Performance Shipping Inc. — 2020 Form 20-F
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone Q4 filing; the filing does not provide clear standalone fourth-quarter financial results. Financial statements are audited and prepared under U.S. GAAP. Unless stated otherwise, amounts below are U.S. dollars.
Business context
The company completed its shift from containerships to tankers, selling its last container vessel in August 2020. Container operations are presented as discontinued operations. It acquired three Aframax tankers in 2020 and reported five tankers in its fleet as of the report date, with combined capacity of 546,094 DWT. Its commercial strategy emphasizes spot and voyage charters, exposing earnings to charter-rate volatility.
Key financial results
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue, continuing tanker operations | $42.0 million | $6.3 million |
| Revenue, discontinued container operations | $4.2 million | $20.5 million |
| Total revenue, continuing and discontinued operations | $46.3 million | $26.8 million |
| Net income (loss), continuing operations | $2.3 million | $(6.7) million |
| Net income (loss), discontinued operations | $1.5 million | $(25.3) million |
| Total net income (loss) | $3.8 million | $(32.1) million |
| Operating cash flow, combined operations | $13.2 million | $(4.2) million |
| Cash and cash equivalents at year-end | $21.4 million | $26.3 million |
| Working capital | $17.6 million | $27.3 million |
| Debt outstanding, approximate | $58.1 million | $32.5 million |
For continuing operations, operating income was $4.3 million on $42.0 million of revenue; net income was $2.3 million. The reported total net income included a $1.5 million gain associated with repurchasing preferred shares. Basic EPS was $1.06 for total operations and $0.76 for continuing operations; total diluted EPS was $1.05.
Continuing tanker operations generated $42.0 million of revenue, including $34.7 million from spot charters and $7.3 million from time charters. Tanker TCE averaged $20,228 per day, versus $20,431 in 2019; fleet utilization including ballast days was 88.1%, versus 84.6%. Daily operating expenses averaged $6,746, up from $5,968. The company reported $14.4 million of voyage expenses, $9.2 million of vessel operating expenses, $5.8 million of depreciation, $8.0 million of general and administrative expenses, and $2.1 million of interest and finance costs for continuing operations.
Cash used in investing activities was $40.1 million, mainly reflecting $63.4 million spent on tanker acquisitions, partly offset by $23.5 million of net proceeds from container-vessel sales. Financing activities provided $22.0 million, including $34.8 million of bank-loan proceeds and $9.2 million of repayments. Year-end total assets were $157.9 million and stockholders’ equity was $96.8 million.
Material changes versus 2019
- Continuing revenue increased as the tanker fleet expanded; management attributed the improvement in continuing results primarily to more vessel operating days while general and administrative costs remained nearly flat.
- The container exit sharply reduced discontinued revenue, but the segment moved from a $25.3 million loss in 2019 to $1.5 million of income in 2020. The 2019 loss included $31.6 million of impairment charges; 2020 included $0.3 million of impairment and a $0.3 million vessel-sale gain.
- Combined operating cash flow improved from a $4.2 million outflow to $13.2 million inflow. Cash declined by about $5.0 million, while debt rose with tanker acquisitions and refinancing.
- The company reinstated a variable quarterly dividend policy and paid a 2020 dividend of $0.10 per share on a post-reverse-split basis ($0.01 before the 1-for-10 split).
Outlook, risks and unusual items
- Outlook: No specific company earnings or charter-rate guidance is provided. Management expected 2021 interest and finance expense to increase with higher average debt, vessel operating costs to rise if the fleet expands, and general and administrative expenses to remain approximately stable. Industry projections cited in the filing anticipate a demand recovery, but note downside risks for Aframax tankers.
- Charters and cash visibility: As of December 31, 2020, Blue Moon was the only tanker on a non-cancelable time charter; minimum contracted revenue, net of commissions, was estimated at $8.565 million through December 31, 2021. The other tankers were employed on spot voyages. As of March 4, 2021, Blue Moon’s stated rate was $28,000 per day, with redelivery expected between November 2021 and January 2022.
- Liquidity and debt: The $21.4 million cash balance included $9.0 million required as compensating cash under loan agreements. The company reported compliance with all loan covenants at year-end. Loans bear floating interest at LIBOR plus margins of 2.75%–2.85%, and mature in 2024; the filing estimates a 1 percentage-point interest-rate increase would raise 2020 interest expense from $1.7 million to $2.2 million.
- Vessel values: Management estimated that the five tankers’ aggregate carrying value exceeded their estimated charter-free market value by approximately $31.5 million at year-end. No impairment was recorded for tanker vessels, but the impairment assessment depends on uncertain future charter rates and utilization assumptions.
- COVID-19 and operations: Crew-rotation restrictions, travel and supply disruptions, additional costs, and off-hire time affected operations. Management said lower activity, seasonal factors and COVID-19 contributed to weaker tanker charter rates in the second half of 2020.
- Other risks and contingencies: The company faces volatile spot rates and vessel values, refinancing and covenant risks, fuel and environmental compliance costs, and potential effects from LIBOR transition. A securities class action remained pending; management said it considers the claims without merit and intends to defend the case. The filing states management was not aware of other contingencies requiring a provision.
- Governance and dilution: Director Aliki Paliou was reported as beneficially owning approximately 46.3% of shares as of March 4, 2021. A related-party brokerage firm controlled by her provided services in 2020. The company also completed a 1-for-10 reverse stock split in November 2020 and repurchased and canceled 81,785 common shares during the year.
Most important facts for investors to verify
- Reconcile continuing-operations earnings, discontinued-operations earnings, the preferred-share repurchase gain, and total EPS to the audited statements.
- Confirm the cash genuinely available for operations after the $9.0 million compensating-balance requirement and scheduled debt service.
- Review spot-market exposure, contracted employment and charter renewal assumptions, especially as the Blue Moon charter approaches redelivery.
- Assess the valuation gap between tanker carrying values and estimated market values, including the charter-rate and utilization assumptions used in impairment testing.
- Monitor covenant headroom, floating-rate exposure and the transition from LIBOR, as well as the status and potential costs of the pending securities litigation.
- Evaluate the variable dividend’s sustainability after debt payments, vessel replacement and drydocking reserves, and consider ownership concentration, related-party arrangements and potential future equity issuance.