K-Sea Transportation Partners L.P. Announces Operating Results and $0.45 Quarterly Distribution for First Quarter of Fiscal 2010

The Company also announced that its distribution to unitholders for the first fiscal quarter will be $0.45 per unit, or $1.80 per unit annualized, compared to the previous distribution of $0.77 per unit. This distribution will be payable on November 16, 2009 to unitholders of record on November 9, 2009. At this distribution rate, the Company anticipates its distributable cash flow for fiscal 2010 will exceed 1.00 times the amount needed to cover the distributions to be paid to unitholders.

The Company believes it currently is in full compliance with all provisions of its debt and lease agreements. While the Company expects to continue to pay when due all future obligations in respect of its debt and leases, the Company expects that it will not be in compliance with its financial covenants in certain of these agreements as of the end of its second or third fiscal quarter of fiscal 2010, and in anticipation of these circumstances, will be seeking to amend these covenants.

President and CEO Timothy J. Casey said, "Upon management's recommendation, our Board determined that our quarterly distribution would be $0.45 per unit based upon our operating results for the first fiscal quarter and our expectation that current market conditions may prevail for at least the next several quarters. The absence of any meaningful recovery in petroleum demand is causing further reductions in refinery utilization and thus further reductions in waterborne product movements, including a reduction in the number of new term charters. Single-hulled tonnage continues to be available at lower rates than in the same period last year for our barges that are not operating on period charters. We believe that the single-hulls, which are mandated to be phased out by 2014, are now commercially obsolete as customers are unwilling to accept this equipment, in light of the availability of double-hulled vessels."

"Given the current and expected market conditions, we expect to phase out our single-hulls in the near-term. Our depreciation and amortization expense in the first fiscal quarter includes an asset impairment charge of $5.9 million in respect of our single-hull equipment. The early phase-out will result in a reduction of $1.4 million per year in our provision for maintenance capital expenditures and should therefore increase our annual distributable cash flow."

"We remain optimistic about the long-term prospects for our Company. We mentioned this in August, but we want to stress again where K-Sea stands in the market for waterborne transportation of refined petroleum products. We focus on transporting cargoes in the range of 20,000 to 150,000 barrels; 28% of this capacity are single-hull units. As mentioned earlier, there has been a noticeable trend for customers to increasingly prefer double-hull units over single-hulls. If all barges currently contracted to be constructed are in fact built and placed into service, and if all existing single-hulls are removed from service, total capacity in this size range would decline by approximately 18%. As the largest operator of barges in this size range, our market position would be enhanced. Thus, we believe our modern fleet, broad geographic presence, blue chip customer base and team of highly skilled employees will enable K-Sea to emerge from the current economic downturn in an even stronger position in our market."

"Regardless of the timing of the recovery in our markets, our results in our fourth fiscal quarter ending June 30, 2010 will reflect a positive impact of the upcoming delivery of our final two incremental newbuildings, the DBL 185 and the DBL 106. Both units will operate under long-term charters already fixed on terms that will be accretive to our results."

Three Months Ended September 30, 2009

For the three months ended September 30, 2009, the Company reported an operating loss of $1.3 million, a decrease of $11.2 million compared to $9.9 million of operating income for the three months ended September 30, 2008. The operating loss resulted from the $5.9 million asset impairment charge on our single-hull vessels mentioned above. EBITDA decreased by $4.5 million, or 20%, to $18.2 million for the three months ended September 30, 2009, compared to $22.7 million for the three months ended September 30, 2008. The decrease in EBITDA resulted from a $5.2 million decrease in net voyage revenue, which is attributable to fewer working days for our single-hull vessels and a reduction in our average daily rate due to operating certain of our vessels, mainly single-hulls, under storage contracts in our waste water treatment facility at lower rates. Due to customer preference for double-hull vessels, we have taken a number of our single-hull vessels out of the market and have either retired or sold them, or utilized them as storage vessels. Additionally, other revenue decreased by $2.7 million mainly due to the expiration of time charter contracts on tugboats acquired in June 2008 and the current soft market to utilize those vessels, and the recognition of a $0.5 million gain in the first quarter of fiscal 2008 on the settlement of an early termination of a charter contract. This decrease was partially offset by a $1.6 million reduction in vessel operating expenses and a $1.0 million reduction in general and administrative expenses, substantially as a result of cost reduction efforts we implemented.

Net loss for the three months ended September 30, 2009 was $5.2 million, or $0.29 per fully diluted limited partner unit, a decrease of $9.1 million compared to net income of $3.9 million, or $0.19 per fully diluted limited partner unit, for the three months ended September 30, 2008. The decrease was primarily a result of the $4.5 million decrease in EBITDA and a $6.1 million increase in depreciation and amortization expense, offset by a $1.7 decrease in interest expense due to lower average debt balances and interest rates compared to the first quarter of fiscal 2008.

