SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
6-K
REPORT
OF FOREIGN PRIVATE ISSUER
PURSUANT
TO RULE 13A-16 OR 15D-16 OF THE
SECURITIES
EXCHANGE ACT OF 1934
DATED:
April 29, 2009
Commission
File No. 001-33811
NAVIOS
MARITIME PARTNERS L.P.
85
AKTI MIAOULI STREET, PIRAEUS, GREECE 185 38
(Address
of Principal Executive Offices)
Indicate
by check mark whether the registrant files or will file annual reports under
cover of Form 20-F or Form 40-F.
Form
20-F x Form
40-F o
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(1):
Yes o No x
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(7):
Indicate
by check mark whether the registrant by furnishing the information contained in
this Form is also thereby furnishing the information to the Commission pursuant
to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
If
``Yes'' is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
N/A
NAVIOS
MARITIME PARTNERS L.P.
FORM
6-K
TABLE
OF CONTENTS
| |
|
|
|
|
Page
|
|
|
Operating
and Financial Review and Prospects
|
|
|
|
|
1
|
|
| |
|
|
|
|
|
|
|
Risk
Factors
|
|
|
|
|
17
|
|
| |
|
|
|
|
|
|
|
Financial
Statements Index
|
|
|
|
|
22
|
|
The information contained in this
Report is hereby incorporated by reference into the Registration Statement on
Form F-3, File No. 333-157000.
Operating
and Financial Review and Prospects
The
following is a discussion of the financial condition and results of operations
for the three month periods ended March 31, 2009 and 2008 of Navios Maritime
Partners L.P. (“Navios Partners”). All of these financial statements have been
prepared in accordance with Generally Accepted Accounting Principles in the
United States of America (US GAAP). You should read this section together with
the consolidated financial statements and the accompanying notes included in
Navios Partners' 2008 annual report filed on Form 20-F with the Securities
Exchange Commission.
This
report contains forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. These
forward looking statements are based on Navios Partners' current expectations
and observations. Actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause
actual results to differ materially include, but are not limited to changes in
the demand for dry bulk vessels, fluctuation of charter rates, competitive
factors in the market in which Navios Partners operates; risks associated with
operations outside the United States; and other factors listed from time to time
in the Navios Partners’ filings with the Securities and Exchange
Commission.
Overview
General
Navios
Partners is an international owner and operator of Capesize and Panamax drybulk
carriers, formed in August 2007 by Navios Maritime Holdings Inc. (“Navios
Holdings”), a vertically integrated seaborne shipping and logistics company with
over 50 years of operating history in the dry bulk shipping industry. Navios
Partners completed its IPO of 10,000,000 common units and the concurrent sale of
500,000 common units to a corporation owned by Angeliki Frangou, Navios
Partners’ Chairman and Chief Executive Officer, on November 16,
2007. Navios Partners used the proceeds of these sales of
approximately $193.3 million, plus $160.0 million funded from its revolving
credit facility to acquire its initial fleet of vessels. Two vessels were
acquired since the IPO and the fleet currently consists of eight modern Panamax
vessels and one modern Capesize vessel.
Pursuant
to the IPO, Navios Partners retained an option to purchase a Capesize vessel
exercisable by April of 2009. On April 2, 2009, Navios
Partners announced that it would not be exercising this option given the
then-prevailing unfavorable capital market conditions. In addition,
in connection with the IPO, in November 2007, we agreed to purchase from Navios
Holdings the Navios TBN I, a Capesize vessel which is currently under
construction, for $130.0 million in cash. This purchase is subject to
the delivery of the vessel to Navios Holdings, which is anticipated to occur in
late June 2009. Since Navios Partners entered into this agreement,
the world has suffered from a significant credit crisis and global
recession. However, it is unclear the extent to which the market
value of this Capesize vessel has been affected because of its associated
long-term charter in place as of the date of the agreement, which is insured
against non-payment by our credit default insurance. If we are unable to finance
this acquisition, we will seek to renegotiate the agreement with Navios
Holdings, our sponsor, based on commercially reasonable
terms.
After the
issuance on July 1, 2008 of 3,131,415 common units to Navios Holdings for the
acquisition of the Navios Hope (formerly known as Navios Aurora I), and the
issuance of additional general partnership units, there are currently
outstanding: 13,631,415 common units, 7,621,843 subordinated units and 433,740
general partnership units. As of March 31, 2009, Navios Holdings owned a 51.6%
interest in Navios Partners, including the 2% general partner
interest.
On
November 15, 2007, Navios Partners entered into a revolving credit facility
agreement with Commerzbank AG and DVB Bank AG maturing on November 15, 2017.
This credit facility provided Navios Partners with financing availability of up
to $260.0 million, of which $165.0 million was drawn on November 16, 2007. Of
the total drawn down amount, $160.0 million was paid to Navios Holdings as part
of the purchase price of the capital stock of Navios Holdings’ subsidiaries that
owned or had rights to the eight vessels of Navios Partners’ fleet. The
remaining $5.0 million balance of the drawn amount was used for working capital
purposes.
On June
25, 2008, this credit facility was amended, in part, to increase the available
borrowings by $35.0 million, in anticipation of purchasing the Navios Hope
(formerly known as Navios Aurora I), thereby increasing the total facility to
$295.0 million.
On May 2,
2008, Navios Partners borrowed $35.0 million to finance the acquisition of the
vessel the Navios Fantastiks and on July 1, 2008 borrowed an additional $35.0
million to finance the acquisition of the vessel the Navios Hope (formerly known
as Navios Aurora I). With the consent of the banks, Navios Partners may borrow
up to $60.0 million under its credit facility to fund a portion of the purchase
price of the Navios TBN I and, to the extent that it is not used for such
purpose, the availability of such $60.0 million under the credit facility will
be terminated.
In
January 2009, Navios Partners further amended the terms of its existing credit
facility. The amendment is effective until January 15, 2010 and provides for
(a) the repayment of $40.0 million which took place on February 9,
2009, (b) maintaining minimum cash reserves in a pledged account with the agent
bank as follows: $2.5 million as of January 31, 2009; $5.0 million as of March
31, 2009; $7.5 million as of June 30, 2009, $10.0 million as
of September 30, 2009; and $12.5 million as
of December 31, 2009 and (c) an increased margin on the loans of
2.25%. Further, the covenants were amended by (a) reducing the minimum net worth
to $100.0 million from $135.0 million, (b) reducing the value maintenance
covenant ("VMC") to 100% using charter free vessel values, (c) changing the
calculation of the minimum leverage covenant to use charter inclusive adjusted
vessel values until December 31, 2009, and (d) adding a new VMC based on charter
inclusive valuations to be at 143%. Also, Navios Partners pays a
commitment fee of 0.35% for undrawn amounts under the facility. As of March 31,
2009, Navios Partners was in compliance with the financial covenants under the
facility.
Navios
Partners received a lump sum charter payment of approximately $29.6 million for
Navios Hope in the first quarter of 2009. This charter payment was net of
expenses and represents an acceleration of a significant portion of the $56.2
million nominal charter amount. Navios Partners will receive the entire amount
of the original charter through the lump sum payment and the new charter
payments for the remainder of the term of the original charter (ending in
2013).
Fleet
Our fleet
consists of eight modern active Panamax vessel, one modern Capesize vessel and
one newbuild Capesize vessel, the Navios TBN I, that we have agreed to purchase
from Navios Holdings when it is delivered, which is expected to occur in late
June 2009.
All of
our current vessels operate under long-term time charters of three or more years
at inception with counterparties that we believe are creditworthy. Under certain
circumstances, we may operate vessels in the spot market until the vessels have
been fixed under appropriate long-term charters.
The
following table provides summary information about our fleet:
|
Owned
Vessels
|
|
Type
|
|
Built
|
|
Capacity
(DWT)
|
|
Original Charter
Expiration Date/ New Charter Expiration
Date (1)
|
|
Original Charter Out
Rate/ New Charter Out Rate per day (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Navios
Gemini S
|
|
Panamax
|
|
1994
|
|
|
68,636 |
|
February
2009
|
|
$ |
19,523 |
|
|
|
|
|
|
|
|
|
|
|
February
2014
|
|
$ |
24,225 |
|
|
Navios
Libra II
|
|
Panamax
|
|
1995
|
|
|
70,136 |
|
December
2010
|
|
$ |
23,513 |
|
|
Navios
Felicity
|
|
Panamax
|
|
1997
|
|
|
73,867 |
|
April
2013
|
|
$ |
26,169 |
|
|
Navios
Galaxy I
|
|
Panamax
|
|
2001
|
|
|
74,195 |
|
February
2018
|
|
$ |
21,937 |
|
|
Navios
Alegria
|
|
Panamax
|
|
2004
|
|
|
76,466 |
|
December
2010
|
|
$ |
23,750 |
|
|
Navios
Fantastiks
|
|
Capesize
|
|
2005
|
|
|
180,265 |
|
March
2011
|
|
$ |
32,279 |
|
|
|
|
|
|
|
|
|
|
|
March
2014
|
|
$ |
36,290 |
|
|
Navios
Hope (3)
|
|
Panamax
|
|
2005
|
|
|
75,397 |
|
February
14, 2009
|
|
$ |
33,863 |
|
|
|
|
|
|
|
|
|
April,
1 2009 – May 18, 2009
|
|
$ |
8,080 |
|
|
|
|
|
|
|
|
|
May
18, 2010
|
|
$ |
10,643 |
|
|
|
|
|
|
|
|
|
August
2013
|
|
$ |
16,841 |
|
Owned
Vessels to be delivered
|
|
|
|
|
Expected
delivery
|
|
|
|
|
|
|
|
|
Navios
TBN I (4)
|
|
Capesize
|
|
June
2009
|
|
|
180,000 |
|
June
2014
|
|
$ |
47,400 |
|
Long-term
Chartered-in Vessels
|
Navios
Prosperity (5)
|
|
Panamax
|
|
2007
|
|
|
82,535 |
|
July
2012
|
|
$ |
24,000 |
|
|
Navios
Aldebaran (6)
|
|
Panamax
|
|
2008
|
|
|
76,500 |
|
March
2013
|
|
$ |
28,391 |
|
(1)
Represents the initial expiration date of the time charter and, if applicable,
the new time charter expiration date for the vessels with new time
charters.
(2) Net
time charter-out rate per day (net of commissions). Represents the charter-out
rate during the time charter period prior to the time charter expiration date
and, if applicable, the charter-out rate under the new time
charter.
(3)
Navios Partners received a lump sum charter payment of approximately $29.6
million for Navios Hope in the first quarter of 2009. This charter payment was
net of expenses and represents an acceleration of a significant portion of the
$56.2 million nominal charter amount. Navios Partners will receive the entire
amount of the original charter through the lump sum payment and the new charter
payments for the remainder of the term of the original charter (ending in
2013). The rate for the period from April, 1 2009 to August 2013 is
as presented in the table above. On February 9, 2009, Navios Aurora I was
renamed to the Navios Hope.
(4) We
have agreed to purchase Navios TBN I from Navios Holdings for $130.0 million.
This purchase is subject to the delivery of the vessel to Navios Holdings, which
is anticipated to occur in late June 2009. Since we entered into this
agreement, the world has suffered from a significant credit crisis and global
recession. However, it is unclear the extent to which the market
value of this Capesize vessel has been affected because of its associated
long-term charter in place as of the date of the agreement, which is insured
against non-payment by our credit default insurance.
If
we are unable to finance this acquisition, we will seek to renegotiate the
agreement with Navios Holdings, our sponsor, based on commercially reasonable
terms.
(5)
Navios Prosperity is chartered-in for seven years starting from June 19, 2008
and we will have options to extend for two one-year periods. We have the option
to purchase the vessel after June 2012 at a purchase price that is initially 3.8
billion Yen ($39.1 million based upon the exchange rate at March 31, 2009),
declining pro rata by 145 million Yen ($1.5 million based upon the exchange rate
at March 31, 2009) per calendar year.
(6)
Navios Aldebaran was delivered on March 17, 2008. Navios Aldebaran is
chartered-in for seven years and we have options to extend for two one-year
periods. We have the option to purchase the vessel after March 2013 at a
purchase price that is initially 3.6 billion Yen ($37.0 million based upon the
exchange rate at March 31, 2009) declining pro rata by 150 million Yen ($1.5
million based upon the exchange rate at March 31, 2009) per calendar
year.
Additionally
on April 2, 2009, we announced that we would not exercise our option to acquire
TBN II, a new building capesize vessel, from Navios Holdings for $135.0 million.
This decision was reached in light of the unfavorable conditions in the capital
markets. There are no fees or costs payable in connection with the option
expiration on April 1, 2009.
Our
Charters
We
generate revenues by charging our customers for the use of our vessels to
transport their dry bulk commodities. All of the vessels in our fleet are
chartered out under time charters, which range in length from three to five
years. We may in the future operate vessels in the spot market until the vessels
have been chartered under appropriate long-term charters.
For the
three month period ended March 31, 2009, Mitsui O.S.K. Lines Ltd, Cargill
International S.A., Sanko Steamship Co., and Daiichi Chuo Kisen Kaisha accounted
for approximately 34.72%, 21.74%, 14.04% and 10.34% respectively, of total
revenues. We believe that the combination of the long-term nature of our
charters (which provide for the receipt of a fixed fee for the life of the
charter) and our management agreement with Navios ShipManagement Inc. (“Navios
ShipManagement”) (which provides for a fixed management fee through November 16,
2009) will provide us with a strong base of stable cash flows.
Our
revenues are driven by the number of vessels in the fleet, the number of days
during which the vessels operate and our charter hire rates, which, in turn, are
affected by a number of factors, including:
|
|
•
|
|
the
duration of the charters;
|
|
|
|
|
|
|
|
•
|
|
the
level of spot and long-term market rates at the time of
charter;
|
|
|
|
|
|
|
|
•
|
|
decisions
relating to vessel acquisitions and disposals;
|
|
|
|
|
|
|
|
•
|
|
the
amount of time spent positioning vessels;
|
|
|
|
|
|
|
|
•
|
|
the
amount of time that vessels spend undergoing repairs and upgrades in
drydock;
|
|
|
|
|
|
|
|
•
|
|
the
age, condition and specifications of the vessels; and
|
|
|
|
|
|
|
|
•
|
|
the
aggregate level of supply and demand in the dry bulk shipping
industry.
|
Time
charters are available for varying periods, ranging from a single trip (spot
charter) to long-term which may be many years. In general, a long-term time
charter assures the vessel owner of a consistent stream of revenue. Operating
the vessel in the spot market affords the owner greater spot market opportunity,
which may result in high rates when vessels are in high demand or low rates when
vessel availability exceeds demand. We intend to operate our vessels in the
long-term charter market. Please read “Risk Factors” in our Report on Form 20-F
and elsewhere in this Report on Form 6-K for a discussion of certain risks
inherent in our business.
Trends
and Factors Affecting Our Future Results of Operations
We
believe the principal factors that will affect our future results of operations
are the economic, regulatory, political and governmental conditions that affect
the shipping industry generally and that affect conditions in countries and
markets in which our vessels engage in business. Please read “Risk Factors” in
our Report on Form 20-F and elsewhere in this Report on Form 6-K for a
discussion of certain risks inherent in our business.
Results
of Operations
Overview
The
financial condition and the results of operations presented for the three month
periods ended March 31, 2008 and 2009 of Navios Partners discussed below include
the following entities and chartered-in vessels:
| |
|
|
Statement
of income
|
|
Company
name
|
Vessel
name
|
Country
of incorporation
|
2008
|
2009
|
| |
|
|
|
|
|
Libra
Shipping Enterprises Corporation
|
Navios
Libra II
|
Marshall
Is.
|
1/1
– 03/31
|
1/1
– 03/31
|
|
Alegria
Shipping Corporation
|
Navios
Alegria
|
Marshall
Is.
|
1/1
– 03/31
|
1/1
– 03/31
|
|
Felicity
Shipping Corporation
|
Navios
Felicity
|
Marshall
Is.
|
1/1
– 03/31
|
1/1
– 03/31
|
|
Gemini
Shipping Corporation
|
Navios
Gemini S
|
Marshall
Is.
|
1/1
– 03/31
|
1/1
– 03/31
|
|
Galaxy
Shipping Corporation
|
Navios
Galaxy I
|
Marshall
Is
|
1/1
– 03/31
|
1/1
– 03/31
|
|
Fantastiks
Shipping Corporation (*)
|
Navios
Fantastiks
|
Marshall
Is.
|
1/1
– 03/31
|
1/1
– 03/31
|
|
Aurora
Shipping Enterprises Ltd.
|
Navios
Hope(**)
|
Marshall
Is.
|
-
|
1/1
– 03/31
|
|
Chartered-in
vessel
|
|
|
|
|
|
Prosperity
Shipping Corporation (***)
|
Navios
Prosperity
|
Marshall
Is.
|
1/1
– 03/31
|
1/1
– 03/31
|
|
Chartered-in
vessel
|
|
|
|
|
|
Aldebaran
Shipping Corporation (***)
|
Navios
Aldebaran
|
Marshall
Is.
|
3/17
– 03/31
|
1/1
– 03/31
|
|
Navios
Maritime Partners L.P
|
N/A
|
Marshall
Is.
|
1/1
– 03/31
|
1/1
– 03/31
|
|
Navios
Maritime Operating LLC
|
N/A
|
Marshall
Is.
|
1/1
– 03/31
|
1/1
– 03/31
|
|
(*)
|
Fantastiks
Shipping Corporation took ownership of the vessel Fantastiks from
chartered-in vessel, which was renamed to Navios Fantastiks on May 2,
2008.
|
|
(**)
|
On
February 9, 2009, Navios Aurora I was renamed the Navios
Hope.
|
|
(***)
|
Not
a vessel-owning subsidiary and only holds rights to charter-in
contract
|
The
accompanying interim condensed consolidated financial statements of Navios
Partners are unaudited, but, in the opinion of management, contain all
adjustments necessary to present fairly, in all material respects, Navios
Partners’ condensed consolidated financial position as of March 31, 2009 and the
condensed consolidated results of operations for the three months ended March
31, 2008 and 2009. The footnotes are condensed as permitted by the requirements
for interim financial statements and accordingly, do not include information and
disclosures required under US GAAP for complete financial statements. All such
adjustments are deemed to be of a normal, recurring nature. The results of
operations for the interim periods are not necessarily indicative of the results
to be expected for the full year. These financial statements should be read in
conjunction with the consolidated financial statements and related notes
included in Navios Partners’ Annual Report on Form 20-F for the year ended
December 31, 2008.
