Performance Shipping Inc. — 2019 Form 20-F
Reporting period: Fiscal year ended December 31, 2019. This is an annual report, not a standalone fourth-quarter filing. Financial statements are audited and prepared under U.S. GAAP; amounts below are U.S. dollars.
Business context
The company shifted from a primarily containership owner toward tanker operations, taking delivery of two Aframax tankers during 2019 while selling two containerships. At year-end, the fleet comprised two tankers and two containerships; a third tanker was delivered in January 2020. The company reported tanker and container segments.
Key financial metrics
| Metric | 2019 | 2018 |
|---|---|---|
| Voyage and time-charter revenue | $26.8 million | $25.6 million |
| Operating loss | $31.7 million | $41.4 million |
| Net loss | $32.1 million | $52.9 million |
| Loss per common share, basic and diluted | $1.12 | $5.60 |
| Operating cash flow | $(4.2) million | $(0.3) million |
| Investing cash flow | $(18.5) million | $93.2 million |
| Financing cash flow | $38.6 million | $(88.8) million |
| Cash and cash equivalents at year-end | $26.4 million | $10.5 million |
| Total assets | $130.6 million | $100.1 million |
| Stockholders’ equity | $94.2 million | $95.6 million |
| Debt outstanding, before deferred financing costs | $32.5 million | None reported |
| Working capital | $27.3 million | $9.1 million |
Time charter equivalent (TCE) rate, a non-GAAP measure, rose to $15,435 per available day from $10,639. Fleet utilization declined to 92.4% from 95.3%, while daily vessel operating expenses rose to $7,468 from $6,698. The filing does not provide a conventional gross-profit or operating-margin presentation.
Changes versus 2018
- Revenue increased 5%, mainly reflecting partial-year tanker revenue, partly offset by the shrinking containership fleet.
- Net loss narrowed by $20.8 million. Interest and finance costs fell to $0.7 million from $11.5 million, following repayment of earlier related- and unrelated-party loans in 2018; the average interest rate also decreased.
- Impairment charges increased to $31.6 million from $20.7 million. The 2019 charges related to three containerships; 2018 charges related to two.
- Operating cash use increased to $4.2 million. Management attributed this partly to higher receivables, inventories and prepaid assets associated with spot voyages, where freight is generally collected after completion and the owner pays voyage costs.
- Investing cash flow swung from a $93.2 million inflow to an $18.5 million outflow, reflecting tanker purchases and containership sale proceeds. Financing cash flow turned positive with Nordea borrowing and preferred-share proceeds.
Outlook, risks and unusual items
- Management expected 2020 revenue to increase with fleet expansion and improving tanker markets, but warned COVID-19 could cause unpredictable revenue losses. The company said COVID-19’s eventual impact could not be estimated.
- The Nordea senior secured facility had $32.5 million outstanding at year-end, bore interest at LIBOR plus 2.75%, and matured in 2024. It required minimum liquidity of $7 million, plus $1 million for each additional tanker acquired; the company reported covenant compliance at year-end and at the report date. Later amendments increased the facility ceiling to $59 million to help finance additional tankers.
- 2019 included $31.6 million of non-cash impairment charges, a $0.1 million loss on vessel sales, and $1.8 million of restricted-stock compensation cost. The company also issued 21.7 million common shares, valued at $21 million, to acquire affiliated entities holding tanker purchase contracts.
- Five charterers represented 81% of 2019 revenue, creating customer concentration exposure. Tankers were operating on spot voyages at year-end; the remaining containership charter contracts were estimated to provide $1.1 million of minimum annual revenue through 2020.
- Key risks include volatile tanker and containership charter rates and vessel values, counterparty and financing access, floating-rate debt and LIBOR transition, COVID-19 operational and demand disruption, higher costs from IMO 2020 low-sulfur fuel requirements, and environmental and ballast-water compliance costs.
- The company reported a pending purported securities class action concerning 2016–2017 share purchases; management considers the claims without merit and intends to defend them. Cash dividends have been suspended since 2016.
- After year-end, Nasdaq transferred the shares to the Capital Market and granted until August 31, 2020 to regain the $1 minimum bid-price requirement. The report also describes management and board changes, the repurchase and cancellation of preferred shares, and a 2020 common-share repurchase program.
Important facts for investors to verify
- Whether spot-market tanker employment can generate positive operating cash flow after voyage costs and working-capital needs.
- Current liquidity against Nordea’s minimum-cash terms, scheduled amortization, balloon payments and vessel-value covenants.
- The assumptions and market evidence supporting the $31.6 million impairment charges and remaining vessel carrying values.
- Actual charterer concentration, charter expirations and counterparty credit quality, alongside the company’s ability to employ its expanded tanker fleet.
- COVID-19 effects, low-sulfur fuel and other regulatory costs, Nasdaq bid-price compliance, and developments in the securities litigation.
- Related-party transactions, the substantial common-share issuance used for tanker-contract acquisitions, and the resulting dilution and governance implications.