Navios Partners profit falls in fourth quarter; cash distributions suspended

Angeliki Frangou

Navios Maritime Partners L.P. (“Navios Partners” or the “Company”) (NYSE:NMM), an international owner and operator of container and dry bulk vessels, today reported its financial results for the fourth quarter and the year ended December 31, 2015.

Angeliki Frangou, Chairman and Chief Executive Officer of Navios Partners stated, “For 2015, we reported $153.3 million of EBITDA and earned $41.8 million of net income. Our net income per unit for the year was a strong $0.48. While Navios Partners is healthy, we announced the necessary, but painful decision to eliminate distributions given our untenable cost of capital, the inability to know when markets will restore and the opportunities to acquire assets at attractive prices.”

Angeliki Frangou continued, “We did not take this decision lightly. However, we believe that reallocating cash flow to growth opportunities is in the best long-term interests of unitholders when Navios Partners does not have access to equity capital. Moreover, given current distressed market conditions, we believe that Navios Partners can be a unique platform for growth. While unitholders will forego near-term cash flows, Navios Partners should be able to create meaningful future distributable cash flow, whether through capital gains or a healthy charter market, assuming the market improves over time.”

Distributions

The Board of Directors of the Company has decided to suspend the quarterly cash distributions to its unitholders including the distribution for the quarter ended December 31, 2015. The Board believes such a decision is in the best long-term interests of the Company and its stakeholders. The Board of Directors will reassess the Company’s distribution policy as the environment changes.

Long-Term and Insured Cash Flow

Navios Partners has entered into medium to long-term time charter-out agreements for its vessels with a remaining average term of 3.2 years. Navios Partners has currently contracted out 79.5% of its available days for 2016, 57.2% for 2017 and 49.9% for 2018, including index-linked charters respectively, expecting to generate revenues of approximately $196.3 million, $165.7 million and $151.5 million, respectively. The average expected daily charter-out rate for the fleet is $24,418, $33,557 and $33,298 for 2016, 2017 and 2018, respectively.

Navios Partners has insurance on certain long-term charter-out contracts of drybulk vessels for credit default occurring until the end of 2016, through an agreement with Navios Maritime Holdings Inc., up to a maximum cash payment of $20.0 million.

EARNINGS HIGHLIGHTS

For the following results and the selected financial data presented herein, Navios Partners has compiled consolidated statements of income for the three month periods and the years ended December 31, 2015 and 2014. The quarterly 2015 and 2014 information was derived from the unaudited condensed consolidated financial statements for the respective periods. Adjusted EBITDA, Adjusted Earnings per Common Unit, Adjusted Net Income and Operating Surplus are non-GAAP financial measures and should not be used in isolation or substitution for Navios Partners’ results.

Three Month Three Month Twelve Month Twelve Month
 Period Ended  Period Ended  Period Ended  Period Ended
(in $‘000 except per December 31,
2015
 December 31,
2014
 December 31,
2015
 December 31,
2014
unit data) (unaudited) (unaudited) (unaudited) (unaudited)
Revenue $ 53,314 $ 59,390 $ 223,676 (1 ) $  227,356
Net Income $ 7,807 $ 13,465 $ 41,805 (1 ) $ 74,853
Adjusted Net Income $ 7,807 $ 13,465 $ 41,805 (1 ) $ 49,298 (2) (3)
EBITDA $ 35,732 $ 39,279 $ 153,279 (1 ) $ 199,954
Adjusted EBITDA $ 35,732 $ 39,279 $ 153,279 (1 ) $ 152,389 (2 )
Earnings per Common Unit (basic and diluted) $ 0.09 $ 0.16 $ 0.48 (1 ) $ 0.93
Adjusted Earnings per Common Unit (basic and diluted) $ 0.09 $ 0.16 $ 0.48 (1 ) $ 0.60 (2) (3)
Operating Surplus $ 25,175 $ 26,436 $ 112,732 (1 ) $ 150,206
Maintenance and Replacement Capital Expenditure reserve $ 3,621 $ 6,253 $ 13,811 $ 24,047
(1)  Negatively affected by approximately $5.6 million revenue lost due to drydocks performed in advance.
(2) Adjusted Net Income, Adjusted EBITDA and Adjusted Earnings per Common Unit do not include the accounting effect of the $47.6 million income from the insurance settlement.
(3) Adjusted Net Income and Adjusted Earnings per Common Unit do not include the $22.0 million loss from the non-cash accelerated amortization of the intangible asset relating to one Capesize vessel. 

Three month periods ended December 31, 2015 and 2014

Time charter and voyage revenues for the three month period ended December 31, 2015 decreased by $6.1 million or 10.2% to $53.3 million, as compared to $59.4 million for the same period in 2014. The decrease was mainly attributable to the decrease in the time charter equivalent (“TCE”) to $18,223 for the three month period ended December 31, 2015, from $20,388 for the three month period ended December 31, 2014. This decrease was partially mitigated by the increase in revenue following the delivery of the YM Utmost and the YM Unity in the second half of 2014 and the delivery of the MSC Cristina in April 2015.

EBITDA decreased by $3.5 million to $35.7 million for the three month period ended December 31, 2015, as compared to $39.3 million for the same period in 2014. The decrease in EBITDA was primarily due to: (i) a $6.1 million decrease in revenue; (ii) a $1.0 million increase in management fees due to the increased number of vessels; and (iii) a $0.1 million increase in general and administrative expenses. The above decrease was partially mitigated by: (i) a $2.4 million decrease in time charter and voyage expenses; and (ii) a $1.3 million increase in other income, net.

