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The following is an excerpt from a 10-K SEC Filing, filed by K-SEA TRANSPORTATION PARTNERS LP on 9/15/2008.
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K-SEA TRANSPORTATION PARTNERS LP - 10-K - 20080915 - PART_I


PART I

ITEMS 1 and 2.    BUSINESS and PROPERTIES.

Our Partnership

        We are a leading provider of marine transportation, distribution and logistics services for refined petroleum products in the United States. As of September 1, 2008, we operated a fleet of 74 tank barges and 66 tugboats that serves a wide range of customers, including major oil companies, oil traders and refiners. With approximately 4.4 million barrels of capacity, we believe we operate the largest coastwise tank barge fleet in the United States.

        For the fiscal year ended June 30, 2008, our fleet transported approximately 160 million barrels of refined petroleum products for our customers, including BP, Chevron, Conoco Philips, ExxonMobil and Tesoro. Our five largest customers in fiscal 2008 have been doing business with us for approximately 18 years on average. We do not assume ownership of any of the products we transport. During fiscal 2008, we derived approximately 81% of our revenue from longer-term contracts that are generally for periods of one year or more.

        We believe we have a high-quality, well-maintained fleet. As of September 1, 2008, approximately 76% of our barrel-carrying capacity was double-hulled. Furthermore, we will be permitted to continue to operate our single-hull tank vessels until January 1, 2015 in compliance with the Oil Pollution Act of 1990, or OPA 90, which mandates the phase-out of all single-hull tank vessels transporting petroleum and petroleum products in U.S. waters. All of our tank vessels except two operate under the U.S. flag, and all but four are qualified to transport cargo between U.S. ports under the Jones Act, the federal statutes that restrict foreign owners from operating in the U.S. maritime transportation industry.

        Our strategy to expand our business and increase our distributable cash flow includes the expansion of our fleet through the building of new equipment and strategic acquisitions. On August 14, 2007, we acquired all of the equity interests in Smith Maritime, Ltd., Go Big Chartering, LLC, and Sirius Maritime, LLC, which we refer to collectively as the "Smith Maritime Group". The Smith Maritime Group provides marine transportation and logistics services to major oil companies, oil traders and refiners in Hawaii and along the West Coast of the United States. On a combined basis, the petroleum transportation operations of these companies added 11 petroleum tank barges and 14 tugboats to our fleet, aggregating 777,000 barrels of capacity, of which 669,000 barrels, or 86%, are double-hulled. The aggregate purchase price for the Smith Maritime Group was $203.7 million, comprising $168.9 million in cash, $23.5 million in assumed debt, and common units representing limited partner interests valued at $11.3 million.

        On October 18, 2005, we acquired all of the membership interests in Sea Coast Transportation LLC, or Sea Coast, from Marine Resources Group, Inc., or MRG. Also on October 18, 2005, Sea Coast acquired four tugboats from MRG. Sea Coast is a provider of marine transportation and logistics services to major oil companies, oil traders and refiners along the West Coast of the United States and Alaska. The aggregate purchase price for Sea Coast and the four tugboats was $82.4 million, comprising $78.0 million in cash and common units representing limited partner interests valued at $4.4 million.

        We also have grown our fleet through acquisitions of individual vessels and through a robust vessel newbuilding program. Since our initial public offering in January 2004, we have purchased or retrofitted six existing double-hulled tank barges, with aggregate capacity of 634,000 barrels. Also since our initial public offering, under our vessel newbuilding program, we have taken delivery of twelve newly built double-hulled tank barges with aggregate capacity of 610,000 barrels, and we have entered into agreements with shipyards to construct eight more new double-hulled tank barges with an aggregate capacity of 645,000 barrels, including a 185,000 barrel articulated tug-barge unit, all scheduled to be delivered by the end of calendar 2010. These vessels are expected to cost, in the aggregate and after

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the addition of certain special equipment, approximately $165.0 million. We expect to finance construction of these new vessels with borrowings and cash from operations.

        In June 2008, we purchased eight tugboats from Roehrig Maritime for $41.5 million in cash. These tugboats will initially reduce our outside towing costs or be chartered out under existing contracts; however, they will also provide sufficient power for our newbuild barges to be delivered by the end of 2010. To enhance productivity and reduce reliance on chartered-in towing, we also purchased three additional tugboats during fiscal 2008 at a total cost of approximately $9.8 million.

