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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: August 6, 2020

 

Commission File No. 001-34104

 

 

 

NAVIOS MARITIME ACQUISITION CORPORATION

 

 

 

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 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 ACQUISITION CORPORATION FORM 6-K

 

TABLE OF CONTENTS

 

 

  Page
 

Operating and Financial Review

2
Exhibit List 20
Financial Statements Index F-1

This Report on Form 6-K is hereby incorporated by reference into the Navios Maritime Acquisition Corporation Registration Statements on Form F-3, File No. 333-235369.

 

 

Operating and Financial Review and Prospects

 

The following is a discussion of the financial condition and results of operations for the three and six month periods ended June 30, 2020 and 2019 of Navios Maritime Acquisition Corporation (referred to herein as “we,” “us” or “Navios Acquisition”). All of the financial statements have been stated 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 Acquisition’s 2019 Annual Report filed on Form 20-F with the U.S. Securities and Exchange Commission (the “SEC”).

 

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 Acquisition’s future dividends, expected cash flow generation and Navios Acquisition’s growth strategy and measures to implement such strategy; including expected vessel acquisitions and entering into further employment contracts. 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 employment contracts. These forward-looking statements are based on the information available to, and the expectations and assumptions deemed reasonable by, Navios Acquisition at the time this filing was made. Although Navios Acquisition 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 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 Acquisition. 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, global and regional economic and political conditions including the impact of the COVID-19 pandemic and efforts throughout the world to contain its spread, including effects on global economic activity, demand for seaborne transportation of the products we ship, the ability and willingness of charterers to fulfill their obligations to us and prevailing charter rates, shipyards performing scrubber installations, drydocking and repairs, changing vessel crews and availability of financing, potential disruption of shipping routes due to accidents, diseases, pandemics, political events, piracy or acts by terrorists, including the impact of the COVID-19 pandemic and the ongoing efforts throughout the world to contain it, 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 dry docking 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 Acquisition operates; risks associated with operations outside the United States; and other factors listed from time to time in the Navios Acquisition’s filings with the SEC, including its annual and interim reports filed on Form 20-F and Form 6-K. Navios Acquisition 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 Acquisition’s expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based. Navios Acquisition makes no prediction or statement about the performance of its common stock.

 

Recent Developments

 

Debt developments

 

In June 2020, Navios Acquisition entered into a loan agreement with a commercial bank of $20.8 million in order to refinance the outstanding balance on the existing facility of two product tankers. The facility is repayable in 16 quarterly installments of $0.8 million each with a final balloon payment of $8.0 million repayable on the last repayment date. The facility matures in June 2024 and bears interest at LIBOR plus 300 bps per annum.

 

In June 2020, Navios Acquisition entered into a loan agreement with a commercial bank of $41.7 million in order to refinance seven containerships. The facility is repayable in 4 quarterly installments with a final balloon payment of $21.7 million repayable on the last repayment date. The facility matures in May 2021 and bears interest at LIBOR plus 375 bps per annum.

 

In June 2020, Navios Acquisition entered into sale and leaseback agreements with unrelated third parties for $72.1 million in order to refinance the outstanding balance on the existing facilities of four product tankers. The agreements will be repaid through periods ranging from four to seven years in consecutive quarterly installments of up to $1.8 million each, with a repurchase obligation of up to $27.0 million in total. The sale and leaseback arrangement bears interest at LIBOR plus a margin ranging from 390 bps to 410 bps per annum, depending on the vessel financed.

 

Subsequently to June 30, 2020, Navios Acquisition repurchased $9.0 million of its ship mortgage notes for a cost of $5.3 million.

 

 

 

Liquidation of Navios Europe II Inc.

 

On June 29, 2020, following the liquidation of Navios Europe II (the “Liquidation of Navios Europe II”), Navios Acquisition was allocated $8.9 million in cash and seven containerships with their associated working capital. The vessels are accounted for as held for sale. Navios Acquisition drew $41.7 million under a new short term credit facility secured with the seven containerships used for the repayment of $45.1 million of the vessels’ indebtedness. Please refer to “Related Party Transactions”.

