Navios Partners slides into first-quarter net loss

Navios Acquisition

Navios Maritime Partners L.P., an international owner and operator of container and dry bulk vessels, reported its financial results for the first quarter ended March 31, 2017.

Angeliki Frangou, Chairman and Chief Executive Officer of Navios Partners stated, “For the first quarter of 2017, Navios Partners reported revenue of $42.4 million and adjusted EBITDA of $25.9 million. We are pleased with these results as we are coming off the worst year in history for the dry bulk market – with the BDI reaching a historical low in the first quarter of 2016 and the container sector suffering its own set of challenges.”

Angeliki Frangou continued, “Through balance sheet discipline and rigorous cost management, Navios Partners has weathered the storm. And, by innovative transactions, Navios Partners is positioned to thrive in a recovering market. During the first quarter of 2017, we refinanced debt, so that Navios Partners has no debt maturing for over three years. Navios Partners also raised $100.0 million in equity and has acquired five drybulk vessels which are expected to provide reasonable levered returns. Finally, Navios Partners took advantage of a unique opportunity by raising $75.0 million for Navios Maritime Containers Inc. (“Navios Containers”), a growth vehicle dedicated to containers. Navios Partners will benefit from any recovery in the container sector through its 40% equity in Navios Containers.”

Navios Maritime Containers Inc.

In April 2017, Navios Partners agreed to acquire the entire container fleet (the “Fleet”) of Rickmers Maritime Trust Pte. (the “Trust”). The Fleet consists of 14 Container vessels. The acquisition of the first five 4,250 TEU vessels is expected in May 2017. These vessels are employed on charters that have staggered expirations in 2018 and early 2019 at a net daily charter rate of $26,850.

On May 11, 2017, Navios Partners formed Navios Containers, a Marshall Islands company, which agreed with investors to sell approximately 15.0 million of its shares for aggregate gross proceeds of approximately $75.0 million, at a subscription price of $5.00 per share.

Navios Containers intends to use the proceeds to acquire the Fleet that Navios Partners previously agreed to purchase from the Trust as well as for further vessel acquisitions, working capital and general corporate purposes. The offering is expected to close on or about June 1, 2017.

Navios Partners will invest $30.0 million and receive 40% of the equity, and Navios Maritime Holdings Inc. (“Navios Holdings”) will invest $5.0 million and receive 6.67% of the equity of Navios Containers. Each of Navios Partners and Navios Holdings will also receive warrants, with a five-year term, for 6.8% and 1.7% of the equity, respectively.

The Fleet vessels are expected to be delivered starting in May, 2017. The acquisition is subject to a number of conditions, and no assurance can be provided that the acquisition will close at all or in part. Navios Containers also announced today that it intends to file an application to register on the Norwegian Over-The-Counter market (N-OTC). Navios Containers expects to be registered on or about June 1, 2017.

Debt Refinancing

On March 14, 2017, Navios Partners completed the issuance of a new $405.0 million Term Loan B facility. The Term Loan B facility bears an interest rate of LIBOR plus 500 basis points (“bps”) and has a three and a half year term with 5.0% amortization profile. Navios Partners used the net proceeds of the Term Loan B facility to: (i) to refinance the existing Term Loan B; and (ii) to pay fees and expenses related to the term loans.

In March 2017, Navios Partners agreed to refinance $32.0 million of its existing credit facility with DVB Bank S.E. Based on the refinanced terms, the credit facility will mature in August 2020 and will bear interest at a rate of LIBOR plus 310 bps.

Acquisition of Vessels

In April 2017, Navios Partners agreed to acquire two 2007 South Korean-built Panamax vessels of approximately 75,000 dwt each, for a total purchase price of $27.0 million. The vessels are expected to be delivered to Navios Partners’ owned fleet by July 2017.

In April 2017, Navios Partners agreed to acquire one 2010-built Capesize vessel of 178,132 dwt, for a purchase price of $27.5 million. The vessel is expected to be delivered to Navios Partners’ owned fleet by September 2017.

In May 2017, Navios Partners agreed to acquire one 2009 Japanese-built Capesize vessel of 180,274 dwt, for a purchase price of $28.3 million. The vessel is expected to be delivered to Navios Partners’ owned fleet by August 2017.

In May 2017, Navios Partners agreed to acquire one 2011 South Korean-built Capesize vessel of 179,016 dwt, for a purchase price of $31.05 million. The vessel is expected to be delivered to Navios Partners’ owned fleet by June 2017.

Acquisition of Other Assets

On March 17, 2017, Navios Holdings transferred to Navios Partners its participation in Navios Revolving Loans and Navios Term Loans, both relating to Navios Europe I, for $4.1 million in cash and 13,076,923 newly issued common units of Navios Partners.

Completion of Sale of the Navios Apollon

In April 2017, the Company completed the sale of the Navios Apollon, a 2000 Ultra-Handymax vessel of 52,073 dwt. The vessel was sold to an unrelated third party for a total net sale price of $4.8 million.

