Ardmore Shipping Corp. Form 6-K Summary
Business Context and Reporting Period
This Form 6-K reports the unaudited condensed interim consolidated financial results for Ardmore Shipping Corporation (NYSE: ASC) for the three and nine months ended September 30, 2019. Ardmore owns and operates a fleet of 25 Medium Range (MR) product and chemical tankers, focusing on fuel-efficient, modern vessels. The company is commercially independent, managing its own chartering and commercial operations.
Key Financial Metrics
| Metric | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 |
|---|---|---|---|---|
| Revenue | $169.4 million | $151.8 million | $52.1 million | $48.9 million |
| Net Loss | $(24.8) million | $(26.0) million | $(5.7) million | $(12.2) million |
| Loss Per Share (Basic/Diluted) | $(0.75) | $(0.79) | $(0.17) | $(0.37) |
| Operating Cash Flow | $13.3 million | $7.5 million | $2.1 million | $(2.4) million |
| Cash and Cash Equivalents | $46.2 million (as of Sep 30, 2019) | |||
| Total Debt (Net) | $203.3 million (as of Sep 30, 2019) | |||
| Average TCE Rate | $14,045/day | $11,816/day | $13,029/day | $10,261/day |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 12% year-over-year for the nine-month period, driven by higher spot market rates and increased revenue days from spot chartering, despite a reduction in the average fleet size from 28.0 to 25.7 vessels.
- Profitability Improvement: Net loss narrowed by 5% for the nine-month period and 53% for the three-month period compared to the prior year, primarily due to improved Time Charter Equivalent (TCE) rates and lower vessel operating expenses.
- Asset Sales: The company recorded a $13.2 million loss on the sale of two vessels (Ardmore Seamaster and Ardmore Seafarer) during the nine months ended September 30, 2019. No such sales occurred in the comparable 2018 period.
- Cost Management: Vessel operating expenses decreased by 6% for the nine-month period due to the smaller fleet size. Corporate general and administrative expenses increased 13% due to new share-based compensation awards.
Guidance, Outlook, and Risks
- Financing Update: In October 2019, Ardmore agreed to terms for two new credit facilities totaling $201.5 million. These facilities will refinance 12 ships, extend debt maturities to the end of 2024, and release $15.8 million in cash. Closing is expected in Q4 2019.
- Liquidity: The company maintains $46.2 million in cash and cash equivalents. Management believes working capital and operating cash flows are sufficient for current requirements. The company remains in compliance with all financial covenants.
- Capital Expenditures: Significant upcoming capital requirements include drydocking for 10 vessels in 2020 and 5 in 2021, as well as Ballast Water Treatment System (BWTS) installations for 10 vessels in 2021.
- Risks: Key risks include volatility in spot charter rates, fluctuations in bunker fuel prices, interest rate exposure (LIBOR-based debt), and potential disruption of shipping routes due to geopolitical events or accidents.
Investor Verification Checklist
- Refinancing Closure: Verify the successful closing of the $201.5 million refinancing package in Q4 2019 and the actual cash release amount.
- Covenant Compliance: Confirm continued compliance with debt covenants, specifically the minimum solvency (30%) and minimum cash balance requirements ($21.2 million as of Sep 30, 2019).
- Spot Market Exposure: Monitor the impact of 100% spot market exposure (no pool arrangements) on revenue volatility given the cyclical nature of the tanker industry.
- Capital Expenditure Timing: Track the execution of the 2020 drydocking schedule and BWTS installations to ensure they do not materially disrupt cash flow or vessel availability.
- Share-Based Compensation: Review the impact of new SAR and RSU grants on future corporate general and administrative expenses.