 

 

Continuous Offering Program

 

On November 29, 2019, Navios Acquisition entered into a Continuous Offering Program Sales Agreement, pursuant to which Navios Acquisition may issue and sell from time to time through the sales agent shares of common stock having an aggregate offering price of up to $25.0 million. As of August 4, 2020, since the commencement of the program, Navios Acquisition has issued 516,250 shares of common stock and received net proceeds of $3.2 million.

 

Exercised our Option for VLCC Newbuilding under Bareboat Charter

 

In the second quarter of 2020, Navios Acquisition exercised its option for a fourth Japanese newbuild VLCC under a twelve year bareboat charter agreement with de-escalating purchase options and expected delivery in the second quarter of 2022.

 

The bareboat agreement reflects an implied price of approximately $84.5 million and an annual effective interest of approximately 6% fixed for the duration of the agreement.

 

Dividend

 

On July 28, 2020, the Board of Directors declared a quarterly cash dividend in respect of the second quarter of 2020 of $0.30 per share of common stock, which will be paid on October 8, 2020 to stockholders of record as of September 4, 2020. The declaration and payment of any further dividends remain subject to the discretion of the Board of Directors and will depend on, among other things, Navios Acquisition’s cash requirements as measured by market opportunities and restrictions under its credit agreements and other debt obligations and such other factors as the Board of Directors may deem advisable.

 

Fleet

 

As of August 4, 2020, our core fleet consisted of a total of 47 double-hulled tanker vessels, aggregating approximately 6.0 million deadweight tons, or dwt. The fleet includes 14 Very Large Crude Carriers (“VLCC”) tankers (over 200,000 dwt per ship) which transport crude oil, including the four bareboat chartered-in VLCCs expected to be delivered in each of the fourth quarter of 2020, and the first and the third quarters of 2021 and the second quarter of 2022, ten Long Range 1 (“LR1”) product tankers (60,000-85,000 dwt per ship), 18 Medium Range 2 (“MR2”) product tankers (47,000-52,000 dwt per ship), three Medium Range one (“MR1”) product tankers (35,000-45,000 dwt per ship) and two chemical tankers (25,000 dwt per ship), which transport refined petroleum products and bulk liquid chemicals. Navios Acquisition also owns seven containerships that are accounted for as held for sale. All of our vessels are currently chartered-out to quality counterparties with an average remaining charter period of approximately one year. As of August 4, 2020, we had charters covering 86.1% of available days for our core fleet for the remaining period of 2020 and 36.7% of available days for our core fleet in 2021.

 

                                                   

Vessels

  Type     Year
Built
    Dwt     Net Charter
Rate (1)
    Profit Sharing
Arrangements
    Expiration
Date (2)
   
Owned Vessels – Core fleet                                                  
Nave Polaris     Chemical Tanker       2011       25,145       Floating Rate (7)      None       November 2020    
Nave Cosmos     Chemical Tanker       2010       25,130       Floating Rate (7)      None       November 2020    
Perseus N     MR1 Product Tanker       2009       36,264     $ 12,146       None       December 2021    
Star N     MR1 Product Tanker       2009       37,872     $ 13,894       None       February 2021    
Hector N     MR1 Product Tanker       2008       38,402     $ 14,813 (17)      None       January 2021    
Nave Velocity     MR2 Product Tanker       2015       49,999     $ 16,047       None       December 2020    
Nave Sextans     MR2 Product Tanker       2015       49,999     $ 17,250 (14)      None       May 2021    
Nave Pyxis     MR2 Product Tanker       2014       49,998     $ 15,500       None       December 2020    
Nave Luminosity     MR2 Product Tanker       2014       49,999     $ 17,034       None       December 2021    
Nave Jupiter     MR2 Product Tanker       2014       49,999     $ 15,306       None       April 2021    
Bougainville     MR2 Product Tanker       2013       50,626     $ 14,709 (4)      100%       September 2020    
                            $ 15,600 (19)      100%       September 2023    
Nave Alderamin     MR2 Product Tanker       2013       49,998     $ 15,159       None       November 2020    
                                         
