UNITED STATES
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: October 24, 2017
Commission File
No. 001-36738
NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
7 Avenue de
Grande Bretagne, Office 11B2
Monte Carlo, MC 98000 Monaco
(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 ☒
Form
40-F ☐
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 ☐ No ☒
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):
Yes ☐ No ☒
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.
Yes ☐ No ☒
If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule
12g3-2(b):
N/A
NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
FORM
6-K
TABLE OF CONTENTS
2
The information contained in this Report is hereby incorporated by reference into the Registration Statement on
Form
F-3,
File
No. 333-208623.
Operating
and Financial Review and Prospects
The following is a discussion of the financial condition and results of operations for the three
and nine month periods ended September 30, 2017 and 2016 of Navios Maritime Midstream Partners L.P. (referred to herein as we, us, Navios Midstream or the Company). All of the financial statements
have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). You should read this section together with the consolidated financial statements and the accompanying notes
included in Navios Midstreams 2016 Annual Report (the 2016 Annual Report) filed on Form
20-F
with the U.S. Securities and Exchange Commission.
This report contains forward-looking statements (as defined in Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended) concerning future events and expectations, including with respect to Navios Midstreams future dividends and Navios Midstreams growth strategy and measures to implement
such strategy; including expected vessel acquisitions and entering into further time charters. Words such as may, expects, intends, plans, believes, anticipates,
hopes, estimates, and variations of such words and similar expressions are intended to identify forward-looking statements. Such statements include comments regarding expected revenue and time charters. These forward-looking
statements are based on the information available to, and the expectations and assumptions deemed reasonable by, Navios Midstream at the time this filing was made. Although Navios Midstream believes that the expectations reflected in such
forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are
inherently subject to significant uncertainties and contingencies, many of which are beyond the control of Navios Midstream. 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, the creditworthiness of our charterers and the ability of our contract counterparties to fulfill their obligations to us, tanker industry trends, including charter rates and
vessel values and factors affecting vessel supply and demand, the aging of our vessels and resultant increases in operation and drydocking costs, the loss of any customer or charter or vessel, our ability to repay outstanding indebtedness, to obtain
additional financing and to obtain replacement charters for our vessels, in each case, at commercially acceptable rates or at all, increases in costs and expenses, including but not limited to: crew wages, insurance, provisions, port expenses, lube
oil, bunkers, repairs, maintenance and general and administrative expenses, the expected cost of, and our ability to comply with, governmental regulations and maritime self-regulatory organization standards, as well as standard regulations imposed
by our charterers applicable to our business, potential liability from litigation and our vessel operations, including discharge of pollutants, general domestic and international political conditions, competitive factors in the market in which
Navios Midstream operates, risks associated with operations outside the United States, and other factors listed from time to time in Navios Midstreams filings with the Securities and Exchange Commission, including its Form
20-Fs
and Form
6-Ks.
Navios Midstream expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements
contained herein to reflect any change in Navios Midstreams expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based. Navios Midstream makes no prediction or statement about the
performance of its common units.
Overview
Navios Midstream was formed on October 13, 2014, as a Marshall Islands limited partnership to own, operate and acquire crude oil tankers,
refined petroleum product tankers, chemical tankers, and LPG tankers under long-term employment contracts. Navios Maritime Midstream Partners GP LLC, a wholly-owned subsidiary of Navios Maritime Acquisition Corporation (Navios
Acquisition), was formed on October 13, 2014 to act as our general partner. On November 18, 2014, we completed our initial public offering (IPO).
Equity Transactions
On July 29,
2016, Navios Midstream entered into a Continuous Offering Program Sales Agreement (the Sales Agreement) with S. Goldman Capital LLC, as sales agent (the Agent), pursuant to which Navios Midstream may issue and sell from time
to time through the Agent common units representing limited partner interests having an aggregate offering price of up to $25.0 million.
During the nine month period ended September 30, 2017, Navios Midstream issued 336,011 common units and received net proceeds of
approximately $4.0 million. Pursuant to the issuance of the common units, Navios Midstream issued 6,858 general partnership units to its general partner in order to maintain its 2.0% general partner interest. The net proceeds from the issuance
of the general partnership units were $0.1 million. As of September 30, 2017, there were outstanding: 10,011,806 common units, 9,342,692 subordinated units, 1,592,920 subordinated Series A units and 427,499 general partnership units.
3
Our Fleet
Our fleet consists of six very large crude carriers (VLCC), which have an average remaining employment term of approximately 3.6
years, including the backstop commitment from Navios Acquisition. They are chartered to five counterparties, Dalian Ocean Shipping Co. Ltd. (Cosco Dalian), a Chinese state-owned enterprise, SK Shipping Company Limited (SK
Shipping), Formosa Petrochemical Corporation, a Taiwan Stock Exchange-listed company (Formosa Petrochemical), VL8 Pool Inc. (VL8) and Shell Trading Singapore (Private) Ltd. (Shell).
The following table provides summary information about our fleet as of October 24, 2017:
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Vessels
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Type
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Built/
Delivery
Date
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DWT
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Net
Charter
Rate
(1)
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Profit Share to Owner
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Expiration
Date
(2)
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Shinyo Ocean
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VLCC
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2001
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281,395
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Pool earnings
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Upon notice
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(3)
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$
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38,400
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January 2019
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(4)
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Shinyo Kannika
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VLCC
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2001
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287,175
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Pool earnings
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Upon notice
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(3)
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$
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38,025
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February 2019
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(4)
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Shinyo Saowalak
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VLCC
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2010
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298,000
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$
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48,153
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35% above $54,388
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(5)
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June 2025
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40% above $59,388
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(5)
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50% above $69,388
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(5)
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Shinyo Kieran
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VLCC
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2011
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297,066
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$
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48,153
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35% above $54,388
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(5)
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June 2026
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40% above $59,388
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(5)
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50% above $69,388
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(5)
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C. Dream
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VLCC
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2000
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298,570
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$
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29,625
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50% above $30,000
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(7)
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March 2019
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40% above $40,000
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(7)
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Nave Celeste
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VLCC
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2003
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298,717
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$
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17,775
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100% between $17,775
and $37,525; 50% above $37,525
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(8)
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January 2018
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$
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35,000
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December 2018
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(6)
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(1)
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Net time
charter-out
rate per day in dollars (net of commissions).
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(2)
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Estimated dates assuming midpoint of redelivery of charterers.
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(3)
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Evergreen until terminated by owners or charterers notice.
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(4)
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Includes a backstop period for the Shinyo Ocean and the Shinyo Kannika. Navios Acquisition has provided a backstop commitment for a
two-year
period at the net time charter out
rate of $38,400 per day for the Shinyo Ocean and $38,025 per day for the Shinyo Kannika. All data in the table is based on a charter length inclusive of both the initial and backstop periods.
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(5)
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Calculated annually on the basis of the weighted average of the daily values of four Baltic Exchange Tanker Routes for the past four quarters adjusted for certain agreed specifications (i.e. actual consumption and other
voyage expenses). Any profit is split between the owner and the charterer with the owner receiving the percentage stated in the table above.
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(6)
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Includes a backstop period for the Nave Celeste. Navios Acquisition has provided a backstop commitment for a
two-year
period at the net time charter out rate of $35,000 per day.
All data in the table is based on a charter length inclusive of both the initial and backstop periods.
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(7)
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Calculated annually based on the actual earnings of the vessel. Any profit is split between the owner and the charterer with the owner receiving the percentage stated in the table above.
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(8)
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Rate calculated monthly and based upon daily Baltic International Tanker Routes, Route Tanker Dirty 3 ME Gulf to Japan (BITR TD3).
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Option Vessels
We have options,
exercisable through November 18, 2018, to purchase the following three VLCCs from Navios Acquisition at fair market value. Although we anticipate that we may exercise some or all of our options to purchase the following three VLCCs, the timing
of such purchases is uncertain and each such purchase is subject to various conditions, including reaching an agreement with Navios Acquisition regarding the fair market value of the vessel and the availability of financing, which we anticipate
would be from external sources. Generally, we expect to fund the acquisition of any or all of the three additional VLCCs we may elect to purchase with cash from operations, bank borrowings and the issuance of debt and equity securities.
4
The following table provides summary information about the vessels subject to the options as of October 24,
2017:
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Vessels
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Purchase Option
Expiration Date
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Type
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Built/
Delivery
Date
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DWT
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Net Charter
Rate
(1)
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Profit Share to
Owner
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Employment
Expiration
Date
(2)
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Nave Buena Suerte
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November 2018
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VLCC
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2011
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297,491
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Floating Rate
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(3)
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November 2017
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Nave Neutrino
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November 2018
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VLCC
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2003
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298,287
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Floating Rate
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(4)
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November 2017
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Nave Electron
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November 2018
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VLCC
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2002
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305,178
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Floating Rate
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(5)
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December 2017
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(1)
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Net time
charter-out
rate per day in dollars (net of commissions).
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(2)
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Estimated dates assuming midpoint of redelivery of charterers.
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(3)
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Rate is based upon daily BITR TD3. Navios Acquisition will receive 100% of the index rate up to $38,019 net per day and 50% of any amount in excess of $38,019 net per day. The contract provides for a minimum rate of
$18,269/day net until November 2017.
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(4)
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Rate is based upon daily BITR TD3. Navios Acquisition will receive 100% of the index rate up to $37,750 net per day and 50% of any amount in excess of $37,750 net per day. The contract provides for a minimum rate of
$17,750/day net until November 2017.
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(5)
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Rate based on VLCC pool earnings.
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Our Customers
We provide seaborne shipping services under charters with customers that we believe are creditworthy.
For the nine month period ended September 30, 2017, customers representing 10% or more of total revenue were Cosco Dalian, VL8 and Shell
that accounted for 46.7%, 15.5% and 10.3%, respectively, of our revenue. For the year ended December 31, 2016, our customers representing 10% or more of total revenue were Cosco Dalian, Formosa Petrochemical and SK Shipping that accounted for
70.6%, 15.7% and 13.7%, respectively, of our revenue.
Although we believe that if any one of our charters were terminated we could
re-charter
the related vessel at the prevailing market rate relatively quickly, the permanent loss of a significant customer or a substantial decline in the amount of services requested by a significant customer
could harm our business, financial condition and results of operations if we were unable to
re-charter
our vessel on a favorable basis due to the current market conditions, or otherwise.
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 Tankers Management Inc. (the Manager) (which provides for a fixed management fee extended through December 31, 2018) 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 charters hire
rates, which, in turn, are affected by a number of factors, including:
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the duration of the charters;
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the level of spot and long-term market rates at the time of charter;
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decisions relating to vessel acquisitions and disposals;
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the amount of time spent positioning vessels;
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the amount of time that vessels spend undergoing repairs and upgrades in drydock;
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the age, condition and specifications of the vessels; and
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the aggregate level of supply and demand in the tanker shipping industry.
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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. Vessel charter
rates are affected by world economics, international events, weather conditions, strikes, governmental policies, supply and demand and many other factors that might be beyond our control.
5
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 2016 Annual Report 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 nine month periods ended September 30, 2017 and 2016 of Navios Midstream discussed below include the following entities:
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Company name
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Vessel name
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Country of
incorporation
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2017
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2016
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Navios Maritime Midstream Operating LLC
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N/A
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Marshall Islands
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1/1-9/30
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1/1-9/30
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Navios Maritime Midstream Partners L.P.
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N/A
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Marshall Islands
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1/1-9/30
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1/1-9/30
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Navios Maritime Midstream Partners Finance (US) Inc.
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N/A
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Delaware
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1/1-9/30
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1/1-9/30
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Shinyo Kannika Limited
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Shinyo Kannika
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Hong Kong
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1/1-9/30
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1/1-9/30
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Shinyo Ocean Limited
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Shinyo Ocean
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Hong Kong
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1/1-9/30
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1/1-9/30
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Shinyo Saowalak Limited
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Shinyo Saowalak
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British Virgin Is.
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1/1-9/30
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1/1-9/30
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Shinyo Kieran Limited
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Shinyo Kieran
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British Virgin Is.
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1/1-9/30
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1/1-9/30
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Shinyo Dream Limited
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C. Dream
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Hong Kong
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1/1-9/30
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1/1-9/30
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Sikinos Shipping Corporation
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Nave Celeste
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Marshall Islands
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1/1-9/30
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1/1-9/30
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The accompanying interim condensed consolidated financial statements of Navios Midstream are unaudited, but,
in the opinion of management, contain all adjustments necessary to present a fair statement of results, in all material respects, of Navios Midstreams condensed consolidated financial position as of September 30, 2017 and the condensed
consolidated results of operations for the three and nine month periods ended September 30, 2017 and 2016. The footnotes are condensed as permitted by the requirements for interim financial statements and, accordingly, do not include
information and disclosures required under U.S. 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 Midstreams Annual Report on Form
20-F
for the year ended December 31, 2016.