FINANCIAL
HIGHLIGHTS
The
following table presents consolidated revenue and expense information for the
three month periods ended March 31, 2009 and 2008.
|
|
|
(unaudited)
Three
Month Period ended March 31, 2008
($
‘000)
|
|
|
(unaudited)
Three
Month Period ended March 31, 2009
($
‘000)
|
|
|
Time
charter and voyage revenues
|
|
$ |
14,320 |
|
|
$ |
21,157 |
|
|
Time
charter and voyage expenses
|
|
|
(2,821 |
) |
|
|
(3,008 |
) |
|
Direct
vessel expenses
|
|
|
(144 |
) |
|
|
(124 |
) |
|
Management
fees
|
|
|
(1,820 |
) |
|
|
(2,610 |
) |
|
General
and administrative expenses
|
|
|
(496 |
) |
|
|
(902 |
) |
|
Depreciation
and amortization
|
|
|
(2,764 |
) |
|
|
(3,277 |
) |
|
Interest
expense and finance cost, net
|
|
|
(2,473 |
) |
|
|
(2,425 |
) |
|
Interest
income
|
|
|
48 |
|
|
|
57 |
|
|
Other
income
|
|
|
- |
|
|
|
91 |
|
|
Other
expense
|
|
|
(3 |
) |
|
|
- |
|
|
Net
income
|
|
$ |
3,847 |
|
|
$ |
8,959 |
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$ |
9,180 |
|
|
$ |
14,728 |
|
|
Operating
Surplus
|
|
$ |
7,156 |
|
|
$ |
10,550 |
|
Period
over Period Comparisons
For the Three Month Period ended
March 31, 2009 compared to Three Month Period
ended March 31, 2008
Time charter and
voyage revenues: Time charter and voyage revenues for the three month
period ended March 31, 2009 increased by $6.9 million or 48.2% to $21.2 million
as compared to $14.3 million for the same period in 2008. The increase was
mainly attributable to the delivery of Navios Aldebaran on March 17, 2008 and
the acquisition of Navios Hope (formerly known as Navios Aurora I) on July 1,
2008, both of which were fully operating during the three month period ended
March 31, 2009.
Time charter and
voyage expenses: Time charter and voyage expenses increased by
$0.2 million or 7.1% to $3.0 for the three month period ended March 31, 2009 as
compared to $2.8 million for same period in 2008. The increase was mainly
attributable to the delivery of the chartered-in vessel Navios Aldebaran on
March 17, 2008. This increase was mitigated by the acquisition of Navios
Fantastiks from Navios Holdings into the owned fleet on May 2, 2008, from
chartered-in vessel.
Direct vessel
expenses: Direct vessel expenses, comprised of the
amortization of drydock and special survey costs, decreased by $0.02 million or
14.3% to $0.12 million for the three month period ended March 31, 2009 as
compared to $0.14 million for the same period in 2008. The above decrease is
explained by the fact that the drydocking cost of one of the owned vessels was
fully amortized at the end of 2008. Consequently, there is no amortization this
period in comparison to the three month period in 2008. The additional vessels
in 2009 have not yet been drydocked, and do not influence the amortization cost
for the period.
Management
fees: Management fees increased by $0.8 million to $2.6
million or 44.4% for the three month period ended March 31, 2009, as compared to
$1.8 million for the same period in 2008. The increase is mainly attributable to
the acquisition of Navios Fantastiks from Navios Holdings into the owned fleet,
from chartered-in vessel on May 2, 2008 and to the acquisition of Navios Hope
from Navios Holdings on July 1, 2008. Starting on November 16, 2007,
in connection with the management agreement entered into by Navios Partners, the
Manager provides all of Navios Partners’ owned vessels with commercial and
technical management services for a daily fee of $4,000 per owned Panamax vessel
and $5,000 per owned Capesize vessel until November 16, 2009.
General and
administrative expenses: General and administrative expenses increased by
$0.4 million to $0.9 million or 80% for the three month period ended March 31,
2009, as compared to $0.5 million for the same period of 2008. The increase is
mainly attributable to (a) an increase in general and administrative expenses
due to the increase in the number of owned and chartered-in vessels and (b) an
increase in professional, legal and audit fees incurred by Navios Partners in
connection with the amendment of the loan agreement and other
activities.
Pursuant
to the Administrative Services Agreement, the Manager provides administrative
services and is reimbursed for reasonable costs and expenses incurred in
connection with the provision of these services. For the three month periods
ended March 31, 2009 and 2008, the expenses charged by the Manager for
administrative fees were $0.3 million and $0.2 million, respectively. The
remaining balances of $0.6 million and $0.3 million of general and
administrative expenses for the three month periods ended March 31, 2009 and
2008, respectively, relate to legal and professional fees, as well as audit
fees.
Depreciation and
amortization: Depreciation and amortization amounted to $3.3
million for the three month period ended March 31, 2009 compared to $2.8 million
for the three month period ended March 31, 2008. The main reason for this
increase of $0.5 million was: (a) the increase in depreciation expense of $1.8
million due to the acquisitions of Navios Fantastiks on May 2, 2008 (which until
then was part of the chartered-in fleet of Navios Partners) and Navios Hope
(formerly known as Navios Aurora I) on July 1, 2008 and (b) the decrease in
amortization income of $1.3 million related to favorable lease recognized on the
acquisition of Navios Fantastiks (chartered-in vessel until May 2, 2008 that
then became an owned vessel) as part of the acquisition of Kleimar by Navios
Holdings in February 2007, which was fully amortized in 2008 and, therefore,
there is no such income from amortization for the three month period ended March
31, 2009. Depreciation of vessels is calculated using an estimated useful life
of 25 years from the date the vessel was originally delivered from the shipyard.
Intangible assets are amortized over the contract periods which range from four
to ten years.
Interest expense
and finance cost, net: Interest expense and finance cost, net for the
three month period ended March 31, 2009 decreased to $2.4 million as compared to
$2.5 million in the same period of 2008. The slight decrease in interest expense
is mainly attributable to the increase in average outstanding loan balance from
$165.0 million in the three months ended March 31, 2008 to $195.0 million in the
three months ended March 31, 2009. Such increase of average outstanding loan
balance in 2009 was fully offset by the lower average LIBOR rate from 5.6% for
the three month period ended March 31, 2009 compared to 4.2%.the same period in
2008. As of March 31, 2008 the outstanding loan balance under our credit
facility was $165.0 million and $195.0 million as of March 31,
2009.
Interest
income: Interest income increased by $0.01 million to $0.06
million for the three month period ended March 31, 2009 as compared to $0.05
million for the same period of 2008. Interest income is considered
immaterial.
Other income and
expenses, net: Other
income and expenses, net increased by $0.1 million to $0.1 million or 100% for
the three month period ended March 31, 2009 as compared to $0.0 million for the
same period of 2008.
Net income:
Net income for three months ended March 31, 2009 amounted to $9.0 million
compared to $3.8 million for the three months ended March 31, 2008. The increase
in net income of $5.2 million is due to the factors discussed
above.
Operating
Surplus: Navios Partners
generated an operating surplus for the period of $10.6 million in comparison to
$7.2 million for the three month period ended March 31,
2008. Operating surplus is a non-GAAP financial measure used by
certain investors to measure the financial performance of Navios Partners and
other master limited partnerships(See “Reconciliation of EBITDA to Net Cash from
Operating Activities, Operating Surplus and Available Cash for Distribution”
below).
Seasonality:
Because Navios Partners’ vessels operate under long-term charters, the results
of operations are not generally subject to the effect of seasonable variations
in demand.
Liquidity
and Capital Resources
Revolving
Credit Facility
Upon
the closing of the IPO, we entered into a $260.0 million revolving credit
facility with DVB Bank AG and Commerzbank AG which was amended in June 2008, in
part, to increase the available borrowings by $35.0 million, in anticipation of
purchasing Navios Aurora I, thereby increasing the total facility to $295.0
million. Currently, our total borrowings under our revolving credit facility are
$195.0 million. With the consent of our banks, we may borrow up to $60.0 million
under our credit facility to fund a portion of the purchase price of the Navios
TBN I and, to the extent that we do not use it for such purposes, the
availability of such $60.0 million under the credit facility will be
terminated.
In
January 2009, Navios Partners further amended the terms of its existing credit
facility. The amendment is effective until January 15, 2010 and provides for
(a) the repayment of $40.0 million which took place on February 9,
2009, (b) maintaining minimum cash reserves in a pledged account with the agent
bank as follows: $2.5 million as of January 31, 2009; $5.0 million as of March
31, 2009; $7.5 million as of June 30, 2009, $10.0 million as
of September 30, 2009;and $12.5 million as
of December 31, 2009 and (c) an increased margin on the loans of
2.25%. Further, the covenants were amended by (a) reducing the minimum net worth
to $100.0 million from $135.0 million, (b) reducing the value maintenance
covenant ("VMC") to 100% using charter free vessel values, (c) changing the
calculation of the minimum leverage covenant to use charter inclusive adjusted
vessel values until December 31, 2009, and (d) adding a new VMC based on charter
inclusive valuations to be at 143%. Also, Navios Partners pays a
commitment fee of 0.35% for undrawn amounts under the facility.
As of
March 31, 2009, Navios Partners was in compliance with the financial covenants
of its revolving loan facility. The repayment of the credit facility starts no
earlier than February 2012 and is subject to changes in repayment amounts and
dates depending on various factors such as the future borrowings under the
credit facility agreement.
Purchase
of Newbuilding
The table
below summarizes certain information with respect to the Capesize newbuilding
Navios TBN I and related charter contract that we have agreed to purchase from a
subsidiary of Navios Holdings upon delivery to Navios Holdings which is expected
to occur in late June 2009 for a purchase price of $130.0 million:
|
|
|
|
|
|
|
|
|
Charter
|
|
|
|
|
|
|
|
|
|
|
|
Expiration
|
|
Charter-Out
|
|
Vessel
|
|
Expected
delivery
|
|
Capacity
(Dwt)
|
|
Ownership
|
|
Date
|
|
Rate
|
|
|
|
Navios
TBN I
|
|
June
2009
|
|
180,000
|
|
100%
|
|
June
2014
|
|
$47,400
|
This
purchase is subject to the delivery of the vessel to Navios Holdings, which is
anticipated to occur in late June 2009. Since we entered into this
agreement, the world has suffered from a significant credit crisis and global
recession. However, it is unclear the extent to which the market
value of this Capesize vessel has been affected because of its associated
long-term charter in place as of the date of the agreement, which is insured
against non-payment by our credit default insurance. If we are unable to
finance this acquisition, we will seek to renegotiate the agreement with Navios
Holdings, our sponsor, based on commercially reasonable
terms.
With the
consent of our banks, we may borrow up to $60.0 million under our credit
facility to fund a portion of the purchase price of the Navios TBN I and, to the
extent that we do not use it for such purposes, the availability of such $60.0
million under the credit facility will be terminated.
Liquidity
and Capital Resources
The
following table presents cash flow information derived from the unaudited
condensed consolidated statements of cash flows of Navios Partners for the three
month periods ended March 31, 2009 and 2008.
|
|
|
Three
Month Period Ended March 31, 2008
($
‘000)
|
|
|
Three
Month Period Ended March 31, 2009
($
‘000)
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Net cash provided by operating
activities
|
|
$ |
3,504 |
|
|
$ |
43,048 |
|
|
Net cash used in financing
activities
|
|
|
(3,236 |
) |
|
|
(53,875 |
) |
|
Change in cash and cash
equivalents
|
|
$ |
268 |
|
|
$ |
(10,827 |
) |
Cash
provided by operating activities for the three month period ended March 31, 2009
as compared to the cash provided for the three month period ended March
31, 2008:
Net cash
provided by operating activities increased by $39.5 million to $43.0 million for
the three month period ended March 31, 2009 as compared to $3.5 million for the
same period in 2008. The increase is analyzed as follows:
The
increase resulted from higher net income for the three month period ended March
31, 2009, of $9.0 million compared to $3.9 million for the three month period
ended March 31, 2008 and other factors as discussed below. In determining net
cash provided by operating activities, net income is adjusted for the effects of
certain non-cash items including depreciation and amortization of $3.3 million
and $2.8 million for the three month periods ended March 31, 2009 and 2008,
respectively.
Amounts
due to related parties increased by $2.2 million from $2.4 million as of March
31, 2008 to $4.6 million as of March 31, 2009. The main reason was (a) the
increase in management fees by $1.7 million, of which, $0.8 million is due to
the acquisition of Navios Hope (formerly known as Navios Aurora I) on July 1,
2008 and Navios Fantastiks on May 2, 2008, from chartered-in vessel and $0.9
million relate to management fees due from December 31, 2008; and (b)
administrative fees of $0.6 million, of which $0.5 million relate to
administrative fees due from December 31, 2008 and $0.1 million is additional
administrative fees incurred during the three month period ended March 31, 2009.
The overall above increase of $2.3 million was mitigated by a decrease of $0.1
million due to other expenses owed to affiliated companies.
Restricted
cash decreased by $2.3 million from $3.1 million at March 31, 2008 to $0.8
million at March 31, 2009. Although there was an increase due to a $0.8 million
guarantee for a claim related to an owned vessel this was offset by a decrease
of $3.1 million. Up to August 2008, Navios Partners was required to hold cash in
a retention account according to the loan facility of $165.0 million that it had
entered into prior to the closing of the IPO. As of March 31, 2009 we no longer
had that obligation.
Accounts
receivable increased by $0.3 million from $0.5 million at March 31, 2008 to $0.8
million at March 31, 2009. The reason for this increase was an off-hire from
previous year that was invoiced to the counterparty this quarter. This off-hire
had been accrued last year, however, the off-hire was finalized in the first
quarter of 2009 and the receivable from the counterparty was increased by $0.2
million.
Deferred
voyage revenue primarily reflects charter-out amounts collected on voyages that
have not been completed. Deferred voyage revenue, net of commissions increased
by $7.8 million from $0.7 million at March 31, 2008 to $8.5 million at March 31,
2009. Out of $8.5 million at March 31, 2009, the amount of $6.8 million
represents the short term portion of deferred revenue received from the
counterparty to the Navios Hope (formerly known as Navios Aurora I). In January
2009, Navios Partners and its counterparty to the Navios Hope charter mutually
agreed for a lump sum amount of approximately $30.4 million or $29.6 million,
net of expenses. Under a new charter agreement, the balance of the aggregate
value of the original contract will be allocated to the period until its
original expiration. The amount of $30.4 million has been recognized as deferred
revenue and amortized over the life of the vessel’s contract.
Accounts
payable increased by $0.7 million from $0.2 million at March 31, 2008 to $0.9
million at March 31, 2009. The increase is mainly due to an increase in brokers
fees of $0.3 million, an increase in suppliers payable of $0.2 million and an
increase in professional and legal fees payable of $0.1 million.
Prepaid
expenses and other current assets increased by $0.05 million from $0.05 million
at March 31, 2008 to $0.1 million at March 31, 2009. This increase is considered
immaterial.
Accrued
expenses decreased by $2.5 million from $3.8 million at March 31, 2008 to $1.3
million at March 31, 2009. The primary reason for this decrease was a decrease
in accrued loan interest by $2.6 million. This decrease was mitigated by an
increase in accrued voyage expenses by $0.1 million.
Cash
used in investing activities for the three month period ended March 31, 2009 as
compared to the three month period ended March 31, 2008:
There
were no investing activities during the periods presented.
