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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2003.

OR

COMMISSION FILE NO. 001-31920

K-SEA TRANSPORTATION PARTNERS L.P.
(Exact name of registrant as specified in its charter)

3245 Richmond Terrace
Staten Island, New York 10303
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (718) 720-9306

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o    No ý

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

        At February 23, 2004, the number of the issuer's outstanding common units was 4,165,000.

K-SEA TRANSPORTATION PARTNERS L.P.
Successor to K-Sea Transportation LLC (Predecessor)
FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 2003
TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION

PART II—OTHER INFORMATION

        References in this Form 10-Q to "K-Sea Transportation Partners L.P.," "the Partnership," "we," "our," "us" or like terms when used in a historical context refer to the assets of K-Sea Transportation LLC and its subsidiaries that were contributed to K-Sea Transportation Partners L.P. and its subsidiaries in connection with the initial public offering of common units representing limited partner interests in K-Sea Transportation Partners L.P. When used in the present tense or prospectively, those terms refer to K-Sea Transportation Partners L.P.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

K-SEA TRANSPORTATION LLC (Notes 1 and 2)
Predecessor to K-Sea Transportation Partners L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)

The accompanying notes are an integral part of these consolidated financial statements.

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K-SEA TRANSPORTATION LLC (Notes 1 and 2)
Predecessor to K-Sea Transportation Partners L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)

The accompanying notes are an integral part of these consolidated financial statements.

2

K-SEA TRANSPORTATION LLC (Notes 1 and 2)
Predecessor to K-Sea Transportation Partners L.P.
UNAUDITED CONSOLIDATED STATEMENT OF MEMBERS' EQUITY
(in thousands)

The accompanying notes are an integral part of these consolidated financial statements.

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K-SEA TRANSPORTATION LLC (Notes 1 and 2)
Predecessor to K-Sea Transportation Partners L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

The accompanying notes are an integral part of these consolidated financial statements.

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K-SEA TRANSPORTATION LLC
Predecessor to K-Sea Transportation Partners L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

        K-Sea Transportation LLC ("K-Sea LLC") and its subsidiaries K-Sea Acquisition Corp., EW Holding Corp. and K-Sea Transportation Corp. (collectively, the "Predecessor"), and their predecessor companies, have since 1959 engaged in the transportation of refined petroleum products in the northeastern United States and Gulf of Mexico. On July 8, 2003, K-Sea Transportation Partners L.P. (the "Partnership") was formed to own and operate the refined petroleum product marine transportation, distribution and logistics business conducted by the Predecessor. On January 14, 2004, the Predecessor contributed substantially all of its assets and liabilities to the Partnership in connection with the initial public offering of common units representing limited partner interests in the Partnership (the "common units"). In exchange for these assets and liabilities, the Predecessor received 665,000 common units and 4,165,000 subordinated units representing limited partner interests in the Partnership.

        The unaudited interim consolidated financial statements included in this report as of December 31, 2003, and for the three and six-month periods then ended, are for the Predecessor and, in the opinion of management, reflect all adjustments (consisting of normal recurring entries) necessary for a fair statement of the financial results for such interim periods. The results of operations for interim periods are not necessarily indicative of the results of operations to be expected for a full year. These financial statements should be read together with the consolidated financial statements of the Predecessor, and notes thereto, included in the Partnership's Registration Statement on Form S-1 (Registration No. 333-107084), as amended (the "Form S-1"), originally filed with the Securities and Exchange Commission on July 16, 2003. The June 30, 2003 financial information has been derived from the audited consolidated financial statements included in the Form S-1.

        All dollar amounts, except per unit prices, appearing in these consolidated financial statements are in thousands.

2. Subsequent Events

a. Initial Public Offering

        On January 14, 2004, the Partnership completed its initial public offering of 3,625,000 common units at a price of $23.50 per unit. On January 21, 2004, the Partnership sold an additional 540,000 common units to the public in connection with the underwriters' exercise of their over-allotment option, making a total of 4,165,000 common units outstanding. Total gross proceeds from these sales were $97,877, before offering costs and underwriting fees. Concurrent with these sales, the Partnership redeemed the 665,000 common units held by K-Sea LLC (see Note 1) at a cost of $14,592. The proceeds retained by the Partnership relating to the sale of the common units totaled $83,285. These proceeds were used to repay $73,941 in outstanding term and revolving credit debt, including prepayment fees, and to pay $5,939 in underwriting fees and $3,405 in professional fees and other

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offering expenses. The proceeds received by the Partnership from the offering and the use of those proceeds are summarized as follows:

