EDISON, NJ -- (Marketwire) -- 08/11/08 -- U.S. Shipping Partners L.P. (NYSE: USS) (the "Partnership") today reported its results for the second quarter ended June 30, 2008.

The Partnership had voyage revenue of $49.8 million, operating income of $1.6 million and a net loss of $2.7 million for the three months ended June 30, 2008, compared to voyage revenue of $45.6 million, operating income of $6.2 million and net income of $2.4 million for the same period in 2007. The Partnership had voyage revenue of $101.3 million, operating income of $2.1 million and a net loss of $10.0 million for the six months ended June 30, 2008, compared to voyage revenue of $87.7 million, operating income of $16.6 million and net income of $8.2 million for the same period in 2007.

Earnings before interest, taxes and depreciation and amortization and other non-cash expenses ("Adjusted EBITDA"), a non-GAAP measure, were $12.5 million for the three months ended June 30, 2008, compared to $15.7 million for the comparable period in 2007. Adjusted EBITDA, a non-GAAP measure, was $30.1 million for the six months ended June 30, 2008, compared to $35.2 million for the comparable period in 2007.

As previously announced, the Partnership's review of strategic alternatives and its negotiations with its lenders to amend certain financial covenants under its senior credit facility are continuing. In light of these continuing efforts, the Partnership has determined that it will not pay a distribution on its units for the quarter ended June 30, 2008.

The tug for the Partnership's second articulated tug barge ("ATB") is currently traveling up the east coast to pick up the barge portion in Sturgeon Bay, Wisconsin. The Partnership expects that the completed ATB will be placed in service during the second half of August, 2008, at a total cost (excluding capitalized interest) of approximately $66.6 million. The cost increase over the originally estimated amount of $65 million was principally due to contractually provided cost increases for steel and owner furnished equipment.

"Market conditions for Jones Act petroleum product tankers remained very challenging in the second quarter of 2008. Although our chemical business recovered somewhat in May and June following a weak April, the effects of record high oil prices on both refining activity and consumption of refined products caused a sharp drop in spot market demand for tanker transportation in our core market. Persistent record prices for fuel consumed to power our vessels also contributed to pressure on operating margins for those units primarily trading in the spot market. In response to the drop in spot market demand, the Partnership has redeployed three of its six ITBs into carrying grain for humanitarian organizations under a U.S. government financed program where demand has been reasonably strong. However, given continued microeconomic stresses on the US economy and unprecedented crude oil prices, our outlook for 2008 remains very guarded," said Mr. Gridley.

In order to address reduced demand for our ITBs in the spot market for transportation of petroleum products, we are currently employing three of our ITBs in the foreign transportation of grain for humanitarian organizations. Unlike our petroleum voyages, where we generally recognize revenue and expenses based upon the relative transit time in each period to the total estimated transit time for each voyage, for our grain voyages we only recognize revenue and expenses when the grain reaches its final destination (although our expenses are deferred and accrued as a liability on our balance sheet), which often falls in the next reporting period. Accordingly, a comparison of our results for the three months ended June 30, 2008 with prior quarters and comparable periods in the prior year may be less meaningful.

Three Months Ended June 30, 2008

The Partnership had a net loss for the three months ending June 30, 2008 of $2.7 million compared to net income of $2.4 million for the same period in 2007. Operating income was $1.6 million for the three months ending June 30, 2008 compared to $6.2 million in the same period in 2007. Net loss per basic and diluted limited partnership unit for the second quarter 2008 was $0.14 compared to net income per basic and diluted limited partnership unit for the second quarter 2007 of $0.13.

Voyage revenue was $49.8 million for the three months ended June 30, 2008, an increase of $4.2 million from $45.6 million for the three months ended June 30, 2007. The increase in voyage revenue was primarily the result of the addition of the ATB Freeport placed in service in July 2007, as well as higher spot market rates compared to time charter rates given that spot market rates include an amount to cover voyage expenses whereas time charter rates do not include this amount because the customer is responsible for payment of these expenses. These revenues were partially offset by more offhire days due to reduced demand for our ITBs as well as the impact related to the difference in revenue recognition policies for grain voyages compared to our other voyages. Revenues are affected by several factors, such as the mix of charter types; the charter rates attainable in the market; fleet utilization and other items such as fuel surcharges. Certain charters, including contracts of affreightment and consecutive voyage charters, generally provide for fuel escalation charges, but do not fully protect the Partnership when the price of fuel increases. These charges generally increase revenue, but only serve to partially offset the increase in fuel expenses. Revenue for the three months ended June 30, 2008 included $4.4 million of fuel surcharges, compared to $2.6 million for the three months ended June 30, 2007.