Cash
used in financing activities for the three month period ended March 31, 2009 as
compared to the three month period ended March 31, 2008:
Net cash
used in financing activities increased by $50.7 million to $53.9 million for the
three month period ended March 31, 2009 as compared to $3.2 million for the same
period in 2008. The increase is analyzed as follows:
Cash used
in financing activities of $53.9 million for the three month period
ended March 31, 2009 was due to: (a) repayment of $40.0 million which took place
in February 2009, according to the Amendment dated January 30, 2009 to the
existing credit facility; (b) payment of $0.2 million restructuring fee relating
to the above Amendment; (c) payment of a total cash distribution of $8.7
million; and (d) maintenance of a minimum balance in our retention account of
$5.0 million until March 31, 2009, in accordance with the Supplemental Agreement
dated January 30, 2009 to the Facility Agreement dated November 15,
2007.
Cash used
in financing activities of $3.2 million for the three month period ended March
31, 2008 was due to the payment of a cash distribution of $3.2
million.
Reconciliation
of EBITDA to Net Cash from Operating Activities, Operating Surplus and Available
Cash for Distribution
|
|
|
Three
Month Period Ended March 31, 2008
($
‘000)
|
|
|
Three
Month Period Ended March 31, 2009
($
‘000)
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Net
Cash from Operating Activities
|
|
$ |
3,504 |
|
|
$ |
43,048 |
|
|
Net
increase/(decrease) in operating assets
|
|
|
(2,493 |
) |
|
|
1,025 |
|
|
Net
(increase)/decrease in operating liabilities
|
|
|
807 |
|
|
|
(31,651 |
) |
|
Net
interest cost
|
|
|
2,425 |
|
|
|
2,425 |
|
|
Interest
income
|
|
|
- |
|
|
|
(57 |
) |
|
Deferred
finance charges
|
|
|
(49 |
) |
|
|
(62 |
) |
|
EBITDA
|
|
|
9,180 |
|
|
|
14,728 |
|
|
Cash
interest income
|
|
|
48 |
|
|
|
57 |
|
|
Cash
interest paid
|
|
|
- |
|
|
|
(2,278 |
) |
|
Maintenance
and replacement capital expenditures
|
|
|
(2,072 |
) |
|
|
(1,957 |
) |
|
Operating
surplus
|
|
|
7,156 |
|
|
|
10,550 |
|
|
Cash
distribution paid relating to the first quarter
|
|
|
- |
|
|
|
(8,675 |
) |
|
Recommended
reserves accumulated as of beginning of quarter
|
|
|
- |
|
|
|
2,127 |
|
|
Recommended
reserves held as of quarter end
|
|
|
(684 |
) |
|
|
4,001 |
|
|
Available
cash for distribution
|
|
$ |
6,472 |
|
|
$ |
8,003 |
|
EBITDA
EBITDA
represents net income before interest, depreciation and amortization. Navios
Partners uses EBITDA because Navios Partners believes that EBITDA is a basis
upon which liquidity can be assessed and EBITDA presents useful information to
investors regarding Navios Partners’ ability to service and/or incur
indebtedness. Navios Partners also uses EBITDA (i) in its credit agreement to
measure compliance with covenants such as interest coverage and debt incurrence;
(ii) by prospective and current lessors as well as potential lenders to evaluate
potential transactions; and (iii) to evaluate and price potential acquisition
candidates.
EBITDA
has limitations as an analytical tool, and should not be considered in isolation
or as a substitute for analysis of Navios Parters’ results as reported under US
GAAP. Some of these limitations are: (i) EBITDA does not reflect changes in, or
cash requirements for, working capital needs; and (ii) although depreciation and
amortization are non-cash charges, the assets being depreciated and amortized
may have to be replaced in the future, and EBITDA does not reflect any cash
requirements for such capital expenditures. Because of these limitations, EBITDA
should not be considered as a principal indicator of Navios Partners’
performance.
EBITDA
increased by $5.5 million to $14.7 million for the three month period ended
March 31, 2009 as compared to $9.2 million for the same period of 2008. This
$5.5 million increase in EBITDA was primarily due to: (a) a $6.8 million
increase as a result of the increased number of vessels in Navios Partners’
fleet and due to some accelerated payments from the Navios Hope; and (b) a $0.1
million increase in other income/expense, net. The above overall favorable
variance of $6.9 million was mitigated by: (a) a $0.2 million increase in time
charter and voyage expenses; (b) a $0.8 million increase in
management fees due to the
increase in the number of vessels; and (c) a $0.4 million increase in general
and administrative expenses due to the increase in the number of owned and
chartered-in vessels during the three month period ended March 31, 2009,
compared to the respective period in 2008.
Operating
Surplus
Operating
Surplus represents net income adjusted for depreciation and amortization
expense, non-cash interest expense and estimated maintenance and replacement
capital expenditures and expansion capital expenditures. Maintenance
and replacement capital expenditures are those capital expenditures required to
maintain over the long term the operating capacity of or the revenue generated
by Navios Partners’ capital assets. Expansion capital expenditures are those
capital expenditures that increase the operating capacity of or the revenue
generated by Navios Partners’ capital assets.
Operating
surplus is a quantitative measure used in the publicly-traded partnership
investment community to assist in evaluating a partnership’s ability to make
quarterly cash distributions. Operating Surplus is not required by accounting
principles generally accepted in the United States and should not be considered
as an alternative to net income or any other indicator of Navios Partners’
performance required by accounting principles generally accepted in the United
States.
Available
Cash
Available
Cash generally means, for each fiscal quarter, all cash on hand at the end of
the quarter:
• less
the amount of cash reserves established by the board of directors
to:
provide
for the proper conduct of our business (including reserve for maintenance and
replacement capital expenditures);
– comply
with applicable law, any of Navios Partners’ debt instruments, or other
agreements; or
provide
funds for distributions to the unitholders and to the general partner for any
one or more of the next four quarters;
• plus
all cash on hand on the date of determination of available cash for the quarter
resulting from working capital borrowings made after the end of the quarter.
Working capital borrowings are generally borrowings that are made under any
revolving credit or similar agreement used solely for working capital purposes
or to pay distributions to partners.
Available
Cash is a quantitative measure used in the publicly-traded partnership
investment community to assist in evaluating a partnership’s ability to make
quarterly cash distributions. Available cash is not required by accounting
principles generally accepted in the United States and should not be considered
as an alternative to net income or any other indicator of Navios Partners’
performance required by accounting principles generally accepted in the United
States.
Borrowings
Our
long-term third party borrowings are reflected in our balance sheet as
“Long-term debt, net” and as current liabilities in “Current portion of
long-term debt.” As of March 31, 2009 and December 31, 2008, long-term debt
amounted to $195.0 million and $235.0 million, respectively, of which the
current portion of long-term debt amounted to $0.0 million and $40.0 million for
the respective periods in 2009 and 2008.
Capital
Expenditures
During
the three months ended March 31, 2008, we financed our capital expenditures with
cash flow from operations, the incurrence of bank debt and equity raising.
Expansion capital expenditures for the three month periods ended March 31, 2009
and 2008 was $0.0 million for both periods. The reserve for estimated
maintenance and replacement capital expenditures for the three month periods
ended March 31, 2009 and 2008 was $2.0 million and $2.1 million,
respectively.
Maintenance
for our vessels and expenses related to drydocking are included in the fee we
pay our vessel manager under our management agreement. Navios Partners pays the
Manager a daily fee of $4,000 per owned Panamax vessel and $5,000 per owned
Capesize vessel which is fixed until November 16, 2009, to provide such
commercial and technical services to the vessels in our initial fleet. The fee
Navios Partners pay to the Manager includes any costs associated with scheduled
drydockings during the term of the management agreement.
Replacement
Reserve
We
estimate that our annual replacement reserve for the year ending December 31,
2009 will be approximately $7.8 million, for replacing our vessels at the end of
their useful lives. The amount for estimated maintenance and replacement capital
expenditures attributable to future vessel replacement is based on the following
assumptions: (i) current market price to purchase a five year old vessel of
similar size and specifications which we estimate to be $28.5 million for
Panamax vessels and $45.3 million for Capesize vessels; (ii) a 25-year useful
life; and (iii) a 5.0% net investment rate. Our board of directors, with the
approval of the conflicts committee, may determine that one or more of our
assumptions should be revised, which could cause our board of directors to
increase or decrease the amount of estimated maintenance and replacement capital
expenditures. We may elect to finance some or all or our maintenance and
replacement capital expenditures through the issuance of additional common units
which could be dilutive to existing unitholders.
Off-Balance
Sheet Arrangements
We
have no off-balance sheet arrangements that have or are reasonably likely to
have, a current or future material effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.
Contractual
Obligations and Contingencies
The
following table summarizes our long-term contractual obligations as of March 31,
2009:
Payments
due by year
($
‘000)
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
Thereafter
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Loan
obligations(1)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
28,611 |
|
|
$ |
26,686 |
|
|
$ |
139,703 |
|
|
$ |
195,000 |
|
|
Operating
lease
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
obligations(2)
|
|
$ |
7,431 |
|
|
$ |
9,864 |
|
|
$ |
9,864 |
|
|
$ |
9,891 |
|
|
$ |
9,864 |
|
|
$ |
7,599 |
|
|
$ |
54,513 |
|
|
Committed
vessel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
purchase(3)
|
|
$ |
130,000 |
|
|
$ |
- |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
- |
|
|
$ |
130,000 |
|
|
Total
contractual
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
obligations
|
|
$ |
137,431 |
|
|
$ |
9,864 |
|
|
$ |
9,864 |
|
|
$ |
38,502 |
|
|
$ |
36,550 |
|
|
$ |
147,302 |
|
|
$ |
379,513 |
|
|
(1)
|
|
Represents
amounts drawn under our June 2008 amended credit facility. This amended
credit facility provides borrowing for up to $295.0 million. Such facility
was further amended in January 2009 pursuant to which $40.0 million of the
outstanding loan amount was paid on February 9, 2009. Amounts do not
include interest costs associated with them, which are based on a margin
ranging from 1.25% to 2.25%, as amended. The amended facility also
requires a total of $12.5 million in cash reserve balance to be maintained
as December 31, 2009.
|
|
|
|
|
|
(2)
|
|
These
amounts reflect future minimum commitments under our charter-in contracts,
net of commissions. As of December 31, 2008, we had entered into a
charter-in agreement for two of our vessels (Navios Prosperity and Navios
Aldebaran). Navios Prosperity is a chartered-in vessel starting from June
19, 2007 for seven years with options to extend for two one-year periods.
We have the option to purchase Navios Prosperity after June 2012 at a
purchase price that is initially 3.8 billion Japanese Yen ($39.1 million
based on the exchange rate at March 31, 2009), declining pro rata by 145
million Japanese Yen ($1.5 million based on the exchange rate at March 31,
2009) per calendar year. Navios Aldebaran is a chartered-in vessel
starting from March 17, 2008 for seven years with options to extend for
two one-year periods. We have the option to purchase Navios Aldebaran
after March 2013 at a purchase price that it is initially 3.6 billion
Japanese Yen ($37.0 million based on the exchange rate at March 31, 2009)
declining pro rata by 150 million Japanese Yen ($1.5 million based on the
exchange rate at March 31, 2009) per calendar year.
|
|
|
|
|
|
(3)
|
|
Consists
of the purchase price of $130.0 million for Navios TBN I which is
anticipated to be delivered to Navios Holdings in
late June 2009 and paid for through additional borrowing from the existing
credit facility and issuance of additional common units or other equity
securities. This purchase is subject to the delivery of the vessel. Since we
entered into this agreement, the world has suffered from a significant
credit crisis and global recession. However, it is unclear the
extent to which the market value of this Capesize vessel has been affected
because of its associated long-term charter in place as of the date of the
agreement, which is insured against non-payment by our credit default
insurance. If we are unable
to finance this acquisition, we will seek to renegotiate
the agreement with Navios Holdings, our sponsor, based on commercially
reasonable terms.
With
the consent of our banks, we may borrow up to $60.0 million under our
credit facility to fund a portion of the purchase price of the Navios TBN
I and, to the extent that we do not use it for such purposes, the
availability of such $60.0 million under the credit facility will be
terminated. We have anticipated funding the balance of the purchase price
with the proceeds of equity sales, which could include the proceeds of the
offering contemplated by this prospectus, but given current market
conditions there can be no assurance that we will be able to sell
sufficient equity at favorable prices or at
all.
|
Fleet
Employment Profile
The
following table reflects certain key indicators indicative of the performance of
Navios Partners and its core fleet performance for the three month periods ended
March 31, 2009 and 2008.
| |
|
Three
Month Period ended March 31, 2008
|
|
|
Three
Month Period ended March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
Available
Days (1)
|
|
|
635.0 |
|
|
|
810.0 |
|
|
Operating
Days (2)
|
|
|
635.0 |
|
|
|
809.6 |
|
|
Fleet
Utilization (3)
|
|
|
100.0 |
% |
|
|
99.95 |
% |
|
Time
Charter Equivalent (per day)
|
|
$ |
22,565 |
|
|
$ |
26,120 |
|
|
(1)
|
Available
days for the fleet represent total calendar days the vessels were in our
possession for the relevant period after subtracting off-hire days
associated with major repairs, drydockings 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 our 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.
|
Cash
Distribution Policy
Rationale
for Our Cash Distribution Policy
Our cash
distribution policy reflects a basic judgment that our unitholders are better
served by distributing our cash available (after deducting expenses, including
estimated maintenance and replacement capital expenditures and reserves) rather
than retaining it. Because we believe we will generally finance any expansion
capital expenditures from external financing sources, we believe that our
investors are best served by our distributing all of our available cash. Our
cash distribution policy is consistent with the terms of our partnership
agreement, which requires that we distribute all of our available cash quarterly
(after deducting expenses, including estimated maintenance and replacement
capital expenditures and reserves).
Limitations
on Cash Distributions and Our Ability to Change Our Cash Distribution
Policy
There is
no guarantee that unitholders will receive quarterly distributions from us. Our
distribution policy is subject to certain restrictions and may be changed at any
time.
Our
ability to make distributions to our unitholders depends on the performance of
our subsidiaries and their ability to distribute funds to us. The ability of our
subsidiaries to make distributions to us may be restricted by, among other
things, the provisions of existing and future indebtedness, applicable
partnership and limited liability company laws and other laws and
regulations.
Minimum
Quarterly Distribution
We intend
to distribute to the holders of common units and subordinated units on a
quarterly basis at least the minimum quarterly distribution of $0.35 per unit,
or $1.40 per unit per year, to the extent we have sufficient cash on hand to pay
the distribution after we establish cash reserves and pay fees and expenses. The
amount of available cash from operating surplus needed to pay the minimum
quarterly distribution for four quarters on all units outstanding and the
related distribution on the 2.0% general partner interest is approximately $34.8
million. There is no guarantee that we will pay the minimum quarterly
distribution on the common units and subordinated units in any quarter. Even if
our cash distribution policy is not modified or revoked, the amount of
distributions paid under our policy and the decision to make any distribution is
determined by our board of directors, taking into consideration the terms of our
partnership agreement. We are prohibited from making any distributions to
unitholders if it would cause an event of default, or an event of default is
existing, under our existing revolving credit agreement.
On
January 21, 2009, the Board of Directors of Navios Partners authorized its
quarterly cash distribution for the three month period ended December 31, 2008
of $0.40 per unit. The distribution was paid on February 12, 2009 to all holders
of record of common units as of February 9, 2009, and with respect to
subordinated and general partner units (excluding 3,131,415 common units issued
to Navios Holdings in connection with the sale of the vessel Navios Hope (ex
Navios Aurora I).
During
the three month period ended March 31, 2009, the aggregate amount of cash
distribution paid was $8.7 million.
On April
24, 2009 the Board of Directors of Navios Partners authorized its quarterly cash
distribution for the three month period ended March 31, 2009 of $0.40 per unit.
The distribution is payable on May 6, 2009 to all holders of record of common,
subordinated and general partner units on May 1, 2009. The aggregate amount of
the declared distribution is $8.7 million.
Subordination
period
During
the subordination period the common units have the right to receive
distributions of available cash from operating surplus in an amount equal to the
minimum quarterly distribution of $0.35 per unit, plus any arrearages in the
payment of the minimum quarterly distribution on the common units from prior
quarters, before any distributions of available cash from operating surplus may
be made on the subordinated units. Distribution arrearages do not accrue on the
subordinated units. The purpose of the subordinated units is to increase the
likelihood that during the subordination period there will be available cash to
be distributed on the common units.
Incentive
Distribution Rights
Incentive
distribution rights represent the right to receive an increasing percentage of
quarterly distributions of available cash from operating surplus after the
minimum quarterly distribution and the target distribution levels have been
achieved. Our general partner currently holds the incentive distribution rights,
but may transfer these rights separately from its general partner interest,
subject to restrictions in the partnership agreement. Except for transfers of
incentive distribution rights to an affiliate or another entity as part of our
general partner’s merger or consolidation with or into, or sale of substantially
all of its assets to such entity, the approval of a majority of our common units
(excluding common units held by our general partner and its affiliates), voting
separately as a class, generally is required for a transfer of the incentive
distribution rights to a third party prior to December 31, 2017.