        Concurrent with the closing of the initial public offering, the Partnership also entered into a new, three-year $47,000 credit agreement with KeyBank N.A. and The CIT Group/Equipment Financing, Inc. The credit agreement comprises a $10,000 senior secured revolving working capital facility, a $30,000 senior secured revolving acquisition facility, and a $7,000 senior secured standby letter of credit facility. Additionally, the agreements governing the Title XI debt were renegotiated with the guarantor of the debt, the Maritime Administration ("MARAD") of the U.S. Department of Transportation, to permit distributions and to effect other changes consistent with operation of the Partnership as a public entity.

b. Acquisition of Integrated Tug-Barge Unit

        On January 29, 2004, the Partnership acquired a 140,000 barrel capacity double-hull tank barge and an 8,000 horsepower tugboat. This integrated tug-barge unit, built in 2000, had been leased by SeaRiver Maritime, Inc. ("SeaRiver"), a subsidiary of Exxon Mobil Corporation ("Exxon Mobil"), from a financial institution. The purchase price of $34,157 was financed using available cash and $25,048 in borrowings under a new term loan. The Partnership also signed a new multi-year contract with SeaRiver to utilize the unit in Exxon Mobil's petroleum products transportation in the northeastern United States.

3. Significant Accounting Policies

        Cash and Cash Equivalents.    Cash equivalents include time deposits with maturities of three months or less when purchased and cash on deposit at a financial institution. Under the line of credit agreement in effect prior to the closing of the initial public offering, customer cash receipts were deposited in a lockbox bank account and transferred to the financial institution to reduce credit line borrowings and cash transfers in excess of borrowings were remitted to the Predecessor. Subsequent to the initial public offering, lockbox receipts are retained by the Partnership.

        Vessels and Equipment.    Vessels and equipment are recorded at cost, including capitalized interest where appropriate, and depreciated using the straight-line method over the estimated useful lives of the individual assets as follows: tank vessels—five to twenty-five years; tugboats—twenty years; and pier and office equipment—five years. For single-hull tank vessels, such useful lives are limited to the remaining period of operation prior to mandatory retirements as required by the Oil Pollution Act of 1990 ("OPA 90"). Four of the Predecessor's single-hull tank vessels must be retired or retrofitted by December 31,

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2004, and an additional 16 single-hull tank vessels must be retired or retrofitted by December 31, 2014; the useful lives of these assets have been limited to these respective periods.

        Included in vessels and equipment are drydocking expenditures that are capitalized and amortized over three years. Drydocking of vessels is required both by the United States Coast Guard and by the applicable classification society, which in the Partnership's case is the American Bureau of Shipping. Such drydocking activities include, but are not limited to, the inspection, refurbishment, and replacement of steel, engine components, tailshafts, mooring equipment and other parts of the vessel.

        Major renewals and betterments of assets are capitalized and depreciated over the remaining useful lives of the assets. Maintenance and repairs that do not improve or extend the useful lives of the assets are expensed.

        The Predecessor recognizes impairment on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. An impairment loss would be recognized to the extent the carrying value exceeds fair value by appraisal.

        When property items are retired, sold or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts with any gain or loss on disposition included in income. Assets to be disposed of are reported at the lower of their carrying amounts or fair values, less the estimated costs of disposal.

        Deferred Financing Costs.    Direct costs associated with obtaining long-term debt financing are deferred and amortized over the terms of the related financings. Deferred financing costs are stated net of accumulated amortization which, at June 30 and December 31, 2003, amounted to $1,110 and $1,337, respectively.

        Revenue Recognition.    The Predecessor earns revenue under contracts of affreightment, voyage charters, time charters and bareboat charters. For contracts of affreightment and voyage charters, revenue is recognized based upon the relative transit time in each period, with expenses recognized as incurred. Although contracts of affreightment and certain contracts for voyage charters may be effective for periods in excess of one year, revenue is recognized on the basis of individual voyages, which are generally less than ten days in duration. For time charters and bareboat charters, revenue is recognized ratably over the contract period, with expenses recognized as incurred. Estimated losses on contracts of affreightment and charters are accrued when such losses become evident.

        Use of Estimates.    The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. The most significant estimates relate to depreciation of the vessels, liabilities incurred from employee, commercial and other claims, the allowance for doubtful accounts and deferred income taxes. Actual results could differ from these estimates.

        Concentrations of Credit Risk.    Financial instruments that potentially subject the Predecessor to concentrations of credit risk are primarily cash and cash equivalents and trade accounts receivable. The Predecessor maintains its cash and cash equivalents on deposit at a financial institution in amounts that, at times, may exceed insurable limits.