6
FINANCIAL HIGHLIGHTS
The following table presents consolidated revenue and expense information for the three and nine month periods ended September 30, 2017
and 2016.
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Three Month
Period ended
September 30,
2017
($000)
(unaudited)
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Three Month
Period ended
September 30,
2016
($000)
(unaudited)
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Nine Month
Period ended
September 30,
2017
($000)
(unaudited)
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Nine Month
Period ended
September 30,
2016
($000)
(unaudited)
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Revenue
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$
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20,742
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$
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22,209
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$
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60,352
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$
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69,053
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Time charter expenses
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(224
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)
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(412
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)
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(793
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)
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(1,161
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)
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Direct vessel expenses
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(999
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)
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(724
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)
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(2,774
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)
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(2,312
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)
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Management fees
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(5,244
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)
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(5,244
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)
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(15,561
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)
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(15,618
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)
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General and administrative expenses
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(753
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)
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(866
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)
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(2,107
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)
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(2,416
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)
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Depreciation and amortization
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(6,259
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)
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(6,377
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)
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(18,811
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)
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|
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(19,156
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)
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Interest income
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8
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|
82
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19
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151
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Interest expenses and finance cost
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|
|
(3,395
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)
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(3,207
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)
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(9,729
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)
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(9,647
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)
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Other (expense), net
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(6
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)
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(4
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)
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(264
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)
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(53
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)
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Net income
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$
|
3,870
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$
|
5,457
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$
|
10,332
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$
|
18,841
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EBITDA
(1)
|
|
$
|
14,515
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$
|
15,683
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$
|
41,627
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|
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$
|
49,805
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|
Operating Surplus
(1)
|
|
$
|
9,094
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|
|
$
|
9,331
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$
|
25,604
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$
|
30,602
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(1)
|
EBITDA and Operating Surplus are
non-GAAP
financial measures. See Reconciliation of EBITDA to Net Cash from Operating Activities, Operating Surplus for a
description of EBITDA and Operating Surplus and a reconciliation of EBITDA and Operating Surplus to the most comparable measure under U.S. GAAP.
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Period over Period Comparisons
For the Three Month
Period ended September 30, 2017 compared to the Three Month Period ended September 30, 2016
Revenue:
Revenue
for the three month period ended September 30, 2017 decreased by $1.5 million to $20.7 million, as compared to $22.2 million for the same period in 2016, mainly due to the lack of profit share as a result of prevailing market
conditions and the unscheduled
off-hire
due to the prolonged drydock of one of our vessels. Time Charter Equivalent (TCE) was $39,292 for the three month period ended September 30, 2017 and
$40,835 for the three month period ended September 30, 2016.
Time charter expenses:
Time charter expenses were
$0.2 million and $0.4 million, for the three month periods ended September 30, 2017 and 2016, respectively.
Direct
vessel expenses:
Direct vessel expenses, comprised of the amortization of dry dock and special survey costs, of certain vessels in our fleet amounted to $1.0 million and $0.7 million for the three month periods ended
September 30, 2017 and 2016, respectively.
Management fees:
Management fees amounted to $5.2 million for each of
the three month periods ended September 30, 2017 and 2016.
General and administrative expenses:
Total general and
administrative expenses for the three month period ended September 30, 2017 decreased by $0.1 million to $0.8 million, as compared to $0.9 million for the three month period ended September 30, 2016 due to a
$0.1 million decrease in legal and professional fees. The expenses charged by the Manager for administrative services were $0.4 million for each of the three month periods ended September 30, 2017 and 2016.
Depreciation and amortization:
Depreciation and amortization for the three month period ended September 30, 2017 amounted
to $6.3 million as compared to $6.4 million for the three month period ended September 30, 2016. Depreciation of a vessel is calculated using an estimated useful life of 25 years for the date the vessel was originally delivered from
the shipyard. Intangible assets are amortized over the contract periods, which ranged from 6.34 to 15.00 years at inception.
7
Interest expense and finance cost:
Interest expense and finance cost for the three
month period ended September 30, 2017 amounted to $3.4 million as compared to $3.2 million for the three month period ended September 30, 2016. As of September 30, 2017 and 2016, the outstanding weighted average loan balance
was $200.9 million and $202.9 million, respectively, and the weighted average interest rate was 5.79% and 5.50% for each of the three month periods ended September 30, 2017 and 2016, respectively.
Operating surplus:
Navios Midstream generated operating surplus for the three month period ended September 30, 2017 of
$9.1 million as compared to $9.3 million for the three month period ended September 30, 2016. Operating Surplus is a
non-GAAP
financial measure used by certain investors to assist in evaluating
a partnerships ability to make quarterly cash distributions. (See Reconciliation of EBITDA to Net Cash from Operating Activities, EBITDA, Operating Surplus contained herein).
For the Nine Month Period ended September 30, 2017 compared to the Nine Month Period ended September 30, 2016
Revenue:
Revenue for the nine month period ended September 30, 2017 decreased by $8.7 million to $60.4 million, as
compared to $69.1 million for the same period in 2016, mainly due to the lack of profit share as a result of the prevailing market conditions and certain unscheduled
off-hires
among which the prolonged
drydock of one of our vessels. TCE was $39,043 for the nine month period ended September 30, 2017 and $43,295 for the nine month period ended September 30, 2016.
Time charter expenses:
Time charter expenses for the nine month period ended September 30, 2017 were $0.8 million, as
compared to $1.2 million for the nine month period ended September 30, 2016, mainly due to the reasons described above.
Direct vessel expenses:
Direct vessel expenses, comprised of the amortization of dry dock and special survey costs, of certain
vessels in our fleet amounted to $2.8 million for the nine month period ended September 30, 2017, as compared to $2.3 million for the nine month period ended September 30, 2016.
Management fees:
Management fees amounted to $15.6 million for each of the nine month periods ended September 30, 2017
and 2016.
General and administrative expenses:
Total general and administrative expenses for the nine month period ended
September 30, 2017 decreased by $0.3 million to $2.1 million, as compared to $2.4 million for the nine month period ended September 30, 2016, due to a $0.3 million decrease in legal and professional fees. The expenses
charged by Navios Maritime Holdings Inc. (Navios Holdings) for administrative services were $1.1 million for each of the nine month periods ended September 30, 2017 and 2016.
Depreciation and amortization:
Depreciation and amortization for the nine month period ended September 30, 2017 amounted to
$18.8 million as compared to $19.2 million for the nine month period ended September 30, 2016. Depreciation of vessels is calculated using an estimated useful life of 25 years for the date the vessel was originally delivered from the
shipyard. Intangible assets are amortized over the contract periods, which ranged from 6.34 to 15.00 years at inception.
Interest
expense and finance cost:
Interest expense and finance cost for the nine month period ended September 30, 2017 amounted to $9.7 million as compared to $9.6 million for the nine month period ended September 30, 2016. For
the nine month periods ended September 30, 2017 and 2016, the outstanding weighted average loan balance was $201.4 million and $203.5 million, respectively, and the weighted average interest rate was 5.64% and 5.50%, respectively.
Other (expense), net:
Other expense, net for the nine month period ended September 30, 2017 was $0.3 million, as
compared to approximately $0.1 million for the nine month period ended September 30, 2016.
Operating surplus:
Navios Midstream generated operating surplus for the nine month period ended September 30, 2017 of $25.6 million as compared to $30.6 million for the same period ended September 30, 2016. Operating Surplus is a
non-GAAP
financial measure used by certain investors to assist in evaluating a partnerships ability to make quarterly cash distributions. (See Reconciliation of EBITDA to Net Cash from Operating
Activities, EBITDA, Operating Surplus and Available Cash for Distribution contained herein).
Liquidity and Capital Resources
Our primary short-term liquidity needs will be to fund general working capital requirements and drydocking expenditures, while our long-term liquidity needs
are expected to primarily relate to expansion and investment capital expenditures and other maintenance capital expenditures and debt repayment. Expansion capital expenditures are primarily for the purchase or construction of vessels to the extent
the expenditures increase the operating capacity of or revenue generated by our fleet, while maintenance capital expenditures primarily consist of drydocking expenditures and expenditures to replace vessels in order to maintain the operating
capacity of or revenue generated by our fleet. We anticipate that our primary sources of funds for our short-term liquidity needs will be cash flows from operations and borrowings which we believe will be sufficient to meet our existing short-term
liquidity needs for
8
at least the next 12 months. Generally, our long-term sources of funds will be from cash from operations, long-term borrowings and other debt or equity financings. Please read the Equity
Transactions section for a discussion of our Sales Agreement. We expect that we will rely upon external financing sources, including bank and other borrowings, to fund acquisitions and expansion and investment capital expenditures. We cannot
assure you that we will be able to secure adequate financing or obtain additional funds on favorable terms to meet our liquidity needs.
On July 29,
2016, Navios Midstream entered into a Sales Agreement with the Agent, pursuant to which Navios Midstream may issue and sell from time to time through the Agent common units representing limited partner interests having an aggregate offering price of
up to $25.0 million.
During the nine month period ended September 30, 2017, Navios Midstream issued 336,011 common units and received net
proceeds of approximately $4.0 million. Pursuant to the issuance of the common units, Navios Midstream issued 6,858 general partnership units to its general partner in order to maintain its 2.0% general partner interest. The net proceeds from
the issuance of the general partnership units were $0.1 million.
Credit Facilities
Term Loan B:
On June 18, 2015, Navios Midstream and Navios Maritime Midstream Partners Finance (US) Inc., as
co-borrowers,
completed the issuance of the $205.0 million Term Loan B. The Term Loan B is set to mature on June 18, 2020 and is repayable in equal quarterly installments of 0.25% of the initial
principal amount of the Term Loan B, beginning on September 18, 2015, with a final payment of the aggregate principal amount of the Term Loan B, plus accrued and unpaid interest, due on maturity. The Term Loan B bears interest at LIBOR plus
4.50% per annum, is secured by first priority mortgages covering six vessels owned by subsidiaries of Navios Midstream, in addition to other collateral, and is guaranteed by such subsidiaries.
The Term Loan B requires maintenance of a loan to value ratio of no greater than 0.85 to 1.0 and a minimum interest coverage ratio of at least 3.75 to 1.0,
and other restrictive covenants including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions. The Term Loan B also provides for excess cash flow prepayments and customary events of default.
As of September 30, 2017, an amount of $200.4 million was outstanding under this facility. The weighted average interest rate for the nine month
period ended September 30, 2017 was 5.64%.
As of September 30, 2017, Navios Midstream was in compliance with the covenants set forth in the
Term Loan B.
The following table presents cash flow information derived from the unaudited condensed consolidated statements of cash flows of Navios
Midstream for the nine month periods ended September 30, 2017 and 2016.
|
|
|
|
|
|
|
|
|
|
|
Nine Month
Period Ended
September 30,
2017
($000)
(Unaudited)
|
|
|
Nine Month
Period Ended
September 30,
2016
($000)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
11,768
|
|
|
$
|
36,219
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
(500
|
)
|
Net cash used in financing activities
|
|
|
(34,530
|
)
|
|
|
(24,325
|
)
|
(Decrease)/ increase in cash and cash equivalents
|
|
$
|
(22,762
|
)
|
|
$
|
11,394
|
|
Cash provided by operating activities for the nine month period ended September 30, 2017 as compared to the nine
month period ended September 30, 2016:
Net cash provided by operating activities decreased by $24.5 million to
$11.8 million for the nine month period ended September 30, 2017 as compared to $36.2 million for the same period in 2016. The decrease is analyzed as follows:
The net income for the nine month period ended September 30, 2017 was $10.3 million compared to $18.8 million for the nine month
period ended September 30, 2016. In determining net cash provided by operating activities for the nine month period ended September 30, 2017, net income was adjusted for the effect of depreciation and amortization of $18.8 million,
$1.0 million for amortization of deferred financing cost and $2.8 million for the amortization of drydock and special survey costs. In determining net cash provided by operating activities for the nine month period ended September 30,
2016, net income was adjusted for the effect of depreciation and amortization of $19.2 million, $1.1 million for amortization of deferred financing cost and $2.3 million for the amortization of drydock and special survey costs.
9
Amounts due from related parties increased by $12.9 million from $4.9 million for the
year ended December 31, 2016 to $17.8 million as of September 30, 2017, which mainly related to the backstop commitment from Navios Acquisition, as well as, payments of management fees and other expenses including dry docking expenses
to Navios Holdings and its subsidiaries in accordance with our Management Agreement.
Accounts receivable decreased by $0.9 million
from $2.3 million for the year ended December 31, 2016 to $1.4 million as of September 30, 2017 due to the decrease in receivables from charterers.
