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 six months ended June 30, 2011
Date Filed: July 28, 2011
Navios Maritime Partners L.P. is an international owner and operator of dry bulk vessels. The fleet consists of Panamax, Capesize, and Ultra-Handymax vessels, primarily operating under long-term time charters. The company is managed by Navios ShipManagement Inc., a subsidiary of Navios Maritime Holdings Inc., which owns a 27.1% interest in the partnership.
Key Financial Metrics
| Metric ($ in thousands) | 3 Months Ended June 30, 2011 |
3 Months Ended June 30, 2010 |
6 Months Ended June 30, 2011 |
6 Months Ended June 30, 2010 |
|---|---|---|---|---|
| Time Charter Revenues | $45,675 | $33,255 | $88,479 | $62,668 |
| Net Income | $13,511 | $13,184 | $30,111 | $25,769 |
| EBITDA | $30,793 | $24,592 | $63,223 | $45,933 |
| Adjusted EBITDA | $34,772 | $24,592 | $67,202 | $45,933 |
| Operating Surplus | $28,673 | $19,957 | $55,191 | $36,886 |
| Net Cash from Operating Activities | $30,597 | $26,643 | $61,870 | $50,426 |
| Long-Term Debt (Total) | $341.9 million (as of June 30, 2011) | |||
| Cash and Cash Equivalents |
Fleet Performance (6 Months Ended June 30, 2011):
- Operating Days: 2,814
- Fleet Utilization: 95.5%
- Time Charter Equivalent (TCE): $30,013 per day
Material Changes vs. Prior Period
Revenue Growth: Time charter revenues increased by 41.1% ($25.8 million) for the six months ended June 30, 2011, compared to the same period in 2010. This growth is primarily attributable to the acquisition of six vessels (Navios Hyperion, Sagittarius, Aurora II, Pollux, Melodia, Fulvia, Luz, and Orbiter) which increased operating days from 2,218 to 2,814.
Profitability: Net income increased by 16.8% ($4.3 million) for the six-month period. Adjusted EBITDA increased by 46.4% ($21.3 million), driven by revenue growth from new vessels, partially offset by higher management fees and administrative expenses.
Unusual Items: A $4.0 million write-off of an intangible asset was recorded in the second quarter of 2011. This resulted from the termination of the charter-out contract for the Navios Apollon following an engine breakdown.
Debt and Liquidity: Total borrowings increased to $341.9 million as of June 30, 2011, from $271.5 million in the prior year period. This increase was due to new tranches under the Credit Facility and a new $35.0 million facility entered into in May 2011 to finance vessel acquisitions.
Guidance, Outlook, and Risks
Recent Developments:
- Equity Offering: In April 2011, the company completed a public offering of 4.6 million common units, raising net proceeds of approximately $86.3 million.
- Vessel Acquisitions: In May 2011, the company acquired the Navios Luz (Capesize) and Navios Orbiter (Panamax) from Navios Holdings for a total purchase price of $130.0 million (paid via cash and issuance of common units).
- Distributions: The Board authorized a quarterly cash distribution of $0.44 per unit for the second quarter of 2011, payable in August 2011.
Outlook and Risks:
- Market Conditions: Future results depend on dry bulk shipping demand, charter rates, and competitive factors.
- Counterparty Risk: Korea Line Corporation (charterer of Navios Melodia) filed for receivership in January 2011. The charter was affirmed, but payments are made directly by the sub-charterer during an interim suspension period.
- Operational Risk: The Navios Apollon remains off-hire for repairs following an engine breakdown, with operations expected to resume in September 2011.
- Interest Rate Risk: Borrowings are based on LIBOR plus a margin. A 1% increase in LIBOR would increase interest expense by approximately $1.4 million for the six-month period.
Key Facts for Investor Verification
- Related Party Transactions: Significant vessel acquisitions and management fees are tied to Navios Maritime Holdings Inc. and its subsidiaries. Verify the terms of the management agreement and the valuation of vessels acquired from the parent company.
- Intangible Asset Write-off: Confirm the impact of the $4.0 million write-off related to the Navios Apollon on future earnings and the status of the vessel's repair and re-chartering.
- Debt Covenants: Verify continued compliance with financial covenants under the Credit Facility and the New Credit Facility, particularly given the increased leverage from recent acquisitions.
- Counterparty Exposure: Monitor the financial stability of major charterers, specifically Cosco Bulk Carrier and Mitsui O.S.K. Lines, which accounted for over 40% of revenues in the first half of 2011.
- Distribution Coverage: Assess the sustainability of the $0.44 per unit distribution against Operating Surplus and cash reserves, noting the requirement to maintain reserves for maintenance and replacement capital expenditures.