        With respect to accounts receivable, the Predecessor extends credit based upon an evaluation of a customer's financial condition and generally does not require collateral. The Predecessor maintains an

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allowance for doubtful accounts for potential losses, totaling $476 and $527 at June 30 and December 31, 2003, respectively, and does not believe it is exposed to concentrations of credit risk that are likely to have a material adverse effect on its financial position, results of operations or cash flows.

        Income Taxes.    As a limited liability company, K-Sea LLC is treated as a partnership for income tax purposes and, accordingly, is not responsible for federal, state and local income taxes, as its profits and losses are passed directly to its members for inclusion in their income tax returns. K-Sea LLC is subject to the New York City Unincorporated Business Tax. K-Sea LLC's subsidiaries are C Corporations that are subject to federal, state and local income taxes which are reflected in these financial statements. The provisions for income taxes for the three and six month periods ended December 31, 2002 and 2003 are based upon the estimated annual effective tax rates expected to be applicable to K-Sea LLC for fiscal 2003 and 2004, respectively.

        Deferred taxes represent the tax effects of differences between the financial reporting and tax bases of the Predecessor's assets and liabilities at enacted tax rates in effect for the years in which the differences are expected to reverse. The Predecessor evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

4. Vessels and Equipment and Construction in Progress

        At June 30 and December 31, 2003, vessels and equipment and construction in progress comprised the following:

        Depreciation and amortization of vessels and equipment for the three and six months ended December 31, 2002 and December 31, 2003 was $4,146, $8,204, $4,226 and $8,232, respectively. Such depreciation and amortization includes amortization of drydocking expenditures for the three and six months ended December 31, 2002 and December 31, 2003 of $1,703, $3,322, $1,819 and $3,504, respectively.

        On January 16, 2004, the Partnership took delivery of the DBL 102, the fourth and final newly built, double-hull tank barge pursuant to a construction contract with Bollinger Gretna, L.L.C. The vessel has begun work in the coastwise trade. Also, as described in Note 2 above, on January 29, 2004 the Partnership acquired a 140,000 barrel capacity double-hull tank barge and an 8,000 horsepower tugboat at a purchase price of $34,157.

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5. Financing

        As of June 30 and December 31, 2003, the Predecessor's outstanding debt balances were as follows:

        In connection with the Partnership's initial public offering of common units, as described in Note 2, all of the Predecessor's debt balances, exclusive of $12,950 in subordinated notes, were contributed to the Partnership. The contributed short-term and long-term debt (excluding the Title XI bonds) were then repaid at a cost of $73,941, including prepayment fees, with proceeds of the initial public offering. After the closing of the initial public offering, the Partnership's debt included only the bonds issued by the Predecessor to finance the construction of four new tank vessels and guaranteed by MARAD (the "Title XI bonds"). Since proceeds from the initial public offering were used to repay credit line borrowings and term loan payments due over the next twelve months, such indebtedness was excluded from current liabilities and is classified as long-term debt at December 31, 2003. The $12,950 of subordinated notes due December 31, 2004 is included in current liabilities; however, these subordinated notes were not contributed to the Partnership in connection with the initial public offering, and, therefore, will be excluded from the Partnership's indebtedness.

        Concurrent with the closing of the initial public offering, the Partnership also entered into a new, three-year $47,000 credit agreement, which comprises a $10,000 senior secured revolving working capital facility, a $30,000 senior secured revolving acquisition facility, and a $7,000 senior secured standby letter of credit facility. Borrowings under the credit facilities bear interest, at the option of the Partnership, at a rate equal to (a) the greater of the prime rate and the federal funds rate plus 0.5%, or (b) 30-day LIBOR plus 2.5%. The credit agreement is collateralized by vessels having an orderly liquidation value of at least $71,000. At closing, none of these funds were drawn and were completely available to the Partnership. Additionally, the agreements with MARAD governing the Title XI borrowings were restructured. The Partnership will be required to make available to the Secretary additional collateral in the form of (a) a total of $8,000 in additional funds in the form of escrowed cash (a minimum of $1,518) and standby letters of credit, and (b) additional vessels having an orderly liquidation value of at least $10,000. In addition, the Partnership is obligated to place in escrow with the Secretary one-sixth of the semi-annual debt service payment on each Title XI bond, which deposits will be withdrawn to make such payments.

        In connection with the delivery of the DBL 102 in January 2004, as described in Note 4, the Partnership drew down $9,932 in Title XI escrow funds. In connection with the acquisition of the 140,000 barrel integrated tug-barge unit, also described in Note 4, the Partnership entered into a seven-year, $25,048 term loan. The loan is repayable in monthly installments of $139, plus interest at an

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annual rate of 30-day LIBOR plus 2.95%, with a balloon payment of the remaining principal balance at maturity in 2011.