For the three months ended June 30, 2008, revenues from our chemical fleet were $20.1 million, an increase of $5.4 million over the three months ended June 30, 2007. The ATB Freeport contributed $4.5 million of this increase; the remainder of the increase was due to increased charter rates and fuel surcharges. Revenue from the remainder of the Partnership's vessels, which consist of the six ITBs and the product tanker Houston, were $29.8 million for the three months ended June 30, 2008, a decrease of $1.1 million from the comparable period in 2007. The decrease in revenue is largely due to the deferral of recognition of revenue of $5.5 million attributable to two grain voyages that commenced in the second quarter of 2008 that will be recognized in the third quarter of 2008 upon delivery of the grain to its final destination, as well as increased offhire days due to reduced demand in the spot market for transportation of petroleum products and required repairs to the ITB New York. The decrease in revenues from the Partnership's ITB fleet was partially offset by the fact that the Partnership obtained higher rates than it would have received if the vessels had been operating on time charters, as the Partnership was responsible for the payment of voyage expenses.

During the three months ended June 30, 2008, voyage expenses increased by $8.6 million over the prior year due to the addition of the ATB Freeport, which contributed $1.4 million in voyage expenses, coupled with increases in fuel, port, commission and other costs on the remaining fleet of approximately $7.2 million. Approximately $3.8 million of the $7.2 million increase related to increased fuel costs, which were only partially offset by the $0.8 million of increased fuel surcharge revenue, and approximately $2.8 million related to the cost of readying our ITBs to transport grain. A significant increase in voyage expenses is due to the loss of two time charters for our ITBs in 2008 resulting in the Partnership incurring voyage expenses that it previously did not incur under time charters. The impact of these additional voyage expenses increased revenues as rates are generally higher to compensate for these voyage expenses that were previously incurred by the customer under a time charter. Because we do not recognize voyage expenses related to our grain voyages until the voyage is completed, voyage expenses for the three months ended June 30, 2008 do not include approximately $2.3 million of expenses related to grain voyages commenced in the second quarter of 2008 yet completed in July 2008.

During the three months ended June 30, 2008 vessel operating expenses decreased $1.0 million from the second quarter of 2007, primarily due to a $2.2 million net reduction in expenditures on supplies, repairs and maintenance, safety and training. This decrease was partially offset by the addition of the ATB Freeport, which increased vessel operating expenses by $1.1 million. There was a net $0.1 million increase in all other vessel operating expenses.

General and administrative expenses decreased $0.2 million in the three months ended June 30, 2008 compared to the same period in 2007. A decrease in personnel expense of $0.6 million was partially offset by an increase in professional fees consisting of legal, accounting and consulting fees primarily related to our review of strategic alternatives, of $0.4 million.

During the three months ended June 30, 2008, depreciation and amortization expense increased by $1.4 million from the same period in 2007. The increase is primarily due to additional amortization of drydock expenditures of $1.0 million, principally resulting from drydocks completed in 2007, and $0.8 million attributable to the addition of the ATB Freeport. These increases to depreciation and amortization expense were partially offset by a decrease of $0.4 million resulting from an adjustment of to the values assigned to the vessels in the original purchase of the ITBs due to net payments made to us under the Hess Support Agreement, which under GAAP were considered an adjustment to the original purchase price.

Other expense in the three month ended June 30, 2008 of $45 reflects a loss related to the sale of surplus equipment. There was not other expense or income in the three months ended June 30, 2007.

Interest expense increased by $0.2 million for the three months ended June 30, 2008 compared to the same period in 2007 due primarily to increased borrowings. Interest income earned by the Partnership decreased by $2.0 million, due primarily to reduced balances in the Partnership's restricted cash accounts. Funds were released in connection with the construction of the ATBs and the tankers being constructed by the joint venture entered into by the Partnership in 2006 (the "Joint Venture"). The restricted cash accounts consist of two escrow accounts which were established as part of the Partnership's 2006 debt and equity financings to fund the construction of three new ATBs and the Partnership's remaining committed equity contributions to the Joint Venture. Interest income will continue to decrease as funds in these escrow accounts are used to fund the construction of the three new ATBs and the Partnership's equity contributions to the Joint Venture.