Accounts payable decreased by $0.4 million from $2.4 million for the year ended December 31, 2016 to $2.0 million as of
September 30, 2017. This decrease was attributable to the decrease in brokers expenses payable by $0.3 million.
Prepaid
expenses and other current assets increased by approximately $2.2 million from $1.2 million for the year ended December 31, 2016 to $3.3 million as of September 30, 2017. The increase was mainly due to the $2.0 million
working capital advances required under our pooling arrangements.
Accrued expenses were $0.5 million and $0.6 million as of
September 30, 2017 and December 31, 2016, respectively.
Deferred voyage revenue primarily relates to cash received from
charterers prior to it being earned. These amounts are recognized as revenue over the voyage or charter period. Deferred voyage revenue amounted to $1.7 million as of September 30, 2017 as compared to $2.5 million for the year ended
December 31, 2016.
Cash used in investing activities for the nine month period ended September 30, 2017 as compared to the nine month
period ended September 30, 2016:
There was no net cash used in investing activities for the nine month period ended
September 30, 2017 as compared to $0.5 million for the same period in 2016.
Cash used in financing activities for the nine month period
ended September 30, 2017 as compared to the nine month period ended September 30, 2016:
Net cash used in financing
activities for the nine month period ended September 30, 2017 was $34.5 million, compared to $24.3 million net cash used in financing activities for the nine month period ended September 30, 2016. Net cash used in financing
activities for the nine month period ended September 30, 2017 primarily resulted from: (a) a $10.0 million increase in restricted cash; (b) $27.1 million of dividends paid; and (c) $1.5 million of loan repayments, partially
mitigated by: (i) $4.0 million proceeds from issuance of common units; and (ii) $0.1 million proceeds from issuance of general partner units. Net cash used in financing activities for the nine month period ended September 30, 2016
primarily resulted from: (a) $26.3 million of dividend paid; and (b) $1.5 million of loan repayments, partially mitigated by: (i) $3.4 million proceeds from issuance of common units; and (ii) $0.1 million proceeds from issuance
of general partner units.
10
Reconciliation of EBITDA to Net Cash from Operating Activities and Operating Surplus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Month
Period ended
September 30, 2017
($ 000)
(unaudited)
|
|
|
Three Month
Period ended
September 30, 2016
($ 000)
(unaudited)
|
|
|
Nine Month
Period ended
September 30, 2017
($ 000)
(unaudited)
|
|
|
Nine Month
Period ended
September 30, 2016
($ 000)
(unaudited)
|
|
Net cash provided by operating activities
|
|
$
|
3,796
|
|
|
$
|
16,825
|
|
|
$
|
11,768
|
|
|
$
|
36,219
|
|
Net increase/ (decrease) in operating assets
|
|
|
7,918
|
|
|
|
(2,061
|
)
|
|
|
19,939
|
|
|
|
4,869
|
|
Net (increase)/ decrease in operating liabilities
|
|
|
(236
|
)
|
|
|
(1,851
|
)
|
|
|
1,250
|
|
|
|
277
|
|
Net interest cost
|
|
|
3,387
|
|
|
|
3,125
|
|
|
|
9,710
|
|
|
|
9,496
|
|
Amortization of deferred finance cost and bond premium
|
|
|
(350
|
)
|
|
|
(355
|
)
|
|
|
(1,040
|
)
|
|
|
(1,056
|
)
|
EBITDA
|
|
$
|
14,515
|
|
|
$
|
15,683
|
|
|
$
|
41,627
|
|
|
$
|
49,805
|
|
Cash interest paid
|
|
$
|
(2,968
|
)
|
|
$
|
(2,853
|
)
|
|
$
|
(8,660
|
)
|
|
$
|
(8,613
|
)
|
Cash interest income
|
|
|
8
|
|
|
|
82
|
|
|
|
20
|
|
|
|
151
|
|
Maintenance and replacement capital expenditures
|
|
$
|
(2,461
|
)
|
|
$
|
(3,581
|
)
|
|
$
|
(7,383
|
)
|
|
$
|
(10,741
|
)
|
Operating Surplus
|
|
$
|
9,094
|
|
|
$
|
9,331
|
|
|
$
|
25,604
|
|
|
$
|
30,602
|
|
|
|
|
|
|
|
|
Three Month
Period ended
September 30, 2017
($ 000)
(unaudited)
|
|
|
Three Month
Period ended
September 30, 2016
($ 000)
(unaudited)
|
|
|
Nine Month
Period ended
September 30, 2017
($ 000)
(unaudited)
|
|
|
Nine Month
Period ended
September 30, 2016
($ 000)
(unaudited)
|
|
Net cash provided by operating activities
|
|
$
|
3,796
|
|
|
$
|
16,825
|
|
|
$
|
11,768
|
|
|
$
|
36,219
|
|
Net cash used in investing activities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(500
|
)
|
Net cash used in financing activities
|
|
$
|
(9,544
|
)
|
|
$
|
(5,816
|
)
|
|
$
|
(34,530
|
)
|
|
$
|
(24,325
|
)
|
EBITDA
EBITDA represents
net income before interest and finance costs, before depreciation and amortization and income taxes. We use EBITDA as a liquidity measure and reconcile EBITDA to net cash provided by/ (used in) operating activities, the most comparable U.S. GAAP
liquidity measure. EBITDA in this document is calculated as follows: net cash provided by/(used in) operating activities adding back, when applicable and as the case may be, the effect of (i) net increase/(decrease) in operating assets,
(ii) net (increase)/decrease in operating liabilities, (iii) net interest cost, (iv) amortization of deferred finance charges and other related expenses, (v) provision for losses on accounts receivable, (vi) equity in
affiliates, net of dividends received, (vii) payments for drydock and special survey costs, (viii) gain/(loss) on sale of assets/subsidiaries, and (ix) impairment charges. Navios Midstream believes that EBITDA is the basis upon which
liquidity can be assessed and presents useful information to investors regarding Navios Midstreams ability to service and/or incur indebtedness, pay capital expenditures, meet working capital requirements and make cash distributions. Navios
Midstream also believes that EBITDA is used: (i) by potential lenders to evaluate potential transactions; (ii) to evaluate and price potential acquisition candidates; and (iii) by securities analysts, investors and other interested
parties in the evaluation of companies in our industry.
EBITDA has limitations as an analytical tool, and should not be considered in isolation or as a
substitute for the analysis of Navios Midstreams results as reported under U.S. 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. 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 Midstreams performance. Furthermore, our calculation of EBITDA may not be comparable to that reported by other companies due to
differences in methods of calculation.
EBITDA represents net income plus interest and finance costs plus depreciation and amortization including
accelerated amortization of time charters and income taxes.
11
EBITDA decreased by $1.2 million to $14.5 million for the three month period ended September 30,
2017, as compared to $15.7 million for the same period in 2016. The decrease in EBITDA was due to a $1.5 million decrease in revenue; partially mitigated by a: (i) $0.2 million decrease in time charter expenses; and (ii)
$0.1 million decrease in general and administrative expenses.
EBITDA decreased by approximately $8.2 million to $41.6 million for the nine
month period ended September 30, 2017, as compared to $49.8 million for the same period in 2016. The decrease in EBITDA was due to a: (i) $8.7 million decrease in revenue; and (ii) $0.2 million increase in other expense. The
above decrease was partially mitigated by a: (a) $0.4 million decrease in time charter expenses; and (b) $0.3 million decrease in general and administrative expenses.
Operating Surplus
Operating Surplus
represents net income adjusted for depreciation and amortization expense,
non-cash
interest expense and estimated maintenance and replacement 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 Midstreams capital assets.
Operating Surplus is a quantitative measure used in the publicly-traded partnership investment community to assist in evaluating a
partnerships 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 a substitute for net income, cash flow from operating
activities and other operations or cash flow statement data prepared in accordance with accounting principles generally accepted in the United States or as a measure of profitability or liquidity.
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 Navios Midstreams business (including reserve for maintenance and replacement capital expenditures);
|
|
|
|
comply with applicable law, any of Navios Midstreams 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 partnerships 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 a substitute for net income, cash flow from operating activities and other operations or
cash flow statement data prepared in accordance with accounting principles generally accepted in the United States or as a measure of profitability or liquidity.
Borrowings
Navios Midstreams long-term third party
borrowings are reflected in its balance sheet as Long-term debt, net of deferred finance costs and discount. As of September 30, 2017 and December 31, 2016, the loan balance outstanding amounted to $200.4 million and
$201.9 million, respectively, under the Term Loan B, discussed above. The current portion of long-term debt amounted to $2.1 million for each of the periods ended September 30, 2017 and December 31, 2016.
Capital Expenditures
Maintenance for our
vessels and expenses related to drydocking are paid to our Manager at cost under the Management Agreement.
12
Maintenance and replacement capital expenditures
Our partnership agreement requires our Board of Directors to deduct from operating surplus each quarter estimated maintenance and replacement
capital expenditures, as opposed to actual maintenance and replacement capital expenditures, in order to reduce disparities in operating surplus caused by fluctuating maintenance and replacement capital expenditures, such as drydocking and vessel
replacement. The actual cost of replacing the vessels in our fleet will depend on a number of factors, including prevailing market conditions, hire rates and the availability and cost of financing at the time of replacement. 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 the amount of estimated maintenance and replacement capital expenditures. We may
elect to finance some or all of our maintenance and replacement capital expenditures through the issuance of additional common units, which could be dilutive to our existing unitholders. We must make substantial capital expenditures to maintain the
operating capacity of our fleet, which will reduce cash available for distribution. In addition, each quarter we are required to deduct estimated maintenance and replacement capital expenditures from operating surplus, which may result in less cash
available to unitholders than if actual maintenance and replacement capital expenditures were deducted.
Maintenance Capital
Expenditures
. Our initial annual estimated drydocking capital expenditure reserve was expected to be $1.7 million. The estimation was based on assumptions and estimates regarding the remaining useful lives of the vessels, a relative net
investment rate, and drydocking and special survey costs based on current industry data.
Replacement Capital Expenditures
. Because
of the substantial capital expenditures we are required to make to maintain our fleet over time, our initial annual estimated replacement capital expenditures for estimating maintenance and replacement capital expenditures was expected to be
$8.1 million per year, for replacing vessels at the end of their useful lives. The future vessel replacement is based on assumptions and estimates regarding the remaining useful lives of the vessels, a relative net investment rate, vessel
replacement values based on current market conditions and residual value of the vessels at the end of their useful lives based on current steel prices.
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.
F. Contractual Obligations and Contingencies
The
following table summarizes our long-term contractual obligations as of September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period
(Unaudited)
|
|
|
|
Less than
1 year
|
|
|
1-3
years
|
|
|
3-5 years
|
|
|
More than
5 years
|
|
|
Total
|
|
|
|
(In thousands of U.S. dollars)
|
|
Loan obligations
(1), (2)
|
|
$
|
2,050
|
|
|
$
|
198,338
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
200,388
|
|
Total contractual obligations
|
|
$
|
2,050
|
|
|
$
|
198,338
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
200,388
|
|
(1)
|
The amount identified does not include interest costs associated with the outstanding Term Loan B, which are based on LIBOR, plus the costs of complying with any applicable regulatory requirements and a margin of 4.50%
per annum.
|
(2)
|
The amount identified excludes the discount associated with the outstanding Term Loan B.
|
13
Fleet Employment Profile
Set forth below are selected historical and statistical data of our fleet for each of the three and nine month periods ended September 30,
2017 and September 30, 2016 that we believe may be useful in better understanding our fleets financial position and results of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Month
Period ended
September 30,
2017
(unaudited)
|
|
|
Three Month
Period ended
September 30,
2016
(unaudited)
|
|
|
Nine Month
Period ended
September 30,
2017
(unaudited)
|
|
|
Nine Month
Period ended
September 30,
2016
(unaudited)
|
|
FLEET DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available days
(1)
|
|
|
522
|
|
|
|
534
|
|
|
|
1,525
|
|
|
|
1,568
|
|
Operating days
(2)
|
|
|
519
|
|
|
|
531
|
|
|
|
1,504
|
|
|
|
1,562
|
|
Fleet utilization
(3)
|
|
|
99.3
|
%
|
|
|
99.6
|
%
|
|
|
98.6
|
%
|
|
|
99.6
|
%
|
Vessels operating at period end
|
|
|
6
|
|
|
|
6
|
|
|
|
6
|
|
|
|
6
|
|
AVERAGE DAILY RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time Charter Equivalent per day
(4)
|
|
$
|
39,292
|
|
|
$
|
40,835
|
|
|
$
|
39,043
|
|
|
$
|
43,295
|
|
(1
)
|
Available days:
total calendar days the vessels were in Navios Midstreams possession for the relevant period after subtracting
off-hire
days associated
with major repairs, drydocking or special surveys. The shipping industry uses available days to measure the number of days in a relevant period during which vessels should be capable of generating revenues.
