Business Context and Reporting Period
Company: Navios Maritime Partners L.P.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Three and nine months ended September 30, 2012
Business Overview: Navios Partners is an international owner and operator of dry cargo vessels, primarily operating under long-term time charters. As of September 30, 2012, the fleet consisted of 21 vessels: 12 Panamax, 7 Capesize, and 2 Ultra-Handymax. The company is managed by Navios ShipManagement Inc., a subsidiary of Navios Maritime Holdings Inc., which holds a 25.2% interest in the partnership.
Key Financial Metrics
| Metric ($ in thousands) | 3 Months Ended Sep 30, 2012 | 3 Months Ended Sep 30, 2011 | 9 Months Ended Sep 30, 2012 | 9 Months Ended Sep 30, 2011 |
|---|---|---|---|---|
| Time Charter Revenues | $55,540 | $48,011 | $152,649 | $136,490 |
| Net Income | $22,143 | $16,563 | $55,761 | $46,674 |
| EBITDA | $43,030 | $35,980 | $116,192 | $99,203 |
| Operating Surplus | $35,642 | $29,344 | $94,729 | $84,540 |
| Net Cash from Operating Activities | $42,960 | $34,263 | $115,457 | $96,133 |
| Time Charter Equivalent (TCE) per Day | $29,341 | $28,992 | $29,513 | $29,646 |
| Fleet Utilization | 99.4% | 90.8% | 99.7% | 93.8% |
| Total Debt Outstanding | $325.8 million (as of Sep 30, 2012) | |||
| Cash and Cash Equivalents | $23.7 million (as of Sep 30, 2012) |
Material Changes vs. Prior Period
- Revenue Growth: Nine-month revenues increased 11.8% to $152.6 million, driven by the acquisition of the Navios Buena Ventura, Navios Soleil, and Navios Helios in 2012, as well as vessels acquired in 2011.
- Profitability: Net income for the nine months ended September 30, 2012, rose 19.5% to $55.8 million compared to $46.7 million in the prior year period.
- Expense Increases: Management fees increased 17.3% to $23.0 million (nine months) due to fleet expansion and fixed fee adjustments. Depreciation and amortization rose 13.0% to $53.0 million due to new vessel acquisitions and favorable lease term amortization.
- Interest Costs: Net interest expense increased 18.8% to $7.6 million (nine months) primarily due to a higher weighted average interest rate (2.99% vs. 2.42%), partially offset by a lower average debt balance.
- One-Time Items: The prior year (2011) included a $4.0 million write-off of an intangible asset related to the Navios Apollon charter termination, which did not recur in 2012.
Guidance, Outlook, and Risks
- Capital Expenditures: The company acquired three vessels in 2012 for a total cash consideration of approximately $109.7 million. Future expansion is expected to be funded by external financing and equity issuances rather than retained cash.
- Debt Refinancing: In July 2012, the company entered a $290.45 million credit facility maturing in 2017 to refinance existing debt. In August 2012, a $44.0 million facility was secured to fund recent acquisitions. All facilities were fully drawn as of September 30, 2012.
- Distributions: The Board authorized a quarterly distribution of $0.4425 per unit for the third quarter of 2012, payable in November 2012. The minimum quarterly distribution target is $0.35 per unit.
- Risks: Key risks include fluctuations in dry bulk charter rates, demand for shipping services, and interest rate volatility (LIBOR-based debt). The company is exposed to credit risk from major counterparties, with Cosco Bulk Carrier, Mitsui O.S.K. Lines, and Samsun Logix accounting for over 50% of revenues.
- Related Party Transactions: Significant transactions with Navios Holdings include management fees, administrative services, and vessel acquisitions. Navios Holdings owns 23.2% of the common units.
Investor Verification Checklist
- Debt Covenants: Verify continued compliance with financial covenants (Net Worth, debt coverage ratios) under the July 2012 and August 2012 credit facilities.
- Charter Expirations: Review the schedule of charter expirations, noting that several vessels have charters ending in 2013 and 2014, which may expose the company to spot market volatility upon renewal.
- Related Party Dependence: Assess the impact of the Omnibus Agreement and the concentration of revenue from Navios Holdings and its affiliates.
- Liquidity Position: Monitor the ratio of cash reserves to debt service requirements, noting that restricted cash increased to $28.1 million to meet retention account requirements.
- Unit Conversion: Confirm the impact of the conversion of subordinated units to common units (completed in 2012) on future distribution waterfalls and earnings per unit calculations.