        Our primary business objective is to increase distributable cash flow to unitholders by executing the following strategies:

    Expanding our fleet through newbuildings and accretive and strategic acquisitions.   We have grown successfully in the past through vessel newbuildings and strategic acquisitions. We expect to continue this strategy by regularly surveying the marketplace to identify and pursue newbuilding opportunities and acquisitions that expand the services and products we offer or that expand our geographic presence. Since our initial public offering in January 2004, we have grown our fleet barrel-carrying capacity from 2.3 million barrels to 4.4 million barrels currently, and we have an additional 645,000 barrels capacity under construction.

    Maximizing fleet utilization and improving productivity.   The interchangeability of our tank vessels and the critical mass of our fleet give us the flexibility to allocate the right vessel for the right cargo assignment on a timely basis. We intend to continue improving our operational efficiency through the use of new technology and comprehensive training programs for new and existing employees. We also intend to minimize down time by emphasizing efficient scheduling and timely completion of planned and preventative maintenance.

    Maintaining safe, low-cost and efficient operations.   We believe we are a cost-efficient and reliable tank vessel operator. We intend to continue to reduce operating costs through constant evaluation of each vessel's performance and concurrent adjustment of operating and chartering procedures to maximize each vessel's safety and profitability. We also intend to continue to minimize costs through an active preventative maintenance program both on-shore and at sea, employing qualified officers and crew and continually training our personnel to ensure safe and reliable vessel operations.

    Balancing our fleet deployment between longer-term contracts and shorter-term business in an effort to provide stable cash flows through business cycles, while preserving flexibility to respond to changing market conditions.   During fiscal 2008, we derived approximately 81% of our revenue from time charters, consecutive voyage charters, contracts of affreightment, and bareboat charters, all of which are generally for periods of one year or more. We derived the remaining 19% of our revenue for fiscal 2008 from single voyage charters, which are generally priced at prevailing market rates. Vessels operating under voyage charters may generate increased profit margins during periods of improved charter rates, while vessels operating on time charters generally provide more predictable cash flow. We intend to pursue a strategy of emphasizing longer-term contracts, while preserving operational flexibility to take advantage of changing market conditions.

    Attracting and maintaining customers by adhering to high standards of performance, reliability and safety.   Customers place particular emphasis on efficient operations and strong environmental and safety records. We intend to continue building on our reputation for maintaining high standards of performance, reliability and safety, which we believe will enable us to attract increasingly selective customers.

        We are a publicly traded Delaware limited partnership. Our business activities are conducted through our subsidiary, K-Sea Operating Partnership L.P., a Delaware limited partnership which we

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refer to as the operating partnership, and the subsidiaries of the operating partnership. Our general partner, K-Sea General Partner L.P., is a Delaware limited partnership whose general partner is K-Sea General Partner GP LLC, a Delaware limited liability company. K-Sea General Partner GP LLC has ultimate responsibility for managing our business.

        Our principal executive office is located at One Tower Center Boulevard, 17 th  Floor, East Brunswick, New Jersey 08816, and our telephone number at that address is (732) 585-3818.

Our Industry

Introduction

        Tank vessels, which include tank barges and tankers, are a critical link in the refined petroleum product distribution chain. Tank vessels transport gasoline, diesel fuel, heating oil, asphalt and other products from refineries and storage facilities to a variety of destinations, including other refineries, distribution terminals, power plants and ships. According to a June 2006 study by the Association of Oil Pipe Lines, 29.9% of all domestic refined petroleum product transportation was by water in 2004, making waterborne transportation the most used mode of transportation for refined petroleum products after pipelines.

        Among the laws governing the domestic tank vessel industry is the one commonly referred to as the Jones Act, the federal statute that restricts foreign competition in the U.S. marine transportation industry. Under the Jones Act, marine transportation of cargo between points in the United States, generally known as U.S. coastwise trade, is limited to U.S.-flag vessels that were built in the United States and are owned, manned and operated by U.S. citizens. All of our tank vessels except two operate under the U.S. flag, and all but four are qualified to transport cargo between U.S. ports under the Jones Act.

        OPA 90 mandates, among other things, the phase-out of all single-hull tank vessels transporting petroleum and petroleum products in U.S. waters at varying times by January 1, 2015. The effect of this legislation has been, and is expected to continue to be, the replacement of domestic single-hull tank vessel capacity with double hulled newbuildings and retrofitting of existing single-hull tank vessels.