The
following table illustrates the percentage allocations of the additional
available cash from operating surplus among the unitholders and our general
partner up to the various target distribution levels. The amounts set forth
under ‘‘Marginal Percentage Interest in Distributions’’ are the percentage
interests of the unitholders and our general partner in any available cash from
operating surplus we distribute up to and including the corresponding amount in
the column ‘‘Total Quarterly Distribution Target Amount,’’ until available cash
from operating surplus we distribute reaches the next target distribution level,
if any. The percentage interests shown for the unitholders and our general
partner for the minimum quarterly distribution are also applicable to quarterly
distribution amounts that are less than the minimum quarterly distribution. The
percentage interests shown for our general partner assume that our general
partner maintains its 2.0% general partner interest and assume our general
partner has not transferred the incentive distribution rights.
|
|
|
|
|
|
Marginal
Percentage Interest in Distributions
|
|
|
|
|
Total
Quarterly Distribution
Target
Amount
|
|
|
Common
and Subordinated Unitholders
|
|
|
General
Partner
|
|
|
Minimum
Quarterly Distribution
|
|
$
0.35
|
|
|
|
98 |
% |
|
|
2 |
% |
|
First
Target Distribution
|
|
up
to $0.4025
|
|
|
|
98 |
% |
|
|
2 |
% |
|
Second
Target Distribution
|
|
above
$0.4025 up to $0.4375
|
|
|
|
85 |
% |
|
|
15 |
% |
|
Third
Target Distribution
|
|
above
$0.4375 up to $0.525
|
|
|
|
75 |
% |
|
|
25 |
% |
|
Thereafter
|
|
above
$0.525
|
|
|
|
50 |
% |
|
|
50 |
% |
Related
Party Transactions
Management fees: Pursuant to
the management agreement dated November 16, 2007, the Manager, a wholly owned
subsidiary of Navios Holdings, provides commercial and technical management
services to Navios Partners’ vessels for a daily fee of $4,000 per owned Panamax
vessel and $5,000 per owned Capesize vessel. This daily fee covers
all of the vessels’ operating expenses, including the cost of drydock and
special surveys. The daily rates are fixed for a period of two years until
November 16, 2009, whereas the initial term of the agreement is until November
16, 2012. Total management fees for the three month period ended March 31, 2009
amounted to $2.6 million ($1.8 million for the three month period ended March
31, 2008).
General and administrative
expenses: Pursuant
to the administrative services agreement dated November 16, 2007, the Manager
also provides administrative services to Navios Partners which include:
bookkeeping, audit and accounting services, legal and insurance services,
administrative and clerical services, banking and financial services, advisory
services, client and investor relations and other. The Manager is reimbursed for
reasonable costs and expenses incurred in connection with the provision of these
services.
Total
general and administrative expenses for the three month period ended March 31,
2009 amounted to $0.9 million ($0.5 million for the three month period ended
March 31, 2008).
Balance due to related
parties: Included in the current liabilities, as of March 31, 2009 is an
amount of $4.6 million, which represents the current account payable to Navios
Holdings and its subsidiaries. The balance mainly consists of the management
fees amounting to $3.5 million, of which $0.9 million relate to management fees
from December 2008, administrative service expenses amounting to $0.9 million of
which $0.5 million are related to administrative service expenses for the three
month period ended December 31, 2008, and other expenses owed to affiliated
companies amounting to $0.2 million. Total management fees and
administrative fees charged to Navios Partners amounted to $2.6 million and $0.3
million, respectively, for the three month period ended March 31, 2009, and $1.8
million and $0.2 million, respectively, for the three month period ended March
31, 2008.
Vessel
Acquisition: On July 1, 2008, Navios Partners acquired from
Navios Holdings, the vessel Navios Hope (formerly known as Navios Aurora I) for
a purchase price of $79.9 million, consisting of $35.0 million cash and the
issuance of 3,131,415 common units to Navios Holdings. The per unit price at the
day of the delivery was $14.35 (see note 5 of the Condensed Notes to the
Consolidated Financial Statements).
Quantitative
and Qualitative Disclosures about Market Risks
Foreign
Exchange Risk
Our
functional and reporting currency is the U.S. Dollar. We engage in worldwide
commerce with a variety of entities. Although our operations may expose us to
certain levels of foreign currency risk, our transactions are predominantly U.S.
dollar denominated. Transactions in currencies other than U.S. Dollars are
translated at the exchange rate in effect at the date of each transaction.
Differences in exchange rates during the period between the date a transaction
denominated in a foreign currency is consummated and the date on which it is
either settled or translated, are recognized.
Interest
Rate Risk
Borrowings
under our new credit facility bear interest at rate based on a premium over US$
LIBOR. Therefore, we are exposed to the risk that our interest expense may
increase if interest rates rise. For the three month period ended March 31,
2009, we paid interest on our outstanding debt at a weighted average interest
rate of 4.3%. A 1% increase in LIBOR would have increased our interest expense
for the three month period ended March 31, 2009 by $0.5 million.
Concentration
of Credit Risk
Financial
instruments, which potentially subject us to significant concentrations of
credit risk, consist principally of trade accounts receivable. We closely
monitor our exposure to customers for credit risk. We have policies in place to
ensure that we trade with customers with an appropriate credit history. For the
three month period ended March 31, 2009, Mitsui O.S.K. Lines Ltd, Cargill
International S.A., Sanko Steamship Co., and Daiichi Chuo Kisen Kaisha accounted
for approximately 34.72%, 21.74%, 14.04% and 10.34% respectively, of total
revenues. As our counterparties obligations to us are unsecured, we maintain
counterparty insurance which we re-assess on a quarterly basis to help reduce
our credit risk.
It is our
policy not to trade any other financial instruments that would potentially
expose us to significant concentrations of credit risk.
Inflation
Inflation
has had a minimal impact on vessel operating expenses, drydocking expenses and
general and administrative expenses. Our management does not consider inflation
to be a significant risk to direct expenses in the current and foreseeable
economic environment.
Recent
Accounting Pronouncements
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“FAS 141R”), which replaces FASB Statement No. 141. FAS 141R
establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed any non controlling interest in the acquiree and the
goodwill acquired. The Statement also establishes disclosure requirements which
will enable users to evaluate the nature and financial effects of the business
combination. FAS 141R will be effective for Navios Partners for the fiscal year
beginning on January 1, 2009. The adoption of FAS 141R did not have a material
impact on Navios Partners’ consolidated financial statements.
In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statement—amendments of ARB No. 51 (“SFAS 160”). SFAS 160
states that accounting and reporting for minority interests will be
recharacterized as noncontrolling interests and classified as a component of
equity. The Statement also establishes reporting requirements that provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. SFAS 160
applies to all entities that prepare consolidated financial statements, except
not-for-profit organizations, but will affect only those entities that have an
outstanding noncontrolling interest in one or more subsidiaries or that
deconsolidate a subsidiary. This statement was effective as of January 1, 2009.
The adoption of SFAS 160 did not have a material impact on Navios
Partners’ consolidated financial statements.
In
February 2008, the FASB issued the FASB Staff Position (“FSP 157-2”) which
delays the effective date of SFAS 157, for nonfinancial assets and nonfinancial
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). For purposes
of applying this FSP, nonfinancial assets and nonfinancial liabilities would
include all assets and liabilities other that those meeting the definition of a
financial asset or financial liability as defined in paragraph 6 of FASB
Statement No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities” This FSP defers the effective date of SFAS 157 to fiscal years
beginning after November 15, 2008, and the interim periods within those fiscal
years for items within the scope of this FSP. The application of SFAS 157 in
future periods to those items covered by FSP 157-2 would not have a material
effect on the consolidated financial statements of Navios Partners.
In March
2008, the FASB issued its final consensus on “Issue 07-4 —Application of the
Two-Class Method under FASB Statement No. 128, Earnings per Share, to Master
Limited Partnerships”. This issue may impact a publicly traded master limited
partnership (MLP) that distributes “available” cash to the limited partners
(LPs), the general partner (GP), and the holders of incentive distribution
rights (IDRs). This issue addresses earnings-per-unit (EPU) computations for all
MLPs with IDR interests. MLPs will need to determine the amount of “available
cash” at the end of a reporting period when calculating the period’s EPU. This
guidance in Issue 07-4 was effective for Navios Partners for the fiscal year
beginning as of January 1, 2009. The adoption of Issue 07-4 under FASB Statement
No. 128 did not have a material impact on the consolidated financial statements
of Navios Partners.
In
April 2008, FASB issued FASB Staff Position FSP 142-3 “Determination of the
useful life of intangible assets”. This FASB Staff Position (FSP) amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB
Statement No. 142, “Goodwill and Other Intangible Assets”. The intent of this
FSP is to improve the consistency between the useful life of a recognized
intangible asset under Statement 142 and the period of expected cash flows used
to measure the fair value of the asset under FASB Statement No. 141 (revised
2007), “Business Combinations”, and other U.S. GAAP. This FSP will be effective
for Navios Partners for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. Early adoption is prohibited. The
adoption of FSP 142-3 is not expected to have a material effect on the
consolidated financial statements of the Navios Partners.
In May
2008, the FASB issued FASB Statement No. 162, “The Hierarchy of Generally
Accepted Accounting Principles”. The new standard is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with US GAAP for nongovernmental entities.
Statement No. 162 is effective 60 days following the SEC’s approval of the
Public Company Accounting Oversight Board Auditing amendments to AU Section 411,
The Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles. The adoption of SFAS No. 162 is not expected to have a material
effect on the consolidated financial statements of Navios Partners.
In
October 2008, the FASB issued the FASB Staff Position (“FSP No. 157-3”) which
clarifies the application of FASB Statement No. 157, “Fair Value Measurements”
in a market that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the
market for that asset is not active. This FSP applies to financial assets within
the scope of accounting pronouncements that require or permit fair value
measurements in accordance with Statement 157. The FSP shall be effective upon
issuance, including prior periods for which financial statements have not been
issued. Revisions resulting from a change in the valuation technique or its
application shall be accounted for as a change in accounting estimate (FASB
Statement No. 154 “Accounting changes and Error Corrections”, paragraph 19). The
disclosure provisions of Statement No. 154 for a change in accounting estimate
are not required for revisions resulting from a change in valuation technique or
its application. The application of FSP 157-3 did not have a material effect on
the consolidated financial statements of Navios Partners.
In
January 2009, the FASB issued the FASB Staff Position “Amendments to the
Impairment Guidance to EITF Issue No. 99-20” (“FSP EITF 99-20-1”) which amends
the impairment guidance in EITF Issue No.99-20, “Recognition of Interest Income
and Impairment on Purchased Beneficial Interests and Beneficial Interests That
Continue to Be Held by a Transferor in Securitized Financial Assets,” to achieve
more consistent determination of whether an other-than-temporary impairment has
occurred. FSP EITF 99-20-1 also retains and emphasizes the objective of an
other-than-temporary impairment assessment and the related disclosure
requirements in FASB Statement No. 115, “Accounting for Certain Investments
in Debt and Equity Securities”, and other related guidance. FSP EITF
99-20-1 is effective for interim and annual reporting periods ending after
December 15, 2008, and shall be applied prospectively. Retrospective application
to a prior interim or annual reporting period is not permitted. The adoption of
FSP EITF 99-20-1 is not expected to have a material effect on the consolidated
financial statements of Navios Partners.
In
April 2009, the FASB issued the FASB Staff Position (“FAS 107-1 and APB 28-1”),
which amends FASB Statement No.107, Disclosures about Fair Value of Financial
Instruments, to require disclosures about fair value of financial instruments
for interim reporting periods of publicly traded companies, as well as in annual
financial statements. This FSP also amends APB Opinion No.28, Interim Financial
Reporting, to require those disclosures in summarized financial information at
interim reporting periods. An entity may early adopt this FSP only if it also
elects to early adopt FSP FAS 157-4, Determining Fair Value when the volume and
level of activity for the asset or liability have significantly decreased and
identifying transactions that are not orderly, and FSP FAS 115-2 and FAS 124-2,
Recognition and Presentation of other-than-temporary impairments. This FSP does
not require disclosures for earlier periods presented for comparative purposes
at initial adoption. In periods after initial adoption, this FSP requires
comparative disclosures only for periods ending after initial adoption. This FSP
will be effective for interim reporting periods after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. The adoption of FSP
FAS 107-1 and APB 28-1 is not expected to have a material effect on the
consolidated statements of Navios Partners.
Critical
Accounting Policies
Our
financial statements have been prepared in accordance with US GAAP. The
preparation of these financial statements requires us to make estimates in the
application of our accounting policies based on the best assumptions, judgments
and opinions of management. Following is a discussion of the accounting policies
that involve a higher degree of judgment and the methods of their application
that affect the reported amount of assets and liabilities, revenues and expenses
and related disclosure of contingent assets and liabilities at the date of our
financial statements. Actual results may differ from these estimates under
different assumptions or conditions.
Critical
accounting policies are those that reflect significant judgments or
uncertainties, and potentially result in materially different results under
different assumptions and conditions. For a description of all of our
significant accounting policies, see Note 2 to the Notes to the consolidated
financial statements included in Navios Partners’ 2008 annual report filed on
Form 20-F with the Securities and Exchange Commission.
Impairment
of Long Lived Assets
Vessels,
other fixed assets and other long lived assets held and used by Navios Partners
are reviewed periodically for potential impairment whenever events or changes in
circumstances indicate that the carrying amount of a particular asset may not be
fully recoverable. In accordance with FAS 144, Navios Partners’ management
evaluates the carrying amounts and periods over which long-lived assets are
depreciated to determine if events or changes in circumstances have occurred
that would require modification to their carrying values or useful lives. In
evaluating useful lives and carrying values of long-lived assets, certain
indicators of potential impairment, are reviewed such as undiscounted projected
operating cash flows, vessel sales and purchases, business plans and overall
market conditions. Undiscounted projected net operating cash flows are
determined for each vessel and compared to the vessel carrying value. In the
event that impairment occurred, the fair value of the related asset is
determined and a charge is recorded to operations calculated by comparing the
asset’s carrying value to the estimated fair market value. Fair market value is
estimated primarily through the use of third-party valuations performed on an
individual vessel basis.
Vessels
Vessels
are stated at historical cost, which consists of the contract price and any
material expenses incurred upon acquisition (improvements and delivery
expenses). Subsequent expenditures for major improvements and upgrading are
capitalized, provided they appreciably extend the life, increase the earning
capacity or improve the efficiency or safety of the vessels. Expenditures for
routine maintenance and repairs are expensed as incurred.
Depreciation
is computed using the straight line method over the useful life of the vessels,
after considering the estimated residual value. Management estimates the useful
life of our vessels to be 25 years from the vessel’s original construction.
However, when regulations place limitations over the ability of a vessel to
trade on a worldwide basis, its useful life is re-estimated to end at the date
such regulations become effective.
Deferred
Drydock and Special Survey Costs
Our
vessels are subject to regularly scheduled drydocking and special surveys which
are carried out every 30 or 60 months to coincide with the renewal of the
related certificates issued by the classification societies, unless a further
extension is obtained in rare cases and under certain conditions. The costs of
drydocking and special surveys are deferred and amortized over the above periods
or to the next drydocking or special survey date if such has been determined.
Unamortized drydocking or special survey costs of vessels sold are written off
to income in the year the vessel is sold.
Revenue
Recognition
Revenue
is recorded when services are rendered, we have a signed charter agreement or
other evidence of an arrangement, the price is fixed or determinable, and
collection is reasonably assured. We generate revenue from transportation of
cargoes and time charter of vessels.
Voyage
revenues for the transportation of cargo are recognized ratably over the
estimated relative transit time of each voyage. A voyage is deemed to commence
when a vessel is available for loading and is deemed to end upon the completion
of the discharge of the current cargo. Estimated losses on voyages are provided
for in full at the time such losses become evident. Under a voyage charter, we
agree to provide a vessel for the transportation of specific goods between
specific ports in return for payment of an agreed upon freight rate per ton of
cargo.
Revenues
from time chartering of vessels are accounted for as operating leases and are
thus recognized on a straight-line basis, as the average revenue over the rental
periods of such charter agreements, as service is performed, except for loss
generating time charters, in which case the loss is recognized in the period
when such loss is determined. A time charter involves placing a vessel at the
charterer’s disposal for a period of time during which the charterer uses the
vessel in return for the payment of a specified daily hire rate. Short period
charters for less than three months are referred to as spot charters. Charters
extending three months to a year are generally referred to as medium term
charters. All other charters are considered long-term. Under time charters,
operating cost such as for crews, maintenance and insurance are typically paid
by the owner of the vessel.
The
following risk factors reflect an update of several risk factors since our most
recent Annual Report on Form 20-F. You should carefully consider
these updated risk factors together with the risk factors contained in our
Annual Report and all of the other information included therein when evaluating
an investment in our common units.
