Navios Maritime Partners L.P. — FY2015 Form 20-F
Reporting period: Fiscal year ended December 31, 2015; audited U.S. GAAP financial statements. This is an annual filing, not a standalone fourth-quarter report. Figures below are U.S. dollars unless stated otherwise.
Business context
The partnership owns and operates drybulk and container vessels, generally under medium- to long-term time charters. At year-end it reported 31 vessels, including owned and chartered-in vessels. It acquired the 13,100-TEU container ship MSC Cristina in April 2015 for approximately $147.8 million.
Financial performance and position
| Metric | 2015 | 2014 | Change |
|---|---|---|---|
| Time charter and voyage revenue | $223.7 million | $227.4 million | Down 1.6% |
| Net income | $41.8 million | $74.9 million | Down 44.1% |
| Basic and diluted earnings per common unit | $0.48 | $0.93 | Down |
| EBITDA (non-GAAP) | $153.3 million | $200.0 million | Down 23.3% |
| Net cash from operating activities | $123.4 million | $171.7 million | Down 28.1% |
| Operating surplus (non-GAAP) | $112.7 million | $150.2 million | Down 25.0% |
| Cash and cash equivalents at year-end | $26.8 million | $99.5 million | Down |
| Net debt at year-end | $598.1 million | $576.0 million | Up |
Net income margin was approximately 18.7%, versus 32.9% in 2014. The filing does not provide a directly comparable operating margin. Average time-charter equivalent (TCE) declined to $19,739 per day from $20,306. Revenue was nearly flat as additional vessel days, including from MSC Cristina, partly offset lower TCE.
At December 31, 2015, total assets were $1.350 billion, partners’ capital was $732.2 million, and current assets of $39.8 million were below current liabilities of $41.5 million, leaving negative working capital of approximately $1.7 million. Restricted cash was $7.8 million. Gross borrowings were $605.9 million; approximately $60 million remained available under a Navios Holdings facility. Debt is predominantly floating-rate; management estimated a 1 percentage-point increase in LIBOR would raise 2015 interest expense by $6.1 million. The partnership reported covenant compliance at year-end.
Changes, outlook and material items
- Net income and cash generation declined. EBITDA fell mainly because 2014 included substantial one-time other income; 2015 other income was $5.2 million versus $47.9 million in 2014. The prior-year items included compensation related to termination of credit-default insurance and proceeds from selling a counterparty claim.
- Cash used in investing was $149.4 million, principally for MSC Cristina. Financing used $46.7 million, including $132.3 million of distributions and $60.7 million of debt repayments, partly offset by unit issuance and facility proceeds. Cash decreased by $72.7 million during the year.
- Management identified a severe shipping-market downturn: drybulk and container charter rates were depressed, and the Baltic Dry Index was 325 on February 25, 2016. No specific earnings or distribution guidance is provided.
- On February 3, 2016, the board suspended quarterly distributions, including the distribution for the quarter ended December 31, 2015, to conserve cash and improve liquidity. The board said it would reassess the policy as conditions change. Distributions had already been reduced to $0.2125 per unit for Q3 2015 from $0.4425 in the preceding quarters.
- In the fourth quarter of 2015, the partnership performed impairment testing after deteriorating spot markets raised concern. No impairment was recorded, but 28 vessels had carrying values approximately $319.5 million above estimated fair values in aggregate. The conclusion relied on projected undiscounted cash flows and assumptions about future charter rates; management warned that a prolonged or worse downturn could lead to future impairment charges.
- Customer concentration and counterparty credit are material: Hyundai Merchant Marine (HMM), Navios Corporation and Yang Ming accounted for 24.0%, 17.4% and 11.4% of 2015 revenue, respectively. The filing notes HMM’s financial difficulties and restructuring proposal. Charterer defaults, low rechartering rates, vessel-value declines, covenant restrictions, refinancing needs, and related-party management dependence are key risks.
Most important facts for investors to verify
- Current liquidity, cash availability and compliance with each facility’s covenants, including minimum liquidity requirements and restrictions on distributions.
- Debt repayment and refinancing plan, especially the approximately $421.1 million of scheduled principal payments in 2018, as well as any subsequent amendments to credit facilities.
- Whether the distribution suspension continues and what cash generation would be required for a reinstatement.
- HMM’s restructuring outcome, charter payments and exposure to other major customers; confirm any recoveries under the Navios Holdings guarantee.
- Vessel values and impairment assumptions, including how current charter rates compare with the long-term averages used in management’s cash-flow tests.
- Cash costs and terms of related-party ship management and administrative services, including drydocking reimbursements and the management agreement through December 2017.