        The demand for domestic tank vessels is driven primarily by U.S. demand for refined petroleum products, which can be categorized as either clean oil products or black oil products. Clean oil products include motor gasoline, diesel fuel, heating oil, jet fuel and kerosene. Black oil products, which are what remain after clean oil products have been separated from crude oil, include residual fuel oil in the refining process, asphalt, petrochemical feedstocks and bunker fuel. The demand for clean oil products is impacted by vehicle usage, air travel and prevailing weather conditions, while demand for black oil products varies depending on the type of product transported and other factors, such as oil refinery requirements and turnarounds, asphalt use, the use of residual fuel oil by electric utilities and bunker fuel consumption.

Transportation of Refined Petroleum Products

        Refined petroleum products are transported by pipelines, water carriers, motor carriers and railroads. Tank vessels are used frequently to continue the transportation of refined petroleum products along the distribution chain after these products have first been transported by another method of transportation, such as a pipeline. For example, many areas have access to refined petroleum products only by using marine transportation as the last link in their distribution chain. In addition, tank vessel transportation is generally a more cost-effective and energy-efficient means of transporting bulk commodities such as refined petroleum products than transportation by rail car or truck. The carrying capacity of a 100,000-barrel tank barge is the equivalent of approximately 162 average-size rail tank cars and approximately 439 average-size tractor trailer tank trucks.

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Types of Tank Vessels

        The domestic tank vessel fleet consists of tankers, which have internal propulsion systems, and tank barges, which do not have internal propulsion systems and are instead pushed or towed by a tugboat. Tank barges generally move at slower speeds than comparably sized tankers, but are less expensive to build and operate. Although tank barge configuration varies, the bow and stern of most tank barges are square or sloped, with the stern of many tank barges having a notch of varying depth to permit pushing by a tugboat. While a larger tank vessel may be able to carry more cargo, some voyages require a tank vessel to go through a lock, bridge opening or narrow waterway, which limit the size of vessels that may be used. In addition, some loading and discharge facilities have physical limitations that prevent larger tank vessels from loading or discharging their cargo. Tank barges are often able to navigate the shallower waters of the inland waterway system and the waters along the coast. Tankers, however, are often confined to the deeper waters offshore due to their size.

        Tank vessels can be categorized by:

    Barrel-carrying Capacity —the number of barrels of refined product that it takes to fill a vessel;

    Gross Tonnage —the total volume capacity of the interior space of a vessel, including non-cargo space, using a convention of 100 cubic feet per gross ton;

    Net Tonnage —the volume capacity of a vessel determined by subtracting the engine room, crew quarters, stores and navigation space from the gross tonnage using a convention of 100 cubic feet per net ton;

    Deadweight Tonnage —the number of long-tons (2,240 pounds) of cargo that a vessel can transport. A deadweight ton is equivalent to approximately 6.5 to 7.5 barrels of capacity, depending on the specific gravity of the cargo. In this report, we have assumed that a deadweight ton is equivalent to 7.0 barrels of capacity;

    Hull Type —the body or framework of a vessel. Vessels can have more than one hull, which means they have additional compartments between the cargo and the outside of the vessel. Typical vessels are single- or double-hulled; and

    Cargo —the type of commodity transported.

        Tank vessels can also be categorized into the following fleets based on the primary waterway system typically navigated by the vessel:

    Coastwise Fleet.   The term coastwise fleet generally refers to commercial vessels that transport goods in the following areas:
    along the Atlantic, Gulf and Pacific coasts;

    between the U.S. mainland and Puerto Rico, Alaska, Hawaii and other U.S. Pacific Islands; and

    between the Atlantic or Gulf and Pacific coasts by way of the Panama Canal.

    Inland Waterways Fleet.   The term inland waterways fleet generally refers to commercial vessels that transport goods on the navigable internal waterways of the Atlantic, Gulf and Pacific Coasts, and the Mississippi River System. The main arteries of the inland waterways network for the mid-continent are the Mississippi and the Ohio Rivers. The inland waterways fleet consists primarily of tugboats and tank barges which typically have a shallower depth. These tank barges are generally less costly than many tank barges, operating in the coastwise fleet. The vessels comprising the inland waterways fleet are generally not built to standards required for operation in coastal waters.

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    Great Lakes Fleet.   The term Great Lakes fleet generally refers to commercial vessels normally navigating the waters among the U.S. Great Lakes ports and connecting waterways.