The cyclical and volatile nature of
the international dry bulk shipping industry has led to decreases in long-term
charter rates and lower vessel values, which could result in decreased
distributions to our common unitholders.
The
shipping business, including the dry cargo market, is cyclical in varying
degrees, experiencing severe fluctuations in charter rates, profitability and,
consequently, vessel values. For example, during the period from October 30,
2007 to December 31, 2008, the Baltic Exchange’s Panamax time charter average
daily rates experienced a low of $3,537 and a high of $94,977. Additionally
during the period from January 1, 2008 to December 31, 2008, the Baltic
Exchange’s Capesize time charter average daily rates experienced a low of $2,316
and a high of $233,988. We anticipate that the future demand for our dry bulk
carriers and dry bulk charter rates will be dependent upon demand for imported
commodities, economic growth in the emerging markets, including the Asia Pacific
region, India and the rest of the world, seasonal and regional changes in demand
and changes to the capacity of the world fleet. Recent adverse economic,
political, social or other developments have decreased demand and prospects for
growth in the shipping industry and thereby could reduce revenue significantly.
A decline in demand for commodities transported in dry bulk carriers or an
increase in supply of dry bulk vessels could cause a further decline in charter
rates, which could materially adversely affect our results of operations and
financial condition.
The
demand for vessels, in general, has been influenced by, among other
factors:
|
|
•
|
|
global
and regional economic conditions;
|
|
|
|
|
|
|
|
•
|
|
developments
in international trade;
|
|
|
|
|
|
|
|
•
|
|
changes
in seaborne and other transportation patterns, such as port congestion and
canal closures;
|
|
|
|
|
|
|
|
•
|
|
weather
and crop yields;
|
|
|
|
|
|
|
|
•
|
|
armed
conflicts and terrorist activities;
|
|
|
|
|
|
|
|
•
|
|
political
developments; and
|
|
|
|
|
|
|
|
•
|
|
embargoes
and strikes.
|
|
|
•
|
the
number of vessels that are in or out of service;
|
|
|
|
|
|
|
•
|
the
scrapping rate of older vessels;
|
|
|
|
|
|
|
•
|
port
and canal traffic and congestion;
|
|
|
|
|
|
|
•
|
the
number of newbuilding deliveries; and
|
|
|
|
|
|
|
•
|
vessel
casualties.
|
In
connection with the IPO, in November 2007, we agreed to purchase from Navios
Holdings the Navios TBN I, a Capesize vessel which is currently under
construction, for $130.0 million in cash. This purchase is subject to the
delivery of the vessel to Navios Holdings, which is anticipated to occur in late
June 2009. Since we entered into this agreement, the world has
suffered from a significant credit crisis and global
recession. However, it is unclear the extent to which the market
value of this Capesize vessel has been affected because of its associated
long-term charter in place as of the date of the agreement, which is insured
against non-payment by our credit default insurance. If we are unable
to finance this acquisition on commercially reasonable terms, we will seek to
renegotiate the agreement with navios Holdings, which owns 51.6% of our
interests, on commercially reasonable terms. If we are unable to
reach a mutually acceptable commercially reasonable solution, we risk breaching
the purchase agreement.
Even if the market value of the
Capesize declines by the time the newbuilding is actually delivered to the
vessel-owning subsidiary, we will still be required to purchase the interests in
that subsidiary at the price specified in the share purchase agreement. As a
result, we may pay substantially more for that vessel than we would pay if we
were to purchase that vessel from an unaffiliated third party. If we
are unable to finance this acquisition, we will seek to renegotiate the
agreement with Navios Holdings, our sponsor, based on commercially reasonable
terms.
If
we sell a vessel at a time when the market value of our vessels has fallen, the
sale may be at less than the vessel’s carrying amount, resulting in a loss. A
further decline in the market value of our vessels may be a default under our
existing credit facility of $295.0 million, or any other prospective credit
facility to which we become a party and may affect our ability to refinance our
existing credit facility and/or limit our ability to obtain additional
financing.
The global economic slowdown
generally, and specifically in the Asia Pacific, region has markedly reduced
demand for shipping services and has decreased shipping rates and may prevent us
from renewing our time charters, which could adversely affect our results of
operations and financial condition.
Currently,
China, Japan, other Pacific Asian economies and India are the main driving force
behind the development in seaborne dry bulk trades and the demand for dry bulk
carriers. Reduced demand from such economies has driven decreased rates and
vessel values. A further negative change in economic conditions in any Asian
Pacific country, but particularly in China or Japan, as well as India, may have
a material adverse effect on our business, financial condition and results of
operations, as well as our future prospects, by reducing demand and the
resultant charter rates. In particular, in recent years, China has been one of
the world’s fastest growing economies in terms of gross domestic product.
Furthermore, the economic slowdown in the United States, the European Union, and
other countries may deepen the economic slowdown in China, among others. While
the recent introduction of a $586 billion economic stimulus package by the
Chinese government is designed, in part, to increase consumer spending and
reignite the steep growth China experienced before the recent downturn, it
remains to be seen whether such a course of action by China will have the
desired effect. Our financial condition and results of operations, as well as
our future prospects, would likely be adversely affected by an economic downturn
in any of these countries as such downturn would likely translate into reduced
demand for shipping services and lower shipping rates industry-wide. As a
result, our operating results would be further materially affected.
In
addition, when our time charters expire, we cannot assure you that we will be
able to successfully replace them promptly or at all or at rates sufficient to
allow us to operate our business profitably, to meet our obligations, including
payment of debt service to our lenders, or to pay dividends. Our ability to
renew the charters on our vessels on the expiration or termination of our
current charters, or on vessels that we may acquire in the future and the
charter rates payable under any replacement charters, will depend upon, among
other things, economic conditions in the sectors in which our vessels operate at
that time and the financial sector, changes in the supply and demand for vessel
capacity and changes in the supply and demand for the transportation of
commodities as described above.
Disruptions in world financial
markets and the resulting governmental action in the United States and in other
parts of the world could have a material adverse impact on our ability to obtain
financing required to expand our business through the acquisition of vessels or
new businesses. Furthermore, such a disruption would materially adversely affect
our results of operations, financial condition and cash flows, causing the
market price of our common units to decline.
The
United States and other parts of the world are exhibiting deteriorating economic
trends and are currently in a recession. For example, the credit markets
worldwide and in the United States have experienced significant contraction,
de-leveraging and reduced liquidity, and the U.S. federal government, state
governments and foreign governments have implemented and are considering a broad
variety of governmental action and/or new regulation of the financial markets.
Securities and futures markets and the credit markets are subject to
comprehensive statutes, regulations and other requirements. The Securities and
Exchange Commission, other regulators, self-regulatory organizations and
exchanges are authorized to take extraordinary actions in the event of market
emergencies, and may effect changes in law or interpretations of existing
laws.
Recently,
a number of financial institutions have experienced serious financial
difficulties and, in some cases, have entered bankruptcy proceedings or are in
regulatory enforcement actions. The uncertainty surrounding the future of the
credit markets in the U.S. and the rest of the world has resulted in reduced
access to credit worldwide. Due to the fact that we intend to cover all or a
portion of the cost of vessel acquisitions with debt financing, such
uncertainty, combined with restrictions imposed by our current debt, may hamper
our ability to finance vessel or new business acquisitions.
We face
risks attendant to changes in economic environments, changes in interest rates,
and instability in certain securities markets, among other factors. Major market
disruptions and the current adverse changes in market conditions and regulatory
climate in the United States and worldwide may adversely affect our business or
impair our ability to borrow amounts under our existing credit facility or any
future financial arrangements. The current market conditions may last longer
than we anticipate. These recent and developing economic and governmental
factors may have a material adverse effect on our results of operations,
financial condition or cash flows and could cause the price of our common units
to decline significantly.
We are subject to various laws,
regulations and conventions, including environmental laws that could require
significant expenditures both to maintain compliance with such laws and to pay
for any uninsured environmental liabilities resulting from a spill or other
environmental disaster.
The
shipping business and vessel operation are materially affected by government
regulation in the form of international conventions, national, state and local
laws, and regulations in force in the jurisdictions in which vessels operate, as
well as in the country or countries of their registration. Because such
conventions, laws and regulations are often revised, we cannot predict the
ultimate cost of complying with such conventions, laws and regulations, or the
impact thereof on the fair market price or useful life of our vessels. Changes
in governmental regulations, safety or other equipment standards, as well as
compliance with standards imposed by maritime self-regulatory organizations and
customer requirements or competition, may require us to make capital and other
expenditures. In order to satisfy any such requirements, we may be required to
take any of our vessels out of service for extended periods of time, with
corresponding losses of revenues. In the future, market conditions may not
justify these expenditures or enable us to operate our vessels, particularly
older vessels, profitably during the remainder of their economic lives. This
could lead to significant asset write-downs. Additional conventions, laws and
regulations may be adopted that could limit our ability to do business, require
capital expenditures or otherwise increase our cost of doing business, which may
materially adversely affect our operations, as well as the shipping industry
generally. In various jurisdictions, legislation has been enacted or is under
consideration that would impose more stringent requirements on air pollution and
other ship emissions, including emissions of greenhouse gases and ballast water
discharged from vessels. We are required by various governmental and
quasi-governmental agencies to obtain certain permits, licenses and certificates
with respect to our operations.
The
operation of vessels is also affected by the requirements set forth in the ISM
Code. The ISM Code requires ship owners and bareboat charterers to develop and
maintain an extensive safety management system that includes the adoption of a
safety and environmental protection policy setting forth instructions and
procedures for safe vessel operation and describing procedures for dealing with
emergencies. Non-compliance with the ISM Code may subject such party to
increased liability, may decrease available insurance coverage for the affected
vessels, and may result in a denial of access to, or detention in, certain
ports. For example, the United States Coast Guard and European Union authorities
have indicated that vessels not in compliance with the ISM Code will be
prohibited from trading in ports in the United States and European Union.
Currently, each of the vessels in our owned fleet is ISM Code-certified.
However, there can be no assurance that such certification will be maintained
indefinitely.
For all
vessels, including those operated under our fleet, international liability for
oil pollution is currently governed by the International Convention on Civil
Liability for Bunker Oil Pollution Damage, or the “Bunker Convention”, adopted
by the International Maritime Organization (“IMO”) in 2001. The Bunker
Convention imposes strict liability on ship owners for pollution damage in
jurisdictional waters of ratifying states caused by discharges of “bunker oil.”
The Bunker Convention defines “bunker oil” as “any hydrocarbon mineral oil,
including lubricating oil, used or intended to be used for the operation or
propulsion of the ship, and any residues of such oil.” The Bunker Convention
requires registered owners of ships over a certain size to maintain insurance
for pollution damage in an amount equal to the limits of liability under the
applicable national or international limitation regime (but not exceeding the
amount calculated in accordance with the Convention on Limitation of Liability
for Maritime Claims of 1976, as amended). The Bunker Convention became effective
on November 21, 2008, and by early 2009 it was in effect in 22 states. In other
jurisdictions, liability for spills or releases of oil from ships’ bunkers
continues to be determined by the national or other domestic laws in the
jurisdiction where the events or damages occur.
Environmental
legislation in the United States merits particular mention as it is in many
respects more onerous than international laws, representing a high-water mark of
regulation with which ship owners and operators must comply, and of liability
likely to be incurred in the event of non-compliance or an incident causing
pollution. Additionally, pursuant to the federal laws, each state may enact more
stringent regulations, thus subjecting ship owners to dual liability. Notably,
California has adopted regulations that parallel most, if not all of the federal
regulations explained below. We intend to comply with all applicable state
regulations in the ports where our vessels call.
U.S.
federal legislation, including notably the Oil Pollution Act of 1990, or “OPA
90”, establishes an extensive regulatory and liability regime for the protection
and cleanup of the environment from oil spills, including bunker oil spills from
dry bulk vessels as well as cargo or bunker oil spills from tankers. OPA 90
affects all owners and operators whose vessels trade in the United States, its
territories and possessions, or whose vessels operate in United States waters,
which includes the United States’ territorial sea and its 200 nautical mile
exclusive economic zone. Under OPA 90, vessel owners, operators and bareboat
charterers are “responsible parties” and are jointly, severally and strictly
liable (unless the spill results solely from the act or omission of a third
party, an act of God or an act of war) for all containment and clean-up costs
and other damages arising from discharges, or substantial threats of discharges,
of oil from their vessels. In addition to potential liability under OPA 90,
vessel owners may in some instances incur liability on an even more stringent
basis under state law in the particular state where the spillage occurred. For
example, California regulates oil spills pursuant to California Government Code
section 8670 et seq. These regulations prohibit the discharge of oil, require an
oil contingency plan be filed with the state, require that the ship owner
contract with an oil response organization and require a valid certificate of
financial responsibility, all prior to the vessel entering state
waters.
Outside
of the United States, other national laws generally provide for the owner to
bear strict liability for pollution, subject to a right to limit liability under
applicable national or international regimes for limitation of liability. The
most widely applicable international regime limiting maritime pollution
liability is the 1976 Convention referred to above. Rights to limit liability
under the 1976 Convention are forfeited where a spill is caused by a
ship-owner’s intentional or reckless conduct. Certain states have ratified the
IMO’s 1996 Protocol to the 1976 Convention. The Protocol provides for
substantially higher the liability limits to apply in those jurisdictions than
the limits set forth in the 1976 Convention. Finally, some jurisdictions are not
a party to either the 1976 Convention or the Protocol of 1996, and, therefore, a
ship owner’s rights to limit liability for maritime pollution in such
jurisdictions may be uncertain.
In some
areas of regulation, the European Union has introduced new laws without
attempting to procure a corresponding amendment of international law. A
directive on ship-source pollution was adopted in 2005, imposing criminal
sanctions for pollution not only caused by intent or recklessness (which would
be an offense under MARPOL), but also caused by “serious negligence”. The
directive could therefore result in criminal liability being incurred in
circumstances where it would not be otherwise incurred under international law.
Experience has shown that in the emotive atmosphere often associated with
pollution incidents, the negligence alleged by prosecutors has often been found
by courts on grounds which the international maritime community has found hard
to understand. Moreover, there is skepticism that “serious negligence” is likely
to prove any narrower in practice than ordinary negligence. Criminal liability
for a pollution incident could not only result in us incurring substantial
penalties or fines, but may also, in some jurisdictions, facilitate civil
liability claims for greater compensation than would otherwise have been
payable.
We
currently maintain, for each of our owned vessels, insurance coverage against
pollution liability risks in the amount of $1.0 billion per incident. The
insured risks include penalties and fines as well as civil liabilities and
expenses resulting from accidental pollution. However, this insurance coverage
is subject to exclusions, deductibles and other terms and conditions. If any
liabilities or expenses fall within an exclusion from coverage, or if damages
from a catastrophic incident exceed the $1.0 billion limitation of coverage per
incident, our cash flow, profitability and financial position could be adversely
impacted.
Acts of piracy on ocean-going vessels
have increased recently in frequency and magnitude, which could adversely affect
our business.
The
shipping industry has historically been affected by acts of piracy in regions
such as the South China Sea and the Gulf of Aden. In 2008, acts of piracy saw a
steep rise, particularly off the coast of Somalia in the Gulf of Aden. One of
the most significant examples of the increase in piracy came in November 2008
when the M/V Sirius Star, a crude oil tanker which was not affiliated with us,
was captured by pirates in the Indian Ocean while carrying crude oil estimated
to be worth approximately $100 million. If these piracy attacks result in
regions (in which our vessels are deployed) being characterized by insurers as
“war risk” zones or “war and strikes” listed areas, premiums payable for such
insurance coverage could increase significantly and such insurance coverage may
be more difficult to obtain. Crew costs, including those due to employing
onboard security guards, could increase in such circumstances. In addition,
while we believe the charterer remains liable for charter payments when a vessel
is seized by pirates, the charterer may dispute this and withhold charter hire
until the vessel is released. A charterer may also claim that a vessel seized by
pirates was not “on-hire” for a certain number of days and it is therefore
entitled to cancel the charter party, a claim that we would dispute. We may not
be adequately insured to cover losses from these incidents, which could have a
material adverse effect on us. In addition, detention hijacking as a result of
an act of piracy against our vessels, or an increase in cost, or unavailability
of insurance for our vessels, could have a material adverse impact on our
business, financial condition, results of operations and cash
flows.
