Business Context and Reporting Period
Company: Stealthgas Inc. (NASDAQ: GASS)
Reporting Period: Second Quarter and Six Months ended June 30, 2007
Filing Date: August 14, 2007
Business Overview: Stealthgas is a ship-owning company serving the liquefied petroleum gas (LPG) sector. As of the filing date, the company operated a fleet of 36 vessels with a capacity of 153,929 cbm, with agreements to acquire three additional vessels to reach a total of 39 vessels.
Key Financial Metrics
Second Quarter 2007 (vs. Q2 2006)
- Net Revenues: $19.9 million (Increase of $2.7 million or 15.7%)
- Net Income: $5.7 million (Increase of $1.1 million or 23.9%)
- Earnings Per Share (EPS): $0.40 (vs. $0.33 in Q2 2006)
- Adjusted EBITDA: $11.7 million (Increase of $2.8 million or 31.5%)
- Net Cash Provided by Operating Activities: $15.9 million
- Operating Expenses: Average daily total operating expenses were $2,359 (down from $2,519 in Q2 2006).
Six Months Ended June 30, 2007 (vs. 6M 2006)
- Net Revenues: $40.6 million (Increase of $6.4 million or 18.7%)
- Net Income: $12.3 million (Increase of $0.7 million or 6%)
- Earnings Per Share (EPS): $0.85 (vs. $0.83 in 6M 2006)
- Adjusted EBITDA: $24.0 million (Increase of $5.0 million or 26.3%)
- Net Cash Provided by Operating Activities: $24.7 million
Liquidity and Balance Sheet (as of June 30, 2007)
- Cash and Cash Equivalents: $5.96 million
- Restricted Cash: $4.87 million
- Total Debt: Approximately $158.5 million (Current portion: $15.5 million; Long-term: $143.0 million; Short-term bridge facility: $18.0 million)
- Stockholders' Equity: $171.1 million
Material Changes and Operational Highlights
- Fleet Expansion: The average number of vessels increased to 29.3 in Q2 2007 from 25.1 in Q2 2006. The fleet grew to 36 vessels by August 2007.
- Charter Rates: Average Time-Charter-Equivalent (TCE) rate was $7,075 per day in Q2 2007, compared to $6,922 in Q2 2006.
- Follow-on Offering: In July 2007, the company completed a follow-on offering of 7.66 million shares at $18.00 per share, raising net proceeds of approximately $129.6 million.
- Incident Impact: Management noted a revenue decline in Q2 compared to Q1 2007 due to the loss of revenue from the M/V Gas Shanghai incident and seasonal softening of the spot market.
- Non-Cash Items: Q2 2007 included an unrealized, non-cash gain of $0.3 million on interest rate swaps, compared to $0.7 million in Q2 2006.
Guidance, Outlook, and Management Commentary
- Dividend Declaration: The Board declared a quarterly cash dividend of $0.1875 per common share, payable August 31, 2007. This marks the seventh consecutive quarterly dividend since the company went public.
- Outlook: Management expressed confidence in the remainder of 2007 and beyond, citing that approximately 92% of fleet days are fixed for the remainder of 2007, 63% for 2008, and 22% for 2009.
- Market Sentiment: Management highlighted the re-hiring of three vessels at rates approximately 25% higher than current rates as a testament to positive sector fundamentals.
- Capital Allocation: Proceeds from the follow-on offering are being used to pay for vessel acquisitions, repay outstanding indebtedness, and for general corporate purposes.
- Risk Factors: Forward-looking statements are subject to uncertainties including world economic strength, charterhire rates, bunker prices, dry-docking costs, and potential disruption of shipping routes.
Key Facts for Investor Verification
- Dividend Sustainability: Verify the company's ability to maintain its dividend policy given the recent capital expenditure on fleet expansion and the $129.6 million in new equity raised.
- Fleet Utilization: Confirm the 98.2% fleet utilization rate in Q2 2007 and the impact of the M/V Gas Shanghai incident on future revenue projections.
- Debt Structure: Review the terms of the $18 million short-term bridge facility and the company's strategy to maintain 50% of debt on a fixed-rate basis.
- Charter Expirations: Assess the risk associated with the 92% of fleet days fixed for the remainder of 2007 and the potential for rate resets in 2008 and 2009.
- Non-GAAP Reconciliation: Review the reconciliation of Adjusted EBITDA to Net Income to understand the impact of non-cash derivative gains and amortization.