Ardmore Shipping Corp. Form 6-K Summary
Business Context and Reporting Period
This report covers the six months ended June 30, 2018. Ardmore Shipping Corporation (NYSE: ASC) owns and operates a fleet of 28 MR (Medium Range) product and chemical tankers ranging from 25,000 to 50,000 Dwt. The Company provides seaborne transportation of petroleum products and chemicals globally. As of June 30, 2018, the fleet had an average age of 6 years. The Company is commercially independent with no blanket employment arrangements with third-party commercial managers.
Key Financial Metrics (Six Months Ended June 30, 2018)
| Metric | Value |
|---|---|
| Revenue | $102.8 million |
| Net Loss | $(13.7) million |
| Operating Loss | $(1.6) million |
| Net Cash from Operating Activities | $9.9 million |
| Cash and Cash Equivalents | $47.9 million |
| Total Debt (Net) | $358.9 million |
| Finance Lease Obligations (Net) | $92.9 million |
| Average TCE Rate | $12,057 per day |
| Revenue Days | 4,921 |
Material Changes vs. Prior Period
- Profitability: The Company reported a net loss of $13.7 million for the six months ended June 30, 2018, compared to a net loss of $4.0 million in the same period in 2017. Operating results shifted from a profit of $6.4 million in 2017 to a loss of $1.6 million in 2018.
- Revenue: Revenue increased 3% to $102.8 million, driven by an increase in spot charter revenue days (+$14.3 million), partially offset by lower spot rates (-$2.6 million) and a reduction in pool arrangement revenue days (-$7.2 million).
- Expenses: Total operating expenses increased 12% to $104.4 million. Commissions and voyage-related costs rose 18% due to increased spot charter activity. Interest expense increased 16% to $12.3 million, attributed to higher LIBOR rates and changes in debt structure.
- Fleet Composition: The average number of owned vessels increased to 27.9 from 27.0. The fleet mix shifted toward spot charters (24 vessels) and away from pool arrangements (4 vessels) compared to the prior year.
Guidance, Outlook, and Significant Developments
- Capital Transactions: In June 2018, the Company executed a sale and leaseback transaction for the Ardmore Endurance and Ardmore Enterprise, repaying $29.9 million in senior debt. In the quarter, the Company issued 652,416 shares under its at-the-market program, raising $5.2 million.
- Debt Structure: The Company refinanced portions of its debt through finance leases. Total finance lease obligations increased significantly to $92.9 million (net) from $39.6 million at year-end 2017.
- Liquidity: Cash and cash equivalents increased to $47.9 million. The Company remains in compliance with all financial covenants, including a minimum solvency of 30% and a minimum cash balance requirement of $22.7 million.
- Outlook Risks: Management highlights risks related to fluctuations in charter rates, vessel values, bunker prices, and geopolitical events. The Company notes that spot charters contribute to cash flow volatility.
- Accounting Changes: The Company adopted ASC 842 (Leases) early, recognizing right-of-use assets and corresponding liabilities for office leases and reclassifying certain vessel sale-leasebacks as finance leases.
Investor Verification Checklist
- Covenant Compliance: Verify continued adherence to the 30% minimum solvency and minimum cash balance covenants, especially given the increased debt load from new finance leases.
- TCE Rate Trends: Monitor the impact of declining spot rates on the average TCE rate, which fell to $12,057/day for the six-month period.
- Debt Maturity Profile: Review the maturity schedule of the new finance leases (expiring 2023-2025) and the mandatory repurchase obligations associated with them.
- Operating Cash Flow: Assess the sustainability of operating cash flows ($9.9 million) against the increased interest expense and upcoming drydocking schedule (9 vessels scheduled for 2018).
- Equity Dilution: Track the utilization of the at-the-market offering program and the impact of the new Stock Appreciation Rights (SARs) granted in April 2018.