Filing summary
Entity and period: The supplied filing is Diana Containerships Inc.’s annual report on Form 20-F for the fiscal year ended December 31, 2015, filed March 21, 2016. This does not match the request metadata naming Performance Shipping Inc. or specifying 2015 Q4. The financial results below are annual, not quarterly. Figures are U.S. dollars unless stated otherwise.
Business context and financial performance
Diana Containerships owns and charters containerships, principally on time charters. At year-end, its fleet comprised 14 vessels with capacity of 70,464 TEU. During 2015, the company acquired four vessels and sold one. It reported using U.S. GAAP.
| Metric | 2015 | 2014 |
|---|---|---|
| Gross time charter revenue | $70.7 million | $65.7 million |
| Net time charter revenue, after prepaid-charter amortization | $62.2 million | $54.1 million |
| Operating income (loss) | $(10.5) million | $9.9 million |
| Net income (loss) | $(17.5) million | $3.2 million |
| Basic and diluted earnings (loss) per share | $(0.24) | $0.06 |
| Net cash provided by operating activities | $17.4 million | $25.5 million |
| Net cash used in investing activities | $(111.8) million | $(51.6) million |
| Net cash provided by financing activities | $41.7 million | $88.5 million |
| Cash and cash equivalents at year-end | $29.4 million | $82.0 million |
| Working capital | $10.2 million | $77.2 million |
| Principal debt outstanding | $193.5 million | Not stated on a comparable principal basis in the cited summary |
Vessel net book value was $384.5 million, total assets $435.7 million, and stockholders’ equity $239.2 million at December 31, 2015. Current assets were $34.9 million and current liabilities $24.7 million. In addition to $29.4 million of cash and cash equivalents, $9.0 million was restricted cash. The RBS facility requires minimum liquidity of $0.5 million per vessel and restricted cash of $9.0 million.
Operating indicators weakened: the time charter equivalent (TCE) rate fell to $13,192 per available day from $16,803; fleet utilization declined to 92.0% from 99.7%. Daily vessel operating expense decreased to $7,793 from $8,305. The filing does not present a standard gross-margin measure.
Material changes versus 2014
- Net charter revenue rose about 15%, despite lower daily charter rates, mainly because ownership days increased 44% and prepaid charter amortization was lower.
- The company moved from net income of $3.2 million to a net loss of $17.5 million. The 2015 loss included $6.6 million of non-cash impairment on Hanjin Malta and an $8.3 million loss on the sale of Garnet; management attributed the loss primarily to these impairment and sale-related charges.
- Operating expenses increased to $35.8 million from $26.6 million, largely reflecting the larger fleet. Voyage expenses rose to $2.6 million from $0.3 million, including increased bunker costs while vessels were off-hire and higher commissions.
- Cash from operations fell by $8.0 million. Investing outflows increased with vessel purchases, while cash declined by $52.6 million over the year.
- Year-end cash fell by $52.6 million and working capital by $67.0 million. The company refinanced its previous RBS facility, drew the full $148.0 million new term loan, and repaid/prepaid $103.3 million of debt during the year.
Debt, liquidity, outlook, and risks
At year-end, principal debt comprised $144.7 million under the RBS term loan and $48.75 million owed to related-party shareholder Diana Shipping Inc. The RBS loan bears interest at LIBOR plus 2.75%, has quarterly installments and a balloon payment at maturity in September 2021, and is secured by vessel mortgages and related assignments. The Diana Shipping loan bears interest at LIBOR plus 3.0%, requires $5.0 million annual repayments, and matures in March 2022 with a balloon payment. No borrowing capacity remained under the loan agreements at year-end. Debt covenants and minimum-security requirements may constrain dividends and other actions.
Management expected operating cash flow to fund fleet operations and working capital, but did not provide earnings or cash-flow guidance. At December 31, 2015, minimum contractual charter revenue through year-end 2016 was estimated at $21.8 million, net of third-party commissions. Most charters had limited remaining duration; management said many were due to expire in 2016 and warned that replacement charter rates could be materially lower. The containership market was described as cyclical and volatile, with charter rates weakening sharply by late 2015.
- Market and refinancing risk: weak charter rates and vessel values may impair earnings, reduce collateral coverage, or lead to covenant breaches. Management estimated that carrying values of 10 vessels exceeded their aggregate charter-free market values by about $99.0 million; those market-value estimates are inherently uncertain.
- Customer concentration: five charterers accounted for 83% of 2015 revenue. Counterparty failures, renegotiations, or loss of major customers could materially affect cash flow.
- Liquidity and dividends: dividends are discretionary and subject to cash needs, covenants, and legal restrictions. The 2015 dividend was $0.01 per share; the company declared $0.0025 per share for Q4 2015 in March 2016.
- Listing risk: Nasdaq notified the company in January 2016 that its share price had failed the $1.00 minimum bid requirement; the compliance period ran to July 12, 2016. Shareholders authorized the board to effect a reverse split.
- Other risks include vessel operating and drydocking costs, environmental and safety regulation, foreign-exchange exposure, political and sanctions developments, and reliance on related parties. The filing reports no significant pending or threatened legal proceedings requiring disclosure.
Subsequent events and unusual disclosures: Hanjin Malta was sold for demolition for $5.044 million before commissions and delivered on March 9, 2016. The filing also includes a Section 13(r) disclosure concerning Iran port calls by vessels of Diana Shipping Inc., a shareholder and related company—not by Diana Containerships’ vessels, according to the filing. The financial-statement auditors gave an unqualified opinion, and management and the auditor reported effective internal control over financial reporting as of year-end.
Most important facts for investors to verify
- Confirm the issuer and period: this is Diana Containerships’ FY2015 Form 20-F, not a Performance Shipping filing or a standalone Q4 report.
- Review current charter coverage, redelivery dates, and achievable replacement rates, particularly for charters expiring in 2016; compare them with vessel operating costs and debt service.
- Check current cash availability, restricted-cash requirements, debt amortization and balloon payments, and compliance with RBS and related-party loan covenants.
- Assess vessel collateral values and impairment sensitivity, including management’s estimated $99.0 million aggregate gap between carrying value and charter-free market value for 10 vessels.
- Monitor Nasdaq bid-price compliance, any reverse split, and the effect of share issuance or restricted-stock awards on dilution.
- Review charterer concentration, related-party arrangements and fees, and the distinction between the company’s own operations and the affiliate Iran-call disclosure.