Index
|
|
|
|
Page
|
|
NAVIOS
MARITIME PARTNERS L.P.
|
|
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS AT MARCH 31, 2009 (UNAUDITED) AND DECEMBER 31,
2008 (AUDITED)
|
|
|
23
|
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTH PERIODS
ENDED MARCH 31, 2009 AND 2008
|
|
|
24
|
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTH
PERIODS ENDED MARCH 31, 2009 AND 2008
|
|
|
25
|
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS’ NET INVESTMENT,
PARTNERS’ CAPITAL AND COMPREHENSIVE INCOME/(LOSS) FOR THE THREE MONTH
PERIODS ENDED MARCH 31, 2009 AND 2008
|
|
|
26
|
|
CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
27
|
NAVIOS
MARITIME PARTNERS L.P.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Expressed
in thousands of U.S. Dollars except unit data)
|
|
|
|
|
|
December
31,
|
|
|
March
31,
|
|
|
|
|
Notes
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
4
|
|
|
$ |
28,374 |
|
|
$ |
17,547 |
|
|
Restricted
cash
|
|
|
|
|
|
|
- |
|
|
|
5,820 |
|
|
Accounts
receivable, net
|
|
|
|
|
|
|
313 |
|
|
|
778 |
|
|
Prepaid
expenses and other current assets
|
|
|
|
|
|
|
371 |
|
|
|
111 |
|
|
Total
current assets
|
|
|
|
|
|
|
29,058 |
|
|
|
24,256 |
|
|
Vessels,
net
|
|
|
5
|
|
|
|
291,340 |
|
|
|
287,564 |
|
|
Deferred
financing costs, net
|
|
|
|
|
|
|
1,915 |
|
|
|
2,053 |
|
|
Deferred
dry dock and special survey costs, net
|
|
|
|
|
|
|
594 |
|
|
|
470 |
|
|
Total
non-current assets
|
|
|
|
|
|
|
293,849 |
|
|
|
290,087 |
|
|
Total
assets
|
|
|
|
|
|
$ |
322,907 |
|
|
$ |
314,343 |
|
|
LIABILITIES
AND PARTNERS’ CAPITAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
|
|
|
$ |
594 |
|
|
$ |
877 |
|
|
Accrued
expenses
|
|
|
|
|
|
|
1,662 |
|
|
|
1,273 |
|
|
Deferred
voyage revenue
|
|
|
7
|
|
|
|
2,606 |
|
|
|
8,498 |
|
|
Amounts
due to related parties
|
|
|
12
|
|
|
|
1,539 |
|
|
|
4,579 |
|
|
Current
portion of long-term debt
|
|
|
|
|
|
|
40,000 |
|
|
|
- |
|
|
Total
current liabilities
|
|
|
|
|
|
|
46,401 |
|
|
|
15,227 |
|
|
Long-term
debt
|
|
|
8
|
|
|
|
195,000 |
|
|
|
195,000 |
|
|
Unfavorable
lease terms
|
|
|
6
|
|
|
|
4,659 |
|
|
|
4,160 |
|
|
Deferred
voyage revenue
|
|
|
7
|
|
|
|
- |
|
|
|
22,825 |
|
|
Total
non-current liabilities
|
|
|
|
|
|
|
199,659 |
|
|
|
221,985 |
|
|
Total
liabilities
|
|
|
|
|
|
|
246,060 |
|
|
|
237,212 |
|
|
Commitments
and contingencies
|
|
|
11
|
|
|
|
- |
|
|
|
- |
|
|
Partners’
Capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Unitholders (13,631,415 units issued and outstanding at December 31,
2008 and March 31, 2009)
|
|
|
|
|
|
|
243,639 |
|
|
|
243,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated
Unitholders (7,621,843 units issued and outstanding at December 31,
2008 and March 31, 2009)
|
|
|
|
|
|
|
(160,092
|
) |
|
|
(160,003
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
Partner (433,740 units issued and outstanding at December 31, 2008
and March 31, 2009)
|
|
|
|
|
|
|
(6,700
|
) |
|
|
(6,664
|
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
partners’ capital
|
|
|
|
|
|
|
76,847 |
|
|
|
77,131 |
|
|
Total
liabilities and partners’ capital
|
|
|
|
|
|
$ |
322,907 |
|
|
$ |
314,343 |
|
See
unaudited condensed notes to consolidated financial statements
NAVIOS
MARITIME PARTNERS L.P.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(Expressed
in thousands of U.S. Dollars except unit and per unit amounts)
|
|
|
|
|
|
Three
Month Period Ended March 31, 2008
|
|
|
Three
Month Period Ended March 31, 2009
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Time
charter and voyage revenue
|
|
|
8
|
|
|
$ |
14,320 |
|
|
$ |
21,157 |
|
|
Time
charter and voyage expenses
|
|
|
|
|
|
|
(2,821 |
) |
|
|
(3,008 |
) |
|
Direct
vessel expenses
|
|
|
|
|
|
|
(144 |
) |
|
|
(124 |
) |
|
Management
fees
|
|
|
12
|
|
|
|
(1,820 |
) |
|
|
(2,610 |
) |
|
General
and administrative expenses
|
|
|
12
|
|
|
|
(496 |
) |
|
|
(902 |
) |
|
Depreciation
and amortization
|
|
|
5,6
|
|
|
|
(2,764 |
) |
|
|
(3,277 |
) |
|
Interest
expense and finance cost, net
|
|
|
8
|
|
|
|
(2,473 |
) |
|
|
(2,425 |
) |
|
Interest
income
|
|
|
|
|
|
|
48 |
|
|
|
57 |
|
|
Other
income
|
|
|
|
|
|
|
- |
|
|
|
91 |
|
|
Other
expense
|
|
|
|
|
|
|
(3 |
) |
|
|
- |
|
|
Net
income
|
|
|
|
|
|
$ |
3,847 |
|
|
$ |
8,959 |
|
Earnings
per unit (see note 13):
|
|
|
Three
Month Period Ended March 31, 2008
|
|
|
Three
Month Period Ended March 31, 2009
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
3,847 |
|
|
$ |
8,959 |
|
|
Earnings
per unit (see note 13):
|
|
|
|
|
|
|
|
|
|
Common
unit (basic and diluted)
|
|
$ |
0.35 |
|
|
$ |
0.41 |
|
|
Subordinated
unit (basic and diluted)
|
|
$ |
0.01 |
|
|
$ |
0.41 |
|
|
General
partner unit (basic and diluted)
|
|
$ |
0.21 |
|
|
$ |
0.48 |
|
See
unaudited condensed notes to consolidated financial
statements
NAVIOS
MARITIME PARTNERS L.P.
(Expressed
in thousands of U.S. Dollars)
|
|
|
|
|
|
Three
Month
|
|
|
Three
Month
|
|
|
|
|
|
|
|
period
Ended
|
|
|
period
Ended
|
|
|
|
|
Note
|
|
|
March
31, 2008
|
|
|
March
31, 2009
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
$ |
3,84 |
|
|
$ |
8,959 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
|
|
|
|
provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
6,7
|
|
|
|
2,764 |
|
|
|
3,277 |
|
|
Amortization
and write-off of deferred financing cost
|
|
|
|
|
|
|
49 |
|
|
|
62 |
|
|
Amortization
of deferred dry dock costs
|
|
|
|
|
|
|
144 |
|
|
|
124 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in restricted cash
|
|
|
|
|
|
|
(2,339
|
) |
|
|
(820
|
) |
|
Increase
in accounts receivable
|
|
|
|
|
|
|
(147
|
) |
|
|
(465
|
) |
|
Increase/
(decrease) in prepaid expenses and other current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
assets
|
|
|
|
|
|
|
(7
|
) |
|
|
260 |
|
|
(Decrease)/
increase in accounts payable
|
|
|
|
|
|
|
(323
|
) |
|
|
283 |
|
|
Increase/
(decrease) in accrued expenses
|
|
|
|
|
|
|
2,385 |
|
|
|
(389
|
) |
|
Increase
in deferred voyage revenue
|
|
|
|
|
|
|
545 |
|
|
|
28,717 |
|
|
(Decrease)/increase
in amounts due to related parties
|
|
|
|
|
|
|
(3,414
|
) |
|
|
3,040 |
|
|
Net
cash provided by operating activities
|
|
|
|
|
|
|
3,504 |
|
|
|
43,048 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
distribution paid
|
|
|
13
|
|
|
|
(3,236
|
) |
|
|
(8,675
|
) |
|
Increase
in restricted cash
|
|
|
|
|
|
|
|
|
|
|
(5,000
|
) |
|
Repayment
of long-term debt and payment of principal
|
|
|
|
|
|
|
|
|
|
|
(40,000
|
) |
|
Debt
issuance costs
|
|
|
|
|
|
|
- |
|
|
|
(200
|
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in financing activities
|
|
|
|
|
|
|
(3,236
|
) |
|
|
(53,875
|
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase/
(decrease) in cash and cash equivalents
|
|
|
|
|
|
|
268 |
|
|
|
(10,827
|
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
|
|
|
|
10,095 |
|
|
|
28,374 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
|
|
|
|
$ |
10,363 |
|
|
$ |
17,547 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FLOW
INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
|
|
|
|
$ |
- |
|
|
$ |
2,278 |
|
See
unaudited condensed notes to consolidated financial statements
NAVIOS
MARITIME PARTNERS L.P.
PARTNERS’
CAPITAL AND COMPREHENSIVE
INCOME/(LOSS)
(Expressed
in thousands of U.S. Dollars)
| |
|
|
|
|
Limited
Partners
|
|
|
|
|
|
|
|
|
|
|
| |
|
General
Partner
|
|
|
|
|
|
|
|
|
Total
Partners’ Capital
|
|
|
Total
|
|
|
Comprehensive
Income
|
|
| |
|
Units
|
|
|
|
|
|
Units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2007
|
|
|
369,834 |
|
|
$ |
(7,720 |
) |
|
|
10,500,000 |
|
|
$ |
194,265 |
|
|
|
7,621,843 |
|
|
$ |
(159,759 |
) |
|
$ |
26,786 |
|
|
$ |
26,786 |
|
|
$ |
1,613 |
|
|
Cash
distribution paid
|
|
|
- |
|
|
|
(65 |
) |
|
|
- |
|
|
|
(1,837 |
) |
|
|
- |
|
|
|
(1,334 |
) |
|
|
(3,236 |
) |
|
|
(3,236 |
) |
|
|
- |
|
|
Net
income
|
|
|
- |
|
|
|
77 |
|
|
|
- |
|
|
|
3,675 |
|
|
|
- |
|
|
|
95 |
|
|
|
3,847 |
|
|
|
3,847 |
|
|
|
3,847 |
|
|
Balance
March 31, 2008 (unaudited)
|
|
|
369,834 |
|
|
|
(7,708 |
) |
|
|
10,500,000 |
|
|
$ |
196,103 |
|
|
|
7,621,843 |
|
|
$ |
(160,998 |
) |
|
$ |
27,397 |
|
|
$ |
27,397 |
|
|
$ |
3,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2008
|
|
|
433,740 |
|
|
$ |
(6,700 |
) |
|
|
13,631,415 |
|
|
$ |
243,639 |
|
|
|
7,621,843 |
|
|
$ |
(160,092 |
) |
|
$ |
76,847 |
|
|
$ |
76,847 |
|
|
$ |
28,758 |
|
|
Cash
distribution paid
|
|
|
- |
|
|
|
(173 |
) |
|
|
- |
|
|
|
(5,453 |
) |
|
|
- |
|
|
|
(3,049 |
) |
|
|
(8,675 |
) |
|
|
(8,675 |
) |
|
|
- |
|
|
Net
income
|
|
|
- |
|
|
|
209 |
|
|
|
- |
|
|
|
5,612 |
|
|
|
- |
|
|
|
3,138 |
|
|
|
8,959 |
|
|
|
8,959 |
|
|
|
8,959 |
|
|
Balance
March 31, 2009 (unaudited)
|
|
|
433,740 |
|
|
$ |
(6,664 |
) |
|
|
13,631,415 |
|
|
$ |
243,798 |
|
|
|
7,621,843 |
|
|
$ |
(160,003 |
) |
|
$ |
77,131 |
|
|
$ |
77,131 |
|
|
$ |
8,959 |
|
See
unaudited condensed notes to consolidated financial statements
NAVIOS
MARITIME PARTNERS L.P.
CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed
in thousands of U.S. Dollars except unit and per unit amounts)
NOTE
1—DESCRIPTION OF BUSINESS
Navios
Maritime Partners L.P. (“Navios Partners”), is an international owner and
operator of Capesize and Panamax drybulk carriers, formed on August 7, 2007
under the laws of Marshall Islands by Navios Maritime Holdings Inc (“Navios
Holdings”), a vertically integrated seaborne shipping and logistics company with
over 50 years of operating history in the drybulk shipping industry. Navios GP
L.L.C. (the “General Partner”), a wholly owned subsidiary of Navios
Holdings, was also formed on that date to act as the general partner of Navios
Partners and received a 2% general partner interest.
In
connection with the initial public offering (“IPO”) of Navios Partners on
November 16, 2007, Navios Partners acquired interests in five wholly owned
subsidiaries of Navios Holdings, each of which owned a Panamax dry bulk carrier
(the “Initial Fleet”), as well as interests in three wholly owned subsidiaries
of Navios Holdings that operated and had options to purchase, three additional
vessels in exchange for (a) all of the net proceeds from the sale of 10,000,000
common units in the IPO and the sale of 500,000 common units in a concurrent
private offering to a corporation owned by Navios Partners’ Chairman and CEO for
a total estimated amount of $193,300 (see note 3), plus (b) $160,000 of the
$165,000 funded from its revolving credit facility to acquire its initial fleet
of vessels (see note 8), (c) 7,621,843 subordinated units issued to Navios
Holdings and (d) the issuance to the General Partner of the 2% general partner
interest and all incentive distribution rights in Navios Partners. Upon the
closing of the IPO, Navios Holdings owned a 43.2% interest in Navios Partners,
including the 2% general partner interest.
After the
issuance on July 1, 2008 of 3,131,415 common units to Navios Holdings for the
acquisition of the Navios Aurora I (renamed to the Navios Hope), and the
issuance of additional general partnership units, there are currently
outstanding: 13,631,415 common units, 7,621,843 subordinated units and 433,740
general partnership units. As of March 31, 2009, Navios Holdings owns a 51.6%
interest in Navios Partners, including the 2% general partner
interest.
Pursuant
to the IPO, Navios Partners entered into the following agreements: (a) a share
purchase agreement pursuant to which Navios Partners has agreed to acquire the
capital stock of a subsidiary that will own the Capesize vessel Navios TBN I and
related time charter, upon delivery of the vessel to Navios Holdings which is
expected to occur in late June 2009. The purchase price for the Navios TBN I,
which is currently under construction, is $130,000 in cash. This purchase is
subject to the delivery of the vessel, which is anticipated to occur in late
June 2009. With the consent of the banks, Navios Partners may borrow up to
$60,000 under its credit facility to fund a portion of the purchase price of the
Navios TBN I and, to the extent that it is not used for such purpose the
availability of such $60,000 under the credit facility will be terminated. Since
Navios Partners entered into this agreement, the world has suffered from a
significant credit crisis and global recession. However, it is
unclear the extent to which the market value of this Capesize vessel has been
affected because of its associated long-term charter in place as of the date of
the agreement, which is insured against non-payment by the credit default
insurance; (b) a share purchase agreement pursuant to which Navios Partners had
the option, exercisable at any time between January 1, 2009 and April 1, 2009,
to purchase the capital stock of the subsidiary that will own the Capesize
vessel Navios TBN II and related time charter. On April 2, 2009, Navios Partners
announced that it would not be exercising this option given the then-prevailing
unfavorable capital market conditions; (c) a management agreement with Navios
ShipManagement Inc. (the “Manager”) pursuant to which the Manager provides
Navios Partners commercial and technical management services; (d) an
administrative services agreement with the Manager pursuant to which the Manager
provides Navios Partners administrative services; and (e) an omnibus agreement
with Navios Holdings, governing, among other things, when Navios Partners and
Navios Holdings may compete against each other as well as rights of first offer
on certain dry bulk carriers.
Navios
Partners is engaged in the seaborne transportation services of a wide range of
dry bulk commodities including iron ore, coal, grain and fertilizer, chartering
its vessels under medium to long-term charters. The operations of Navios
Partners are managed by the Manager from its head offices in Piraeus,
Greece.
NOTE
2— BASIS OF PRESENTATION
The
accompanying interim consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States of
America (US GAAP).
NAVIOS
MARITIME PARTNERS L.P.
CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed
in thousands of U.S. Dollars except unit and per unit amounts)
The
accompanying consolidated financial statements include the following entities
and chartered-in vessels:
|
Company
name
|
Vessel
name
|
Country
of incorporation
|
Statement
of income
|
| |
|
|
2008
|
2009
|
|
Libra
Shipping Enterprises Corporation
|
Navios
Libra II
|
Marshall
Is.
|
1/1
– 03/31
|
1/1
– 03/31
|
|
Alegria
Shipping Corporation
|
Navios
Alegria
|
Marshall
Is.
|
1/1
– 03/31
|
1/1
– 03/31
|
|
Felicity
Shipping Corporation
|
Navios
Felicity
|
Marshall
Is.
|
1/1
– 03/31
|
1/1
– 03/31
|
|
Gemini
Shipping Corporation
|
Navios
Gemini S
|
Marshall
Is.
|
1/1
– 03/31
|
1/1
– 03/31
|
|
Galaxy
Shipping Corporation
|
Navios
Galaxy I
|
Marshall
Is
|
1/1
– 03/31
|
1/1
– 03/31
|
|
Fantastiks
Shipping Corporation (*)
|
Navios
Fantastiks
|
Marshall
Is.
|
1/1
– 03/31
|
1/1
– 03/31
|
|
Aurora
Shipping Enterprises Ltd.
|
Navios
Hope(**)
|
Marshall
Is.
|
-
|
1/1
– 03/31
|
|
Chartered-in
vessel
|
|
|
|
|
|
Prosperity
Shipping Corporation (***)
|
Navios
Prosperity
|
Marshall
Is.
|
1/1
– 03/31
|
1/1
– 03/31
|
|
Chartered-in
vessel
|
|
|
|
|
|
Aldebaran
Shipping Corporation (***)
|
Navios
Aldebaran
|
Marshall
Is.
|
3/17
– 03/31
|
1/1
– 03/31
|
|
Navios
Maritime Partners L.P
|
N/A
|
Marshall
Is.
|
1/1
– 03/31
|
1/1
– 03/31
|
|
Navios
Maritime Operating LLC
|
N/A
|
Marshall
Is.
|
1/1
– 03/31
|
1/1
– 03/31
|
|
(*)
|
Fantastiks
Shipping Corporation took ownership of the vessel Fantastiks, which was
renamed to Navios Fantastiks on May
2, 2008.
|
|
(**)
|
On
February 9, 2009, Navios Aurora I was renamed the Navios
Hope.
|
|
(***)
|
Not
a vessel-owning subsidiary and only holds rights to charter-in
contract
|
The
accompanying interim condensed consolidated financial statements of Navios
Partners are unaudited, but, in the opinion of management, contain all
adjustments necessary to present fairly, in all material respects, Navios
Partners’ condensed consolidated financial position as of March 31, 2009 and the
condensed consolidated results of operations for the three months ended March
31, 2008 and 2009. The footnotes are condensed as permitted by the requirements
for interim financial statements and accordingly, do not include information and
disclosures required under US GAAP for complete financial statements. All such
adjustments are deemed to be of a normal, recurring nature. The results of
operations for the interim periods are not necessarily indicative of the results
to be expected for the full year. These financial statements should be read in
conjunction with the audited consolidated financial statements and related notes
included in Navios Partners’ Annual Report on Form 20-F for the year ended
December 31, 2008.
NOTE
3—INITIAL PUBLIC OFFERING
On
November 16, 2007, Navios Partners completed its initial public offering of
10,000,000 common units at a price of $20.00 per unit. In addition,
simultaneously with the offering, Navios Partners sold 500,000 common units at a
price of $20.00 per unit to a corporation owned by Navios Partners’ Chairman and
Chief Executive Officer. The proceeds received by Navios Partners from the IPO
and the concurrent private offering and the use of those proceeds are summarized
as follows:
Aggregate
Proceeds received:
|
Aggregate
Proceeds received:
|
|
|
|
|
Sale
of 10,500,000 units at $20.00 per unit
|
|
$ |
210,000 |
|
| |
|
|
|
|
|
Use
of proceeds from sale of common units:
|
|
$ |
(13,500 |
) |
|
Underwriting
discount and fees to underwriters
|
|
$ |
(3,816 |
) |
|
Acquisition
expenses
|
|
$ |
192,684 |
|
|
Net
IPO Proceeds
|
|
|
|
|
|
|
|
$ |
185,789 |
|
|
Net
book value of net assets contributed by Navios Holdings
|
|
|
(353,300 |
) |
|
|
|
$ |
(167,511 |
) |
|
Less
cash contributed to Navios Holdings
|
|
$ |
25,173 |
|
|
Contribution
to Navios Holdings (deemed dividend)
|
|
|
|
|
|
Total
owners’ net investment and partners’ capital (at end of
IPO)
|
|
|
|
|
In
connection with the IPO, Navios Partners acquired all of outstanding shares of
capital stock of the subsidiaries of Navios Holdings that owned or had rights to
eight vessels which was accounted for as a transaction under common control. As
a result, the difference between the aggregate cash consideration paid for the
subsidiaries that owned or had the rights to eight vessels of $353,300 and their
carrying values of $185,789 was considered as a deemed distribution of $167,511
to Navios Holdings. This deemed dividend payable of $167,511 resulted in
reduction of total partners’ capital to reflect the deemed impact of the deemed
distribution, but not the proceeds of the IPO.
NAVIOS
MARITIME PARTNERS L.P.
CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed
in thousands of U.S. Dollars except unit and per unit amounts)
The
deemed distribution calculation has taken into account Navios Partners’
forgiveness of balances due from related parties (which was treated as a capital
distribution to Navios Holdings), which occurred immediately prior to
consummation of the IPO (See note 13).
NOTE
4 —CASH AND CASH EQUIVALENTS
Cash and
cash equivalents consist of the following:
|
|
|
|
|
|
|
|
|
Cash
on hand and at banks
|
|
$ |
13,870 |
|
|
$ |
9,547 |
|
|
Short
term deposits
|
|
|
14,504 |
|
|
|
8,000 |
|
|
Total
cash and cash equivalents
|
|
$ |
28,374 |
|
|
$ |
17,547 |
|
Short
term deposits relate to time deposit accounts held in bank for general financing
purposes. As of March 31, 2009, Navios Partners had a time deposit of
$8,000 with a monthly duration.
NOTE
5 — VESSELS AND OTHER FIXED ASSETS
|
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net
Book Value
|
|
|
|
|
|
|
|
|
|
|
|
|
| Vessels |
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2007
|
|
$ |
151,432 |
|
|
$ |
(15,456 |
) |
|
$ |
135,976 |
|
|
Additions
|
|
|
167,463 |
|
|
$ |
(12,099 |
) |
|
$ |
155,364 |
|
|
Balance
December 31, 2008
|
|
$ |
318,895 |
|
|
$ |
(27,555 |
) |
|
$ |
291,340 |
|
|
Additions
|
|
|
- |
|
|
$ |
(3,776 |
) |
|
$ |
(3,776 |
) |
|
Balance
March 31, 2009
|
|
$ |
318,895 |
|
|
$ |
(31,331 |
) |
|
$ |
287,564 |
|
All of
Navios Partners’ vessels were acquired during December 2005 and the first
quarter of 2006, for a total consideration of approximately $151,400 ($55,000,
related to a vessel acquired in 2006) of which $120,800 related to vessels
acquired from companies affiliated with Navios Holdings’ Chief Executive
Officer.
On May 2,
2008, Fantastiks Shipping Corporation, a wholly owned subsidiary of Navios
Partners (see note 2), purchased the vessel Fantastiks for an amount of $34,155
of cash consideration (from which $34,001 was included in vessel cost) pursuant
to the Memorandum of Agreement between Fantastiks Shipping Corporation and
Kleimar N.V. (“Kleimar”), a wholly owned subsidiary of Navios Holdings. The
remaining carrying amounts of the favorable lease and the
favorable purchase option of the vessel amounting to $53,022 were
transferred to vessel cost and will be depreciated over the remaining useful
life of the vessel (see note 6). Capitalized expenses related to vessel
acquisition amounted to $458 and were also included in vessel cost. The vessel
was renamed to Navios Fantastiks upon acquisition. In addition, pursuant to the
above mentioned Memorandum of Agreement all of the risk of non-performance
related to the vessel was assigned to Navios Partners. Therefore, Kleimar paid
to Fantastiks Shipping Corporation the net of the charter hire it received less
any charter hire it paid, until the vessel was delivered. Hire revenue and
expense, net of address commissions is included in the statement of income,
under time charter and voyage revenue and in time charter and voyage
expenses (see note 12).
On July
1, 2008 Navios Partners acquired from Navios Holdings, the vessel Navios Aurora
I for a purchase price of $79,936, consisting of $35,000 cash and the issuance
of 3,131,415 common units to Navios Holdings. The number of the common units
issued was calculated based on a price of $14.3705 per common unit, which was
the volume weighted average trading price of the common units for the 10
business days immediately prior to the acquisition. The per unit price at the
day of the delivery was $14.35. Capitalized expenses related to vessel
acquisition amounted to $46 and were also included in vessel cost.
NAVIOS
MARITIME PARTNERS L.P.
CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed
in thousands of U.S. Dollars except unit and per unit amounts)
NOTE 6 — INTANGIBLE
ASSETS
Intangible
assets as of December 31, 2008 and March 31, 2009 consist of the
following:
|
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Transfer
to vessel cost
|
|
|
Net
Book Value December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unfavorable
lease terms
|
|
$ |
(8,486 |
) |
|
$ |
3,827 |
|
|
$ |
- |
|
|
$ |
(4,659 |
) |
|
Favorable
lease terms
|
|
|
52,874 |
|
|
|
(6,529 |
) |
|
|
(46,345 |
) |
|
|
- |
|
|
Favorable
vessel purchase option
|
|
|
6,677 |
|
|
|
- |
|
|
|
(6,677 |
) |
|
|
- |
|
|
Total
|
|
$ |
51,065 |
|
|
$ |
(2,702 |
) |
|
$ |
(53,022 |
) |
|
$ |
(4,659 |
) |
|
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Transfer
to vessel cost
|
|
|
Net
Book Value March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unfavorable
lease terms
|
|
$ |
(8,486 |
) |
|
$ |
4,326 |
|
|
$ |
- |
|
|
$ |
(4,160 |
) |
|
Total
|
|
$ |
(8,486 |
) |
|
$ |
4,326 |
|
|
$ |
- |
|
|
$ |
(4,160 |
) |
Amortization
expense of unfavorable and favorable lease terms for the three month periods
ended March 31, 2008 and 2009 is presented in the following table:
|
|
|
Three
Month Period Ended
|
|
|
Three
Month Period Ended
|
|
|
|
|
March
31, 2008
|
|
|
March
31, 2009
|
|
| Unfavorable
lease terms |
|
$ |
499 |
|
|
$ |
499 |
|
| Favorable
lease terms |
|
|
(1,300 |
) |
|
|
- |
|
| Total |
|
$ |
(801 |
) |
|
$ |
499 |
|
Note
7 – DEFERRED VOYAGE REVENUE
Deferred
voyage revenue primarily reflects charter-out amounts collected on voyages that
have not been completed. Deferred revenue also includes compensation of a
lumpsum amount of $30,443 agreed between Aurora Shipping Enterprises Ltd., owner
of the Navios Hope (formerly known as Navios Aurora I) and its counterparty. In
January 2009 Navios Partners and its counterparty to the Navios Aurora I charter
party mutually agreed for a lump sum amount of approximately $30,443, of which
Navios Partners received net of expenses the amount of $29,589 in February
2009. Under a new charter agreement, the balance of the aggregate value of the
original contract will be allocated to the period until its original expiration.
The amount of $30,443 has been recognized as deferred revenue and amortized over
life of the vessel’s contract.
NOTE
8 — BORROWINGS
Borrowings
as of December 31, 2008 and March 31, 2009 consisted of the
following:
|
|
|
|
|
|
|
|
|
Credit
facility
|
|
$ |
235,000 |
|
|
$ |
195,000 |
|
|
Less
current portion
|
|
|
(40,000 |
) |
|
|
- |
|
|
Total
long-term borrowings
|
|
$ |
195,000 |
|
|
$ |
195,000 |
|
Upon
the closing of the IPO, Navios Partners entered into a $260,000 revolving credit
facility with DVB Bank AG and Commerzbank AG which was amended in June 2008, in
part, to increase the available borrowings by $35,000, in anticipation of
purchasing Navios Aurora I, thereby increasing the total facility to $295,000.
Currently, the total borrowings under the revolving credit facility are
$195,000. With the consent of its banks, Navios Partners may borrow up to
$60,000 under our credit facility to fund a portion of the purchase price of the
Navios TBN I and, to the extent that Navios Partners do not use it for such
purposes, the availability of such $60,000 under the credit facility will be
terminated. This purchase is subject to the delivery of the vessel, which is
anticipated to occur in late June 2009. Since Navios Partners entered
into this agreement, the world has suffered from a significant credit crisis and
global recession. However, it is unclear the extent to which the
market value of this Capesize vessel has been affected because of its associated
long-term charter in place as of the date of the agreement, which is insured
against non-payment by our credit default insurance.
NAVIOS
MARITIME PARTNERS L.P.
CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed
in thousands of U.S. Dollars except unit and per unit amounts)
In
January 2009, Navios Partners further amended the terms of its existing credit
facility. The amendment is effective until January 15, 2010 and provides for
(a) the repayment of $40,000 which took place on February 9, 2009,
(b) maintaining minimum cash reserves in a pledged account with the agent
bank as follows: $2,500 as of January 31, 2009; $5,000 as of March 31, 2009;
$7,500 as of June 30, 2009, $10,000 as of September 30,
2009;and $12,500 as of December 31, 2009 and (c) an
increased margin on the loans of 2.25%. Further, the covenants were amended by
(a) reducing the minimum net worth to $100,000 from $135,000, (b) reducing the
value maintenance covenant ("VMC") to 100% using charter free vessel values, (c)
changing the calculation of the minimum leverage covenant to use charter
inclusive adjusted vessel values until December 31, 2009, and (d) adding a new
VMC based on charter inclusive valuations to be at 143%. Also, Navios
Partners now
pays a commitment fee of 0.35% for undrawn amounts under the
facility.
As
of March 31, 2009, Navios Partners was in compliance with the financial
covenants of its revolving loan facility. The repayment of the credit facility
starts no earlier than February 2012 and is subject to changes in repayment
amounts and dates depending on various factors such as the future borrowings
under the credit facility agreement.
The
maturity table below reflects the principal payments due under the credit
facility based on Navios Partners’ $195,000 outstanding balance as of March 31,
2009.
|
Year
|
|
Amount
|
|
|
2009
|
|
$ |
- |
|
|
2010
|
|
$ |
- |
|
|
2011
|
|
$ |
- |
|
|
2012
|
|
$ |
28,611 |
|
|
2013
|
|
$ |
26,686 |
|
|
2014
|
|
$ |
24,761 |
|
|
2015
and thereafter
|
|
$ |
114,942 |
|
|
|
|
$ |
195,000 |
|
NOTE 9— SEGMENT INFORMATION
Navios
Partners reports financial information and evaluates its operations by charter
revenues. Navios Partners does not use discrete financial information to
evaluate operating results for each type of charter. As a result,
management reviews operating results solely by revenue per day and operating
results of the fleet and thus Navios Partners has determined that it operates
under one reportable segment.
The
following table sets out operating revenue by geographic region for Navios
Partners’ reportable segment. Revenue is allocated on the basis of
the geographic region in which the customer is located. Dry bulk
vessels operate worldwide. Revenues from specific geographic region
which contribute over 10% of total revenue are disclosed
separately.
Revenue
by Geographic Region
|
|
|
Three
Month Period
|
|
|
Three
Month Period
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
March
31, 2008
|
|
|
March
31, 2009
|
|
|
Europe
|
|
$ |
6,006 |
|
|
$ |
6,635 |
|
|
Asia
|
|
|
7,676 |
|
|
|
12,503 |
|
|
Australia
|
|
|
638 |
|
|
|
2,019 |
|
|
Total
|
|
$ |
14,320 |
|
|
$ |
21,157 |
|
Vessels
operate on a worldwide basis and are not restricted to specific
locations. Accordingly, it is not possible to allocate the assets of
these operations to specific countries.
NAVIOS
MARITIME PARTNERS L.P.
CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed
in thousands of U.S. Dollars except unit and per unit amounts)
NOTE 10 — INCOME TAXES
Marshall
Islands and Panama do not impose a tax on international shipping
income. Under the laws of Marshall Islands and Panama, the countries
of the vessel-owning subsidiaries’ incorporation and vessels’ registration, the
vessel-owning subsidiaries are subject to registration and tonnage taxes which
have been included in vessel operating expenses in the accompanying consolidated
statements of operations.
Pursuant
to Section 883 of the Internal Revenue Code of the United States, U.S. source
income from the international operation of ships is generally exempt from U.S.
income tax if the company operating the ships meets certain incorporation and
ownership requirements. Among other things, in order to qualify for
this exemption, the company operating the ships must be incorporated in a
country which grants an equivalent exemption from income taxes to U.S.
corporations. All the vessel-owning subsidiaries satisfy these
initial criteria. In addition, these companies must meet an ownership test. The
management of the Company believes that this ownership test was satisfied prior
to the IPO by virtue of a special rule applicable to situations where the
ship operating companies are beneficially owned by a publicly traded company.
Although not free from doubt, Management also believes that the ownership test
will be satisfied based on the trading volume and ownership of Navios
Partners’ units, but no assurance can be given that this will remain so in the
future.
NOTE
11 —COMMITMENTS AND CONTINGENCIES
Navios
Partners is involved in various disputes and arbitration proceedings arising in
the ordinary course of business. Provisions have been recognized in the
financial statements for all such proceedings where Navios Partners believes
that a liability may be probable, and for which the amounts are reasonably
estimable, based upon facts known at the date the financial statements were
prepared.
