Business Context and Reporting Period
This Form 6-K filing by Nordic American Tankers Ltd. (NAT) covers the first quarter of 2013, ending March 31, 2013. The report incorporates a press release dated May 13, 2013, detailing earnings and strategic updates. NAT operates a homogeneous fleet of Suezmax tankers, primarily employed in the spot market through its wholly-owned Orion Tanker Pool. During the quarter, the company acquired its manager, Scandic American Shipping Ltd., and took full control of the Orion Tanker Pool, resulting in fully consolidated financial statements.
Key Financial Metrics
- Revenue: Net Voyage Revenue for 1Q2013 was $17.3 million, compared to $17.5 million in 4Q2012 and $30.5 million in 1Q2012.
- Profitability: The company reported a Net Loss of $32.4 million for 1Q2013. Basic Loss per Share was -$0.59. This includes a one-time settlement loss of $5.0 million related to the Scandic acquisition and $3.6 million in acquisition-related expenses.
- Cash Flow: Operating cash flow (non-GAAP) was -$4.9 million for 1Q2013, compared to -$1.1 million in 4Q2012 and $11.4 million in 1Q2012. Net cash used in operating activities was $21.8 million.
- Liquidity: Cash and cash equivalents stood at $23.6 million as of March 31, 2013. The company maintains a cash break-even rate of approximately $12,000 per day per vessel.
- Debt: Long-term debt is $250 million, drawn from a $430 million non-amortizing credit facility maturing in November 2017. Net debt is approximately $8.2 million per vessel.
- Dividends: The Board declared a quarterly dividend of $0.16 per share, payable May 14, 2013, marking 63 consecutive quarters of dividend payments.
Material Changes vs. Prior Period
- Accounting Changes: Financial statements for 1Q2013 are fully consolidated with Scandic American Shipping Ltd. and Orion Tanker Pool, whereas previous quarters did not fully consolidate these entities. This altered the presentation of General and Administrative (G&A) expenses and balance sheet line items.
- Acquisition Charges: A one-time settlement loss of $5.0 million and $3.6 million in acquisition expenses were recorded in 1Q2013, significantly impacting the net loss compared to prior periods.
- Equity Offering: On April 1, 2013, NAT completed an equity offering of 11.2 million shares, raising net proceeds of $102.3 million. This transaction closed after the reporting period end but is reflected in the share count (66.0 million shares outstanding post-offer).
- Fleet Expansion: The company acquired a new Suezmax tanker (Nordic Future), scheduled for delivery by June 15, 2013, bringing the total fleet to 21 vessels.
Outlook, Risks, and Management Commentary
Market Outlook: Management describes the tanker market as challenging but notes underlying signs of improvement, including a shrinking orderbook for Suezmax vessels and increased scrapping activity. The Imarex index averaged $12,466 per day in 1Q2013, up from $11,533 in 4Q2012 but down significantly from $22,804 in 1Q2012. Management expects that when the market turns, dividends can increase.
Strategy: NAT emphasizes a "Nordic American System" focused on risk management, a conservative balance sheet, and fleet expansion only when accretive to earnings per share. The company does not use derivatives and focuses on cost efficiency through a homogenous fleet and energy-saving technologies.
Risks: Key risks include fluctuations in global economic conditions, bunker fuel prices, charter rates, and vessel values. The company notes that the European economy faces deficits and debt issues, though NAT has no economic interests in Cyprus.
Investor Verification Checklist
- Verify the impact of the $5.0 million settlement loss and $3.6 million acquisition expenses on the reported Net Loss of $32.4 million.
- Confirm the utilization of the $102.3 million raised in the April 2013 equity offering and its effect on future liquidity and debt ratios.
- Monitor the delivery and operational integration of the new vessel, Nordic Future, and its impact on the fleet's average age (currently 10.8 years).
- Track the Imarex index and spot rates to assess the validity of management's expectation of a market upswing and potential dividend increases.
- Review the reconciliation of non-GAAP operating cash flow to understand the divergence from GAAP net cash provided by operating activities.