|
(2)
|
Operating days:
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:
the percentage of time that the Navios Midstreams vessels were available for generating revenue, 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 a companys efficiency in finding suitable employment for its vessels.
|
(4)
|
Time Charter Equivalent:
time charter revenues less time charter expenses during a relevant period divided by the number of available days during the period.
|
Cash Distribution Policy
Rationale for Our Cash
Distribution Policy
Our cash distribution policy reflects a basic judgment that our unitholders will be better served by our
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, including:
|
|
|
Our unitholders have no contractual or other legal right to receive distributions other than the obligation under our partnership agreement to distribute available cash on a quarterly basis, which is subject to the
broad discretion of our board of directors to establish reserves and other limitations.
|
|
|
|
While our partnership agreement requires us to distribute all of our available cash, our partnership agreement, including provisions requiring us to make cash distributions contained therein, may be amended. Although
during the subordination period, with certain exceptions, our partnership agreement may not be amended without the approval of
non-affiliated
common unitholders, our partnership agreement can be amended with
the approval of a majority of the outstanding common units after the subordination period has ended. Currently, Navios Acquisition owns 12.4% of our outstanding common units and 100.0% of our outstanding subordinated units and subordinated Series A
units.
|
14
|
|
|
Even if our cash distribution policy is not modified or revoked, the amount of distributions we pay under our cash distribution policy and the decision to make any distribution is determined by our board of directors,
taking into consideration the terms of our partnership agreement.
|
|
|
|
Under Section 51 of the Marshall Islands Limited Partnership Act, we may not make a distribution to you if the distribution would cause our liabilities to exceed the fair value of our assets.
|
|
|
|
We may lack sufficient cash to pay distributions to our unitholders due to decreases in net revenues or increases in operating expenses, principal and interest payments on outstanding debt, tax expenses, working capital
requirements, maintenance and replacement capital expenditures or anticipated cash needs.
|
|
|
|
Our distribution policy will be affected by restrictions on distributions under our new credit facility that we entered into in connection with the closing of the offering. Specifically, our new credit facility contains
material financial tests that must be satisfied and we will not pay any distributions that will cause us to violate our credit facility or other debt instruments. Should we be unable to satisfy these restrictions included in the proposed new credit
facility or if we are otherwise in default under our new credit facility, our ability to make cash distributions to you, notwithstanding our cash distribution policy, would be materially adversely affected.
|
|
|
|
If we make distributions out of capital surplus, as opposed to operating surplus, such distributions will constitute a return of capital and will result in a reduction in the minimum quarterly distribution and the
target distribution levels. We do not anticipate that we will make any distributions from capital surplus.
|
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
The amount of the minimum quarterly distribution is $0.4125 per unit, or $1.65 per unit per year. The amount of available
cash from operating surplus, which we also refer to as cash available for distributions, needed to pay the minimum quarterly distribution on all of the common units and subordinated units and the 2.0% general partner interest to be outstanding as of
September 30, 2017 for one quarter and for four quarters will be approximately:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
Units
|
|
|
Distributions
|
|
|
|
|
One
Quarter
|
|
|
Four
Quarters
|
|
Common units
|
|
|
10,011,806
|
|
|
$
|
4,129,870
|
|
|
$
|
16,519,480
|
|
Subordinated Series A units
|
|
|
1,592,920
|
|
|
|
657,080
|
|
|
|
2,628,318
|
|
Subordinated units
|
|
|
9,342,692
|
|
|
|
3,853,860
|
|
|
|
15,415,442
|
|
General Partner interest
(1)
|
|
|
427,499
|
|
|
|
176,343
|
|
|
|
705,373
|
|
Total
|
|
|
21,374,917
|
|
|
$
|
8,817,153
|
|
|
$
|
35,268,613
|
|
(1)
|
The number of general partner units is determined by multiplying the total number of units deemed to be outstanding (i.e., the total number of common and subordinated units outstanding divided by 98.0%) by the general
partners 2.0% general partner interest.
|
During the subordination period, before we make any quarterly distributions
to subordinated unitholders, our common unitholders are entitled to receive payment of the full minimum quarterly distribution plus any arrearages in distributions from prior quarters. The amount of the minimum quarterly distribution is $0.4125 per
unit, or $1.65 per unit per year. We cannot guarantee, however, that we will pay the minimum quarterly distribution or any amount on the common units in any quarter.
In general, our general partner is entitled to 2.0% of all distributions that we make prior to our liquidation. The general partners
initial 2.0% interest in these distributions may, however, be reduced if we issue additional units in the future and our general partner does not contribute a proportionate amount of capital to us to maintain its initial 2.0% general partner
interest. Our general partner has the right, but not the obligation, to contribute a proportionate amount of capital to us to maintain its current general partner interest.
On January 23, 2017, the Board of Directors of Navios Midstream authorized a quarterly cash distribution for the three month period ended
December 31, 2016 of $0.4225 per unit. The distribution was paid on February 14, 2017 to all record holders of common units, subordinated units, subordinated Series A units and general partner units on February 9, 2017. The aggregate
amount of the distribution paid was $9.0 million.
15
On April 24, 2017, the Board of Directors authorized a quarterly cash distribution for the
three month period ended March 31, 2017 of $0.4225 per unit. The distribution was paid on May 11, 2017 to all record holders of common units, subordinated units, subordinated Series A units and general partner units on May 5, 2017.
The aggregate amount of the distribution paid was $9.0 million.
On July 20, 2017, the Board of Directors authorized a quarterly
cash distribution for the three month period ended June 30, 2017 of $0.4225 per unit. The distribution was paid on August 11, 2017 to all record holders of common units, subordinated units, subordinated Series A units and general partner
units on August 8, 2017. The aggregate amount of the distribution paid was $9.0 million.
On October 17, 2017, the Board of
Directors authorized a quarterly cash distribution for the three month period ended September 30, 2017 of $0.4225 per unit. The distribution is payable on November 14, 2017 to all record holders of common units, subordinated units,
subordinated Series A units and general partner units on November 10, 2017. The aggregate amount of the declared distribution is anticipated to be $9.0 million.
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.
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
Total Amount
|
|
|
Unitholders
|
|
|
General
Partner
|
|
|
Holders of
IDRs
|
|
Minimum Quarterly Distribution
|
|
$
|
|
|
0.4125
|
|
|
|
98.0
|
%
|
|
|
2.0
|
%
|
|
|
0
|
%
|
First Target Distribution
|
|
up to $
|
|
|
0.4744
|
|
|
|
98.0
|
%
|
|
|
2.0
|
%
|
|
|
0
|
%
|
Second Target Distribution
|
|
above $
|
|
|
0.4744
|
|
|
|
85.0
|
%
|
|
|
2.0
|
%
|
|
|
13.0
|
%
|
|
|
up to $
|
|
0.5156
|
|
|
|
|
|
|
|
|
|
|
Third Target Distribution
|
|
above $
|
|
|
0.5156
|
|
|
|
75.0
|
%
|
|
|
2.0
|
%
|
|
|
23.0
|
%
|
|
|
up to $
|
|
0.6188
|
|
|
|
|
|
|
|
|
|
|
Thereafter
|
|
above $
|
|
|
0.6188
|
|
|
|
50.0
|
%
|
|
|
2.0
|
%
|
|
|
48.0
|
%
|
Related Party Transactions
Management fees:
On November 18, 2014, the Company entered into a Management Agreement with the Manager pursuant to which the
Manager provides commercial and technical management services to Navios Midstreams vessels for a daily fee of $9,500 per VLCC tanker vessel that had originally been fixed until November 2016.
In October 2016, Navios Midstream amended its existing Management Agreement with the Manager to extend the fixed fee period for commercial and
technical management services of its fleet, until December 31, 2018 at the current rate of $9,500 per day per VLCC. Dry docking expenses are reimbursed at cost for all vessels.
Management fees for the three and nine month periods ended September 30, 2017 amounted to $5.2 million and $15.6 million,
respectively. Management fees for the three and nine month periods ended September 30, 2016 amounted to $5.2 million and $15.6 million, respectively.
General and administrative expenses:
On November 18, 2014, Navios Midstream entered into a Administrative Services Agreement with
the Manager, expiring on November 18, 2019, pursuant to which the Manager provides certain administrative management services to Navios Midstream 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 services. The Manager is reimbursed for reasonable costs and expenses.
16
For each of the three month periods ended September 30, 2017 and September 30, 2016,
the expenses arising from the administrative services rendered by the Manager to the Companys vessels amounted to $0.4 million, respectively. For each of the nine month periods ended September 30, 2017 and September 30, 2016,
the expenses charged by Navios Holdings for administrative services were $1.1 million, respectively.
Balances due from related
parties:
Balance due from related parties as of September 30, 2017 and as of December 31, 2016, were $17.8 million and $4.9 million, respectively, and included the current and
non-current
amounts mainly due from Navios Holdings and Navios Acquisition and its subsidiaries. Amounts due from related parties mainly consisted of the backstop commitment from Navios Acquisition (see
paragraph below in current section), as well as special survey and dry docking expenses for certain vessels of our fleet, and management fees in accordance with the Management Agreement.
Omnibus agreement:
On November 18, 2014, Navios Midstream entered into an omnibus agreement, with Navios Acquisition, Navios
Holdings and Navios Maritime Partners L.P. (Navios Partners) in connection with the Navios Midstream IPO, pursuant to which Navios Acquisition, Navios Holdings, Navios Partners and their controlled affiliates generally have agreed not to
acquire or own any VLCCs, crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankers under time charters of five or more years. The omnibus agreement contains significant exceptions that will allow Navios Acquisition,
Navios Holdings, Navios Partners or any of their controlled affiliates to compete with Navios Midstream under specified circumstances.
Under the omnibus agreement, Navios Midstream and its subsidiaries granted to Navios Acquisition a right of first offer on any proposed sale,
transfer or other disposition of any of its VLCCs or any crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankers and related charters owned or acquired by Navios Midstream. Likewise, Navios Acquisition granted a similar
right of first offer to Navios Midstream for any of the VLCCs, crude oil tanker, refined petroleum product tanker, LPG tanker or chemical tanker under charter for five or more years it might own. These rights of first offer will not apply to a
(a) sale, transfer or other disposition of vessels between any affiliated subsidiaries, or pursuant to the terms of any charter or other agreement with a charter party or (b) merger with or into, or sale of substantially all of the assets
to, an unaffiliated third-party.
Navios Maritime Containers Inc. (Navios Containers) was established in the Republic of the
Marshall Islands on April 28, 2017. The Company is a growth vehicle dedicated to the container sector of the maritime industry. In connection with Navios Containerss private placement and listing on the Norwegian
over-the-counter
market, Navios Midstream entered into an omnibus agreement with Navios Containers, Navios Acquisition, Navios Holdings and Navios Partners, pursuant to which
Navios Acquisition, Navios Holdings, Navios Partners and Navios Midstream granted to Navios Containers a right of first refusal over any container vessels to be sold or acquired in the future. The omnibus agreement contains significant exceptions
that will allow Navios Acquisition, Navios Holdings, Navios Partners and Navios Midstream to compete with Navios Containers under specified circumstances.
Backstop agreements:
On November 18, 2014, Navios Acquisition entered into backstop agreements with Navios Midstream. In
accordance with the terms of the backstop agreements, Navios Acquisition has provided a backstop commitment at a net rate of $35,000 per day for the Nave Celeste, $38,400 per day for the Shinyo Ocean and $38,025 per day for the Shinyo Kannika.
Following the expiration of their original charter contracts and the redelivery of the Nave Celeste, the Shinyo Ocean and the Shinyo Kannika in the first quarter of 2017, Navios Midstream has entered into new charter contracts for the above vessels
with third parties. Those contracts provide for index linked charter rates or pool earnings as the case may be. The backstop rates apply for a
two-year
period as of the redelivery of each of the vessels from
its original charterer, if the actual rates achieved are below the agreed backstop rates for each of the vessels. For the three and nine month periods ended September 30, 2017 backstop commitment was $6.0 million and $11.2 million,
respectively ($0 for the respective periods in 2016) and is included in the balance due from related parties (see paragraph above in current section).
General Partner option agreement:
Navios Holdings has a
ten-year
option to purchase a minimum
of 25% of the general partner interest held by the general partner, the incentive distribution rights held by the general partner and/or the membership interests in the general partner from Navios Acquisition, each at fair market value. The option
expires on November 18, 2024.
Option vessels:
Navios Midstream has options expiring on November 18, 2018 to acquire the
Nave Buena Suerte, the Nave Neutrino and the Nave Electron from Navios Acquisition.
17
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. dollar 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. Expenses incurred in foreign currencies against which the U.S. dollar falls in value can increase thereby decreasing our income or vice versa if the U.S. dollar
increases in value.
