Business Context and Reporting Period
Company: Navios Maritime Partners L.P.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Date: November 1, 2013
Reporting Period: Three and nine months ended September 30, 2013 (unaudited).
Business Overview: Navios Partners is an international owner and operator of dry cargo vessels, including Panamax, Capesize, Ultra-Handymax, and Container vessels. The fleet operates primarily under long-term time charters. As of September 30, 2013, the fleet consisted of 22 vessels (14 Panamax, 8 Capesize, 3 Ultra-Handymax, and 5 Container vessels under acquisition).
Key Financial Metrics
| Financial Metric ($ in thousands) | 3 Months Ended Sep 30, 2013 | 9 Months Ended Sep 30, 2013 |
|---|---|---|
| Time Charter & Voyage Revenues | $46,578 | $146,013 |
| Net Income | $13,123 | $48,880 |
| EBITDA (Non-GAAP) | $35,642 | $117,742 |
| Operating Surplus (Non-GAAP) | $28,187 | $99,410 |
| Net Cash from Operating Activities | $40,760 | $91,906 |
| Net Cash Used in Investing Activities | ($6,047) | ($107,587) |
| Net Cash Provided by Financing Activities | $48,762 | $129,373 |
| Total Debt (Outstanding) | $344.7 million (as of Sep 30, 2013) | |
| Cash and Cash Equivalents | $145.8 million (as of Sep 30, 2013) | |
| Time Charter Equivalent (TCE) Rate | $23,202/day | $24,903/day |
Material Changes vs. Prior Period
- Revenue Decline: Revenues decreased 16.1% ($9.0 million) for the three months and 4.3% ($6.6 million) for the nine months ended September 30, 2013, compared to the prior year periods. This was primarily driven by a decrease in the Time Charter Equivalent (TCE) rate, partially offset by increased fleet days due to new acquisitions.
- Net Income Decrease: Net income fell 40.7% ($9.0 million) for the three months and 12.3% ($6.9 million) for the nine months year-over-year.
- Increased Interest Expense: Interest expense and finance costs rose 78.9% for the three months and 40.0% for the nine months. This was due to higher average outstanding loan balances and increased weighted average interest rates (4.4% for Q3 2013 vs. 2.63% in Q3 2012).
- Other Income Spike: Other income increased significantly to $3.3 million (Q3) and $13.4 million (9M) due to upfront payments received under a suspension agreement for the vessel Navios Melodia.
- Capital Expenditures: Investing cash outflows were driven by the acquisition of the Navios Joy ($47.5 million) and deposits for future vessel deliveries.
Guidance, Outlook, and Recent Developments
- Fleet Expansion:
- Acquired Navios Joy (Capesize) for $47.5 million in September 2013.
- Acquired Navios Harmony (Panamax) for $17.8 million in October 2013.
- Agreed to acquire five South Korean-built container vessels for $275.0 million, chartered for 10 years at $30,150/day per vessel.
- Financing Activities:
- Completed a public offering of 5.75 million common units in September 2013, raising net proceeds of approximately $78.4 million.
- Issued a $189.5 million add-on to its Term Loan B facility in October 2013 to partially finance the container vessel acquisitions.
- Management Agreement: Amended the agreement with Navios Shipmanagement Inc. to fix daily management fees for 2014-2015 (e.g., $4,100/day for Panamax, $5,100/day for Capesize).
- Distributions: The Board authorized a quarterly distribution of $0.4425 per unit for the period ended September 30, 2013, payable November 13, 2013.
- Risks: The company highlights risks related to dry bulk demand, charter rate fluctuations, and counterparty credit risk (e.g., Korea Line Corporation receivership, though the charter was affirmed).
Investor Verification Checklist
- Debt Covenants: Verify compliance with the Loan-to-Value ratio (0.8 to 1.0) and other restrictive covenants under the Term Loan B and July 2012 Credit Facilities.
- Counterparty Concentration: Review exposure to top charterers (Cosco Bulk Carrier, Hanjin Shipping, Samsun Logix) which accounted for ~46.5% of 9M 2013 revenue.
- Container Vessel Execution: Confirm the delivery schedule and funding status for the five new container vessels ($275M total cost).
- Scrap Value Assumptions: Note the change in estimated scrap value per LWT from $285 to $340 effective Jan 1, 2013, and its impact on depreciation.
- Related Party Transactions: Monitor management fees and administrative expenses paid to Navios Holdings, which totaled $25.9 million for the nine months ended Sep 30, 2013.