine months ended March 31, 2007.  As a percentage of total revenues, general and administrative expenses decreased to 9.0% for the nine months ended March 31, 2008 from 9.2% for the nine months ended March 31, 2007.  The $5.9 million increase is a result of increased personnel costs resulting from the Smith Maritime Group acquisition, additional increased headcount to support our growth, and the additional facilities costs of our new offices in Philadelphia and Hawaii.

 

Interest Expense, Net

 

Net interest expense was $16.1 million for the nine months ended March 31, 2008, or $5.9 million higher than the $10.2 million incurred in the nine months ended March 31, 2007.  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.  In addition, $1.1 million of interest expense was incurred for bridge financing in connection with the Smith Maritime Group acquisition.

 

Provision for Income Taxes

 

Our interim provisions for income taxes are based on our estimated annual effective tax rate.  For the nine months ended March 31, 2008, our effective tax rate was 1.8% as compared to a rate of 5.3% for the nine months ended March 31, 2007.  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 partnership’s corporate subsidiaries.  Our effective tax rate for the nine months ended March 31, 2008 was lower than the comparable prior year period primarily due to adjustments to the estimated tax liabilities for certain foreign jurisdictions based on tax returns as filed.

 

Net Income

 

Net income was $19.3 million for the nine months ended March 31, 2008, an increase of $7.3 million compared to net income of $12.0 million for the nine months ended March 31, 2007.  This increase resulted

 

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primarily from a $10.9 million increase in operating income, a $1.9 million increase in other income (expense), and a $0.3 million decrease in provision for income taxes, partially offset by a $5.9 million increase in interest expense.

 

This excerpt taken from the KSP 10-Q filed May 12, 2008.

Nine Months Ended March 31, 2008 Compared to Nine Months Ended March 31, 2007

 

Voyage Revenue and Voyage Expenses

 

Voyage revenue was $227.0 million for the nine months ended March 31, 2008, an increase of $67.5 million, or 42%, as compared to voyage revenue of $159.5 million for the nine months ended March 31, 2007.  Voyage expenses were $55.9 million for the nine months ended March 31, 2008, an increase of $23.3 million, or 71%, as compared to voyage expenses of $32.6 million incurred for the nine months ended March 31, 2007.

 

Net voyage revenue

 

Net voyage revenue was $171.1 million for the nine months ended March 31, 2008, which exceeded net voyage revenue of $126.8 million for the nine months ended March 31, 2007 by $44.3 million, or 35%.  In our coastwise trade, net voyage revenue was $132.5 million for the nine months ended March 31, 2008, an increase of $41.4 million, or 45%, as compared to $91.1 million in the nine months ended March 31, 2007.  The acquisition of the Smith Maritime Group in August 2007 resulted in increased coastwise net voyage revenue of $30.5 million.  Net voyage revenue increased by an additional $10.5 million due to an increase in the number of working days for (1) the DBL 104, which began operations in April 2007, (2) the DBL 151, which was in the shipyard for an extended stay in the prior fiscal period, (3) the DBL 134, which was in shipyard being coupled with the Irish Sea in the prior fiscal period and (4) the Columbia, which was purchased and placed in service in September 2007.  Net utilization in our coastwise trade was 87% for the nine-month period ended March 31, 2008 compared to 91% for the nine month period ended March 31, 2007.  Net utilization for the nine month period ended March 31, 2008 decreased as a result of a larger-than-normal drydocking schedule, and an increase in unscheduled repair days, in the third fiscal 2008 quarter.  Average daily rates in the coastwise trade increased 12% to $13,591 for the nine months ended March 31, 2008 from $12,155 for the nine months ended March 31, 2007.

 

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Net voyage revenue in our local trade for the nine months ended March 31, 2008 increased by $2.9 million, or 8%, to $38.6 million from $35.7 million for the nine months ended March 31, 2007.  Local net voyage revenue increased by $5.6 million during the nine months ended March 31, 2008 due to the increased number of work days for the new-build barges DBL 27, DBL 22, DBL 23 and DBL 24, which were delivered in January 2007,  June 2007, September 2007 and December 2007, respectively. This was partially offset by lower net utilization in our local trade of 79% for the nine months ended March 31, 2008 compared to 80% for the nine months ended March 31, 2007.  The net utilization for the nine months ended March 31, 2008 was impacted by some weakness in the market for certain older, smaller units and an unseasonably warm winter in the northeast, which reduced demand for heating oil.  Average daily rates in our local trade increased 3% to $6,947 for the nine months ended March 31, 2008 from $6,763 for the comparative prior year.

 

Bareboat Charter and Other Revenue

 

Bareboat charter and other revenue was $9.2 million for the nine months ended March 31, 2008, compared to $7.1 million for the nine months ended March 31, 2007.  Of this $2.1 million increase, the Smith Maritime Group contributed $3.3 million, $0.3 million was contributed by a small lube oil operation purchased in the fall of 2006 and $0.4 million was contributed by our water treatment plant in Norfolk. This was partially offset by a $1.9 million decrease in chartering of tank barges to third parties.

 

Vessel Operating Expenses

 

Vessel operating expenses were $91.0 million for the nine months ended March 31, 2008 compared to $71.4 million for the nine months ended March 31, 2007, an increase of $19.6 million.  Voyage and vessel operating expenses as a percentage of total revenues decreased to 62.2% for the nine months ended March 31, 2008 from 62.4% for the nine months ended March 31, 2007.  Vessel labor and related costs increased $12.7 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.   Insurance costs and vessel repairs and supplies increased $7.0 million as a result of the operation of the larger number of vessels.

 

Depreciation and Amortization

 

Depreciation and amortization was $32.0 million for the nine months ended March 31, 2008, an increase of $7.8 million, or 32%, compared to $24.2 million for the nine months ended March 31, 2007.  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 $21.2 million for the nine months ended March 31, 2008, an increase of $5.9 million, as compared to general and administrative expenses of $15.3 million for the nine months ended March 31, 2007.  As a percentage of total revenues, general and administrative expenses decreased to 9.0% for the nine months ended March 31, 2008 from 9.2% for the nine months ended March 31, 2007.  The $5.9 million increase is a result of increased personnel costs resulting from the Smith Maritime Group acquisition, additional increased headcount to support our growth, and the additional facilities costs of our new offices in Philadelphia and Hawaii.

 

Interest Expense, Net

 

Net interest expense was $16.1 million for the nine months ended March 31, 2008, or $5.9 million higher than the $10.2 million incurred in the nine months ended March 31, 2007.  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.  In addition, $1.1 million of interest expense was incurred for bridge financing in connection with the Smith Maritime Group acquisition.

 

Provision for Income Taxes

 

Our interim provisions for income taxes are based on our estimated annual effective tax rate.  For the nine months ended March 31, 2008, our effective tax rate was 1.7% as compared to a rate of 5.3% for the nine months ended March 31, 2007.  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 partnership’s corporate subsidiaries.  Our effective tax rate for the nine months

 

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ended March 31, 2008 was lower than the comparable prior year period primarily due to adjustments to the estimated tax liabilities for certain foreign jurisdictions based on tax returns as filed.

 

Net Income

 

Net income was $21.9 million for the nine months ended March 31, 2008, an increase of $9.9 million compared to net income of $12.0 million for the nine months ended March 31, 2007.  This increase resulted primarily from a $13.5 million increase in operating income, a $1.9 million increase in other income (expense), and a $0.3 million decrease in provision for income taxes, partially offset by a $5.9 million increase in interest expense.

 

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