Business Context and Reporting Period
Company: Navios Maritime Partners L.P.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Three months ended March 31, 2018 (Q1 2018)
Filing Date: May 21, 2018
Business Overview: Navios Partners is an international owner and operator of dry cargo vessels, including Panamax, Capesize, Ultra-Handymax, and Container vessels. The fleet is primarily chartered under long-term time charters. As of May 18, 2018, the fleet consisted of 36 vessels (excluding two container vessels pending sale and two Panamax vessels pending delivery).
Key Financial Metrics
| Metric ($ in thousands) | Q1 2018 | Q1 2017 |
|---|---|---|
| Time Charter & Voyage Revenues | $53,052 | $42,411 |
| Net Income / (Loss) | $5,478 | $(5,655) |
| EBITDA | $30,911 | $22,654 |
| Adjusted EBITDA | $31,525 | $25,873 |
| Operating Surplus | $17,460 | $17,566 |
| Net Cash from Operating Activities | $6,427 | $(2,180) |
| Total Debt (Net) | $486,812 | $424,500 (approx. prior period) |
| Working Capital | $27,600 | N/A |
| Time Charter Equivalent (Combined) per Day | $16,108 | $14,671 |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased by $10.6 million (25.1%) to $53.1 million, driven by the acquisition of seven vessels in 2017 and an increase in the Time Charter Equivalent (TCE) rate to $16,108 per day.
- Profitability Turnaround: The Company reported a net income of $5.5 million compared to a net loss of $5.7 million in Q1 2017. This $11.1 million swing was primarily due to higher revenues and a decrease in depreciation and amortization ($1.9 million reduction) following the full amortization of favorable lease intangibles and vessel sales in the prior year.
- Expense Increases: Management fees rose by $2.3 million (16.4%) due to a larger fleet size and an amended management agreement. Interest expense decreased slightly by $0.5 million despite a higher weighted average interest rate (6.4% vs 5.4%), largely due to write-offs of deferred finance fees.
- Cash Flow: Net cash provided by operating activities improved significantly to an inflow of $6.4 million from an outflow of $2.2 million in the prior year.
Guidance, Outlook, and Recent Developments
Recent Developments
- Distribution Reinstatement: The Board declared a cash distribution of $0.02 per unit for Q1 2018, paid on May 14, 2018. This marks the resumption of distributions after a suspension since late 2015.
- Fleet Expansion:
- Acquired Navios Apollon I (Panamax) for $13.0 million on May 9, 2018.
- Acquired Navios Symmetry (Panamax) on May 21, 2018; Navios Altair I expected in Q2 2018.
- Net fleet capacity increased by 40% since 2017, with average fleet age reduced by 12%.
- Asset Sales: Agreed to sell two container vessels (YM Utmost and YM Unity) to affiliate Navios Containers for approximately $67.0 million. A book loss of approximately $38.0 million is expected to be recognized in Q2 2018.
- Investment in Affiliate: Invested $14.5 million in Navios Maritime Containers Inc. (Navios Containers) in March 2018, resulting in a 36.0% equity ownership.
Risks and Contingencies
- Market Risks: Exposure to fluctuations in charter rates, global trade volumes, and bunker costs.
- Customer Concentration: Hyundai Merchant Marine Co., Ltd. (26.3%) and Yang Ming Marine Transport Corporation (11.8%) accounted for over 38% of Q1 2018 revenues.
- Debt Covenants: Distributions are subject to credit facility covenants, including minimum liquidity and EBITDA-to-interest ratios. The Company was in compliance as of March 31, 2018.
Key Facts for Investor Verification
- Upcoming Loss Recognition: Verify the impact of the expected $38.0 million book loss on the sale of two container vessels to be recognized in Q2 2018.
- Debt Maturity Profile: Review the Term Loan B facility ($426.0 million outstanding) maturing in September 2020 and the associated quarterly repayment schedule.
- Related Party Transactions: Confirm the terms of the Management Agreement with Navios Holdings, which dictates fixed daily management fees and represents a significant portion of operating expenses.
- Distribution Sustainability: Assess whether the new $0.02 per unit distribution policy is sustainable given the upcoming vessel sale loss and maintenance capital expenditure requirements (estimated at $24.7 million for 2018).
- Investment in Navios Containers: Monitor the performance of the 36% equity stake in Navios Containers, which contributed $1.0 million to equity earnings in Q1 2018.