Tugboats

        Tugboats are equipped to push, pull or tow tank barges alongside. The amount of horsepower required to handle a barge depends on a number of factors, including the size of the barge, the amount of product loaded, weather conditions and the waterways navigated. A typical tugboat is manned by six people: a captain, a mate, an engineer, an assistant engineer and two deckhands. These individuals perform the duties and tasks required to operate the tugboat, such as standing navigational watches, maintaining and repairing machinery, rigging and line-handling, and painting and other routine maintenance. A standard work schedule for a tugboat crew is 14 days on, 14 days off. While on duty, the crew members generally work two six-hour shifts each day.

Integrated Tug-Barge Units

        Tugboats can also be integrated into a barge utilizing a notching system that connects the two vessels. An integrated tug-barge unit, or ITB, has certain advantages over other tug-barge combinations, including higher speed and better maneuverability. In addition, an ITB can operate in certain sea and weather conditions in which conventional tug-barge combinations cannot.

Our Customers

        We provide marine transportation services primarily to major oil companies, oil traders and refiners in the East, West and Gulf Coast regions of the United States, including Alaska and Hawaii. We monitor the supply and distribution patterns of our actual and prospective customers and focus our efforts on providing services that are responsive to the current and future needs of these customers.

        The following chart sets forth our major customers and the number of years each of them has been a customer:


K-Sea Transportation Partners L.P.
Major Customers

Major Customers
  Years as Customer  

BP

    35  

Chevron

    19  

ConocoPhillips

    12  

ExxonMobil

    12  

Tesoro

    10  

        Our three largest customers in fiscal 2008, based on gross revenue, were ConocoPhillips, ExxonMobil, and Tesoro, each of which accounted for more than 10% of our fiscal 2008 consolidated revenue. Please read note 10 to our audited consolidated financial statements included elsewhere in this report.

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Our Vessels

Tank Vessel Fleet

        At September 1, 2008, our fleet consisted of the following tank vessels:


K-Sea Transportation Partners L.P. Tank Vessel Fleet

Vessel(1)
  Year
Built
  Capacity
(barrels)
  Gross
Tons
  OPA 90
Phase-Out
 

Double-Hull Barges

                         
 

DBL 155(2)

    2004     165,882     12,152     N.A.  
 

DBL 151

    1981     150,000     8,710     N.A.  
 

DBL 140

    2000     140,000     10,303     N.A.  
 

DBL 134(3)

    1994     134,000     9,514     N.A.  
 

DBL 105(4)

    2004     105,000     11,438     N.A.  
 

DBL 101

    2002     102,000     6,774     N.A.  
 

DBL 102

    2004     102,000     6,774     N.A.  
 

DBL 103

    2006     102,000     6,774     N.A.  
 

DBL 104

    2007     102,000     6,774     N.A.  
 

Casablanca(5)

    1987     89,293     5,736     N.A.  
 

Lemon Creek(5)

    1987     89,293     5,736     N.A.  
 

Spring Creek(5)

    1987     89,293     5,736     N.A.  
 

Nale

    2007     86,000     6,508     N.A.  
 

McCleary's Spirit(6)

    2001     85,000     6,554     N.A.  
 

Antares

    2004     84,000     5,855     N.A.  
 

Deneb

    2006     84,000     5,855     N.A.  
 

DBL 81

    2003     82,000     5,667     N.A.  
 

DBL 82

    2003     82,000     5,667     N.A.  
 

Capella(7)

    2002     81,751     5,159     N.A.  
 

Leo

    2003     81,540     5,954     N.A.  
 

Pacific

    1993     81,000     5,669     N.A.  
 

Rigel

    1993     80,861     5,669     N.A.  
 

Sasanoa

    2001     81,000     5,790     N.A.  
 

DBL 78

    2000     80,000     5,559     N.A.  
 

DBL 77

    2008     80,000     5,235     N.A.  
 

DBL 70

    1972     73,024     5,248     N.A.  
 

Kays Point(7)

    1999     67,000     4,720     N.A.  
 

Noa

    2002     67,000     4,826     N.A.  
 

Cascades

    1993     67,000     4,721     N.A.  
 

Columbia

    1993     58,000     4,286     N.A.  
 

Na-Kao

    2005     52,000     4,076     N.A.  
 

Ne'ena

    2004     52,000     4,076     N.A.  
 

DBL 53

    1965     53,000     4,543     N.A.  
 