Mr. Casey stated, "we are disappointed with our first quarter results and lower distribution rate. In response to an unexpected decrease in demand, and in addition to our constant focus on maximizing utilization and rates for our assets, we have stepped up our efforts to minimize costs and capital expenditures, without compromising the quality of service we deliver to our customers or the safety of our employees and the environment."

Distributable Cash Flow

The Company's distributable cash flow for the first quarter of fiscal 2010 was $8.1 million, or 0.93 times the amount needed to cover the cash distribution of $8.7 million declared in respect of the period. The distributable cash flow was negatively impacted by the payment of an additional insurance call which was previously recorded in the second quarter of fiscal 2009. The distributable cash flow excluding the additional insurance call payment would have been $9.2 million, or 1.05 times. Distributable cash flow is a non-GAAP financial measure that is reconciled to net income, the most directly comparable GAAP measure, in the table below.

Earnings Conference Call

The Company has scheduled a conference call for Wednesday, October 28, 2009, at 9:00 am Eastern time, to review the fiscal 2010 first quarter results. Dial-in information for this call is (866) 783-2141 (Domestic) and (857) 350-1600 (International). The Passcode is 17636218. The conference call can also be accessed by webcast, which will be available at www.k-sea.com. Additionally, a replay of the call will be available by telephone until November 4, 2009; the dial in number for the replay is (888) 286-8010 (Domestic) and (617) 801-6888 (International). The Passcode is 26808711.

About K-Sea Transportation Partners

K-Sea Transportation Partners is one of the largest coastwise tank barge operators in the United States. The Company provides refined petroleum products transportation, distribution and logistics services in the U.S. domestic marine transportation market, and its common units trade on the New York Stock Exchange under the symbol KSP. For additional information, please visit the Company's website, including the Investor Relations section, at www.k-sea.com .

Use of Non-GAAP Financial Information

The Company reports its financial results in accordance with generally accepted accounting principles (GAAP). However, certain non-GAAP financial measures such as EBITDA and distributable cash flow are also presented. EBITDA is used as a supplemental financial measures by management and by external users of financial statements to assess (a) the financial performance of the Company's assets and the Company's ability to generate cash sufficient to pay interest on indebtedness and make distributions to partners, (b) the Company's operating performance and return on invested capital as compared to other companies in the industry, and (c) compliance with certain financial covenants in the Company's debt agreements. Management believes distributable cash flow is useful as another measure of the Company's financial and operating performance, and its ability to declare and pay distributions to partners. Distributable cash flow does not represent the amount of cash required to be distributed under the Company's partnership agreement.

None of the non-GAAP measures used in this press release should be considered as alternatives to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity under GAAP. The non-GAAP measures presented herein may not be comparable to similarly titled measures of other companies. A reconciliation of each of the non-GAAP measures used in this press release to net income, the most directly comparable GAAP measure, is presented in the tables below.

Cautionary Statements

This press release contains forward-looking statements, which include any statements that are not historical facts, such as the Company's expectations regarding business outlook, compliance with financial covenants in our debt and lease agreements (and our ability to obtain amendments thereto), anticipated phase-out of single-hull vessels, cost-cutting efforts and our expectations regarding them, vessel utilization and rates, growth in earnings, cost increases (including insurance calls), the benefits of long-term charters, the amount of vessel operating capacity (both at the Company and in the industry), customer preferences for double-hull vessels, and future results of operations. These statements involve risks and uncertainties, including, but not limited to, insufficient cash from operations, a decline in demand for refined petroleum products, a decline in demand for tank vessel capacity, the effects of the economic recession, intense competition in the domestic tank barge industry, the occurrence of marine accidents or other hazards, the loss of any of the Company's largest customers, fluctuations in charter rates, delays or cost overruns in the construction of new vessels, failure to comply with the Jones Act, modification or elimination of the Jones Act and adverse developments in the marine transportation business and other factors detailed in the Company's Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. If one or more of these risks or uncertainties materialize (or the consequences of such a development changes), or should underlying assumptions prove incorrect, actual outcomes may vary materially from those forecasted or expected. The Company disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise.

