TOP Ships Inc. — FY2020 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing, not a standalone fourth-quarter report; the filing text does not provide a clear Q4-only set of financial results. Financial statements are prepared under U.S. GAAP and amounts below are in U.S. dollars unless noted.
Business context
TOP Ships owns and operates oil, petroleum-product and chemical tankers, principally employed on time charters. The company sold ten vessels during 2020 and ended the year with six vessels, while reporting an average fleet of 9.5 vessels for the year. At the filing date, the operating fleet was described as seven tankers, with additional 50%-owned joint-venture vessels and newbuildings. All vessels were on time charters at year-end.
Financial and operating performance
| Metric | FY2020 | FY2019 | Change / context |
|---|---|---|---|
| Total charter revenue | $60.2m | $66.1m | Down 9%; mainly fewer average vessels employed |
| Operating income (loss) | $(1.8)m | $3.9m | Declined $5.7m |
| Net loss | $(22.8)m | $(14.8)m | Loss widened $8.0m |
| Net loss attributable to common shareholders | $(28.8)m | $(31.0)m | Includes preferred-share deemed dividends and dividends |
| Loss per common share, basic and diluted | $(1.22) | $(264.63) | Per-share data reflect reverse stock splits |
| Adjusted EBITDA | $30.0m | $36.5m | Non-GAAP measure; down $6.5m |
| Average daily TCE | $17,314 | $16,233 | Up despite lower total revenue |
| Fleet utilization | 97.68% | 98.17% | Down 0.49 percentage points |
| Vessel operating expenses | $21.0m | $22.8m | Down 8%; daily expense increased to $6,037 |
Interest and finance costs rose to $21.0m from $18.1m, including accelerated write-off of financing fees following debt prepayments. The company recorded a $12.4m loss on vessel sales and $4.8m of charter-termination fees. No vessel impairment was recorded in 2020; the $12.3m impairment charge in 2019 related to vessels held for sale. The filing does not present a distinct margin measure.
Cash flow, balance sheet and liquidity
- Cash and cash equivalents were $19.3m at year-end; restricted cash was $4.0m, for total cash and restricted cash of $23.3m.
- Working capital surplus was $19.7m. Current assets were $45.1m and current liabilities $25.4m.
- Net cash provided by operating activities was $6.0m, versus $19.2m in 2019.
- Investing activities provided $181.3m, largely reflecting $310.0m of net vessel-sale proceeds, offset by $120.9m of advances for vessels under construction and $27.5m invested in joint ventures.
- Financing activities used $177.3m, including $269.6m of debt principal payments and prepayments and $24.6m of Series E redemptions; inflows included $129.7m from common-stock offerings and $60.2m of debt proceeds.
- Reported debt was $107.0m before deferred finance fees, or $104.6m net of those fees. Total assets were $293.0m and total liabilities were $158.8m.
- Management reported compliance with financing covenants at year-end. The company had $182.0m of remaining vessel-acquisition commitments at December 31, 2020; subsequent transactions changed the commitment profile.
Material changes and unusual items
- TOP Ships issued 39.5m common shares during 2020, primarily through registered direct offerings, raising $129.7m before equity-offering costs. Common shares outstanding increased to 39.8m at year-end.
- Ten vessels were sold during 2020. The sales supported substantial debt repayments, including repayment of the ABN facility, and reduced the fleet. The two Suezmax vessels Eco Bel Air and Eco Beverly Hills were sold and leased back under five-year operating leases.
- Related-party vessel/newbuilding transactions during 2020 involved $62.0m of consideration in excess of acquired assets’ historical carrying value, recorded as a reduction to additional paid-in capital. The auditor identified this valuation and related-party accounting as a critical audit matter.
- COVID-19-related crew-rotation delays caused off-hire and additional operating costs. The filing quantifies approximately $0.5m of 2020 revenue reduction from related off-hire.
- Common shareholders received no dividends in 2020. Series E preferred shares carry a 15% annual dividend, with accrued unpaid dividends bearing interest at 15%.
Outlook, risks and contingencies
Management expected operating cash flow in the remainder of 2021 to increase versus the comparable 2020 period, with deliveries of two Suezmax vessels expected to more than offset the effect of vessel disposals. The company stated it believed it could meet obligations over the next 12 months, relying on cash, operating cash flow, financing, equity issuance or potential asset sales. This depends on funding substantial newbuilding commitments; management noted that subsidiary commitments are non-recourse to TOP Ships and guaranteed by related-party Central Mare.
Subsequent to year-end, the company reported a January 2021 related-party exchange involving three product-tanker newbuildings, cash and interests in Suezmax/VLCC projects. It also reported a $38.0m Alpha Bank commitment for Eco Malibu, subject to final documentation, and a $36.8m ABN Amro loan for Eco West Coast, drawn in full. These facilities have repayment, collateral and financial-covenant requirements.
- Principal business risks include volatile tanker rates and vessel values, COVID-19 and operational disruption, charterer concentration and counterparty performance, debt service and covenant compliance, and the ability to finance or complete newbuildings.
- At year-end, revenue was concentrated among six charterers. The company also relies on a related-party fleet manager and management service providers.
- Series D and E preferred shares give the controlling trust and related parties substantial voting influence; the filing states the Lax Trust may be deemed to control 73.7% of total voting power. Series E conversion and anti-dilution terms could further dilute common shareholders.
- The company disclosed an ongoing SEC investigation concerning prior securities offerings; its last communication with the SEC was in February 2019, and the outcome and potential impact were stated to be uncertain. A separate securities class action was concluded in the company’s favor.
- Environmental regulation, including emissions requirements, and the lack of scrubbers on M/T Nord Valiant may add costs. The company also cites litigation, insurance, sanctions, cyber, geopolitical and financing risks.
Deloitte issued unqualified opinions on the 2020 financial statements and internal control over financial reporting. Management also concluded disclosure controls and internal controls were effective as of December 31, 2020.
Most important facts for investors to verify
- Reconcile reported debt, lease obligations and future principal/interest payments with the company’s current vessel fleet and charter cash flows.
- Confirm the funding plan, guarantees and remaining amounts due for newbuilding commitments, including the effect of post-year-end vessel transactions and financing.
- Review the related-party transactions, the $62.0m excess consideration recorded against additional paid-in capital, and the associated independent valuation and fairness-opinion disclosures.
- Assess dilution exposure from the large 2020 share issuance, Series E conversion and dividend terms, Class B warrants, and any subsequent equity issuance.
- Verify charter expirations, optional periods, rates and charterer credit exposure, alongside COVID-related operating impacts and market-rate sensitivity.
- Monitor the SEC investigation and any developments in covenant compliance, liquidity, and the company’s ability to meet its stated 12-month funding needs.