Interest Rate Risk
Borrowings under our credit facility bear interest at rates based on a premium over U.S. $ LIBOR except for the interest rate on the Notes,
which is fixed. Therefore, we are exposed to the risk that our interest expense may increase if interest rates rise. For the nine month period ended September 30, 2017, we paid interest on our outstanding debt at a weighted average interest
rate of 5.64%. A 1% increase in LIBOR would have increased our interest expense for the nine month period ended September, 2017 by $1.5 million. For the nine month period ended September 30, 2016, we paid interest on our outstanding debt
at a weighted average interest rate of 5.50%.
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 nine month period ended September 30, 2017, customers
representing 10% or more of total revenue were Cosco Dalian, VL8 and Shell that accounted for 46.7%, 15.5% and 10.3%, respectively, of our revenue.
For the year ended December 31, 2016, our customers representing 10% or more of total revenue were Cosco Dalian, Formosa Petrochemical
and SK Shipping that accounted for 70.6%, 15.7% and 13.7%, respectively, of our revenue.
Inflation
Inflation has had a minimal impact on vessel operating 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.
Critical Accounting Policies
Our interim condensed consolidated financial statements have been prepared in accordance with U.S. 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 the 2016 Annual Report.
18
NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of U.S. dollars except unit amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
|
September 30,
2017
(unaudited)
|
|
|
December 31,
2016
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
3
|
|
|
$
|
30,029
|
|
|
$
|
52,791
|
|
Restricted cash
|
|
|
3
|
|
|
|
10,000
|
|
|
|
|
|
Accounts receivable, net
|
|
|
|
|
|
|
1,371
|
|
|
|
2,264
|
|
Prepaid expenses and other current assets
|
|
|
|
|
|
|
3,346
|
|
|
|
1,168
|
|
Due from related parties, current
|
|
|
8
|
|
|
|
15,228
|
|
|
|
4,864
|
|
Total current assets
|
|
|
|
|
|
|
59,974
|
|
|
|
61,087
|
|
Vessels, net
|
|
|
4
|
|
|
|
361,776
|
|
|
|
378,444
|
|
Intangible assets
|
|
|
5
|
|
|
|
23,021
|
|
|
|
25,164
|
|
Deferred drydock and special survey costs, net
|
|
|
|
|
|
|
14,038
|
|
|
|
11,086
|
|
Due from related parties,
non-current
|
|
|
8
|
|
|
|
2,565
|
|
|
|
|
|
Total
non-current
assets
|
|
|
|
|
|
|
401,400
|
|
|
|
414,694
|
|
Total assets
|
|
|
|
|
|
$
|
461,374
|
|
|
$
|
475,781
|
|
LIABILITIES AND PARTNERS CAPITAL
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
|
|
$
|
2,000
|
|
|
$
|
2,386
|
|
Accrued expenses
|
|
|
|
|
|
|
502
|
|
|
|
602
|
|
Deferred revenue
|
|
|
|
|
|
|
1,730
|
|
|
|
2,494
|
|
Current portion of long-term debt, net of deferred finance costs and discount
|
|
|
6
|
|
|
|
672
|
|
|
|
661
|
|
Total current liabilities
|
|
|
|
|
|
|
4,904
|
|
|
|
6,143
|
|
Long-term debt, net of current portion and net of deferred finance costs
|
|
|
6
|
|
|
|
196,007
|
|
|
|
196,515
|
|
Total
non-current
liabilities
|
|
|
|
|
|
|
196,007
|
|
|
|
196,515
|
|
Total liabilities
|
|
|
|
|
|
$
|
200,911
|
|
|
$
|
202,658
|
|
Commitments and contingencies
|
|
|
9
|
|
|
|
|
|
|
|
|
|
Total Partners capital
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Unitholders (10,011,806 units and 9,675,795 units issued and outstanding at
September 30, 2017 and December 31, 2016, respectively)
|
|
|
|
|
|
|
121,797
|
|
|
|
125,635
|
|
Subordinated Series A Unitholders (1,592,920 units issued and outstanding at September 30,
2017 and at December 31, 2016, respectively)
|
|
|
|
|
|
|
25,345
|
|
|
|
26,593
|
|
Subordinated Unitholders (9,342,692 units issued and outstanding at September 30, 2017 and
December 31, 2016, respectively)
|
|
|
|
|
|
|
108,230
|
|
|
|
115,552
|
|
General Partner (427,499 units and 420,641 units issued and outstanding at September 30, 2017
and at December 31, 2016, respectively)
|
|
|
|
|
|
|
5,091
|
|
|
|
5,343
|
|
Partners capital
|
|
|
|
|
|
|
260,463
|
|
|
|
273,123
|
|
Total liabilities and Partners capital
|
|
|
|
|
|
$
|
461,374
|
|
|
$
|
475,781
|
|
See unaudited condensed notes to the condensed consolidated financial statements.
F-2
NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Expressed in thousands of U.S. Dollars, except unit and per unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
|
Three Month
Period ended
September 30,
2017
(unaudited)
|
|
|
Three Month
Period ended
September 30,
2016
(unaudited)
|
|
|
Nine Month
Period ended
September 30,
2017
(unaudited)
|
|
|
Nine Month
Period ended
September 30,
2016
(unaudited)
|
|
Revenue (includes related party revenue of $6,018 and $11,248 for the three and nine months ended
September 30, 2017, respectively, and $0 for the three and nine months ended September 30, 2016)
|
|
|
8
|
|
|
$
|
20,742
|
|
|
$
|
22,209
|
|
|
$
|
60,352
|
|
|
$
|
69,053
|
|
Time charter expenses
|
|
|
|
|
|
|
(224
|
)
|
|
|
(412
|
)
|
|
|
(793
|
)
|
|
|
(1,161
|
)
|
Direct vessel expenses
|
|
|
|
|
|
|
(999
|
)
|
|
|
(724
|
)
|
|
|
(2,774
|
)
|
|
|
(2,312
|
)
|
Management fees (entirely through related party transactions)
|
|
|
8
|
|
|
|
(5,244
|
)
|
|
|
(5,244
|
)
|
|
|
(15,561
|
)
|
|
|
(15,618
|
)
|
General and administrative expenses
|
|
|
8
|
|
|
|
(753
|
)
|
|
|
(866
|
)
|
|
|
(2,107
|
)
|
|
|
(2,416
|
)
|
Depreciation and amortization
|
|
|
4, 5
|
|
|
|
(6,259
|
)
|
|
|
(6,377
|
)
|
|
|
(18,811
|
)
|
|
|
(19,156
|
)
|
Interest income
|
|
|
|
|
|
|
8
|
|
|
|
82
|
|
|
|
19
|
|
|
|
151
|
|
Interest expenses and finance cost
|
|
|
6
|
|
|
|
(3,395
|
)
|
|
|
(3,207
|
)
|
|
|
(9,729
|
)
|
|
|
(9,647
|
)
|
Other (expense), net
|
|
|
|
|
|
|
(6
|
)
|
|
|
(4
|
)
|
|
|
(264
|
)
|
|
|
(53
|
)
|
Net income
|
|
|
|
|
|
$
|
3,870
|
|
|
$
|
5,457
|
|
|
$
|
10,332
|
|
|
$
|
18,841
|
|
Earnings attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common unit holders
|
|
|
|
|
|
$
|
1,813
|
|
|
$
|
2,480
|
|
|
$
|
4,839
|
|
|
$
|
8,523
|
|
Subordinated Series A unit holders
|
|
|
|
|
|
$
|
289
|
|
|
$
|
418
|
|
|
$
|
771
|
|
|
$
|
1,448
|
|
Subordinated unit holders
|
|
|
|
|
|
$
|
1,692
|
|
|
$
|
2,455
|
|
|
$
|
4,519
|
|
|
$
|
8,498
|
|
General Partner
|
|
|
|
|
|
$
|
76
|
|
|
$
|
104
|
|
|
$
|
203
|
|
|
$
|
372
|
|
Earnings per unit (basic and diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common unitholders
|
|
|
|
|
|
$
|
0.18
|
|
|
$
|
0.26
|
|
|
$
|
0.48
|
|
|
$
|
0.91
|
|
Subordinated Series A unitholders
|
|
|
|
|
|
$
|
0.18
|
|
|
$
|
0.26
|
|
|
$
|
0.49
|
|
|
$
|
0.91
|
|
Subordinated unitholders
|
|
|
|
|
|
$
|
0.18
|
|
|
$
|
0.26
|
|
|
$
|
0.49
|
|
|
$
|
0.91
|
|
General Partner
|
|
|
|
|
|
$
|
0.18
|
|
|
$
|
0.26
|
|
|
$
|
0.47
|
|
|
$
|
0.91
|
|
See unaudited condensed notes to the condensed consolidated financial statements.
F-3
NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
|
Nine Month
Period ended
September 30,
2017
(unaudited)
|
|
|
Nine Month
Period ended
September 30,
2016
(unaudited)
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
$
|
10,332
|
|
|
$
|
18,841
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
4,5
|
|
|
|
18,811
|
|
|
|
19,156
|
|
Amortization of deferred finance fees
|
|
|
|
|
|
|
1,040
|
|
|
|
1,056
|
|
Amortization of drydock and special survey costs
|
|
|
|
|
|
|
2,774
|
|
|
|
2,312
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in prepaid expenses and other current assets
|
|
|
|
|
|
|
(2,178
|
)
|
|
|
(14
|
)
|
Payments for drydocking
|
|
|
|
|
|
|
(5,725
|
)
|
|
|
(8,113
|
)
|
Decrease in accounts receivable
|
|
|
|
|
|
|
893
|
|
|
|
3,258
|
|
Increase in due from related parties, current
|
|
|
8
|
|
|
|
(10,364
|
)
|
|
|
(2,384
|
)
|
(Decrease) / increase in accounts payable
|
|
|
|
|
|
|
(386
|
)
|
|
|
1,679
|
|
(Decrease) in accrued expenses
|
|
|
|
|
|
|
(100
|
)
|
|
|
(135
|
)
|
Increase in due from related parties,
non-current
|
|
|
8
|
|
|
|
(2,565
|
)
|
|
|
|
|
(Decrease) / increase in deferred revenue
|
|
|
|
|
|
|
(764
|
)
|
|
|
563
|
|
Net cash provided by operating activities
|
|
|
|
|
|
$
|
11,768
|
|
|
$
|
36,219
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of vessels
|
|
|
|
|
|
|
|
|
|
|
(500
|
)
|
Net cash used in investing activities
|
|
|
|
|
|
$
|
|
|
|
$
|
(500
|
)
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan repayment
|
|
|
|
|
|
|
(1,538
|
)
|
|
|
(1,538
|
)
|
Dividend paid
|
|
|
|
|
|
|
(27,080
|
)
|
|
|
(26,295
|
)
|
Proceeds from issuance of general partner units
|
|
|
|
|
|
|
84
|
|
|
|
75
|
|
Proceeds from issuance of common units
|
|
|
|
|
|
|
4,004
|
|
|
|
3,433
|
|
Increase in restricted cash
|
|
|
|
|
|
|
(10,000
|
)
|
|
|
|
|
Net cash used in financing activities
|
|
|
|
|
|
$
|
(34,530
|
)
|
|
$
|
(24,325
|
)
|
Net (decrease) / increase in cash and cash equivalents
|
|
|
|
|
|
|
(22,762
|
)
|
|
|
11,394
|
|
Cash and cash equivalents, beginning of period
|
|
|
|
|
|
$
|
52,791
|
|
|
$
|
37,834
|
|
Cash and cash equivalents, end of period
|
|
|
|
|
|
$
|
30,029
|
|
|
$
|
49,228
|
|
Supplemental disclosures of cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash interest paid
|
|
|
|
|
|
$
|
8,660
|
|
|
$
|
8,613
|
|
See unaudited condensed notes to the condensed consolidated financial statements.
