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, 2012
Filing Date: April 26, 2012
Navios Maritime Partners L.P. is an international owner and operator of dry bulk vessels. As of March 31, 2012, the fleet consisted of 18 vessels: 11 Panamax, 6 Capesize, and 1 Ultra-Handymax. The company operates primarily under long-term time charters. On January 1, 2012, all outstanding subordinated units converted into 7,621,843 common units.
Key Financial Metrics
| Metric ($000s) | Q1 2012 | Q1 2011 |
|---|---|---|
| Time Charter Revenues | $47,987 | $42,804 |
| Net Income | $16,937 | $16,600 |
| EBITDA (Non-GAAP) | $36,785 | $32,430 |
| Operating Surplus (Non-GAAP) | $29,590 | $26,518 |
| Net Cash from Operating Activities | $37,788 | $31,273 |
| Total Debt (Outstanding) | $291,075 | $326,050 |
| Cash and Cash Equivalents | $33,496 | $48,078 |
| Time Charter Equivalent (TCE) per Day | $29,978 | $30,422 |
Material Changes vs. Prior Period
- Revenue Growth: Time charter revenues increased by $5.2 million (12.1%) to $48.0 million, driven by the addition of the Navios Luz and Navios Orbiter acquired in May 2011. Available fleet days increased to 1,576 from 1,407.
- Expense Increases:
- Management Fees: Increased by $1.2 million (20.0%) to $7.2 million due to fleet expansion and a rate increase effective November 2011.
- Depreciation & Amortization: Increased by $3.2 million (22.9%) to $17.2 million, primarily due to new vessel acquisitions and amortization of favorable lease terms.
- Interest Expense: Increased by $0.8 million (40.0%) to $2.8 million due to a higher weighted average interest rate (3.29% vs. 2.40%) and slightly higher average loan balances.
- Debt Reduction: Total borrowings decreased to $291.1 million from $326.1 million. The company repaid $35.0 million in principal during the quarter.
- Cash Flow: Net cash provided by operating activities increased by $6.5 million to $37.8 million. Net cash used in financing activities increased to $52.4 million outflow, primarily due to loan repayments and cash distributions.
Guidance, Outlook, and Risks
- Distributions: The Board authorized a quarterly cash distribution of $0.44 per unit for Q1 2012, payable May 14, 2012. The aggregate amount is anticipated to be $24.8 million. The minimum quarterly distribution target is $0.35 per unit.
- Liquidity: The company believes cash flows from operations are sufficient to meet short-term liquidity needs for at least the next 12 months. All credit facilities are fully drawn with no undrawn availability.
- Outlook: Management expects to rely on external financing (debt or equity) to fund expansion and investment capital expenditures, as available cash is distributed to unitholders.
- Risks:
- Counterparty Concentration: Top three charterers (Cosco Bulk Carrier, Mitsui O.S.K. Lines, Samsun Logix) accounted for 56.5% of revenues in Q1 2012.
- Interest Rate Risk: Borrowings are based on LIBOR plus a margin. A 1% increase in LIBOR would increase interest expense by approximately $0.8 million per quarter.
- Asset Impairment: Management monitors vessel values against carrying amounts. While no impairment was recorded in Q1 2012, significant market downturns could trigger future charges.
Investor Verification Checklist
- Debt Covenants: Verify continued compliance with financial covenants (tangible net worth, debt coverage ratios) given the fully drawn credit facilities.
- Charter Expirations: Review the schedule of charter expirations, noting that the Navios Libra II charter expires in November 2012 and Navios Prosperity (chartered-in) expires in July 2012.
- Related Party Transactions: Confirm the impact of management fees and administrative expenses paid to Navios Holdings, which increased in the current period.
- Counterparty Credit: Assess the creditworthiness of major charterers, particularly given the concentration of revenue and the history of receivership filings in the industry (e.g., Korea Line Corporation).
- Capital Expenditures: Monitor the reserve for maintenance and replacement capital expenditures ($4.5 million for Q1 2012) against actual drydocking needs.