K-SEA TRANSPORTATION PARTNERS L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for unit and per unit data)
                                                    Three months ended
                                                    September 30,
                                                          2009        2008
Voyage revenue                                      $     66,426    $ 84,640
Other revenue                                             4,176       6,854
Total revenues                                            70,602      91,494
Voyage expenses                                           10,519      23,505
Vessel operating expenses                                 35,456      37,066
General and administrative expenses                       6,979       7,961
Depreciation and amortization                             18,922      12,775
Net loss on disposal of vessel                            -           294
Total operating expenses                                  71,876      81,601
Operating income (loss)                                   (1,274 )    9,893
Interest expense, net                                     4,177       5,905
Other expense (income), net                               (510   )    (4     )
Income (loss) before provision for income taxes           (4,941 )    3,992
Provision for income taxes                                202         136
Net income (loss) before non-controlling interests  $     (5,143 )  $ 3,856
Net income to non-controlling interests                   99          2
Net income (loss)                                   $     (5,242 )  $ 3,854
General partner's interest in net income (loss)     $     (55    )  $ 1,124
Limited partners' interest in:
Net income (loss)                                   $     (5,187 )  $ 2,730
Net income (loss) per unit - basic                  $     (0.29  )  $ 0.19
- diluted                                           $     (0.29  )  $ 0.19
Weighted average units outstanding - basic                17,650      14,729
- diluted                                                 17,671      14,745
Supplemental Operating Statistics
                                                    Three months ended
                                                    September 30,
                                                          2009        2008
Local Trade:
Average daily rate (1)                              $     7,210     $ 7,219
Net utilization (2)                                       80     %    81     %
Coastwise Trade:
Average daily rate                                  $     12,509    $ 13,027
Net utilization                                           89     %    89     %
Total Fleet
Average daily rate                                  $     10,791    $ 11,093
Net utilization                                           86     %    87     %

(1) Average daily rate is equal to the net voyage revenue earned
by a group of tank vessels during the period, divided by the
number of days worked by that group of tank vessels during the
period.
(2) Net utilization is equal to the total number of days worked by
a group of tank vessels during the period, divided by total
calendar days for that group of tank vessels during the period.

K-SEA TRANSPORTATION PARTNERS L.P.
Reconciliation of Unaudited Non-GAAP Financial Measures to GAAP
Measures
(in thousands)
Distributable Cash Flow (1)
                                            Three months ended September 30,
                                                    2009         2008
Net income (loss)                           $       (5,242  )  $ 3,854
Adjustments to reconcile net income
to distributable cash flow :
Depreciation and amortization (2)                   19,083       12,952
Non cash compensation cost under
long term incentive plan                            358          257
Adjust loss on vessel sale to net proceeds          523          934
Deferred income tax expense                         187          85
Non cash insurance expense (3)                      (1,033  )    -
Maintenance capital expenditures (4)                (5,750  )    (6,200  )
Distributable cash flow                             8,126        11,882
Cash distribution in respect of the period  $       8,727      $ 13,367
Distribution coverage                               0.93         0.89

(1) Distributable Cash Flow provides additional information for
evaluating our operating performance and ability to continue to
make quarterly distributions, and is presented solely as a
supplemental performance measure.
(2) Including amortization of deferred financing costs.
(3) Represents non cash insurance expense recorded in the year
ended June 30, 2009, which was paid in September 2009. Such
expense resulted from additional calls made by our insurer on
retrospective policy years, which are subject to reassessment
prior to the payment date.
(4) Maintenance capital expenditures are the estimated cash
capital expenditures necessary to maintain the operating capacity
of our capital assets over the long term. This amount includes an
allowance for future scheduled drydocking costs calculated using
annually updated projections of such costs over the next five
years. Based on historical results, the difference between
cumulative amounts charged and the actual amounts spent are
adjusted over the same five-year period. It also includes a small
allowance for other miscellaneous maintenance capital expenditures.

Earnings before Interest, Taxes, Depreciation and Amortization
(EBITDA)
                                         Three months ended
                                         September 30,
                                                 2009         2008
Net income (loss)                        $       (5,242  )  $ 3,854
Adjustments to reconcile net income
(loss) to EBITDA :
Depreciation and amortization                    18,922       12,775
Interest expense, net                            4,177        5,905
Provision for income taxes                       202          136
Net income to non-controlling interests          99           2
EBITDA                                   $       18,158     $ 22,672

K-SEA TRANSPORTATION PARTNERS L.P.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
                                                                 September 30,   June 30,
                                                                 2009            2009
Assets
Current assets:
Cash and cash equivalents                                        $      4,111    $      1,819
Accounts receivable, net                                                29,058          29,819
Prepaid expenses and other current assets                               16,652          17,807
Total current assets                                                    49,821          49,445
Vessels and equipment, net                                              522,401         533,996
Construction in progress                                                81,230          66,882
Goodwill                                                                54,300          54,300
Other assets                                                            32,867          34,180
Total assets                                                     $      740,619  $      738,803
Liabilities and Partners' Capital
Current liabilities:
Current portion of long-term debt and capital lease obligations  $      17,143   $      16,820
Accounts payable and accrued expenses                                   41,349          44,373
Deferred revenue                                                        12,380          12,476
Total current liabilities                                               70,872          73,669
Term loans and capital lease obligations                                224,372         225,915
Credit line borrowings                                                  104,850         140,278
Other liabilities                                                       12,267          11,395
Deferred taxes                                                          3,805           3,618
Total liabilities                                                       416,166         454,875
Commitments and contingencies
Partners' Capital                                                       324,453         283,928
Total liabilities and partners' captial                          $      740,619  $      738,803

SOURCE: K-Sea Transportation Partners L.P.

K-Sea Transportation Partners L.P 
Terrence P. Gill, 732-565-3818 
Chief Financial Officer