F-4
NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS CAPITAL
(Expressed in thousands of U.S. Dollars except unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited Partners
|
|
|
|
|
|
|
|
|
|
|
|
|
General Partner
|
|
|
Common
Unitholders
|
|
|
Subordinated
Unitholders
|
|
|
Subordinated
Series A
Unitholders
|
|
|
Total
Partners
Capital
|
|
|
|
Units
|
|
|
$
|
|
|
Units
|
|
|
$
|
|
|
Units
|
|
|
$
|
|
|
Units
|
|
|
$
|
|
|
$
|
|
Consolidated Balance December
31, 2015
|
|
|
413,843
|
|
|
|
5,464
|
|
|
|
9,342,692
|
|
|
|
126,317
|
|
|
|
9,342,692
|
|
|
|
120,154
|
|
|
|
1,592,920
|
|
|
|
27,379
|
|
|
|
279,314
|
|
Net Income
|
|
|
|
|
|
|
372
|
|
|
|
|
|
|
|
8,523
|
|
|
|
|
|
|
|
8,498
|
|
|
|
|
|
|
|
1,448
|
|
|
|
18,841
|
|
Equity offering
|
|
|
5,655
|
|
|
|
75
|
|
|
|
277,103
|
|
|
|
3,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,508
|
|
Cash distribution
|
|
|
|
|
|
|
(525
|
)
|
|
|
|
|
|
|
(11,910
|
)
|
|
|
|
|
|
|
(11,841
|
)
|
|
|
|
|
|
|
(2,019
|
)
|
|
|
(26,295
|
)
|
Consolidated Balance September 30, 2016
|
|
|
419,498
|
|
|
|
5,386
|
|
|
|
9,619,795
|
|
|
|
126,363
|
|
|
|
9,342,692
|
|
|
|
116,811
|
|
|
|
1,592,920
|
|
|
|
26,808
|
|
|
|
275,368
|
|
Consolidated Balance December
31, 2016
|
|
|
420,641
|
|
|
|
5,343
|
|
|
|
9,675,795
|
|
|
|
125,635
|
|
|
|
9,342,692
|
|
|
|
115,552
|
|
|
|
1,592,920
|
|
|
|
26,593
|
|
|
|
273,123
|
|
Net Income
|
|
|
|
|
|
|
203
|
|
|
|
|
|
|
|
4,839
|
|
|
|
|
|
|
|
4,519
|
|
|
|
|
|
|
|
771
|
|
|
|
10,332
|
|
Equity offering
|
|
|
6,858
|
|
|
|
84
|
|
|
|
336,011
|
|
|
|
4,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,088
|
|
Cash distribution
|
|
|
|
|
|
|
(539
|
)
|
|
|
|
|
|
|
(12,681
|
)
|
|
|
|
|
|
|
(11,841
|
)
|
|
|
|
|
|
|
(2,019
|
)
|
|
|
(27,080
|
)
|
Consolidated Balance September
30, 2017
|
|
|
427,499
|
|
|
|
5,091
|
|
|
|
10,011,806
|
|
|
|
121,797
|
|
|
|
9,342,692
|
|
|
|
108,230
|
|
|
|
1,592,920
|
|
|
|
25,345
|
|
|
|
260,463
|
|
See unaudited condensed notes to the condensed consolidated financial statements.
F-5
NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
CONDENSED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. Dollars except unit and per unit data)
NOTE 1: DESCRIPTION OF BUSINESS
Navios Maritime Midstream Partners L.P. (Navios Midstream or the Company) (NYSE: NAP), was formed in The Republic of the Marshall
Islands on October 13, 2014. Navios Maritime Midstream Partners GP LLC (the General Partner), a Marshall Islands limited liability company and wholly-owned subsidiary of Navios Maritime Acquisition Corporation (Navios
Acquisition), was also formed on that date to act as the General Partner of Navios Midstream and receive a 2.0% general partner interest.
In
connection with the initial public offering (IPO) of Navios Midstream in November 2014, Navios Midstream acquired all of the outstanding shares of capital stock of four of Navios Acquisitions vessel-owning subsidiaries (Shinyo
Ocean Limited, Shinyo Kannika Limited, Shinyo Kieran Limited and Shinyo Saowalak Limited) in exchange for: (i) all of the estimated net proceeds from the IPO amounting to $110,403; (ii) $104,451 of the $126,000 borrowings under Navios
Midstreams new credit facility; (iii) 9,342,692 subordinated units and 1,242,692 common units; and (iv) 381,334 general partner units, representing a 2.0% general partner interest in Navios Midstream, and all of the incentive distribution
rights in Navios Midstream, to our General Partner.
On or prior to the closing of the IPO, Navios Midstream entered into the following agreements: a) a
share purchase agreement with Navios Acquisition pursuant to which Navios Midstream will have options, exercisable at any time during a
two-year
period until November 18, 2016, to acquire the capital
stock of up to seven of its subsidiaries that own seven VLCCs (Very Large Crude Carriers) and the related time charters; b) a management agreement (the Management Agreement) with Navios Tankers Management Inc. (the
Manager), a subsidiary of Navios Maritime Holdings Inc. (Navios Holdings), pursuant to which the Manager provides Navios Midstream commercial and technical management services; c) an administrative services agreement (the
Administrative Services Agreement) with the Manager pursuant to which the Manager provides Navios Midstream administrative services; and d) an omnibus agreement with Navios Holdings, Navios Acquisition, Navios Maritime Partners L.P.
(Navios Partners) and the General Partner governing, among other things, when Navios Midstream, Navios Holdings, Navios Acquisition and Navios Partners may compete against each other as well as rights of first offer on VLCCs, crude oil
tankers, refined petroleum product tankers, chemical tankers and liquefied petroleum gas (LPG) tankers.
In June 2015, Navios Midstream
exercised its option to acquire the shares of the vessel-owning subsidiaries of the Nave Celeste and the C. Dream from Navios Acquisition for an aggregate purchase price of $100,000. The aggregate purchase price consisted of 1,592,920 subordinated
Series A Units, issued to Navios Acquisition, and $73,000 cash consideration. The rights and terms of the subordinated Series A Units are substantially similar to those of the subordinated units in terms of rights such as voting and distributions;
provided, however, the subordinated Series A Units are senior in preference in liquidation to the subordinated units and unlike the subordinated units that convert at the end of the subordination period (as such period is determined pursuant to the
partnership agreement), all of the outstanding subordinated Series A Units will automatically convert into common units on a
one-for-one
basis on the earlier of
(i) June 18, 2018, or (ii) the Liquidation Date, as defined in the partnership agreement.
Navios Midstreams principal activity is to
own, operate and acquire crude oil tankers under long-term employment contracts as well as refined petroleum product tankers, chemical tankers, and LPG tankers under long-term employment contracts. The Company intends to charter the vessels under
long-term employment contracts to international oil companies, refiners, and large vessel operators.
As of September 30, 2017, there were
outstanding: 10,011,806 common units, 9,342,692 subordinated units, 1,592,920 subordinated Series A Units and 427,499 general partnership units. As of September 30, 2017, Navios Acquisition owned a 58.97% limited partner interest in Navios
Midstream, which included a 2.0% general partner interest.
As of September 30, 2017, the Company owned six VLCC tanker vessels.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
The accompanying interim condensed consolidated financial statements are unaudited, but, in the opinion of management,
reflect all adjustments for a fair statement of Navios Midstreams condensed consolidated financial position, statements of income and cash flows for the periods presented. Adjustments consist of normal, recurring entries. The yearend condensed
balance sheet data was derived from audited financial statements, but does not include all disclosure required by accounting principles generally accepted in the United States of America (GAAP). The results of operations for the interim
periods
F-6
NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
CONDENSED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. Dollars except unit and per unit data)
are not necessarily indicative of results for the full year. The footnotes are condensed as permitted by the
requirements for interim financial statements and accordingly, do not include information and disclosures required under GAAP for complete financial statements. These interim financial statements should be read in conjunction with the Companys
consolidated financial statements and notes included in Navios Midstreams 2016 Annual Report filed on Form
20-F
with the U.S. Securities and Exchange Commission.
(b) Principles of consolidation:
The accompanying interim condensed consolidated financial statements include the accounts of Navios Midstream, a
Marshall Islands corporation, and its subsidiaries that are all 100% owned. All significant intercompany balances and transactions have been eliminated in the condensed consolidated statements.
(c) Revenue recognition:
Revenue is recorded when (i) services are rendered, (ii) the Company has signed charter agreement or other
evidence of an arrangement, (iii) the price is fixed or determinable and (iv) collection is reasonably assured. Revenue is generated from the time charter of vessels.
Revenues from time chartering of vessels are accounted for as operating leases and are therefore recognized on a straight-line basis as the average revenue
over the rental periods of such charter agreements, as service is performed. A time charter involves placing a vessel at the charterers disposal for a period of time during which the charterer uses the vessel in return for the payment of a
specified daily hire rate. Under time charters, operating costs such as for crews, maintenance and insurance are typically paid by the owner of the vessel.
Profit-sharing revenues are calculated at an agreed percentage of the excess of the charterers average daily income (calculated on a quarterly,
half-yearly or annually basis) over an agreed amount and accounted for on an accrual basis based on provisional amounts and for those contracts that provisional accruals cannot be made due to the nature of the profit share elements, these are
accounted for or when such revenue becomes determinable.
Revenues are recorded net of address commissions. Address commissions represent a discount
provided directly to the charterers based on a fixed percentage of the agreed upon charter. Since address commissions represent a discount (sales incentive) on services rendered by the Company and no identifiable benefit is received in exchange for
the consideration provided to the charterer, these commissions are presented as a reduction of revenue.
Pooling arrangements
For vessels operating in pooling arrangements, the Company earns a portion of total revenues generated by the pool, net of expenses incurred by the pool. The
amount allocated to each pool participant vessel, including the Companys vessels, is determined in accordance with an agreed-upon formula, which is determined by margins awarded to each vessel in the pool based on the vessels age, design
and other performance characteristics. Revenue under pooling arrangements is accounted for on the accrual basis and is recognized when an agreement with the pool exists, price is fixed, service is provided and the collectability is reasonably
assured.
As of September 30, 2017, the entities included in these condensed consolidated financial statements were:
|
|
|
|
|
|
|
|
|
|
|
|
|
Company name
|
|
Vessel name
|
|
Country of
incorporation
|
|
2017
|
|
|
2016
|
|
Navios Maritime Midstream Operating LLC
|
|
N/A
|
|
Marshall Islands
|
|
|
1/1-9/30
|
|
|
|
1/1-9/30
|
|
Navios Maritime Midstream Partners L.P.
|
|
N/A
|
|
Marshall Islands
|
|
|
1/1-9/30
|
|
|
|
1/1-9/30
|
|
Navios Maritime Midstream Partners Finance (US) Inc.
|
|
N/A
|
|
Delaware
|
|
|
1/1-9/30
|
|
|
|
1/1-9/30
|
|
Shinyo Kannika Limited
|
|
Shinyo Kannika
|
|
Hong Kong
|
|
|
1/1-9/30
|
|
|
|
1/1-9/30
|
|
Shinyo Ocean Limited
|
|
Shinyo Ocean
|
|
Hong Kong
|
|
|
1/1-9/30
|
|
|
|
1/1-9/30
|
|
Shinyo Saowalak Limited
|
|
Shinyo Saowalak
|
|
British Virgin Is.
|
|
|
1/1-9/30
|
|
|
|
1/1-9/30
|
|
Shinyo Kieran Limited
|
|
Shinyo Kieran
|
|
British Virgin Is.
|
|
|
1/1-9/30
|
|
|
|
1/1-9/30
|
|
Shinyo Dream Limited
|
|
C. Dream
|
|
Hong Kong
|
|
|
1/1-9/30
|
|
|
|
1/1-9/30
|
|
Sikinos Shipping Corporation
|
|
Nave Celeste
|
|
Marshall Islands
|
|
|
1/1-9/30
|
|
|
|
1/1-9/30
|
|
F-7
NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
CONDENSED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. Dollars except unit and per unit data)
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU
2014-09
Revenue from Contracts with Customers clarifying the method used
to determine the timing and requirements for revenue recognition on the statements of income. Under the new standard, an entity must identify the performance obligations in a contract, the transaction price and allocate the price to specific
performance obligations to recognize the revenue when the obligation is completed. The amendments in this update also require disclosure of sufficient information to allow users to understand the nature, amount, timing and uncertainty of revenue and
cash flow arising from contracts. The standard will be effective for public entities for annual reporting periods beginning after December 15, 2017 and interim periods therein. The Company will adopt the standard as of January 1, 2018 and
is in the process of validating aspects of its preliminary assessment of ASU
2014-09,
determining the transitional impact and completing other items required for the adoption of ASU
2014-09.
The Company is considering the business assumptions, processes, systems and controls to fully determine revenue recognition and disclosure under the new standard. The Companys initial assessment may
change as it continues to review the new guidance.
NOTE 3: CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
September
30, 2017
|
|
|
December
31, 2016
|
|
Cash at banks
|
|
$
|
27,008
|
|
|
$
|
49,787
|
|
Short-term deposits
|
|
|
3,021
|
|
|
|
3,004
|
|
Total cash and cash equivalents
|
|
$
|
30,029
|
|
|
$
|
52,791
|
|
The bank accounts are legally owned by the entities referenced in Note 1.
Cash deposits and cash equivalents in excess of amounts covered by government-provided insurance are exposed to loss in the event of
non-performance
by financial institutions. The Company does maintain cash deposits and equivalents in excess of government-provided insurance limits. The Company also minimizes exposure to credit risk by dealing
with a diversified group of major financial institutions.
