Ardmore Shipping Corp. Form 6-K Summary
Business Context and Reporting Period
This report covers the unaudited condensed interim consolidated financial statements and Management's Discussion and Analysis for Ardmore Shipping Corporation (NYSE: ASC) for the three and six months ended June 30, 2019. Ardmore owns and operates a fleet of Medium Range (MR) product and chemical tankers. As of June 30, 2019, the fleet consisted of 25 vessels with an average age of 5.9 years. The company focuses on fuel-efficient, modern vessels to transport petroleum products and chemicals globally.
Key Financial Metrics
| Metric | Six Months Ended Jun 30, 2019 | Six Months Ended Jun 30, 2018 | Three Months Ended Jun 30, 2019 | Three Months Ended Jun 30, 2018 |
|---|---|---|---|---|
| Revenue | $117.3 million | $102.8 million | $55.0 million | $52.4 million |
| Net Loss | $(19.1) million | $(13.7) million | $(9.9) million | $(8.6) million |
| Loss Per Share (Basic/Diluted) | $(0.58) | $(0.42) | $(0.30) | $(0.26) |
| Operating Cash Flow | $11.2 million | $9.9 million | $9.6 million | $4.9 million |
| Cash and Cash Equivalents | $54.8 million (as of Jun 30, 2019) | $56.9 million (as of Dec 31, 2018) | N/A | |
| Total Debt (Net) | $208.0 million | $228.4 million | N/A | |
| Net Finance Lease Obligations | $221.6 million | $238.6 million | N/A | |
| Average TCE Rate | $14,663 per day | $12,057 per day | $14,375 per day | $11,503 per day |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 14% year-over-year for the six months ended June 30, 2019, driven by higher spot market rates and increased revenue days from spot chartering. This offset a decrease in pool revenue as the company removed all vessels from third-party pool arrangements during 2018.
- Net Loss Expansion: Net loss increased 39% for the six-month period. This was primarily due to a $13.2 million loss on the sale of two vessels (Ardmore Seamaster and Ardmore Seafarer) and increased interest expenses.
- Interest Expense: Interest expense and finance costs rose 12% to $13.8 million for the six months ended June 30, 2019, attributed to higher average LIBOR rates and changes in debt structure from new finance leases.
- Fleet Reduction: The average number of owned vessels decreased to 26.1 for the six months ended June 30, 2019, from 27.9 in the prior year period, due to vessel sales.
- Accounting Presentation: The company amended its Consolidated Statement of Operations to remove the "Income from Operations" subtotal, reclassifying gains/losses on vessel sales to be included within operating results in accordance with ASC 360-10.
Outlook, Risks, and Unusual Items
- Unusual Items: The company recognized a $13.2 million loss on the sale of vessels in the first half of 2019. Additionally, corporate general and administrative expenses increased due to new share-based compensation awards (SARs and RSUs).
- Liquidity: The company reported $54.8 million in cash and cash equivalents. Management believes working capital and operating cash flows are sufficient for current requirements. The company remains in compliance with all financial covenants, including a minimum cash balance requirement of $21.6 million.
- Capital Expenditures: Drydocking expenses are expected to increase as the fleet ages. The schedule indicates 7 vessels in drydock for the remainder of 2019, 10 in 2020, and 11 in 2021.
- Risks: Key risks include volatility in charter rates and vessel values, fluctuations in oil prices, interest rate sensitivity (LIBOR exposure), and potential disruption of shipping routes due to political events or piracy. The company has not entered into derivative contracts to manage foreign exchange risk.
Investor Verification Checklist
- Vessel Sales Impact: Verify the specific carrying values and sale proceeds of the Ardmore Seamaster and Ardmore Seafarer to understand the full magnitude of the $13.2 million loss.
- Debt Covenants: Confirm continued compliance with the minimum cash balance covenant ($21.6 million) and solvency ratios given the recent net losses.
- Interest Rate Exposure: Assess the impact of rising LIBOR rates on future interest expenses, noting the sensitivity analysis indicates a $2.0 million expense increase for a 100 basis-point rate hike.
- Share-Based Compensation: Review the vesting schedules and future expense recognition for the new SARs and RSUs granted in 2019, which are expected to impact future GAAP earnings.
- Drydocking Schedule: Monitor upcoming capital outlays for the 7 vessels scheduled for drydocking in the remainder of 2019.