DBL 31

    1999     30,000     2,146     N.A.  
 

DBL 32

    1999     30,000     2,146     N.A.  
 

DBL 28

    2006     28,000     2,146     N.A.  
 

DBL 29

    2006     28,000     2,146     N.A.  
 

DBL 26

    2006     28,000     2,146     N.A.  
 

DBL 27

    2007     28,000     2,146     N.A.  
 

DBL 22

    2007     28,000     2,146     N.A.  
 

DBL 23

    2007     28,000     2,146     N.A.  

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Vessel(1)
  Year
Built
  Capacity
(barrels)
  Gross
Tons
  OPA 90
Phase-Out
 
 

DBL 24

    2007     28,000     2,146     N.A.  
 

DBL 25

    2007     28,000     2,146     N.A.  
 

Puget Sounder

    1992     25,000     1,870     N.A.  
 

DBL 2202

    1962     22,000     1,830     N.A.  
 

DBL 16

    1954     20,000     1,420     N.A.  
 

DBL 17

    1998     18,000     1,499     N.A.  
 

DBL 18

    1998     18,000     1,499     N.A.  
 

DBL 19

    1998     18,000     1,499     N.A.  
                       
   

Subtotal

          3,333,937     239,135        
                       

 

Vessel(1)
  Year
Built
  Capacity
(barrels)
  Gross
Tons
  OPA 90
Phase-Out
 

Single-Hull Barges

                         
 

KTC 80

    1981     82,878     4,576     2015  
 

KTC 71

    1975     81,759     4,719     2015  
 

BB 110(7)

    1976     78,000     4,754     2015  
 

SCT 340

    1983     75,000     4,395     2015  
 

344(7)

    1984     75,000     5,214     2015  
 

Noho Hele

    1982     67,880     4,185     2015  
 

KTC 60

    1980     61,638     3,824     2015  
 

KTC 55

    1972     53,012     3,113     2015  
 

KTC 50

    1974     54,716     3,367     2015  
 

SCT 280

    1977     48,000     3,081     2015  
 

SCT 282

    1978     48,000     3,081     2015  
 

Hui Mana(7)

    1988     40,000     2,299     2015  
 

Essex

    1967     35,160     2,307     2015  
 

DBL 3201

    1968     31,000     2,033     2015  
 

KTC 30

    1960     30,000     1,807     2015  
 

Wallabout Bay

    1986     28,330     1,687     2015  
 

Newark Bay

    1969     27,390     1,595     2015  
 

PM 230(7)

    1983     25,000     1,610     2015  
 

KTC 21

    1961     20,000     1,214     2015  
 

KTC 20

    1980     20,000     1,065     2015  
 

Oyster Bay

    1951     19,370     1,278     2015  
 

SCT 180

    1980     16,250     1,053     2015  
 

Josiah Bartlett

    1955     14,000     1,287     2015  
 

SEA 76

    1969     13,313     830     2015  
 

KTC 14

    1941     13,000     820     2015  
                       
   

Subtotal

          1,058,696     65,194        
                       
   

Total Fleet

          4,392,633     304,329        
                       

(1)
Excludes one potable water barge and one deck barge which we also operate.

(2)
Built in 1974; double-hulling was completed and the vessel redelivered in September 2004.

(3)
Built in 1986 and rebuilt in 1994.

(4)
Built in 1982 and rebuilt for petroleum transportation in 2004.

(5)
Vessel not qualified for Jones Act trade due to foreign construction.

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(6)
Built in 1969 and rebuilt in 2001.

(7)
Chartered-in vessel.

Newbuildings

        The following sets forth the size and expected delivery date for vessels in our newbuilding program:

Vessels   Expected Delivery
Two 80,000-barrel tank barges   1 st  – 2nd Quarter fiscal 2009


One 185,000-barrel articulated tug-barge unit


 


2 nd  Quarter fiscal 2010

One 100,000-barrel tank barge

 

2 nd Quarter fiscal 2010

Four 50,000-barrel tank barges

 

3 rd  Quarter fiscal 2010 – 2 nd  Quarter fiscal 2011

        The total cost of the barges described above, in the aggregate and after the addition of certain special equipment, is approximately $165.0 million, of which approximately $40.4 million has been spent as of June 30, 2008. Please read "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Ongoing Capital Expenditures" in Item 7 of this report.