        The agreements governing the $47,000 credit facility, $25,048 term loan and the Title XI borrowings contain restrictive covenants that, among others, (a) prohibit distributions under defined events of default, (b) restrict investments and sales of assets, and (c) require the Partnership to adhere to certain financial covenants, including defined ratios of fixed charge coverage and funded debt to EBITDA, and a minimum balance of members' equity.

6. Commitments and Contingencies

        The Predecessor is the subject of various claims and lawsuits in the ordinary course of business for monetary relief arising principally from personal injuries and other casualties. Although the outcome of any individual claim or action cannot be predicted with certainty, the Predecessor believes that any adverse outcome, individually or in the aggregate, would be substantially mitigated by applicable insurance or indemnification from previous owners of the Predecessor's assets, and would not have a material adverse effect on the Predecessor's financial position, results of operations or cash flows. The Predecessor is subject to deductibles with respect to its insurance coverage that range from $25 to $100 per incident and provides on a current basis for estimated payments thereunder.

7. New Accounting Pronouncements

        Financial Accounting Standards Board Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities, an interpretation of ARB No. 51," was issued in January 2003 and addresses consolidation by business enterprises of variable interest entities that meet certain characteristics. Based on the provisions of FIN 46, if a business enterprise has a controlling financial interest in a variable interest entity, the assets, liabilities, and results of the activities of the variable interest entity should be included in consolidated financial statements with those of the business enterprise. The Predecessor was required to adopt FIN 46 in fiscal 2004, which did not have a material impact on the consolidated financial statements.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview

        We are a leading provider of refined petroleum product marine transportation, distribution and logistics services in the northeastern United States. Our fleet of 36 tank barges, 3 tankers and 19 tugboats serves a wide range of customers, including major oil companies, oil traders and refiners. With over two million barrels of capacity, we believe we own and operate the third-largest ocean-going tank barge fleet in the United States as measured by barrel-carrying capacity.

        Demand for our services is driven primarily by demand for refined petroleum products in the East Coast and Gulf of Mexico regions of the United States. We generate revenue by charging customers for the transportation and distribution of their products utilizing our tank vessels and tugboats. These logistics services are generally provided under the following four basic types of contractual relationships:

•

time charters, which are contracts to charter a vessel for a fixed period of time, generally one year or more, at a set daily rate;



•

contracts of affreightment, which are contracts to provide transportation services for products over a specific trade route, generally for one or more years, at a negotiated per barrel rate;



•

voyage charters, which are charters for shorter intervals, usually a single round-trip, that are made on either a current market rate or advance contractual basis; and



•

bareboat charters, which are longer-term agreements that allow a customer to operate one of our vessels and utilize its own operating staff without taking ownership of the vessel.

        In addition, a variation of a voyage charter is known as a "consecutive voyage charter." Under this arrangement, voyage charters are continuously performed for a specified period of time.

        The table below illustrates the primary distinctions among these types of contracts. Definitions of certain terms follow.

(1)

Under a consecutive voyage charter, the customer pays for idle time.

        Vessel operators can increase utilization and revenue generation through efficient vessel scheduling. Voyage charter rates, which are typically more responsive to changing market conditions than other rates, generally include payments for the time required for the vessel to return to the loading port after discharging its cargo. By scheduling the loading of new cargo closer to a discharge port, vessel operators can increase vessel utilization, generate additional revenue and increase average

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daily revenue. High vessel utilization tends to create higher average daily rates even though an operator may charge no more than its competitors for a particular voyage.

Definitions

        In order to understand our discussion of our results of operations, it is important to understand the meaning of the following terms used in our analysis and the factors that influence our results of operations:

•

Voyage revenue. Voyage revenue includes revenue from time charters, contracts of affreightment and voyage charters where we, as vessel operator, pay the vessel operating expenses. Voyage revenue is impacted by changes in charter and utilization rates and by the mix of business among the types of contracts described in the preceding sentence.



•

Voyage expenses. Voyage expenses include items such as fuel, port charges, pilot fees, tank cleaning costs and canal tolls, which are unique to a particular voyage. Depending on the form of contract and customer preference, voyage expenses may be paid directly by customers or by us. If we pay voyage expenses, they are included in our results of operations when they are incurred. Typically when we pay voyage expenses, we add them to our freight rates at an approximate cost.



