TOP Ships Inc. — FY 2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023; filed March 29, 2024. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under U.S. GAAP and presented in U.S. dollars, generally in millions below.
Business context
TOP Ships owns and operates oil, petroleum-product and chemical tankers. At year-end it operated eight vessels, all employed on time charters, and held 50% interests in two additional product tankers through joint ventures. Revenue is therefore largely contracted, but results remain exposed to charterer credit, operating costs, interest rates and financing terms.
Key financial metrics
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Revenue | $82.9m | $80.7m |
| Operating income | $28.7m | $32.6m |
| Net income | $6.1m | $18.9m |
| Net income attributable to common shareholders | Loss of $22.4m | Loss of $9.2m |
| Basic and diluted loss per common share | $12.44 | $36.34 |
| EBITDA (non-GAAP) | $43.1m | $46.6m |
| Cash provided by operating activities | $28.9m | $33.4m |
| Cash and cash equivalents | $36.0m | $20.5m |
| Restricted cash | $4.0m | $4.0m |
| Debt before unamortized fees and discounts | $246.2m | $240.6m |
Revenue increased 2.8%. Operating margin was approximately 34.6% (40.4% in 2022), while net margin was approximately 7.3% (23.5% in 2022). These margins use consolidated operating income and net income, respectively. The company reported a $2.6m working-capital deficit, including $6.6m of unearned revenue from amounts collected in advance that it says do not require future cash settlement. Cash and restricted cash totaled approximately $40.0m.
Changes versus the prior year
- Net income fell by $12.9m, while operating income declined $3.9m, despite modest revenue growth and slightly higher TCE revenue per operating day: $27,856 versus $27,310.
- Interest and finance costs rose $8.6m to $23.0m, reflecting higher floating rates, a full year of costs on vessel financings and $3.5m of amortization of a debt discount related to the Cargill facility.
- General and administrative expense rose $5.1m to $6.7m, primarily because of a $5.0m CEO bonus. It was declared in December 2023, accrued at year-end and paid in January 2024.
- Operating cash flow decreased $4.5m. Investing activities provided $2.5m, mainly from joint-venture distributions; financing activities used $16.0m after debt repayments, preferred-share redemptions and dividends.
- Net income remained positive, but common shareholders’ attributable result was a $22.4m loss. A $22.4m deemed dividend associated with the December conversion of Series E preferred shares into 2.93m common shares drove this difference.
Financing, outlook and risks
- During December 2023, the company entered into $41.0m sale-and-leaseback financings for each of Eco West Coast and Eco Malibu, refinancing their prior bank loans. These carry floating SOFR-based interest and include balloon or repurchase obligations. The company reported compliance with its financing covenants at year-end.
- Most debt is floating-rate; the Cargill facility is fixed-rate. The filing estimates that a one-percentage-point increase in the relevant U.S. dollar reference rate would add approximately $2.2m to annual interest expense based on year-end debt.
- Contracted minimum time-charter receipts were $322.6m as of December 31, 2023, subject to charter performance and estimated dry-dock off-hire. Management said cash on hand and operating cash flow should cover liquidity needs for the following 12 months. It also expected slightly lower 2024 operating cash flow under prevailing SOFR assumptions and significant first-half 2024 dry-docking costs for three vessels. No specific earnings guidance was provided.
- Subsequent to year-end, the company redeemed all 3.66m outstanding Series F preferred shares for approximately $43.9m cash on February 6, 2024. It also exercised purchase options on two VLCCs and refinanced them through new CMBFL sale-and-leasebacks totaling $125m. These transactions are post-period events and affect assessment of liquidity and leverage after year-end.
- All 2023 revenue came from four charterers. Other principal risks include tanker-market volatility, higher SOFR, vessel-value declines and covenant pressure, customer or counterparty default, geopolitical disruption including Red Sea attacks, environmental regulation and potential dilution. The company also disclosed substantial voting control associated with the CEO’s family trusts; Series D preferred shares carried 1,000 votes each.
- The board announced a share repurchase authorization of up to $4m in December 2023; no shares were repurchased, and the program expired March 14, 2024. The company is evaluating alternatives for a potential asset spin-off after Rubico withdrew its registration statement in August 2023. It also disclosed advanced discussions about buying an interest in a 47-meter megayacht from a CEO affiliate; completion is not assured.
Important facts for investors to verify
- Reconcile the $6.1m consolidated net income with the $22.4m common-shareholder loss, including the $22.4m Series E deemed dividend and the conversion terms.
- Review post-year-end cash usage for the $43.9m Series F redemption alongside the $125m VLCC sale-and-leaseback proceeds, associated obligations and resulting net debt.
- Check current liquidity, restricted cash, scheduled debt and lease payments, SOFR exposure, and compliance with minimum-liquidity and leverage covenants after the post-year-end transactions.
- Assess charterer concentration, charter expiry and extension options, and whether the $322.6m of disclosed future receipts remains collectible and consistent with actual vessel availability.
- Evaluate the CEO bonus, related-party transactions and management arrangements, as well as the voting rights and potential dilution from outstanding warrants and preferred securities.
- Consider the auditor’s unmodified opinion on the financial statements and note that the auditor did not attest to internal control over financial reporting; management reported controls effective. The auditor identified no critical audit matters.