Tugboat Fleet

        We use tugboats as the primary means of propelling our tank barge fleet. Therefore, we seek to maintain the proper balance between the number of tugboats and the number of tank barges in our fleet. This balance is influenced by a variety of factors, including the condition of the vessels in our fleet, the mix of our coastwise business and our local business and the level of longer-term contracts versus shorter-term business. We are also able to maintain a proper balance between tugboats and tank barges by analyzing the historical trading patterns of our customers and the nature of their cargoes. While a tank barge is unloading, we often dispatch its tugboat to perform other work.

        At September 1, 2008, we operated the following tugboats:


K-Sea Transportation Partners L.P. Tugboat Fleet

Name(1)
  Year Built   Horsepower   Dimensions  

Lincoln Sea

    2000     8000     119' × 40' × 22'  

Rebel

    1975     7200     150' × 46' × 22'  

Yankee

    1976     7200     150' × 46' × 22'  

Jimmy Smith

    1976     7200     150' × 40' × 22'  

Barents Sea

    1976     6200     136' × 40' × 16'  

McKinley Sea

    1981     6000     136' × 37' × 20'  

Aegean Sea

    1978     6000     136' × 37' × 20'  

Irish Sea

    1969     5750     135' × 35' × 18'  

Sirius

    1974     5750     135' × 38' × 19'  

Nakolo

    1974     5750     125' × 38' × 14'  

El Lobo Grande

    1978     5750     128' × 36' × 19'  

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Name(1)
  Year Built   Horsepower   Dimensions  

Nakoa

    1976     5500     118' × 34' × 17'  

Volunteer

    1982     4860     120' × 37' × 18'  

Adriatic Sea(2)

    2004     4800     126' × 34' × 15'  

Java Sea(3)

    2005     4800     119' × 34' × 15'  

Namahoe

    1997     4400     105' × 34' × 16'  

Pacific Freedom(4)

    1998     4500     120' × 31' × 15'  

Viking

    1972     4300     133' × 34' × 18'  

Beaufort Sea

    1971     4300     113' × 32' × 16'  

North Sea

    1982     4200     126' × 34' × 16'  

Greenland Sea

    1990     4200     117' × 34' × 17'  

Pacific Wolf

    1975     4100     111' × 24' × 13'  

William J. Moore

    1970     4000     135' × 35' × 20'  

Niolo

    1982     4000     117' × 34' × 17'  

Nokea

    1975     4000     105' × 30' × 14'  

Nunui

    1978     4000     185' × 40' × 12'  

Tasman Sea

    1976     3900     124' × 34' × 16'  

Norwegian Sea(5)

    2006     3900     133' × 34' × 17'  

Sea Hawk(6)

    2006     3900     112' × 32' × 15'  

John Brix(7)

    1999     3900     141' × 35' ×   8'  

Pacific Avenger

    1977     3900     140' × 34' × 17'  

Altair

    1981     3800     106' × 33' × 17'  

Kara Sea

    1974     3520     111' × 32' × 14'  

Ross Sea

    2003     3400       95' × 32' × 14'  

Bismarck Sea

    1978     3300     95' × 28' × 13'  

Solomon Sea

    1965     3300     105' × 32' × 14'  

Coral Sea

    1973     3280     111' × 32' × 14'  

Nathan E. Stewart

    2001     3200     95' × 32' × 14'  

Maryland

    1962     3010     110' × 28' × 14'  

Baltic Sea

    1973     3000     101' × 30' × 13'  

Pacific Challenger

    1976     3000     118' × 34' × 16'  

Paragon

    1978     3000     99' × 32' × 15'  

Pacific Raven

    1970     3000     112' × 31' × 14'  

Na Hoku

    1981     3000     105' × 34' × 17'  

Nalani

    1981     3000     105' × 34' × 17'  

Nohea

    1983     3000     98' × 30' × 14'  

Pacific Pride(8)

    1989     2500     84' × 28' × 13'  

Sargasso Sea

    1972     2460     105' × 30' × 15'  

Labrador Sea

    2002     2400     82' × 26' × 12'  

Siberian Sea

    1980     2400     85' × 24' × 10'  

Caribbean Sea

    1961     2400     85' × 24' × 10'  

Bering Sea

    1975     2250     105' × 29' × 13'  

Caspian Sea

    1981     2000     65' × 24' ×   9'  

Inland Sea

    2000     2000     76' × 26' × 10'  

Pacific Patriot

    1981     2000     77' × 27' × 12'  

Davis Sea

    1982     2000     77.4' × 26' × 9'  