In the
opinion of management, the ultimate disposition of these matters is immaterial
and will not adversely affect Navios Partners financial position, results of
operations or liquidity.
In March
2008, Navios Partners took delivery of the "Navios Aldebaran", a newbuilding
Panamax vessel of 76,500 dwt. The vessel came into the fleet under a long-term
charter-in agreement with a purchase option exercisable in 2013. Navios Partners
has chartered-out the vessel for a period of five years at a net daily
charter-out rate of approximately US$ 28.
In
addition, in connection with the IPO, Navios Partners entered into a share
purchase agreement with a subsidiary of Navios Holdings to purchase its
interests in the subsidiary that owns the newbuilding Capesize Navios TBN I at
the pre-determined purchase price of $130,000. Navios Partners has agreed to
purchase from a subsidiary of Navios Holdings its interests in the subsidiary
that owns the newbuilding upon delivery of the vessel to the subsidiary, which
is expected to occur in late June 2009. Since Navios Partners entered into this
agreement, the world has suffered from a significant credit crisis and global
recession. However, it is unclear the extent to which the market
value of this Capesize vessel has been affected because of its associated
long-term charter in place as of the date of the agreement, which is insured
against non-payment by our credit default insurance.
In May
2008, the chartered-in vessel “Fantastiks” was acquired by Fantastiks Shipping
Corporation and was renamed to “Navios Fantastiks” (see note 5).
The
future minimum commitments of Navios Partners under its charter-in contracts,
net of commissions, are as follows:
|
|
|
Amount
|
|
|
|
|
|
|
|
2009
|
|
|
7,431 |
|
|
2010
|
|
|
9,864 |
|
|
2011
|
|
|
9,864 |
|
|
2012
|
|
|
9,891 |
|
|
2013
|
|
|
9,864 |
|
|
2014
and thereafter
|
|
|
7,599 |
|
|
|
|
$ |
54,513 |
|
NOTE
12 —TRANSACTIONS WITH RELATED PARTIES AND AFFILIATES
Management fees: Pursuant to
the management agreement dated November 16, 2007, the Manager, a wholly owned
subsidiary of Navios Holdings, provides commercial and technical management
services to Navios Partners’ vessels for a daily fee of $4,000 per owned Panamax
vessel and $5,000 per owned Capesize vessel. This daily fee covers
all of the vessels’ operating expenses, including the cost of drydock and
special surveys. The daily rates are fixed for a period of two years until
November 16, 2009 whereas the initial term of the agreement is until November
16, 2012. Total management fees for the three-month period ended March 31, 2009
amounted to $2,610 ($1,820 for the three month period ended March 31,
2008).
NAVIOS
MARITIME PARTNERS L.P.
CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed
in thousands of U.S. Dollars except unit and per unit amounts)
General and administrative
expenses: Pursuant
to the administrative services agreement dated November 16, 2007, the Manager
also provides administrative services to Navios Partners, which include
bookkeeping, audit and accounting services, legal and insurance services,
administrative and clerical services, banking and financial services, advisory
services, client and investor relations and other. The Manager is reimbursed for
reasonable costs and expenses incurred in connection with the provision of these
services.
Total
general and administrative fees for the three month period ended March 31, 2009
amounted to $902 of which $517 relate to administrative fees and the rest relate
mainly to professional, legal and other expenses. ($496 for the three month
period ended March 31, 2008).
Balance due to related
parties: Included in the current liabilities as at March 31, 2009 is an
amount of $4,579, which represents the current account payable to Navios
Holdings and its subsidiaries. The balance mainly consists of the management
fees amounting to $3,509 of which $899 are related to management fees of
December 2008, administrative service expenses amounting to $882 out of which
$532 relate to administrative expenses for the three month period ended December
31, 2008, and other expenses owed to affiliated companies amounting to
$188. Total management fees and administrative fees charged to Navios
Partners amounted to $2,610 and $350 respectively for the three month period
ended March 31, 2009 and $1,820 and $270, respectively for the three month
period ended March 31, 2008.
Vessel
Acquisition: On July 1, 2008 Navios Partners acquired from
Navios Holdings, the vessel Navios Hope (formerly known as the Navios Aurora I)
for a purchase price of $79,936, consisting of $35,000 cash and the issuance of
3,131,415 common units to Navios Holdings. The per unit price at the day of the
delivery was $14.35 (see note 5).
NOTE
13 — CASH DISTRIBUTIONS AND EARNINGS PER UNIT
The
partnership agreement of Navios Partners requires that all available cash is
distributed quarterly, after deducting expenses, including estimated maintenance
and replacement capital expenditures and reserves. Distributions may be
restricted by, among other things, the provisions of existing and future
indebtedness, applicable partnership and limited liability company laws and
other laws and regulations. The amount of the minimum quarterly distribution is
$0.35 per unit or $1.40 unit per year and is made in the following manner,
during the subordination period:
|
|
·
|
First,
98% to the holders of common units and 2% to the General Partner until
each common unit has received a minimum quarterly distribution of $0.35
plus any arrearages from previous
quarters;
|
|
|
·
|
Second,
98% to the holders of subordinated units and 2% to the General Partner
until each subordinated unit has received a minimum quarterly distribution
of $0.35; and
|
|
|
·
|
Third,
98% to all unitholders, pro rata, and 2% to General Partner, until each
unit has received an aggregate amount of
$0.4025
|
Thereafter
there is incentive distribution rights held by the General Partner, which are
analyzed as follows:
|
|
|
Marginal
Percentage Interest in Distributions
|
|
|
Total
Quarterly Distribution
Target
Amount
|
Common
and Subordinated Unitholders
|
General
Partner
|
|
Minimum
Quarterly Distribution
|
$0.35
|
98%
|
2%
|
|
First
Target Distribution
|
up
to $0.4025
|
98%
|
2%
|
| Second
Target Distribution |
above
$0.4025 up to $0.4375
|
85%
|
15%
|
| Third
Target Distribution |
above
$0.4375 up to $0.525
|
75%
|
25%
|
| Thereafter |
above
$0.525
|
50%
|
50%
|
On
January 21, 2009 the Board of Directors of Navios Partners authorized its
quarterly cash distribution for the three month period ended December 31, 2008
of $0.40 per unit. The distribution was paid on February 12, 2009 to all holders
of record of common as of February 9, 2009, subordinated and general partner
units (excluding 3,131,415 common units issued to Navios Holdings in connection
with the sale of the vessel Navios Hope). The aggregate amount of the declared
distribution was $8,675.
NAVIOS
MARITIME PARTNERS L.P.
CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed
in thousands of U.S. Dollars except unit and per unit amounts)
Basic
net income per unit is determined by dividing net income by the weighted average
number of units outstanding during the period. Diluted net income per unit is
calculated in the same manner as net income per unit, except that the weighted
average number of outstanding units is increased to include the dilutive effect
of outstanding unit options or phantom units. There were no options or phantom
units outstanding during the three month period ended March 31,
2009.
The
general partner's interest in net income is calculated as if all net income for
the year was distributed according to the terms of Navios Partners partnership
agreement, regardless of whether those earnings would or could be distributed.
Navios Partners agreement does not provide for the distribution of net income;
rather, it provides for the distribution of available cash, which is a
contractually defined term that generally means all cash on hand at the end of
each quarter less the amount of cash reserves established by Navios Partners’
board of directors to provide for the proper conduct of Navios Partners’
business including reserves for maintenance and replacement capital expenditure
and anticipated credit needs.
The
calculations of the basic and diluted earnings per unit are presented
below. For purposes of the earnings per unit (EPU) calculations, the
subordinated units and general partner units are assumed to be outstanding for
periods presented prior to IPO.
|
|
|
Three
Month
|
|
|
Three
Month
|
|
|
|
|
Period
|
|
|
Period
|
|
|
|
|
Ended
March
|
|
|
Ended
March
|
|
|
Net
income
|
|
|
3,847 |
|
|
|
8,959 |
|
|
Earnings
attributable to:
|
|
|
|
|
|
|
|
|
|
Common
unit holders
|
|
|
3,675 |
|
|
|
5,612 |
|
|
Subordinated
unit holders
|
|
|
95 |
|
|
|
3,138 |
|
|
General
partner unit holders
|
|
|
77 |
|
|
|
209 |
|
|
Weighted
average units outstanding (basic and diluted)
|
|
|
|
|
|
|
|
|
|
Common
unit holders
|
|
|
10,500,000 |
|
|
|
13,631,415 |
|
|
Subordinated
unit holders
|
|
|
7,621,843 |
|
|
|
7,621,843 |
|
|
General
partner unit holders
|
|
|
369,834 |
|
|
|
433,740 |
|
|
Earnings
per unit (basic and diluted):
|
|
|
|
|
|
|
|
|
|
Common
unit holders
|
|
$ |
0.35 |
|
|
$ |
0.41 |
|
|
Subordinated
unit holders
|
|
$ |
0.01 |
|
|
$ |
0.41 |
|
|
General
partner unit holders
|
|
$ |
0.21 |
|
|
$ |
0.48 |
|
NOTE
14— RECENT ACCOUNTING PRONOUNCEMENTS
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“FAS 141R”), which replaces FASB Statement No. 141. FAS 141R
establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed any non controlling interest in the acquiree and the
goodwill acquired. The Statement also establishes disclosure requirements which
will enable users to evaluate the nature and financial effects of the business
combination. FAS 141R will be effective for Navios Partners for the fiscal year
beginning on January 1, 2009. The adoption of FAS 141R did not have a material
impact on Navios Partners’ consolidated financial statements.
In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statement—amendments of ARB No. 51 (“SFAS 160”). SFAS 160
states that accounting and reporting for minority interests will be
recharacterized as noncontrolling interests and classified as a component of
equity. The Statement also establishes reporting requirements that provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. SFAS 160
applies to all entities that prepare consolidated financial statements,
except not-for-profit organizations, but will affect only those entities that
have an outstanding noncontrolling interest in one or more subsidiaries or that
deconsolidate a subsidiary. This statement was effective as of January 1, 2009.
The adoption of SFAS 160 did not have a material impact on Navios
Partners’ consolidated financial statements.
NAVIOS
MARITIME PARTNERS L.P.
CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed
in thousands of U.S. Dollars except unit and per unit amounts)
In
February 2008, the FASB issued the FASB Staff Position (“FSP 157-2”) which
delays the effective date of SFAS 157, for nonfinancial assets and nonfinancial
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). For purposes
of applying this FSP, nonfinancial assets and nonfinancial liabilities would
include all assets and liabilities other that those meeting the definition of a
financial asset or financial liability as defined in paragraph 6 of FASB
Statement No. 159, “The Fair Value Option for Financial Assets and
Financial Liabilities” This FSP defers the effective date of SFAS 157 to fiscal
years beginning after November 15, 2008, and the interim periods within those
fiscal years for items within the scope of this FSP. The application of SFAS 157
in future periods to those items covered by FSP 157-2 would not have a material
effect on the consolidated financial statements of Navios Partners.
In March
2008, the FASB issued its final consensus on “Issue 07-4 —Application of the
Two-Class Method under FASB Statement No. 128, Earnings per Share, to Master
Limited Partnerships”. This issue may impact a publicly traded master limited
partnership (MLP) that distributes “available” cash to the limited partners
(LPs), the general partner (GP), and the holders of incentive distribution
rights (IDRs). This issue addresses earnings-per-unit (EPU) computations for all
MLPs with IDR interests. MLPs will need to determine the amount of “available
cash” at the end of a reporting period when calculating the period’s EPU. This
guidance in Issue 07-4 was effective for Navios Partners for the fiscal year
beginning as of January 1, 2009. The adoption of Issue 07-4 under FASB Statement
No. 128 did not have a material impact on the consolidated financial statements
of Navios Partners.
In
April 2008, FASB issued FASB Staff Position FSP 142-3 “Determination of the
useful life of intangible assets”. This FASB Staff Position (FSP) amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under
FASB Statement No. 142, “Goodwill and Other Intangible Assets”. The intent of
this FSP is to improve the consistency between the useful life of a recognized
intangible asset under Statement 142 and the period of expected cash flows used
to measure the fair value of the asset under FASB Statement No. 141 (revised
2007), “Business Combinations”, and other U.S. GAAP. This FSP will be effective
for Navios Partners for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. Early adoption is prohibited. The
adoption of FSP 142-3 is not expected to have a material effect on the
consolidated financial statements of the Navios Partners.
In May
2008, the FASB issued FASB Statement No. 162, “The Hierarchy of Generally
Accepted Accounting Principles”. The new standard is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with US GAAP for nongovernmental entities.
Statement No. 162 is effective 60 days following the SEC’s approval of the
Public Company Accounting Oversight Board Auditing amendments to AU Section 411,
The Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles. The adoption of SFAS No. 162 is not expected to have a material
effect on the consolidated financial statements of Navios Partners.
In
October 2008, the FASB issued the FASB Staff Position (“FSP No. 157-3”) which
clarifies the application of FASB Statement No. 157, “Fair Value Measurements”
in a market that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the
market for that asset is not active. This FSP applies to financial assets within
the scope of accounting pronouncements that require or permit fair value
measurements in accordance with Statement 157. The FSP shall be effective upon
issuance, including prior periods for which financial statements have not been
issued. Revisions resulting from a change in the valuation technique or its
application shall be accounted for as a change in accounting estimate (FASB
Statement No. 154 “Accounting changes and Error Corrections”, paragraph 19). The
disclosure provisions of Statement No. 154 for a change in accounting estimate
are not required for revisions resulting from a change in valuation technique or
its application. The application of FSP 157-3 did not have a material effect on
the consolidated financial statements of Navios Partners.
In
January 2009, the FASB issued the FASB Staff Position “Amendments to the
Impairment Guidance to EITF Issue No. 99-20” (“FSP EITF 99-20-1”) which amends
the impairment guidance in EITF Issue No.99-20, “Recognition of Interest Income
and Impairment on Purchased Beneficial Interests and Beneficial Interests That
Continue to Be Held by a Transferor in Securitized Financial Assets,” to achieve
more consistent determination of whether an other-than-temporary impairment
has occurred. FSP EITF 99-20-1 also retains and emphasizes the objective of an
other-than-temporary impairment assessment and the related disclosure
requirements in FASB Statement No. 115, “Accounting for Certain Investments in Debt and Equity
Securities”, and
other related guidance. FSP EITF 99-20-1 is effective for interim and annual
reporting periods ending after December 15, 2008, and shall be applied
prospectively. Retrospective application to a prior interim or annual reporting
period is not permitted. The adoption of FSP EITF 99-20-1 is not expected to
have a material effect on the consolidated financial statements of Navios
Partners.
In
April 2009, the FASB issued the FASB Staff Position (“FAS 107-1 and APB 28-1”),
which amends FASB Statement No.107, Disclosures about Fair Value of Financial
Instruments, to require disclosures about fair value of financial instruments
for interim reporting periods of publicly traded companies, as well as in annual
financial statements. This FSP also amends APB Opinion No.28, Interim Financial
Reporting, to require those disclosures in summarized financial information at
interim reporting periods. An entity may early adopt this FSP only if it also
elects to early adopt FSP FAS 157-4, Determining Fair Value when the volume
and level of activity for the asset or liability have significantly decreased
and identifying transactions that are not orderly, and FSP FAS 115-2 and FAS
124-2, Recognition and Presentation of other-than-temporary impairments. This
FSP does not require disclosures for earlier periods presented for comparative
purposes at initial adoption. In periods after initial adoption, this FSP
requires comparative disclosures only for periods ending after initial adoption.
This FSP will be effective for interim reporting periods after June 15, 2009,
with early adoption permitted for periods ending after March 15, 2009. The
adoption of FSP FAS 107-1 and APB 28-1 is not expected to have a material effect
on the consolidated statements of Navios Partners.
NAVIOS
MARITIME PARTNERS L.P.
CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed
in thousands of U.S. Dollars except unit and per unit amounts)
NOTE
15 — SUBSEQUENT EVENTS
On April
2, 2009 - Navios Maritime Partners L.P. announced that it would not be
exercising its option to acquire TBN II, a new building capesize vessel, from
Navios Maritime Holdings Inc. for $135,000. This decision was reached in light
of the unfavorable conditions in the capital markets. There are no fees or costs
payable in connection with the option expiring on April 1, 2009.
On
April 24, 2009, the Board of Directors of Navios Partners authorized its
quarterly cash distribution for the three month period ended March 31, 2009 of
$0.40 per unit. The distribution is payable on May 6, 2009 to all holders of
record of common, subordinated and general partner units on May 1, 2009. The
aggregate amount of the declared distribution is $8,675.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
| |
NAVIOS
MARITIME PARTNERS L.P.
|
|
| |
|
|
|
|
|
By:
|
/s/
Angeliki Frangou |
|
| |
|
Angeliki
Frangou
|
|
| |
|
Chief
Executive Officer
|
|
| |
|
Date:
April 29, 2009
|
|