Business Context and Reporting Period
Company: Navios Maritime Partners L.P.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Three and six months ended June 30, 2015 (Unaudited)
Date Filed: August 3, 2015
Navios Maritime Partners L.P. is an international owner and operator of dry cargo and container vessels. As of August 3, 2015, the fleet consisted of 31 vessels: 23 drybulk vessels (12 Panamax, 8 Capesize, 3 Ultra-Handymax) and 8 container vessels. The company operates primarily under long-term time charters.
Key Financial Metrics
| Metric ($ in thousands) | 3 Months Ended June 30, 2015 |
6 Months Ended June 30, 2015 |
|---|---|---|
| Time Charter & Voyage Revenues | $56,473 | $113,259 |
| Net Income | $11,355 | $22,234 |
| EBITDA (Non-GAAP) | $38,712 | $76,675 |
| Operating Surplus (Non-GAAP) | $29,320 | $57,136 |
| Net Cash from Operating Activities | $42,102 | $69,438 |
| Total Debt (Net) | $608,501 (as of June 30, 2015) | |
| Cash & Cash Equivalents | $26,841 (as of June 30, 2015) | |
| Available Credit Facilities | $123,000 (undrawn capacity) |
Material Changes vs. Prior Period
- Revenue: Six-month revenue increased slightly by 0.5% ($0.6 million) to $113.3 million, driven by new vessel deliveries (MSC Cristina, YM Utmost, YM Unity) offset by redeliveries (Navios Aldebaran, Navios Prosperity) and a decline in Time Charter Equivalent (TCE) rates to $20,248/day from $20,413/day.
- Net Income: Decreased significantly by 54.0% ($26.1 million) to $22.2 million for the six months ended June 30, 2015. The decline was primarily due to a $47.5 million decrease in "Other Income" compared to 2014, which included a one-time $47.6 million gain from credit default insurance termination in the prior year.
- Expenses: Management fees increased by 13.6% ($3.3 million) due to fleet expansion. Depreciation and amortization decreased by 38.8% ($23.5 million) largely due to the absence of a $22.0 million accelerated amortization charge recorded in the prior year.
- Capital Expenditures: Investing cash outflows surged to $148.6 million (vs. $3.7 million in 2014) primarily due to the $147.8 million acquisition of the MSC Cristina container vessel.
Guidance, Outlook, and Risks
- Recent Developments: On April 22, 2015, the company acquired the MSC Cristina (13,100 TEU) for $147.8 million, chartered for 12 years at $60,275/day. An option to acquire a second similar vessel was not exercised in June 2015.
- Liquidity: The company believes cash flows from operations are sufficient for short-term needs. It maintains a shelf registration for up to $500 million in securities, with approximately $330.4 million currently available.
- Distributions: The Board authorized a quarterly distribution of $0.4425 per unit for the quarter ended June 30, 2015, payable August 14, 2015. The minimum quarterly distribution target is $0.35 per unit.
- Risks & Contingencies:
- Counterparty Risk: Samsun Logix filed for rehabilitation; Navios Partners has one vessel chartered to them but expects no significant exposure due to insurance coverage up to $20.0 million.
- Market Risk: Results are sensitive to dry cargo demand, charter rates, and interest rate fluctuations (LIBOR-based debt).
- Related Party Transactions: Significant revenue and management fees are derived from Navios Holdings and its subsidiaries.
Investor Verification Checklist
- Debt Covenants: Verify compliance with financial covenants, specifically the EBITDA to interest expense ratio (minimum 5.00:1.00) and loan-to-value ratios.
- Charter Expirations: Review the fleet charter expiration schedule, noting that several vessels have charters expiring in 2016, exposing the company to spot market volatility upon renewal.
- Related Party Dependence: Assess the concentration of revenue from Navios Holdings and the impact of management fee structures on operating margins.
- Non-GAAP Reconciliations: Review the reconciliation of EBITDA and Operating Surplus to Net Income to understand the impact of non-cash items and maintenance capital expenditure reserves.
- Insurance Coverage: Confirm the status and limits of credit default insurance coverage for long-term charters, particularly regarding the Samsun Logix situation.