Performance Shipping Inc. — FY2021 Form 20-F
Business context and reporting period. This is an annual report for the fiscal year ended December 31, 2021, not a standalone fourth-quarter report; Q4 results are not separately stated in the supplied filing text. The company is a tanker owner and operator and completed its exit from containerships in 2020. At the report date, its fleet comprised five Aframax tankers with combined capacity of 546,094 DWT and a weighted average age of about 12.5 years. Financial statements are prepared under U.S. GAAP.
Key financial and operating metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue from continuing tanker operations | $36.5 million | $42.0 million |
| Operating income (loss), continuing operations | $(8.5) million | $4.3 million |
| Net income (loss), continuing operations | $(10.1) million | $2.3 million |
| Total net income (loss), including discontinued operations | $(9.7) million | $3.8 million |
| Basic/diluted loss per common share, total | $(1.93) | $1.06 / $1.05 |
| Net cash from (used in) operating activities | $(3.1) million | $13.2 million |
| Cash and cash equivalents at year-end | $9.6 million | $21.4 million |
| Long-term debt outstanding, gross | $50.2 million | Not clearly stated as gross in the supplied text |
| Working capital | $4.2 million | $17.6 million |
Cash-flow and cash figures include continuing and discontinued operations where stated. The company reported $7.9 million of bank-debt principal repayments and $0.8 million of net cash used in investing activities in 2021. Current assets were $19.4 million and current liabilities $15.2 million at year-end. Shareholders’ equity was $87.3 million, versus $96.8 million in 2020.
Fleet utilization fell to 85.5% from 88.1% for the tanker fleet in 2020. Tanker TCE declined to $9,963 per available day from $20,228; daily operating expenses were broadly unchanged at $6,740 versus $6,746. The filing reports a net-debt-to-fleet-value ratio of about 35% at December 31, 2021.
Material changes versus the prior comparable period
- Continuing revenue fell 13.1%, while continuing operations moved from $2.3 million of net income to a $10.1 million net loss. Lower tanker rates were the principal stated cause.
- Voyage expenses rose to $19.2 million from $14.4 million, mainly due to higher bunker costs and greater spot-market activity. Vessel operating expenses rose with the larger average fleet, while per-day operating costs remained nearly flat.
- Operating cash flow deteriorated from $13.2 million provided to $3.1 million used; year-end cash declined by $11.8 million.
- Debt declined to $50.2 million from $57.7 million on the balance sheet. The company said it complied with loan covenants at year-end; lenders temporarily reduced minimum required liquidity from $9.0 million to $5.0 million.
- No tanker impairment was recorded in 2021. The company estimated that the carrying value of four tankers exceeded their aggregate charter-free market values by approximately $13.1 million; this is a disclosed valuation gap, not a recognized impairment charge.
Outlook, management commentary, risks and unusual items
- Outlook: Management expected 2022 revenue to increase if the fleet expanded, and expected higher interest and finance expense following the subsequent related-party credit facility borrowing. It did not provide numerical company guidance for revenue, earnings, or rates. Its industry discussion cited a projected 3.4% recovery in global crude-oil demand and a 7.1% increase in crude-tanker DWT demand in 2022, but emphasized material uncertainty and downside risks, including the Russia-Ukraine conflict.
- Market and operating risks: Spot and pool exposure leaves earnings sensitive to volatile tanker rates, utilization, oil demand and trade patterns. COVID-related crew changes and port logistics caused delays, off-hire and added costs. Fuel prices, vessel values, regulation, environmental compliance, financing availability and counterparty performance are also material risks.
- Liquidity and financing: Management believed available cash, operating cash flow and access to the equity market and a new credit line would cover liquidity needs and covenant compliance for at least 12 months from the report date, while acknowledging financing availability and terms were uncertain. In March 2022, the company entered into an unsecured facility of up to $5.0 million with Mango Shipping, an affiliate of Chairperson Aliki Paliou; $3.2 million had been drawn by the report date. It carries 9% annual interest, a 3% fee on undrawn amounts and a $0.2 million arrangement fee.
- Capital structure and dividends: No common dividends were paid in 2021. The variable-dividend policy is discretionary and depends on cash generation, reserves, debt service and other constraints. After year-end, an exchange offer resulted in 2,834,612 common shares being exchanged for 793,657 Series B preferred shares. The filing describes possible future conversion into Series C preferred shares with superior voting rights and potential substantial voting concentration. A December 2021 rights agreement may dilute an unapproved acquirer reaching 10% ownership.
- Legal matter: A securities class action against the company and former executives remained pending; the company said it considered the claims without merit and intended to defend them. The filing does not provide a clear estimate of possible exposure.
- Unusual items: The company recorded $0.4 million of discontinued-operations income from compensation for crane damage to a containership sold in 2020, and a $0.1 million net gain on sale of a jointly owned Athens property. The auditor issued an unqualified opinion and identified vessel recoverability estimates, particularly future charter rates and utilization, as a critical audit matter. Management reported effective disclosure controls and internal control over financial reporting.
Most important facts for investors to verify
- Whether tanker charter rates and utilization recover, and whether the company’s spot/pool exposure translates into improved operating cash flow.
- Cash availability after minimum-liquidity requirements, scheduled debt repayments, vessel surveys and the $5.0 million related-party facility; confirm the facility’s draws, fees and repayment terms.
- Vessel market values and impairment sensitivity: management’s 2021 analysis used 88% assumed utilization and a $19,922 average daily earnings rate; it disclosed materially different outcomes under lower-rate assumptions.
- The status and potential financial exposure of the securities litigation, which remained unresolved in the filing.
- The effects of the Series B exchange, any Series C conversion and the rights agreement on dilution, voting control and common-shareholder rights.
- Customer concentration: two charterers accounted for 43% of 2021 revenue, including Aramco Trading Company at 26% and Vitol at 17%.
- Confirm subsequent share issuance and capitalization: the filing reports 5,082,726 common shares outstanding at December 31, 2021, but the post-year-end exchange offer and ATM issuance changed the share count.