Restricted cash of $10,000 as of September 30, 2017 ($0 for December 31, 2016) is
held as required by certain provisions of Navios Midstreams credit facility.
NOTE 4: VESSELS, NET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net Book
Value
|
|
Balance at December 31, 2016
|
|
$
|
487,640
|
|
|
$
|
(109,196
|
)
|
|
$
|
378,444
|
|
Additions
|
|
|
|
|
|
|
(16,668
|
)
|
|
|
(16,668
|
)
|
Balance at September 30, 2017
|
|
$
|
487,640
|
|
|
$
|
(125,864
|
)
|
|
$
|
361,776
|
|
NOTE 5: INTANGIBLE ASSETS
Intangible assets as of September 30, 2017 and December 31, 2016 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Favorable lease terms
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Net Book
Value
|
|
Balance at December 31, 2016
|
|
$
|
44,877
|
|
|
$
|
(19,713
|
)
|
|
$
|
25,164
|
|
Additions
|
|
|
|
|
|
|
(2,143
|
)
|
|
|
(2,143
|
)
|
Write-offs
|
|
|
(3,026
|
)
|
|
|
3,026
|
|
|
|
|
|
Balance at September 30, 2017
|
|
$
|
41,851
|
|
|
$
|
(18,830
|
)
|
|
$
|
23,021
|
|
F-8
NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
CONDENSED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. Dollars except unit and per unit data)
Amortization expense of favorable lease terms for the three and nine month periods ended September 30,
2017 and 2016 is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Month Period Ended
|
|
|
Nine Month Period Ended
|
|
|
|
September 30,
2017
|
|
|
September 30,
2016
|
|
|
September 30,
2017
|
|
|
September 30,
2017
|
|
Favorable lease terms
charter-out
|
|
$
|
(703
|
)
|
|
$
|
(822
|
)
|
|
$
|
(2,143
|
)
|
|
$
|
(2,464
|
)
|
Total
|
|
$
|
(703
|
)
|
|
$
|
(822
|
)
|
|
$
|
(2,143
|
)
|
|
$
|
(2,464
|
)
|
The aggregate amortizations of intangible assets will be as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Within
One
Year
|
|
|
Year
Two
|
|
|
Year
Three
|
|
|
Year
Four
|
|
|
Year
Five
|
|
|
Thereafter
|
|
|
Total
|
|
Favorable lease terms
|
|
$
|
(2,811
|
)
|
|
$
|
(2,811
|
)
|
|
$
|
(2,811
|
)
|
|
$
|
(2,811
|
)
|
|
$
|
(2,811
|
)
|
|
$
|
(8,966
|
)
|
|
$
|
(23,021
|
)
|
Total
|
|
$
|
(2,811
|
)
|
|
$
|
(2,811
|
)
|
|
$
|
(2,811
|
)
|
|
$
|
(2,811
|
)
|
|
$
|
(2,811
|
)
|
|
$
|
(8,966
|
)
|
|
$
|
(23,021
|
)
|
Intangible assets subject to amortization are amortized using the straight-line method over their estimated useful lives to
their estimated residual value of zero. Intangible assets are amortized over the contract periods, which ranged from 6.34 to 15.00 years at inception.
NOTE 6: LONG-TERM DEBT
Long-term debt consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Term Loan B
|
|
$
|
200,388
|
|
|
$
|
201,925
|
|
Less deferred finance costs, net
|
|
|
(2,610
|
)
|
|
|
(3,342
|
)
|
Total long term debt
|
|
|
197,778
|
|
|
|
198,583
|
|
Less unamortized discount
|
|
|
(1,099
|
)
|
|
|
(1,407
|
)
|
Less current portion, net of deferred finance cost
|
|
|
(672
|
)
|
|
|
(661
|
)
|
Total long term debt, net of current portion and net of deferred finance costs
|
|
$
|
196,007
|
|
|
$
|
196,515
|
|
Term Loan B:
On June 18, 2015, Navios Midstream and Navios Maritime Midstream Partners Finance (US) Inc., as
co-borrowers,
completed the issuance of the $205,000 Term Loan B (the Term Loan B). The Term Loan B is set to mature on June 18, 2020 and is repayable in equal quarterly installments of 0.25% of the
initial principal amount of the Term Loan B, beginning on September 18, 2015, with a final payment of the aggregate principal amount of the Term Loan B, plus accrued and unpaid interest, due on the maturity. The Term Loan B bears interest at
LIBOR plus 4.50% per annum.
The Term Loan B requires maintenance of a loan to value ratio of no greater than 0.85 to 1.0 and a minimum interest coverage
ratio of at least 3.75 to 1.0, and other restrictive covenants including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions. The Term Loan B also provides for excess cash flow prepayments and
customary events of default.
Amounts drawn under the facilities are secured by first preferred mortgages on Navios Midstreams vessels and other
collateral and are guaranteed by each vessel-owning subsidiary.
As of September 30, 2017, Navios Midstream was in compliance with the covenants set
forth in the Term Loan B.
F-9
NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
CONDENSED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. Dollars except unit and per unit data)
As of September 30, 2017, a balance of $200,388 was outstanding under the Term Loan B.
The table below reflects the principal payments of credit facilities outstanding as of September 30, 2017 for the next three years based on the repayment
schedule of the respective loan facilities (as described above).
|
|
|
|
|
|
|
September 30,
2017
|
|
Long-Term Debt Obligations:
|
|
|
|
|
Year
|
|
|
|
|
September 30, 2018
|
|
$
|
2,050
|
|
September 30, 2019
|
|
|
2,050
|
|
September 30, 2020
|
|
|
196,288
|
|
Total
|
|
$
|
200,388
|
|
The weighted average interest rate as of September 30, 2017 and 2016 was 5.64% and 5.50%, respectively.
NOTE 7: FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair
Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Cash and cash equivalents:
The carrying amounts reported in the consolidated balance sheets for interest bearing deposits approximate their
fair value because of the short maturity of these investments.
Term Loan B facility:
The fair value of the Companys debt is estimated
based on currently available debt with similar contract terms, interest rate and remaining maturities, as well as taking into account our creditworthiness.
Due from related parties, current:
The carrying amount of due from related parties, current reported in the balance sheet approximates its fair
value due to the short-term nature of these receivables.
Due from related parties,
non-current:
The
carrying amount of due from related parties,
non-current
reported in the balance sheet approximates its fair value.
The fair value hierarchy is explained as follows:
Level I: Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets that we have the ability to access.
Valuation of these items does not entail a significant amount of judgment.
Level II: Inputs other than quoted prices included in Level I
that are observable for the asset or liability through corroboration with market data at the measurement date.
Level III: Inputs that are
unobservable. The Company did not use any Level 3 inputs as of September 30, 2017 or December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
Book Value
|
|
|
Fair Value
|
|
|
Book Value
|
|
|
Fair Value
|
|
Cash and cash equivalents
|
|
$
|
30,029
|
|
|
$
|
30,029
|
|
|
$
|
52,791
|
|
|
$
|
52,791
|
|
Restricted cash
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
|
$
|
|
|
|
$
|
|
|
Long-term debt
|
|
$
|
197,778
|
|
|
$
|
199,386
|
|
|
$
|
198,583
|
|
|
$
|
198,139
|
|
Due from related parties, current
|
|
$
|
15,228
|
|
|
$
|
15,228
|
|
|
$
|
4,864
|
|
|
$
|
4,864
|
|
Due from related parties,
non-current
|
|
$
|
2,565
|
|
|
$
|
2,565
|
|
|
$
|
|
|
|
$
|
|
|
F-10
NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
CONDENSED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. Dollars except unit and per unit data)
Fair Value Measurements
The estimated fair value of our financial instruments that are not measured at fair value on a recurring basis, categorized based upon the fair
value hierarchy, are as follows:
Fair Value Measurements at September 30, 2017 Using
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level I
|
|
|
Level II
|
|
|
Level III
|
|
Cash and cash equivalents
|
|
$
|
30,029
|
|
|
$
|
30,029
|
|
|
$
|
|
|
|
$
|
|
|
Restricted cash
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
|
$
|
|
|
|
$
|
|
|
Long-term debt
|
|
$
|
199,386
|
|
|
$
|
|
|
|
$
|
199,386
|
|
|
$
|
|
|
Due from related parties, current
|
|
$
|
15,228
|
|
|
$
|
15,228
|
|
|
$
|
|
|
|
$
|
|
|
Due from related parties,
non-current
|
|
$
|
2,565
|
|
|
$
|
|
|
|
$
|
2,565
|
|
|
$
|
|
|
Fair Value Measurements at December 31,
2016 Using
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level I
|
|
|
Level II
|
|
|
Level III
|
|
Cash and cash equivalents
|
|
$
|
52,791
|
|
|
$
|
52,791
|
|
|
$
|
|
|
|
$
|
|
|
Long-term debt
|
|
$
|
198,139
|
|
|
$
|
|
|
|
$
|
198,139
|
|
|
$
|
|
|
Due from related parties, current
|
|
$
|
4,864
|
|
|
$
|
4,864
|
|
|
$
|
|
|
|
$
|
|
|
Due from related parties,
non-current
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
NOTE 8: TRANSACTIONS WITH RELATED PARTIES
Management fees:
On November 18, 2014, the Company entered into a Management Agreement with the Manager, a wholly-owned subsidiary of Navios
Holdings, pursuant to which the Manager provides commercial and technical management services to Navios Midstreams vessels for a daily fee of $9.5 per VLCC tanker vessel that was originally fixed for the first two years.
In October 2016, Navios Midstream amended its existing Management Agreement with the Manager to extend the fixed fee period for commercial and technical
management services of its fleet, until December 31, 2018 at the current rate of $9.5 per day per VLCC. Dry docking expenses are reimbursed at cost for all vessels.
Total management fees for each of the three and nine month periods ended September 30, 2017 amounted to $5,244 and $15,561, respectively. Total
management fees for each of the three and nine month periods ended September 30, 2016 amounted to $5,244 and $15,618, respectively.
General and
administrative expenses:
On November 18, 2014, Navios Midstream entered into the Administrative Services Agreement with the Manager, expiring on November 18, 2019, pursuant to which the Manager provides certain administrative
management services to Navios Midstream 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 services. The Manager is reimbursed for reasonable costs and expenses.
For each of the three and nine month periods ended September 30,
2017, the expense arising from the administrative services rendered by the Manager to the Companys vessels amounted to $375 and $1,125, respectively. For each of the three and nine month periods ended September 30, 2016, the expense
arising from the administrative services rendered by the Manager to the Companys vessels amounted to $375 and $1,125, respectively.
Balances due
from related parties:
Balance due from related parties as of September 30, 2017 and as of December 31, 2016, were $17,793 and $4,864, respectively, and included the current and
non-current
amounts mainly due from Navios Holdings and Navios Acquisition and its subsidiaries. Amounts due from related parties mainly consisted of the backstop commitment from Navios Acquisition (see paragraph below in current note), as well as special
survey and dry docking expenses for certain vessels of our fleet, and management fees in accordance with the Management Agreement.
F-11
NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
CONDENSED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. Dollars except unit and per unit data)
Omnibus agreement:
On November 18, 2014, Navios Midstream entered into an omnibus agreement, with
Navios Acquisition, Navios Holdings and Navios Partners in connection with the Navios Midstream IPO, pursuant to which Navios Acquisition, Navios Holdings, Navios Partners and their controlled affiliates generally have agreed not to acquire or own
any VLCCs, crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankers under time charters of five or more years. The omnibus agreement contains significant exceptions that will allow Navios Acquisition, Navios Holdings,
Navios Partners or any of their controlled affiliates to compete with Navios Midstream under specified circumstances.
Under the omnibus agreement, Navios
Midstream and its subsidiaries granted to Navios Acquisition a right of first offer on any proposed sale, transfer or other disposition of any of its VLCCs or any crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankers
and related charters owned or acquired by Navios Midstream. Likewise, Navios Acquisition granted a similar right of first offer to Navios Midstream for any of the VLCCs, crude oil tanker, refined petroleum product tanker, LPG tanker or chemical
tanker under charter for five or more years it might own. These rights of first offer will not apply to a (a) sale, transfer or other disposition of vessels between any affiliated subsidiaries, or pursuant to the terms of any charter or other
agreement with a charter party or (b) merger with or into, or sale of substantially all of the assets to, an unaffiliated third-party.