Long-Term Cash Flow

Navios Partners has entered into medium to long-term time charter-out agreements for its vessels with a remaining average term of 2.6 years. Navios Partners has currently contracted out 79.2% of its available days for 2017, 33.8% for 2018 and 17.3% for 2019, including index-linked charters, respectively, expecting to generate revenues of approximately $134.1 million, $83.2 million and $54.7 million, respectively. The average expected daily charter-out rate for the fleet is $17,244, $25,746 and $24,972 for 2017, 2018 and 2019, respectively.

EARNINGS HIGHLIGHTS

For the following results and the selected financial data presented herein, Navios Partners has compiled consolidated statements of operations for the three month periods ended March 31, 2017 and 2016. The quarterly 2017 and 2016 information was derived from the unaudited condensed consolidated financial statements for the respective periods. EBITDA, 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
Period Ended Period Ended
  March 31,
2017
March 31,
2016
(in $‘000 except per unit data) (unaudited) (unaudited)
Revenue $   42,411 $ 45,641
Net (loss)/ income $ (5,655) $ 209
Adjusted Net income $ 720(1) $ 209
EBITDA $   22,654 $ 28,070
Adjusted EBITDA $   25,873(2) $ 28,070
Earnings per Common unit (basic and diluted) $ (0.06) $
Adjusted  Earnings per Common unit (basic and diluted) $ 0.01(1) $
Operating Surplus $  17,566 $ 18,283
Maintenance and Replacement Capital expenditure reserve $  3,265 $ 2,975
(1) Adjusted Net Income and Adjusted Earnings per Common unit for the three months ended March 31, 2017 have been adjusted to exclude a $3.2 million write-off of deferred finance fees and discount related to the refinancing of the Term Loan B Facility, $1.5 million allowance for doubtful accounts, $1.3 million loss related to the disposal of one of our vessels and $0.5 million equity compensation expense.
(2) Adjusted EBITDA for the three months ended March 31, 2017 has been adjusted to exclude a $1.5 million allowance for doubtful accounts, $1.3 million loss related to the disposal of one of our vessels and $0.5 million equity compensation expense.

Three month periods ended March 31, 2017 and 2016

Time charter and voyage revenues for the three month period ended March 31, 2017 decreased by $3.2 million or 7.1% to $42.4 million, as compared to $45.6 million for the same period in 2016. The decrease was mainly attributable to the decrease in TCE to $14,671 per day for the three month period ended March 31, 2017, from $15,524 per day for the three month period ended March 31, 2016, due to the sale of the MSC Cristina in January 2017. As a result of the vessel’s sale, available days of the fleet decreased to 2,794 days for the three month period ended March 31, 2017, as compared to 2,821 days for the three month period ended March 31, 2016.

EBITDA for the three months ended March 31, 2017 was negatively affected by the accounting effect of a: (i) $1.5 million allowance for doubtful accounts; (ii) $1.3 million loss related to the disposal of the MSC Cristina and; (iii) $0.5 million equity compensation expense. Excluding these items, Adjusted EBITDA decreased by $2.2 million to $25.9 million for the three months ended March 31, 2017, as compared to $28.1 million for the same period in 2016. The decrease in Adjusted EBITDA was primarily due to a $3.2 million decrease in revenue and $0.3 million increase in general and administrative expenses. The above decrease was partially mitigated by a: (i) $0.4 million decrease in time charter and voyage expenses; (ii) $0.4 million decrease in management fees due to the sale of the MSC Cristina in January 2017; (iii) $0.4 million decrease in other expenses; and (iv) $0.1 million increase in other income.

The reserve for estimated maintenance and replacement capital expenditures for the three month periods ended March 31, 2017 and 2016 were $3.3 million and $3.0 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 March 31, 2017 of $17.6 million, compared to $18.3 million for the three month period ended March 31, 2016. 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 months ended March 31, 2017 was negatively affected by the accounting effect of a: (i) $3.2 million write-off of deferred finance fees and discount related to the refinancing of the Term Loan B Facility; (ii) $1.5 million allowance for doubtful accounts; (iii) $1.3 million loss related to the disposal of the MSC Cristina; and (iv) $0.5 million equity compensation expense. Excluding these items, Adjusted net income for the three months ended March 31, 2017 amounted to $0.7 million compared to $0.2 million for the three months ended March 31, 2016. The increase in Adjusted net income of $0.5 million was due to a: (i) $2.0 million decrease in depreciation and amortization expense; (ii) $0.5 million decrease in interest expense and finance cost, net; and (iii) $0.5 million increase in interest income. The above increase was partially mitigated by a $2.2 million decrease in adjusted EBITDA and $0.2 million increase in direct vessel expenses, comprising of the amortization of dry dock and special survey costs.

Fleet Employment Profile

The following table reflects certain key indicators of Navios Partners’ core fleet performance for the three months ended March 31, 2017 and 2016.

Three Month
 Period Ended
 March 31, 2017
 (unaudited)
Three Month
 Period Ended
 March 31, 2016
 (unaudited)
Available Days(1) 2,794 2,821
Operating Days(2) 2,790 2,820
Fleet Utilization(3) 99.83 % 99.96 %
Time Charter Equivalent (per day) (4) $ 14,671 $ 15,524
Vessels operating at period end 31 31
(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 rate: Time Charter Equivalent rate per day is 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 per day 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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