Business Context and Reporting Period
Stealthgas Inc. (NASDAQ: GASS), a ship-owning company serving the liquefied petroleum gas (LPG) sector, reported unaudited financial and operating results for the fourth quarter and full year ended December 31, 2006. The filing was submitted on February 23, 2007. The company operates a fleet of LPG carriers, with 29 vessels in service as of the reporting date and one newbuilding expected in October 2007.
Key Financial Metrics
Fourth Quarter 2006
- Net Revenues: $20.4 million
- Net Income: $4.8 million ($0.33 per share)
- EBITDA: $10.2 million
- Operating Cash Flow: $5.98 million
- Average Fleet Size: 28 vessels
- Average TCE Rate: $7,323 per day
Full Year 2006
- Net Revenues: $73.3 million
- Net Income: $18.5 million ($1.31 per share)
- EBITDA: $36.7 million
- Operating Cash Flow: $33.2 million
- Average Fleet Size: 25.9 vessels
- Average TCE Rate: $7,174 per day
- Total Debt: $140.9 million (Current: $16.1 million; Long-term: $124.8 million)
- Cash and Equivalents: $11.1 million
Material Changes vs. Prior Period
- Revenue Growth: Full-year 2006 revenues increased significantly from $36.6 million in 2005 to $73.3 million in 2006, driven by fleet expansion (average vessels grew from 11.9 to 25.9).
- Earnings Dilution: Despite revenue growth, full-year EPS decreased from $1.84 in 2005 to $1.31 in 2006 due to a substantial increase in the weighted average number of shares outstanding (from 7.9 million to 14.2 million) and higher operating expenses.
- Quarterly Performance: Q4 2006 net income ($4.8 million) was lower than Q4 2005 ($5.7 million), though management noted an improvement compared to Q2 and Q3 2006 due to better charter rates and fewer dry-docking costs.
- Cost Structure: Total vessel operating expenses per day increased from $2,364 in Q4 2005 to $2,682 in Q4 2006, primarily due to higher general and administrative expenses.
Guidance, Outlook, and Risks
- Dividend: The Board declared a quarterly cash dividend of $0.1875 per share, payable March 12, 2007.
- Outlook: Management reports a dramatic improvement in charter rates for the handy-size LPG sector. Approximately 74% of fleet days for 2007 are already fixed.
- Fleet Expansion: The company took delivery of its first newbuilding on February 1, 2007, with a second expected in October 2007.
- Operational Strategy: The company is rationalizing vessel management to reduce costs, bringing more vessels under its affiliate, Stealth Maritime Corp.
- Risks: Management highlighted intense cost pressures regarding crewing due to a scarcity of qualified seafarers. Other risks include bunker prices, dry-docking costs, and general market conditions.
- Unusual Items: The company reported an unrealized, non-cash loss of $28,777 in Q4 2006 and $0.2 million for the full year on interest rate swap arrangements.
Investor Verification Checklist
- Verify the impact of the 74% fixed charter rate for 2007 on future revenue stability.
- Confirm the delivery schedule and cost implications of the two newbuildings (Feb 2007 and Oct 2007).
- Assess the sustainability of operating cost reductions following the rationalization of third-party managers.
- Monitor the crewing shortage issue and its potential effect on vessel operating expenses.
- Review the debt structure and leverage ratios given the increase in total debt to $140.9 million.