Filing summary: Diana Containerships Inc. — FY 2013 Form 20-F
Entity and period: The supplied filing is Diana Containerships Inc.’s annual report for the year ended December 31, 2013, not a filing by Performance Shipping Inc. It reports annual results; standalone fourth-quarter financial figures are not provided in the supplied text. Financial statements are prepared under U.S. GAAP and received an unqualified audit opinion.
Financial and operating performance
| Metric | 2013 | 2012 |
|---|---|---|
| Time-charter revenue before prepaid-charter amortization | $74.3 million | $68.8 million |
| Time-charter revenue, net of amortization | $54.0 million | $56.6 million |
| Operating income (loss) | $(52.9) million | $9.0 million |
| Net income (loss) | $(57.3) million | $6.0 million |
| Basic and diluted earnings (loss) per share | $(1.73) | $0.22 |
| Cash from operating activities | $31.7 million | $31.3 million |
| Cash and cash equivalents at year-end | $19.7 million | $31.5 million |
| Total assets | $316.7 million | $337.0 million |
| Stockholders’ equity | $164.5 million | $238.8 million |
| Debt outstanding | $148.7 million | $92.7 million |
- Cash used in investing activities was $81.7 million, including vessel acquisitions, partly offset by vessel-sale proceeds. Cash provided by financing activities was $38.1 million, including $50.0 million borrowed from Diana Shipping, $6.0 million of additional RBS borrowing, $12.4 million of net ATM proceeds, and $29.7 million of dividends paid.
- Working capital was $19.2 million, compared with $30.8 million in 2012. Restricted cash was $9.9 million; the filing says there was no remaining borrowing capacity under the loan agreements.
- Fleet utilization was 97.9%, down from 99.8%. Average daily TCE fell to $15,162 from $17,499; daily vessel operating expense declined to $8,780 from $9,179.
- At year-end the fleet had nine vessels. The filing reports capacity of 40,894 TEU and a weighted average age of 11.5 years at December 31, 2013; subsequent sales left eight vessels as of the report date.
Material changes and unusual items
- The company recorded $42.3 million of non-cash vessel impairment charges and $16.5 million of losses on vessel sales, principally associated with older vessels sold or impaired. These charges drove the swing from 2012 profit to a substantial 2013 loss.
- Net charter revenue fell 4.6% despite higher gross charter revenue, reflecting $20.3 million of prepaid-charter revenue amortization, versus $12.2 million in 2012, and lower average charter rates. Vessel operating expenses rose to $30.9 million from $29.0 million, while interest and finance costs increased to $4.6 million from $3.1 million.
- The company acquired Hanjin Malta and two Post-Panamax vessels, Puelo and Pucon, and sold four vessels during 2013. APL Sardonyx was sold for demolition in February 2014; the filing states it had been impaired at year-end.
- In 2013, the company issued 2.86 million shares under its at-the-market program for $12.4 million net proceeds. It also drew the full $50.0 million unsecured loan from major shareholder Diana Shipping; the loan bears LIBOR plus 5.0% and has a 1.25% repayment fee.
- The RBS facility’s interest margin increased to 3.10% effective June 2013, and amendments changed covenant definitions, collateral and other terms. Outstanding RBS debt was $98.7 million; the related-party loan was $50.0 million. The RBS loan is stated as repayable at the end of its availability period in January 2017; the Diana Shipping loan matures in August 2017.
Outlook, risks and contingencies
- Management’s strategy is to pursue vessel acquisitions, use short-term charters near term to retain flexibility, and maintain a relatively low-debt balance sheet. It described the charter market as potentially improving, but rates remained below long-term averages and the filing gives no quantified earnings or revenue guidance.
- Four vessel charters were scheduled to expire during 2014, assuming earliest redelivery dates. Rechartering at materially lower rates—or failure to secure replacement employment—could reduce cash flow. Charterers are concentrated: four accounted for 87% of 2013 revenue, with NOL Liner representing 38%.
- The filing identifies cyclical charter rates, vessel-value declines, possible loan-covenant breaches, counterparty credit risk, refinancing constraints, operating-cost increases, regulatory and environmental costs, and foreign-exchange and interest-rate exposure as material risks. The company reported no derivatives in use.
- Dividends are discretionary, variable and subject to available cash, debt covenants, reserves and legal requirements. The company paid $0.90 per share for 2013 and declared a $0.15-per-share dividend in February 2014 for the fourth quarter of 2013; future payments are not assured.
- Management reported effective disclosure controls and internal control over financial reporting; the auditor also gave an unqualified opinion on internal controls. The filing disclosed no significant pending legal proceedings or material contingencies requiring a provision.
Key facts investors should verify
- Confirm the issuer: the supplied document is Diana Containerships Inc.’s 2013 Form 20-F, despite the request metadata naming Performance Shipping Inc.
- Review the vessel impairment assumptions and the $42.3 million charge, including sensitivity to charter rates, utilization, operating costs and vessel values.
- Check charter expirations, actual redeliveries and replacement rates, particularly for concentrated charterers and vessels exposed to near-term repricing.
- Assess liquidity and covenant headroom in light of $148.7 million of debt, no remaining facility borrowing capacity, restricted cash, and scheduled 2017 maturities.
- Evaluate related-party financing and service arrangements, shareholder dilution from the ATM program, and the sustainability of dividends given 2013 operating cash flow and capital needs.