Navios Acquisition results boosted by improved tanker rates in 4Q2018

Navios-NYSE

Navios Maritime Acquisition Corporation, an owner and operator of tanker vessels, reported its financial results for the fourth quarter and the year ended December 31, 2018.

Angeliki Frangou, Chairman and Chief Executive Officer of Navios Acquisition, stated, “For the full year of 2018, Navios Acquisition reported revenue of $187.9 million and Adjusted EBITDA of $56.8 million. For the fourth quarter of 2018, we reported revenue of $58.7 million and Adjusted EBITDA of $20.9 million. We also declared a quarterly dividend of $0.30 per share for the fourth quarter, representing an annualized yield of 21.0% per share.”

Angeliki Frangou continued, “Tanker rates substantially improved during the fourth quarter of 2018, with the Baltic TD3C VLCC spot rate increasing by more than double to about $45,000 per day compared to the fourth quarter of 2017. Although VLCC rates have since retreated, rates for January 2019 were still almost three times higher than rates for January of 2018. In light of the rate improvement, the acquisition of Navios Midstream was timely, as well as accretive to our net asset value and cash flow.“

HIGHLIGHTS — RECENT DEVELOPMENTS

Acquisition of Navios Maritime Midstream Partners L.P.

On December 13, 2018, Navios Acquisition completed the merger (the “Merger”) contemplated by the previously announced Agreement and Plan of Merger, (the “Merger Agreement”), dated as of October 7, 2018, by and among Navios Acquisition, its direct wholly-owned subsidiary NMA Sub LLC (“Merger Sub”), Navios Maritime Midstream Partners L.P. (“Navios Midstream”) and Navios Midstream Partners GP LLC . Pursuant to the Merger Agreement, Merger Sub merged with and into Navios Midstream, with Navios Midstream surviving as a wholly-owned subsidiary of Navios Acquisition.

Pursuant to the terms of the Merger Agreement, each outstanding common unit representing limited partner interests in Navios Midstream held by a common unit holder other than Navios Acquisition, Navios Midstream or their respective subsidiaries (the “NAP Public Units”) was converted into the right to receive 0.42 shares of Navios Acquisition’s common stock. As a result of the Merger, 3,683,284 shares of Navios Acquisition’s common stock were issued to former holders of NAP Public Units. More than eighty (80) percent of holders of NAP Public Units elected (or were deemed to have elected) to receive Navios Acquisition common stock. As such, pursuant to the Merger Agreement, no Navios Acquisition preferred stock was issued in connection with the Merger.

The transaction was accounted for as a business combination. Purchase accounting applied, that resulted in a net effect of less than $0.1 million, analyzed as follows: (a) a gain as a result of the fair value of net assets acquired being in excess of the fair value of the consideration exchanged for obtaining control, in the amount of $69.0 million; and (b) a re-measurement of Navios Acquisition’s previously held investment in Navios Midstream, resulting in a loss of $75.7 million partially mitigated by $6.8 million of accelerated amortization of the deferred gain recognized in relation to the sale of the Nave Celeste and the C Dream to Navios Midstream in June 2015.

Following the completion of the Merger, Erifili Tsironi was appointed as co-chief financial officer of Navios Acquisition.

Quarterly dividend: $0.30 per share
On January 25, 2019, the Board of Directors declared a quarterly cash dividend in respect of the fourth quarter of 2018 of $0.30 per share of common stock which will be paid on March 27, 2019 to stockholders of record as of February 27, 2019. The declaration and payment of any further dividends remain subject to the discretion of the Board of Directors and will depend on, among other things, Navios Acquisition’s cash requirements as measured by market opportunities and restrictions under its credit agreements and other debt obligations and such other factors as the Board of Directors may deem advisable.

Navios Europe I and Navios Europe II
As of December 31, 2018, Navios Acquisition had economic interests of 47.5% in each of Navios Europe I and Navios Europe II. The total value of Navios Europe I and Navios Europe II held by Navios Acquisition as of December 31, 2018 was $72.5 million. The amount was comprised of (a) the initial investment of $4.8 million in Navios Europe I and $6.7 million in Navios Europe II; (b) the working capital contributions of $11.8 million in Navios Europe I and $20.7 million in Navios Europe II; and (c) the compound interest of 12.7% for Navios Europe I and 18.0% for Navios Europe II.

Stock repurchase program
As of February 5, 2019, Navios Acquisition had repurchased 716,338 shares for approximately $7.4 million, under the $25.0 million stock repurchase program, being 5.2% of current fully diluted shares.

1:15 Reverse stock split
On November 9, 2018 the Stockholders of Navios Acquisition approved the previously disclosed one-for-15 reverse stock split of its common stock. Following the effectiveness of the reverse stock split, as of November 14, 2018, Navios Acquisition had approximately 9.5 million shares of common stock outstanding.

Fleet employment
As of February 5, 2019, our fleet consisted of a total of 43 vessels, of which 13 are VLCCs, 26 are product tankers, two are chemical tankers and two are bareboat VLCC chartered-in vessels to be delivered in each of the third and fourth quarter of 2020.

Currently, Navios Acquisition has contracted 52.1% of its available days on a charter-out basis for 2019, which are expected to generate revenues of approximately $126.7 million for 2019. The average contractual net daily charter-out rate for the 44.6% of available days that are contracted on base rate and/or on base rate with profit sharing arrangements are expected to be $18,995.