Pacific Eagle(9)

    2001     2000     98' × 27' × 13'  

Tiger

    1966     2000     88' × 27' × 12'  

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Name(1)
  Year Built   Horsepower   Dimensions  

Chukchi Sea

    1979     2000     92' × 26' ×   9'  

Houma

    1970     1950     90' × 29' × 11'  

Timor Sea

    1960     1920     80' × 24' × 10'  

Odin

    1982     1860     72' × 28' × 12'  

Taurus

    1979     1860     79' × 25' × 12'  

Falcon

    1978     1800     80' × 25' × 12'  

Naupaka

    1983     1800     75' × 26' × 10'  

Fidalgo

    1973     1400     98' × 25' ×   8'  

      (1)
      Excluding certain workboats and other small vessels most of which are less than 1,000 HP.

      (2)
      Built in 1978 and rebuilt in 2004.

      (3)
      Built in 1981 and rebuilt in 2005.

      (4)
      Built in 1969 and rebuilt in 1998.

      (5)
      Built in 1976 and rebuilt in 2006.

      (6)
      Built in 1978 and rebuilt in 2006.

      (7)
      Built in 1963 and rebuilt in 1999.

      (8)
      Built in 1976 and rebuilt in 1989.

      (9)
      Built in 1966 and rebuilt in 1985 and 2001.

Integrated Tug-Barge Units

        As of September 1, 2008, we operated 22 ITBs, which represented approximately 40% of the barrel-carrying capacity of our tank barge fleet.

Bunkering

        For over 30 years, we have specialized in the shipside delivery of fuel, known as bunkering, for the major and independent bunker suppliers in New York Harbor. We also provide bunkering services in the port of Norfolk. Demand for bunkering services is driven primarily by the number of ship arrivals. A ship's time in port generally is limited, and the cost of delaying sailing due to bunkering or other activities can be significant. Therefore, we continually strive to improve the level of service and on-time deliveries to our customers.

        The majority of our bunker delivery tank vessels are equipped with advanced, whole-load sampling devices to provide the supplier and receiver a representative sample. Our bunker delivery tank barges are also equipped with extended booms for hose handling ease alongside ships, remote pump engine shut-offs, spill rails, spill containment equipment and supplies, VHF and UHF radio communication and fendering.

Preventative Maintenance

        We have a computerized preventative maintenance program that tracks U.S. Coast Guard and American Bureau of Shipping inspection schedules and establishes a system for the reporting and handling of routine maintenance and repair.

        Vessel captains submit monthly inspection reports, which are used to note conditions that may require maintenance or repair. Vessel superintendents are responsible for reviewing these reports, inspecting identified discrepancies, assigning a priority classification and generating work orders. Work orders establish job type, assign personnel responsible for the task and record target start and completion dates. Vessel superintendents inspect repairs completed by the crew, supervise outside contractors as needed and conduct quarterly inspections following the same criteria as the captains.

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Drills and training exercises are conducted in conjunction with these inspections, which are typically more comprehensive in scope. In addition, an operations duty officer is available on a 24-hour basis to handle any operational issues. The operations duty officer is prepared to respond on scene whenever required and is trained in technical repair issues, spill control and emergency response.

        The American Bureau of Shipping and the U.S. Coast Guard establish drydocking schedules. Typically, we drydock our vessels twice every five years. Prior to sending a vessel to a shipyard, we develop comprehensive work lists to ensure all required maintenance is completed. Repair facilities bid on these work lists, and jobs are awarded based on quality, price and time to complete. Vessels then report to a cleaning facility to prepare for shipyard. Once the vessel is gas-free, a certified marine chemist issues paperwork certifying that no dangerous vapors are present. The vessel proceeds to the shipyard where the vessel superintendent and certain crewmembers assist in performing the maintenance and repair work. The planned maintenance period is considered complete when all work has been tested to the satisfaction of American Bureau of Shipping or U.S. Coast Guard inspectors or both.

Safety

General

        We are committed to operating our vessels in a manner that protects the safety and health of our employees, the general public and the environment. Our primary goal is to minimize the number of safety- and health-related accidents on our vessels and our property. Our primary concerns are to avoid personal injuries and to reduce occupational health hazards. We want to prevent accidents that may cause damage to our personnel, equipment or the environment, such as fire, collisions, petroleum spills and groundings of our vessels. In addition, we are committed to reducing overall emissions and waste generation from each of our facilities and vessels and to the safe management of associated cargo residues and cleaning wastes.

