Ardmore Shipping Corporation — FY 2019 Form 20-F
Reporting period: Fiscal year ended December 31, 2019; filed April 3, 2020. Although the request references 2019 Q4, this is an annual filing and does not provide a clear standalone fourth-quarter income statement or cash-flow breakdown. Ardmore transports petroleum products and chemicals with a fleet of 25 tankers at year-end.
Key financial and operating metrics
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue | $230.0 million | $210.2 million |
| Net loss | $22.9 million | $42.9 million |
| Basic and diluted loss per share | $0.69 | $1.31 |
| Net cash from operating activities | $20.5 million | $9.4 million |
| Net cash from investing activities | $23.9 million | $(17.6) million |
| Net cash from/(used in) financing activities | $(49.5) million | $25.6 million |
| Cash and cash equivalents at year-end | $51.7 million | $56.9 million |
| Debt obligations, net of deferred fees | $207.3 million | $228.4 million |
| Finance lease obligations, net | $215.7 million | $241.5 million |
| Stockholders’ equity | $326.1 million | $346.6 million |
| Fleet-weighted average TCE per day | $14,686 | $11,529 |
| On-hire utilization | 99.66% | 99.30% |
Cash plus $11 million available and undrawn under revolving facilities was reported as total liquidity of approximately $62.7 million. Minimum cash required under financing covenants was $21.1 million; the company reported compliance with all financing covenants at year-end. The filing states aggregate debt and finance lease obligations of approximately $423 million. Fleet operating costs, including technical management fees, averaged $6,562 per day, versus $6,456 in 2018.
Material changes versus 2018
- Revenue increased 9%, despite average owned vessels declining to 25 from 28. Higher spot rates contributed $25.8 million of additional revenue and increased spot-market revenue days contributed $7.9 million; the reduction in time-charter and pool days reduced revenue by $13.9 million.
- Average TCE rose by $3,157 per day, reflecting stronger spot rates and lower voyage expenses. Voyage expenses declined to $96.1 million and vessel operating expenses to $62.5 million, partly reflecting the smaller fleet.
- Net loss narrowed by $20.1 million. However, 2019 included $13.2 million of losses on sales of two vessels; 2018 included a $6.4 million loss on a vessel held for sale.
- Operating cash flow more than doubled. Investing cash flow turned positive, mainly due to $26.6 million of proceeds from sales of three vessels. Financing cash flow was negative as debt repayments exceeded proceeds from new borrowing.
- December 2019 refinancing of 12 vessels provided $201.5 million in new facilities, released $15.9 million of cash after repayment and fees, extended maturities to 2024 and reduced the stated cost of debt.
Outlook, commentary, risks and unusual items
- Management described product and chemical tanker markets as recovering and highlighted a modern, fuel-efficient fleet and disciplined growth strategy. This view is tempered by substantial uncertainty from COVID-19, which management expected could materially adversely affect the business. The filing said the full impact could not then be estimated.
- Management reported that the early-2020 oil-price collapse had, as of the filing date, increased oil trading, vessel demand and freight rates, partly mitigating pandemic effects. It cautioned that stockpiling could pull demand forward and weaken subsequent trading and vessel demand.
- All vessels were employed directly in the spot market at year-end, exposing earnings and cash flows to volatile charter rates. As of March 15, 2020, none were on time charter.
- Key exposures include charter-rate and vessel-value declines, oil-demand shocks, fuel costs and IMO 2020 compliance, interest-rate and LIBOR transition risk, covenant compliance, refinancing access, counterparty credit, operational incidents, and environmental and regulatory liabilities. A 100-basis-point change in variable interest rates was estimated to change 2019 interest expense by approximately $3.9 million.
- The company sold the Seamaster and Seafarer in 2019 for combined proceeds of $18.8 million and recorded aggregate sale losses of $13.2 million. It also completed the sale of the Seatrader, previously classified as held for sale, in January 2019.
- The company paid a $0.05-per-share dividend for Q4 2019, totaling $1.7 million, on February 28, 2020. On March 9, 2020, it announced a new capital allocation policy prioritizing fleet maintenance, financial strength, accretive growth and shareholder returns; future dividends are not assured.
- A prior material weakness in controls over presentation of unusual transactions led to restatement of prior-period presentation of vessel disposal gains and losses. Management said remediation was completed in Q4 2019, and management and Deloitte concluded controls were effective at December 31, 2019. Deloitte issued an unqualified audit opinion; the auditor changed from Ernst & Young in December 2019.
- The filing reported no material pending legal proceedings and no material off-balance-sheet arrangements.
Important facts for investors to verify
- Obtain Q4-specific results from the company’s quarterly earnings materials; this 20-F presents annual results, not a clear standalone Q4 financial statement.
- Track spot TCE rates, vessel employment, and the sustainability of early-2020 freight-rate strength amid COVID-19 and stockpiling effects.
- Review liquidity, scheduled debt and lease payments, minimum-cash and other covenant headroom, and exposure to LIBOR-based financing.
- Assess whether the new capital allocation policy supports fleet requirements and financial strength while permitting sustainable shareholder distributions.
- Monitor vessel values and impairment assumptions, drydock and ballast-water-system spending, and any further implications of the prior control weakness and auditor transition.