Business Context and Reporting Period
Company: Navios Maritime Partners L.P. (Navios Partners)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Date: July 28, 2017
Reporting Period: Three and six months ended June 30, 2017 (unaudited)
Business Overview: Navios Partners is an international owner and operator of dry cargo vessels (Panamax, Capesize, Ultra-Handymax) and container vessels. The company operates primarily under long-term time charters. In April 2017, it established a consolidated subsidiary, Navios Maritime Containers Inc. ("Navios Containers"), dedicated to the container sector.
Key Financial Metrics
| Metric ($ in thousands) | 3 Months Ended June 30, 2017 | 6 Months Ended June 30, 2017 |
|---|---|---|
| Time Charter & Voyage Revenues | $50,018 | $92,429 |
| Net Income (Loss) | $4,445 | $(1,208) |
| Net Income (Loss) Attributable to Unitholders | $4,090 | $(1,563) |
| EBITDA | $31,745 | $54,399 |
| Adjusted EBITDA | $32,214 | $58,087 |
| Operating Surplus | $22,350 | $39,917 |
| Net Cash Provided by Operating Activities | $12,265 | $10,528 |
| Total Debt (Net) | $475,017 (as of June 30, 2017) | |
| Cash and Cash Equivalents | $79,749 (as of June 30, 2017) | |
| Working Capital | $65,500 (Current Assets $134.1M - Current Liabilities $68.6M) |
Material Changes vs. Prior Period
- Revenue: For the six months ended June 30, 2017, revenues decreased by 1.3% ($1.2 million) compared to the prior year period, primarily due to the sale of the vessel MSC Cristina in January 2017. However, the three-month period showed a 4.5% increase driven by higher Time Charter Equivalent (TCE) rates.
- Profitability: Net loss for the six months ended June 30, 2017, improved significantly to $(1.2) million from a loss of $(16.6) million in the prior year. This improvement was driven by the absence of a $17.2 million vessel impairment loss recorded in the prior year and higher operating surplus.
- Expenses: General and administrative expenses increased by 58.4% ($3.0 million) for the six-month period, largely due to increased legal/professional fees and equity compensation. Interest expense increased by 15.4% due to a higher weighted average interest rate (5.61% vs 4.60%).
- Fleet Utilization: Fleet utilization remained high at 99.51% for the six months ended June 30, 2017, compared to 99.91% in the prior year.
Guidance, Outlook, and Risks
- Distributions: The Company suspended quarterly cash distributions to unitholders effective December 31, 2015, to preserve cash. There is no guarantee of reinstatement, and distributions are subject to credit facility covenants and board discretion.
- Fleet Renewal: The company is actively executing a fleet renewal program. As of July 2017, it had agreed to acquire seven vessels and sold one, reducing the average fleet age by approximately 9% (dwt basis).
- Recent Acquisitions:
- Acquired Navios Prosperity I (Panamax) and Navios Ace (Capesize) in June 2017.
- Agreed to acquire Navios TBN I (Capesize), Navios TBN II (Capesize), and Navios TBN III (Handymax) for delivery in Q3 2017.
- Navios Containers acquired five container vessels from Navios Partners and rights to nine additional vessels.
- Debt Refinancing: In March 2017, Navios Partners issued a new $405 million Term Loan B facility to refinance prior debt. In June 2017, new credit facilities were secured to finance vessel acquisitions.
- Risks: Key risks include global trade uncertainty, fluctuations in charter rates, customer concentration (Hyundai Merchant Marine and Yang Ming accounted for ~44% of revenue in the first half of 2017), and the ability to secure favorable financing terms.
Investor Verification Checklist
- Distribution Policy: Verify the current status of the suspended quarterly distributions and the specific covenants required to reinstate them.
- Debt Covenants: Confirm compliance with financial covenants, specifically the EBITDA to interest expense ratio (minimum 2.00:1.00) and loan-to-value ratios.
- Customer Concentration: Assess the risk exposure to top charterers, specifically Hyundai Merchant Marine Co., Ltd. (30.4% of revenue) and Yang Ming Marine Transport Corporation (13.6% of revenue).
- Related Party Transactions: Review the terms of management fees and administrative services provided by Navios Holdings, which totaled $29.8 million for the six-month period.
- Capital Expenditures: Monitor the execution of the fleet renewal program and the associated cash outflows for vessel acquisitions and deposits ($9.9 million in deposits as of June 30, 2017).