        Our policy is to follow all laws and regulations as required, and we are actively participating with government, trade organizations and the public in creating responsible laws, regulations and standards to safeguard the workplace, the community and the environment. Our Operations Department is responsible for coordinating all facets of our health and safety program and identifies areas that may require special emphasis, including new initiatives that evolve within the industry. Our Human Resources Department is responsible for all training, whether conducted in-house or at a training facility. Supervisors are responsible for carrying out and monitoring compliance for all of the safety and health policies on their vessels.

Tank Barge Characteristics

        To protect the environment, today's tank barge hulls are required not only to be leak-proof into the body of water in which they float but also to be vapor-tight to prevent the release of any fumes or vapors into the atmosphere. Our tank barges that carry light products such as gasoline or naphtha have alarms that indicate when the tank is full (95% of capacity) and when it is overfull (98% of capacity). Each tank barge also has a vapor recovery system that connects the cargo tanks to the shore terminal via pipe and hose to return to the plant the vapors generated while loading.

        The majority of our bunker delivery tank barges are equipped with advanced, whole-load sampling devices to provide the supplier and receiver a representative sample. Our bunker delivery tank barges are also equipped with extended booms for hose handling ease alongside ships, remote pump engine shut-offs, spill rails, spill containment equipment and supplies, VHF and UHF radio, satellite and internet communication.

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Safety Management Systems

        We belong and adhere to the recommendations of the American Waterways Operators ("AWO") Responsible Carrier Program. The program is designed as a framework for continuously improving the industry's and member companies' safety performance. The program complements and builds upon existing government regulations, requiring company safety and training standards that in many instances exceed those required by federal law or regulation.

        Developed by the AWO, the Responsible Carrier Program incorporates best industry practices in three primary areas:

    management and administration;

    equipment and inspection; and

    human factors.

        The Responsible Carriers Program has been recognized by many groups, including the U.S. Coast Guard and shipper organizations. We are periodically audited by an AWO-certified auditor to verify compliance. We were last audited in early 2007, and our Responsible Carrier Program certificate remains in effect until March 2010.

        We are also certified to the standards of the International Safety Management, or ISM, system. The ISM standards were promulgated by the International Maritime Organization, or IMO, and have been adopted through treaty by many IMO member countries, including the United States. Although ISM is not required for coastal tug and barge operations, we have determined that an integrated safety management system including the ISM and Responsible Carriers Program standards promotes safer operations and provides us with necessary operational flexibility as we continue to grow.

Ship Management, Crewing and Employees

        We maintain an experienced and highly qualified work force of shore-based and seagoing personnel. As of August 15, 2008, we employed 1,044 persons, comprising 176 shore staff and 868 fleet personnel. Our tug and tanker captains are non-union management supervisors. Effective July 1, 2008, we agreed on a new two-year collective bargaining agreement with our maritime union covering certain of our seagoing personnel comprising 47% of our workforce. The collective bargaining agreement provides for wage increases, and requires us to make contributions to certain pension and other welfare programs. No unfunded pension liability exists under any of these programs. Our vessel employees are paid on a daily or hourly basis and typically work 14 days on and 14 days off. Our shore-based personnel are generally salaried and most are located at our headquarters in East Brunswick, New Jersey or our facilities in Staten Island, New York, Seattle, Washington, Honolulu, Hawaii, Norfolk, Virginia and Philadelphia, Pennsylvania. We believe that our relations with our employees are satisfactory.

        Our shore staff provides worldwide support for all aspects of our fleet and business operations, including sales and scheduling, crewing and human resources functions, engineering, compliance and technical management, financial and insurance services, and information technology. A staff of dispatchers and schedulers maintain a 24-hour duty rotation to monitor communications and to coordinate fleet operations with our customers and terminals. Communication with our vessels is accomplished by various methods, including wireless data links, cellular telephone, VHF, UHF and HF radio.

        Our crews regularly inspect each vessel, both at sea and in port, and perform most of the ordinary course maintenance. Our procedures call for a member of our shore-based staff to inspect each vessel at least once each fiscal quarter, making specific notations and recommendations regarding the overall condition of the vessel, maintenance, safety and crew welfare. In addition, selected vessels are inspected each year by independent consultants. All of the vessels that are on bareboat charters to third parties are managed and operated by the customer.

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BROKERAGE PARTNERS