Navios
Maritime Containers Inc. (Navios Containers) was established in the Republic of the Marshall Islands on April 28, 2017. The Company is a growth vehicle dedicated to the container sector of the maritime industry. In connection with
Navios Containerss private placement and listing on the Norwegian
over-the-counter
market, Navios Midstream entered into an omnibus agreement with Navios
Containers, Navios Acquisition, Navios Holdings and Navios Partners, pursuant to which Navios Acquisition, Navios Holdings, Navios Partners and Navios Midstream granted to Navios Containers a right of first refusal over any container vessels to be
sold or acquired in the future. The omnibus agreement contains significant exceptions that will allow Navios Acquisition, Navios Holdings, Navios Partners and Navios Midstream to compete with Navios Containers under specified circumstances.
Backstop agreements:
On November 18, 2014, Navios Acquisition entered into backstop agreements with Navios Midstream. In accordance with the terms
of the backstop agreements, Navios Acquisition has provided a backstop commitment at a net rate of $35.0 per day for the Nave Celeste, $38.4 per day for the Shinyo Ocean and $38.0 per day for the Shinyo Kannika. The backstop rates apply for a
two-year
period as of the redelivery of each of the vessels from its original charterer, if the actual rates achieved are below the agreed backstop rates for each of the vessels. For the three and nine month periods
ended September 30, 2017, backstop revenue amounted to $6,018 and $11,248, respectively ($0 for the respective periods in 2016) and is included in the balance due from related parties (see paragraph above in current note).
General Partner option agreement:
Navios Holdings has a
ten-year
option to purchase a minimum of 25% of the
general partner interest held by the general partner, the incentive distribution rights held by the general partner and/or the membership interests in the general partner from Navios Acquisition, each at fair market value. The option expires on
November 18, 2024.
Option vessels:
Navios Midstream has options expiring on November 18, 2018 to acquire the Nave Buena Suerte, the Nave
Neutrino and the Nave Electron from Navios Acquisition.
NOTE 9: COMMITMENTS AND CONTINGENCIES
The Company is involved in various disputes and arbitration proceedings arising in the ordinary course of business. Provisions are recognized in the financial
statements for all such proceedings where the Company believes that a liability may be probable, and for which the amounts are reasonably estimable, based upon facts known at the date of the financial statements were prepared. In the opinion of the
management, the ultimate disposition of these matters individually and in aggregate will not materially affect the Companys financial position, results of operations or liquidity.
NOTE 10: SEGMENT INFORMATION
The Company reports
financial information and evaluates its operations by charter revenues. The Company 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 the Company has determined that it operates under one reportable segment.
F-12
NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
CONDENSED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. Dollars except unit and per unit data)
Company monitors operating revenue by geographic region for the Companys reportable segment. Revenue is
allocated on the basis of the geographic region in which the customer is located. Revenues from specific geographic regions which contribute over 10% of total revenue are disclosed separately. For the three and nine month periods ended
September 30, 2017 and 2016, all the revenues were derived from customers located in Asia.
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.
NOTE 11: ISSUANCE
OF UNITS
On July 29, 2016, Navios Midstream entered into a Continuous Offering Program Sales Agreement with S. Goldman Capital LLC. as sales
agent (the Agent), pursuant to which Navios Midstream may issue and sell from time to time through the Agent common units representing limited partner interests having an aggregate offering price of up to $25,000.
During the nine month period ended September 30, 2017, Navios Midstream issued 336,011 common units and received net proceeds of $4,004. Pursuant to the
issuance of the common units, Navios Midstream issued 6,858 general partnership units to its general partner in order to maintain its 2.0% general partner interest. The net proceeds from the issuance of the general partnership units were $84.
NOTE 12: CASH DISTRIBUTIONS AND EARNINGS/ (LOSSES) PER UNIT
The partnership agreement of Navios Midstream 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 $0.4125 per unit or $1.65 per unit per year and is made in the following manner:
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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 $0.4125 plus any arrearages from previous quarters;
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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 $0.4125; and
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Third, 98% to all unitholders, pro rata, and 2% to General Partner, until each unit has received an aggregate amount of $0.4744.
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Incentive distribution rights represent the right to receive an increasing percentage of quarterly distributions of available cash from operating surplus
after the minimum quarterly distribution and the target distribution levels have been achieved. Our general partner currently holds the incentive distribution rights, but may transfer these rights separately from its general partner interest,
subject to restrictions in the partnership agreement.
Thereafter there are incentive distribution rights held by the General Partner, which are analyzed
as follows:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marginal Percentage
Interest in Distributions
|
|
|
|
Total Quarterly
Distribution
Total
Amount
|
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|
Common
and
subordinated
Unitholders
|
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|
General
Partner
|
|
|
Holders of
IDRs
|
|
Minimum Quarterly Distribution
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$
|
|
|
0.4125
|
|
|
|
98.0
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%
|
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|
2.0
|
%
|
|
|
0
|
%
|
First Target Distribution
|
|
up to $
|
|
|
0.4744
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|
|
|
98.0
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%
|
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|
2.0
|
%
|
|
|
0
|
%
|
Second Target Distribution
|
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above $
|
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|
0.4744
|
|
|
|
85.0
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%
|
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|
2.0
|
%
|
|
|
13.0
|
%
|
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|
up to $
|
|
|
0.5156
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|
|
|
|
|
|
|
|
|
|
|
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|
Third Target Distribution
|
|
above $
|
|
|
0.5156
|
|
|
|
75.0
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%
|
|
|
2.0
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%
|
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|
23.0
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%
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up to $
|
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0.6188
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|
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Thereafter
|
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above $
|
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0.6188
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50.0
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%
|
|
|
2.0
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%
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|
48.0
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%
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F-13
NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
CONDENSED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. Dollars except unit and per unit data)
On January 23, 2017, the Companys Board of Directors authorized its quarterly cash distribution
for the three month period ended December 31, 2016 of $0.4225 per unit. The distribution was paid on February 14, 2017 to all holders of record of common, subordinated, subordinated Series A units and general partner units on
February 9, 2017. The aggregate amount of the distribution paid was $9,019.
On April 24, 2017, the Companys Board of Directors of Navios
Midstream authorized its quarterly cash distribution for the three month period ended March 31, 2017 of $0.4225 per unit. The distribution was paid on May 11, 2017 to all holders of record of common, subordinated, subordinated Series A
units and general partner units on May 5, 2017. The aggregate amount of the distribution paid $9,030.
On July 20, 2017, the Companys
Board of Directors of Navios Midstream authorized its quarterly cash distribution for the three month period ended June 30, 2017 of $0.4225 per unit. The distribution was paid on August 11, 2017 to all holders of record of common units,
subordinated units, subordinated Series A units and general partner units on August 8, 2017. The aggregate amount of the distribution paid $9,031.
For the period subsequent to the IPO, Navios Midstream calculates earnings per unit by allocating reported net income for each period to each class of units
based on the distribution waterfall for available cash specified in Navios Midstreams partnership agreement, net of the unallocated earnings. Basic earnings per unit are determined by dividing net income by the weighted average number of units
outstanding during the period. Basic and diluted net earnings per unit are the same because the Company does not have any potentially dilutive units outstanding for the period presented.
In determining earnings per unit, the net loss for the period prior to the IPO, has been allocated to the general partner.
Net loss per unit undistributed is determined by taking the distributions in excess of net income and allocating between common units, subordinated units and
general partner units on a
98%-2%
basis.
The calculations of the basic and diluted earnings per unit are
presented below.
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Three Month
Period ended
September 30, 2017
(unaudited)
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Three Month
Period ended
September 30, 2016
(unaudited)
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Nine Month
Period ended
September 30, 2017
(unaudited)
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Nine Month
Period ended
September 30, 2016
(unaudited)
|
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Net income attributable to Navios Maritime Midstream Partners L.P. subsequent to initial public
offering and limited partners interest in net income:
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$
|
3,870
|
|
|
$
|
5,457
|
|
|
$
|
10,332
|
|
|
$
|
18,841
|
|
Earnings attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common unit holders
|
|
$
|
1,813
|
|
|
$
|
2,480
|
|
|
$
|
4,839
|
|
|
$
|
8,523
|
|
Subordinated unit holders Series A
|
|
$
|
289
|
|
|
$
|
418
|
|
|
$
|
771
|
|
|
$
|
1,448
|
|
Subordinated unit holders
|
|
$
|
1,692
|
|
|
$
|
2,455
|
|
|
$
|
4,519
|
|
|
$
|
8,498
|
|
General Partner
|
|
$
|
76
|
|
|
$
|
104
|
|
|
$
|
203
|
|
|
$
|
372
|
|
Weighted average units outstanding (basic and diluted)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common unit holders
|
|
|
10,011,806
|
|
|
|
9,486,406
|
|
|
|
9,960,427
|
|
|
|
9,390,946
|
|
Subordinated unit holders Series A
|
|
|
1,592,920
|
|
|
|
1,592,920
|
|
|
|
1,592,920
|
|
|
|
1,592,920
|
|
Subordinated unit holders
|
|
|
9,342,692
|
|
|
|
9,342,692
|
|
|
|
9,342,692
|
|
|
|
9,342,692
|
|
General Partner
|
|
$
|
427,499
|
|
|
$
|
413,904
|
|
|
$
|
426,052
|
|
|
$
|
413,864
|
|
Earnings per unit (basic and diluted):
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common unit holders
|
|
$
|
0.18
|
|
|
$
|
0.26
|
|
|
$
|
0.48
|
|
|
$
|
0.91
|
|
Subordinated unit holders Series A
|
|
$
|
0.18
|
|
|
$
|
0.26
|
|
|
$
|
0.49
|
|
|
$
|
0.91
|
|
Subordinated unit holders
|
|
$
|
0.18
|
|
|
$
|
0.26
|
|
|
$
|
0.49
|
|
|
$
|
0.91
|
|
General Partner
|
|
$
|
0.18
|
|
|
$
|
0.26
|
|
|
$
|
0.47
|
|
|
$
|
0.91
|
|
F-14
NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
CONDENSED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Expressed
in thousands of U.S. Dollars except unit and per unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per unit - distributed (basic and diluted):
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Common unit holders
|
|
$
|
0.42
|
|
|
$
|
0.42
|
|
|
$
|
1.27
|
|
|
$
|
1.27
|
|
Subordinated unit holders Series A
|
|
$
|
0.42
|
|
|
$
|
0.42
|
|
|
$
|
1.27
|
|
|
$
|
1.27
|
|
Subordinated unit holders
|
|
$
|
0.42
|
|
|
$
|
0.42
|
|
|
$
|
1.27
|
|
|
$
|
1.27
|
|
General Partner
|
|
$
|
0.42
|
|
|
$
|
0.42
|
|
|
$
|
1.26
|
|
|
$
|
1.27
|
|
(Losses) per unit - undistributed (basic and diluted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common unit holders
|
|
$
|
(0.24
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.79
|
)
|
|
$
|
(0.36
|
)
|
Subordinated unit holders Series A
|
|
$
|
(0.24
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.78
|
)
|
|
$
|
(0.36
|
)
|
Subordinated unit holders
|
|
$
|
(0.24
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.78
|
)
|
|
$
|
(0.36
|
)
|
General Partner
|
|
$
|
(0.24
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.79
|
)
|
|
$
|
(0.36
|
)
|
NOTE 13: INCOME TAXES
Marshall Islands, British Virgin Islands, and Hong Kong, do not impose a tax on international shipping income. Under the laws of Marshall Islands, British
Virgin Islands, and Hong Kong, of the companies incorporation and vessels registration, the companies are subject to registration and tonnage taxes which have been included in the daily management fee.
In accordance with the currently applicable Greek law, foreign flagged vessels that are managed by Greek or foreign ship management companies having
established an office in Greece are subject to duties towards the Greek state, which are calculated on the basis of the relevant vessels tonnage. The payment of said duties exhausts the tax liability of the foreign ship owning company and the
relevant manager against any tax, duty, charge or contribution payable on income from the exploitation of the foreign flagged vessel.
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 of the Companys
vessel- owning subsidiaries satisfy these initial criteria. In addition, these companies must meet an ownership test. Subject to proposed regulations becoming finalized in their current form, the management of Navios Midstream believes by virtue of
a special rule applicable to situations where the ship operating companies are beneficially owned by a publicly traded company like Navios Midstream, the second criterion can also be satisfied based on the trading volume and ownership of the
Companys shares, but no assurance can be given that this will remain so in the future.
NOTE 14: SUBSEQUENT EVENTS
On October 17, 2017, the Board of Directors authorized a quarterly cash distribution for the three month period ended September 30,
2017 of $0.4225 per unit. The distribution is payable on November 14, 2017 to all holders of record holders of common units, subordinated units, subordinated Series A units and general partner units on November 10, 2017. The aggregate
amount of the declared distribution is anticipated to be $9,031.
F-15
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.
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NAVIOS MARITIME MIDSTREAM PARTNERS L.P.
|
|
|
By:
|
|
/s/ Angeliki Frangou
|
|
|
Angeliki Frangou
|
|
|
Chief Executive Officer
|
Date: October 24, 2017
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