•

Net voyage revenue. Net voyage revenue is equal to voyage revenue less voyage expenses. As explained above, the amount of voyage expenses we incur for a particular contract depends upon the form of the contract. Therefore, in comparing revenues between reporting periods, we use net voyage revenue to improve the comparability of reported revenues that are generated by the different forms of contracts.



•

Bareboat charter and other revenue. Bareboat charter and other revenue include revenue from bareboat charters and from towing and other miscellaneous services.



•

Vessel operating expenses. The most significant direct vessel operating expenses are wages paid to vessel crews, routine maintenance and repairs and marine insurance. We may also incur outside towing expenses during periods of peak demand and in order to maintain our operating capacity while our tugs are drydocked or otherwise out of service for scheduled and unscheduled maintenance.



•

Depreciation and amortization. We incur fixed charges related to the depreciation of the historical cost of our fleet and the amortization of expenditures for drydockings. The aggregate number of drydockings undertaken in a given period, the size of the vessels and the nature of the work performed determine the level of drydocking expenditures. We capitalize expenditures incurred for drydocking and amortize these expenditures over 36 months.



•

General and administrative expenses. General and administrative expenses consist of employment costs of shoreside staff and cost of facilities, as well as legal, audit and other administrative costs.



•

Total tank vessel days. Total tank vessel days are equal to the number of calendar days in the period multiplied by the total number of tank vessels operating or in drydock during that period.



•

Scheduled drydocking days. Scheduled drydocking days are days designated for the inspection and survey of tank vessels, and resulting maintenance work, as required by the U.S. Coast Guard and the American Bureau of Shipping to maintain the vessels' qualification to work in the U.S. coastwise trade. Generally, drydockings are required twice every five years and last between 30 and 60 days, based upon the size of the vessel and the type of work required.

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•

Net utilization. Net utilization is a primary measure of operating performance in our business. Net utilization is a percentage equal to the total number of days worked by a tank vessel or group of tank vessels during a defined period, divided by total tank vessel days for that tank vessel or group of tank vessels. Net utilization is adversely impacted by scheduled drydocking, scheduled and unscheduled maintenance and idle time not paid for by the customer.



•

Average daily rate. Average daily rate, another key measure of our operating performance, is equal to the net voyage revenue earned by a tank vessel or group of tank vessels during a defined period, divided by the total number of days actually worked by that tank vessel or group of tank vessels during that period. Fluctuations in average daily rates result not only from changes in charter rates charged to our customers, but also from changes in vessel efficiency, which could result from internal factors, such as newer and more efficient tank vessels, and from external factors such as weather or other delays.



•

Coastwise and local trades. Our business is segregated into coastwise trade and local trade. Our coastwise trade generally comprises voyages of between 200 and 1,000 miles by vessels with greater than 40,000 barrels of barrel-carrying capacity. These voyages originate from the mid Atlantic states to points as far north as Canada and as far south as Cape Hatteras and from points within the Gulf Coast region to other points within that region or to the Northeast. We also have one tank barge that transports agricultural products to international destinations. Our local trade generally comprises voyages by smaller vessels of less than 200 miles. The term U.S. coastwise trade, as used generally for Jones Act purposes, would include our coastwise and local trades.

Recent Events

a.    Initial Public Offering

        On July 8, 2003, K-Sea Transportation Partners L.P. was formed to own and operate the refined petroleum product marine transportation, distribution and logistics business conducted by K-Sea Transportation LLC ("K-Sea LLC") and its subsidiaries K-Sea Acquisition Corp., EW Holding Corp. and K-Sea Transportation Corp. (collectively, the "Predecessor"). On January 14, 2004, the Predecessor contributed substantially all of its assets and liabilities to us in connection with the initial public offering of our common units representing limited partnership interests (the "common units"). In exchange for these assets and liabilities, the Predecessor received 665,000 common units and 4,165,000 subordinated units representing limited partner interests in us.

        Also on January 14, 2004, we completed our initial public offering of 3,625,000 common units at a price of $23.50 per unit. On January 21, 2004, we sold an additional 540,000 common units to the public in connection with the underwriters' exercise of their over-allotment option, making a total of 4,165,000 common units outstanding. Total gross proceeds from these sales were $97.9 million, before offering costs and underwriting fees. Concurrent with these sales, we redeemed the 665,000 common units held by K-Sea LLC at a cost of $14.6 million. The proceeds retained by us relating to the sale of the common units totaled $83.3 million. These proceeds were used to repay $73.9 million in outstanding term and revolving credit debt, including prepayment fees, and to pay $5.9 million in underwriting fees and $3.4 million in professional fees and other offering expenses. The proceeds that

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we received from the initial public offering and the use of those proceeds is summarized as follows (in thousands):