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, 2010 (Unaudited)
Date Filed: July 26, 2010
Navios Maritime Partners L.P. is an international owner and operator of dry bulk vessels. The fleet consists of 14 vessels (10 Panamax, 3 Capesize, 1 Ultra-Handymax) operating primarily under long-term time charters. The company is managed by Navios ShipManagement Inc., a subsidiary of Navios Maritime Holdings Inc., which holds a 31.3% interest in the partnership.
Key Financial Metrics
| Metric ($ in thousands) | 3 Months Ended June 30, 2010 |
3 Months Ended June 30, 2009 |
6 Months Ended June 30, 2010 |
6 Months Ended June 30, 2009 |
|---|---|---|---|---|
| Time Charter & Voyage Revenues | $33,255 | $22,154 | $62,668 | $43,311 |
| Net Income | $13,184 | $3,592 | $25,769 | $12,551 |
| Adjusted EBITDA | $24,592 | $15,189 | $45,933 | $29,917 |
| Operating Surplus | $34,402 | $11,432 | $52,210 | $21,982 |
| Net Cash from Operating Activities | $26,643 | $13,916 | $50,426 | $56,964 |
| Long-Term Debt (Outstanding) | $271.5 million (as of June 30, 2010) | |||
| Cash and Cash Equivalents |
Per Unit Earnings (6 Months 2010): Common Units: $0.75; Subordinated Units: $0.37; General Partner Units: $0.66.
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 50.0% ($11.1 million) for the three months and 44.8% ($19.4 million) for the six months ended June 30, 2010, compared to the prior year periods. This growth is primarily attributable to the acquisition of five vessels (Navios Sagittarius, Navios Apollon, Navios Hyperion, Navios Aurora II, and Navios Pollux) during the period.
- Profitability: Net income increased significantly due to higher revenues and lower interest rates. Interest expense decreased due to a weighted average interest rate of 2.19% (6 months 2010) compared to 3.98% (6 months 2009).
- Depreciation: Depreciation and amortization expenses increased substantially ($10.0 million for Q2 2010 vs. $3.5 million for Q2 2009) due to new vessel acquisitions and the amortization of favorable lease terms associated with long-term charters.
- Capital Expenditures: Net cash used in investing activities surged to $285.8 million for the six months ended June 30, 2010, compared to $34.6 million in the prior year, driven by vessel acquisitions totaling approximately $285.8 million.
Guidance, Outlook, and Risks
Recent Developments & Capital Raising:
- Equity Offerings: Completed public offerings in February and May 2010, raising approximately $147.5 million in net proceeds to fund fleet expansion.
- Vessel Acquisitions: Acquired Navios Hyperion ($63.0M), Navios Sagittarius ($22.5M), Navios Aurora II ($110.0M), and Navios Pollux ($110.0M) from Navios Holdings in 2010.
- Debt Facility: Amended its Credit Facility multiple times in 2010 to finance acquisitions. Total borrowings reached $271.5 million. The facility margin ranges from 1.45% to 1.80% depending on the loan-to-value ratio.
Distributions:
- Authorized quarterly distribution for Q2 2010 of $0.42 per unit (payable August 12, 2010), totaling approximately $18.3 million.
- Minimum quarterly distribution target is $0.35 per unit.
Risks and Contingencies:
- Market Risks: Exposure to fluctuations in dry bulk charter rates, vessel demand, and interest rates (LIBOR-based debt).
- Concentration Risk: Top four charter counterparties accounted for approximately 62.3% of revenues for the six months ended June 30, 2010.
- Related Party Transactions: Significant reliance on Navios Holdings for vessel acquisitions and management services (management fees of $8.9 million for the six months ended June 30, 2010).
- Impairment: No triggering events for impairment were identified as of June 30, 2010, but vessel values are subject to market conditions.
Investor Verification Checklist
- Debt Covenants: Verify continued compliance with the Value Maintenance Covenant (VMC) of 143% and minimum net worth of $135.0 million under the amended Credit Facility.
- Charter Expirations: Review the fleet charter expiration schedule; while most vessels are on long-term charters, monitor the impact of any charters expiring in the near term (e.g., Navios Libra II and Navios Alegria expiring in December 2010).
- Related Party Pricing: Assess the valuation of vessels acquired from Navios Holdings to ensure purchase prices reflect fair market value.
- Liquidity Position: Monitor cash reserves against the $14.4 million estimated annual replacement reserve and upcoming debt maturities (first principal repayment not due until 2012).
- Counterparty Credit: Evaluate the creditworthiness of major charterers (Mitsui O.S.K. Lines, Cargill, Cosco, Sanko) given the high concentration of revenue.