Performance Shipping Inc. — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a quarterly filing; the supplied filing text does not provide standalone fourth-quarter results. Financial statements are prepared under U.S. GAAP and received an unqualified audit opinion from Ernst & Young (Hellas).
Business context
The company owns and operates tanker vessels, having exited the containership business in 2020. Its strategy emphasizes Aframax tankers and exposure to spot, pool and short-term charter markets. At year-end 2022, it had eight tankers; it reported a fleet of eight vessels with 851,825 DWT as of April 2023.
Key financial and operating metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $75.2 million | $36.5 million |
| Operating income/(loss) | $40.0 million | $(8.5) million |
| Net income/(loss), continuing operations | $36.3 million | $(10.1) million |
| Net income/(loss) attributable to common shareholders, total | $12.0 million | $(9.7) million |
| Basic / diluted EPS, total | $6.49 / $3.02 | $(28.97) / $(28.97) |
| Cash from operating activities | $33.8 million | $(3.1) million |
| Cash and cash equivalents | $38.7 million | $9.6 million |
| Working capital | $27.4 million | $4.2 million |
| Bank debt outstanding | $128.5 million | $49.9 million |
Revenue increased 106%, principally from stronger tanker rates, additional fleet days and higher utilization. TCE rate rose to $29,579 per day from $9,963; fleet utilization increased to 96.8% from 85.5%. Daily operating expenses edged down to $6,683 from $6,740. Voyage expenses fell to $14.9 million from $19.2 million as more employment shifted to time charters and pools, under which charterers or pools bear more voyage costs.
Reported operating income included a $9.5 million gain on the sale of P. Fos. Interest and finance costs rose to $4.0 million from $1.8 million as average debt and borrowing rates increased. Average bank-loan interest rates were 4.85% in 2022 versus 2.90% in 2021. Investing cash outflow was $113.0 million, largely reflecting $143.4 million for vessel acquisitions, partly offset by $32.6 million of net vessel-sale proceeds. Financing cash inflow was $109.3 million, including bank borrowing and equity issuance.
Cash and cash equivalents included $10.5 million of compensating cash balances; the company also reported $1.0 million of non-current restricted cash. Management said working capital was expected to cover liquidity needs and banking covenants for at least 12 months. Debt facilities are secured by vessels, carry variable LIBOR/SOFR-based rates plus margins, and mature from 2024 to 2027. The company reported compliance with all loan covenants at year-end and at the filing date.
Material changes and unusual items
- Acquired four tankers during 2022 for aggregate purchase prices of approximately $142.8 million and sold P. Fos for $34.0 million, recording a $9.5 million gain. Vessel carrying value increased to $236.6 million from $123.0 million.
- Common-shareholder earnings were materially reduced by non-cash deemed dividends and preferred dividends. These included $9.3 million related to the Series B exchange, $6.9 million related to the Series C transaction, $5.9 million from a Series C down-round feature, $1.1 million from warrant down-round features and $1.0 million of preferred dividends. The $36.3 million continuing-operations net income therefore differs substantially from $12.0 million attributable to common shareholders.
- Raised equity through offerings and ATM sales and issued warrants; the year-end common share count was 4,187,588 after a one-for-fifteen reverse split. Convertible preferred shares and warrants may result in further dilution. Series C preferred stock carries superior voting rights; chair Aliki Paliou controlled more than 84.8% of voting power as disclosed in the filing.
- Two charterers accounted for 59% of 2022 revenue: Signal Maritime Aframax Pool (41%) and Penfield Tankers (18%), versus 43% from two charterers in 2021.
Outlook, commentary and risks
Management cited improved 2022 spot rates, supported by higher OPEC+ production and longer trade routes following sanctions on Russian oil. The filing cites external forecasts for 2023 Aframax demand growth of 4.6% and trading fleet growth of 0.2%; these are industry estimates, not company earnings guidance. Management cautions that market conditions and forecasts are uncertain. The company has no specific financial earnings guidance in the supplied filing text.
Management reported no adverse 2022 financial impact from COVID-19 or the Russia-Ukraine war and said no company contracts had been affected at year-end. It warned that sanctions, trade rerouting, inflation and higher interest rates could affect counterparties, costs, financing and tanker demand. Other principal risks include volatile charter rates and vessel values, customer concentration, variable-rate debt, refinancing and covenant exposure, environmental and emissions compliance costs, and the cyclical tanker market.
The company disclosed a pending purported securities class action against it and a former CEO; it considers the claims without merit and intends to defend the case. No provision was identified for material undisclosed contingencies. A planned $63.3 million tanker newbuild was contracted in March 2023, with expected delivery in late 2025; the first $9.5 million installment was paid in April 2023. In April 2023, Nasdaq notified the company that its share price was again below the minimum bid requirement, with a compliance deadline of October 16, 2023.
Important facts for investors to verify
- Review the audited financial statements and notes, particularly the preferred-stock and warrant valuation assumptions and the reconciliation of net income to common-shareholder earnings.
- Assess dilution exposure from preferred-stock conversion, warrant exercises, and future equity financing, alongside the company’s controlling shareholder voting structure.
- Check vessel-level employment, charter duration and rate terms, counterparty exposure, and whether the 2022 customer concentration persisted after year-end.
- Verify available liquidity after restricted and compensating balances, scheduled debt amortization, preferred dividends, and newbuild installments; monitor variable interest rates and covenant headroom.
- Track the securities lawsuit, Nasdaq bid-price compliance, and the impact and cost of environmental and emissions regulations.