The reserve for estimated maintenance and replacement capital expenditures for the three month periods ended December 31, 2015 and 2014 was $3.6 million and $6.3 million, respectively (please see Reconciliation of Non-GAAP Financial Measures in Exhibit 3).

Navios Partners generated an Operating Surplus for the three month period ended December 31, 2015 of $25.2 million, as compared to $26.4 million for the three month period ended December 31, 2014. Operating Surplus is a non-GAAP financial measure used by certain investors to assist in evaluating a partnership’s ability to make quarterly cash distributions (please see Reconciliation of Non-GAAP Financial Measures in Exhibit 3).

Net income for the three month period ended December 31, 2015 amounted to $7.8 million compared to $13.5 million for the three month period ended December 31, 2014. The decrease in net income of $5.7 million was due to a: (i) $3.5 million decrease in EBITDA; (ii) $1.1 million increase in direct vessel expenses; (iii) $0.9 million increase in depreciation and amortization expense mainly due to the increased fleet size; and (iv) $0.1 million increase in interest expense and finance cost, net.

Year ended December 31, 2015 and 2014

Time charter and voyage revenues for the year ended December 31, 2015 decreased by $3.7 million or 1.6% to $223.7 million, as compared to $227.4 million for the same period in 2014. The decrease was mainly attributable to the decrease in TCE to $19,739 per day for the year ended December 31, 2015, from $20,306 per day for the year ended December 31, 2014. The above decrease in time charter and voyage revenues was partially mitigated by an increase in revenue due to the delivery of the Navios La Paix and the Navios Sun in January 2014, the YM Utmost and the YM Unity in the second half of 2014 and the delivery of the MSC Cristina in April 2015. As a result of the vessel acquisitions, available days of the fleet increased to 11,051 days for the year ended December 31, 2015, as compared to 10,927 days for the year ended December 31, 2014.

EBITDA for the year ended December 31, 2014 was positively affected by the accounting effect of $47.6 million income from the insurance settlement. Excluding this item, Adjusted EBITDA increased by $0.9 million to $153.3 million for the year ended December 31, 2015, as compared to $152.4 million for the same period in 2014. The increase in Adjusted EBITDA was due to an $8.2 million decrease in time charter and voyage expenses and a $2.7 million increase in other income, net. The above increase was partially mitigated by a: (i) $3.7 million decrease in revenue; (ii) $6.2 million increase in management fees due to the increased number of vessels; and (iii) $0.1 million increase in general and administrative expenses.

The reserve for estimated maintenance and replacement capital expenditures for the year ended December 31, 2015 and 2014 was $13.8 million and $24.0 million, respectively (please see Reconciliation of Non-GAAP Financial Measures in Exhibit 3).

Navios Partners generated an Operating Surplus for the year ended December 31, 2015 of $112.7 million, as compared to $150.2 million for the year ended December 31, 2014. Operating Surplus is a non-GAAP financial measure used by certain investors to assist in evaluating a partnership’s ability to make quarterly cash distributions (please see Reconciliation of Non-GAAP Financial Measures in Exhibit 3).

Net income for the year ended December 31, 2014 was: (i) positively affected by the accounting effect of $47.6 million income from the insurance settlement; and (ii) negatively impacted by a $22.0 million loss from the non-cash accelerated amortization of an intangible asset relating to one Capesize vessel. Excluding these items, Adjusted Net income for the year ended December 31, 2015 amounted to $41.8 million compared to $49.3 million for year ended December 31, 2014. The decrease in Adjusted Net income by $7.5 million was due to a: (i) $3.3 million increase in direct vessel expenses; (ii) $3.0 million increase in interest expense and finance cost, net; and (iii) $2.1 million increase in depreciation and amortization expense. The above decrease was partially mitigated by a $0.9 million increase in Adjusted EBITDA.

Fleet Employment Profile

The following table reflects certain key indicators of Navios Partners’ core fleet performance for the three month periods and the years ended December 31, 2015 and 2014.

Three Month
 Period Ended
 December 31,
 2015
 ($ ‘000)
 (unaudited)
Three Month
 Period Ended
December 31,
 2014
 ($ ‘000)
 (unaudited)
Year Ended
December 31,
 2015
 ($ ‘000)
 (unaudited)
Year Ended
 December 31,
 2014
 ($ ‘000)
 (unaudited)
Available Days(1) 2,852 2,855 11,051 10,927
Operating Days(2) 2,839 2,848 11,029 10,909
Fleet Utilization(3) 99.5 % 99.7 % 99.8 % 99.8 %
Time Charter Equivalent (per day)(4) $ 18,223 $ 20,388 $ 19,739 $ 20,306
Vessels operating at period end 31  32 31 32
(1 ) Available days for the fleet represent total calendar days the vessels were in Navios Partners’ possession for the relevant period after subtracting off-hire days associated with scheduled repairs, dry dockings or special surveys. The shipping industry uses available days to measure the number of days in a relevant period during which a vessel is capable of generating revenues.
(2 ) Operating days is the number of available days in the relevant period less the aggregate number of days that the vessels are off-hire due to any reason, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a relevant period during which vessels actually generate revenues.
(3 ) Fleet utilization is the percentage of time that Navios Partners’ vessels were available for revenue generating available days, and is determined by dividing the number of operating days during a relevant period by the number of available days during that period. The shipping industry uses fleet utilization to measure efficiency in finding employment for vessels and minimizing the amount of days that its vessels are off-hire for reasons other than scheduled repairs, drydockings or special surveys.
(4 ) TCE rates: TCE rates are defined as voyage and time charter revenues less voyage expenses during a period divided by the number of available days during the period. The TCE rate is a standard shipping industry performance measure used primarily to present the actual daily earnings generated by vessels on various types of charter contracts for the number of available days of the fleet.

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