Three month periods ended December 31, 2018 and 2017

Revenue for the three month period ended December 31, 2018 increased by $8.4 million, or 16.7%, to $58.7 million, as compared to $50.3 million for the same period of 2017. The increase was mainly attributable to an: (i) increase in revenue by $5.0 million due to the acquisition and resulting consolidation of Navios Midstream on December 13, 2018; and (ii) increase in revenue due to certain spot voyages fixed at favourable market rates during the fourth quarter ended December 31, 2018; partially mitigated by a decrease in revenue of $1.7 million mainly due to the sale of the Nave Galactic to Navios Midstream in March 2018. Available days of the fleet increased to 3,297 days for the three month period ended December 31, 2018, as compared to 3,225 days for the three month period ended December 31, 2017, as a result of the merger with Navios Midstream effective as of December 13, 2018. The time charter equivalent rate, or TCE Rate, increased to $15,483 for the three month period ended December 31, 2018, from $15,299 for the three month period ended December 31, 2017.

Time charter and voyage expenses for the three month period ended December 31, 2018 increased by approximately $3.7 million, or 60.7%, to $9.8 million, as compared to $6.1 million for the same period of 2017. The increase was mainly attributable to a: (a) $6.5 million increase in bunkers consumption and voyage expenses due to spot voyages in the period; and (b) $0.1 million increase in brokers’commission; partially mitigated by $3.0 million decrease in the backstop commitment.

Net loss for the three month period ended December 31, 2018 was $16.4 million as compared to $12.0 million for the same period of 2017. The increase in net loss was due to a: (a) $1.5 million decrease in EBITDA; (b) $1.1 million increase in interest expense and finance cost, net of deferred finance cost; (c) $1.1 million increase in direct vessel expenses; (d) $0.4 million decrease in interest income; and (e) $0.3 million increase in depreciation and amortization, due to the acquisition of Navios Midstream on December 13, 2018.

EBITDA for the three month period ended December 31, 2018 decreased by $1.5 million to $18.5 million, as compared to $19.9 million for the same period of 2017. The decrease in EBITDA was mainly due to a: (a) $3.7 million increase in time charter and voyage expenses, as described above; (b) $2.7 million increase in general and administrative expenses mainly due to expenses incurred in connection with the acquisition of Navios Midstream on December 13, 2018 of $2.2 million; (c) $1.6 million increase in other expense; (d) $1.4 million decrease in equity /(loss) in net earnings of affiliated companies; (e) $0.4 million increase in management fees due to the acquisition of Navios Midstream on December 13, 2018 and to the amendment of the fees under the Management Agreement; and (f) $0.1 million decrease in other income; partially mitigated by an $8.4 million increase in revenue, as described above.

Year ended December 31, 2018 and 2017

Revenue for the year ended December 31, 2018 decreased by $39.3 million, or 17.3%, to $187.9 million, as compared to $227.3 million for the same period of 2017. The decrease was mainly attributable to a: (a) decrease in the market rates during the year ended December 31, 2018, as compared to the same period in 2017; and (b) decrease in revenue of $8.2 million mainly due to the sale of the Nave Galactic to Navios Midstream in March 2018; partially mitigated by the increase in revenue of $5.0 million due to the acquisition and resulting consolidation of Navios Midstream on December 13, 2018. Available days of the fleet decreased from 12,904 days for the year ended December 31, 2017 to 12,735 days for the year ended December 31, 2018. The TCE Rate decreased from $17,186 for the year ended December 31, 2017, to $13,855 for the year ended December 31, 2018.

Time charter and voyage expenses for the year ended December 31, 2018 increased by approximately $9.7 million to $31.6 million, as compared to $21.9 million for the same period of 2017. The increase was mainly attributable to a (a) $3.7 million increase in the backstop commitment; (b) $6.3 million increase in bunkers consumption and voyage expenses due to spot voyages in the period; partially mitigated by a $0.4 million decrease in brokers’ commission.

Net loss for the year ended December 31, 2018 was $86.4 million as compared to $78.9 million for the same period of 2017. The increase in net loss was due to a: (a) $3.5 million increase in direct vessel expenses; (b) $2.0 million decrease in interest income; (c) $1.5 million increase in interest expense and finance cost; and (d) $1.0 million decrease in EBITDA, partially mitigated by a $0.6 million decrease in depreciation and amortization, mainly due to the sale of the Nave Galactic to Navios Midstream in March 2018.

EBITDA for the year ended December 31, 2018 decreased by $1.0 million to $47.6 million, as compared to $48.6 million for the same period of 2017. The decrease in EBITDA was mainly due to a: (a) $39.3 million decrease in revenue, as described above; (b) $9.7 million increase in time charter and voyage expenses, as described above; (c) $4.6 million increase in general and administrative expenses mainly consisting of $2.2 million transaction expenses due the acquisition of Navios Midstream on December 13, 2018 and of $1.0 million stock-based compensation expense; (d) $2.6 million increase in other expenses; and (e) $0.1 million decrease in other income; partially mitigated by a: (i) $54.3 million increase in equity /(loss) in net earnings of affiliated companies (which includes $59.1 million of other-than-temporary impairment loss on equity investment in Navios Midstream in the second quarter of 2017); and (ii) $1.0 million decrease in management fees due to the sale of the Nave Galactic to Navios Midstream in March 2018, which was partially offset by the amendment of the fees under the Management Agreement.

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