Nave Bellatrix   MR2 Product Tanker     2013        49,999     $ 16,047     None     March 2021  
Nave Capella   MR2 Product Tanker     2013       49,995     $ 15,800     None     January 2021  
Nave Orion   MR2 Product Tanker     2013       49,999     $ 15,159     None     December 2020  
Nave Titan   MR2 Product Tanker     2013       49,999     $ 9,875 (23)   None     September 2020  
Nave Aquila   MR2 Product Tanker     2012       49,991     $ 15,899 (22)    None     November 2020  
Nave Atria   MR2 Product Tanker     2012       49,992     $ 14,813     None     October 2020  
Nave Orbit   MR2 Product Tanker     2009       50,470     $ 14,000     None     October 2020  
Nave Equator   MR2 Product Tanker     2009       50,542     $ 16,250     None     January 2022  
Nave Equinox   MR2 Product Tanker     2007       50,922     $ 15,800 (20)    ice-transit premium (3)     October 2020  

 

Nave Pulsar

  MR2 Product Tanker     2007       50,922     $ 15,600 (5)    ice-transit premium (3)     October 2020  
Nave Dorado   MR2 Product Tanker     2005       47,999     $ 13,331     50%/50%     December 2020  
Nave Atropos   LR1 Product Tanker     2013       74,695     $ 29,625     None     May 2021  
Nave Rigel   LR1 Product Tanker     2013       74,673     $ 16,088 (8)    None     January 2022  
Nave Cassiopeia   LR1 Product Tanker     2012       74,711       Floating Rate (12)    None     September 2020  
Nave Cetus   LR1 Product Tanker     2012       74,581     $ 16,088 (8)    None     January 2022  
Nave Estella   LR1 Product Tanker     2012       75,000     $ 17,036     None     December 2020  
Nave Andromeda   LR1 Product Tanker     2011       75,000       Floating Rate (12)    None     September 2020  
Nave Ariadne   LR1 Product Tanker     2007       74,671       Floating Rate (18)    None     November 2020  
Nave Cielo   LR1 Product Tanker     2007       74,671     $ 28,875     None     May 2021  
Aurora N   LR1 Product Tanker     2008       63,495       Floating Rate (18)    None     November 2020  
Lumen N   LR1 Product Tanker     2008       63,599       Floating Rate (18)    None     November 2020  
Nave Buena Suerte   VLCC     2011       297,491     $ 47,906 (15)    50%/50%     June 2025  
Nave Quasar   VLCC     2010       297,376     $ 20,475/ 16,788 (10)/(11)   50%/50%     September 2020/ January 2023  
Nave Synergy   VLCC     2010       299,973       32,588     None     April 2022  
Nave Spherical   VLCC     2009       297,188       Floating Rate (6)    None     December 2022  
Nave Neutrino   VLCC     2003       298,287     $ 19,158 (11)    50%/50%     May 2021  
Nave Photon   VLCC     2008       297,395     $ 47,906 (15)    50%/50%     July 2021  
Nave Constellation   VLCC     2010       298,000       Floating Rate (13)    50%/50%     February 2021  
Nave Universe   VLCC     2011       297,066     $ 20,475/17,775 (10)/(21)    50%/50%     October 2020/April 2022  
Nave Celeste   VLCC     2003       298,717       Floating Rate (16)    50%/50%     December 2020  
Nave Galactic   VLCC     2009       297,168     $ 20,475/17,775 (10)/(21)    50%/50%     January 2021/ July 2022  
Vessels to be delivered*                                        
TBN I   VLCC     Q4 2020       310,000     $ 27,816 (9)    None     Q4 2030  
TBN II   VLCC     Q1 2021       310,000     $ 27,816 (9)    None     Q1 2031  
TBN III   VLCC     Q3 2021       310,000     $ 47,906     50%/50%     Q2 2026  
TBN IV   VLCC     Q2 2022       310,000                      
Owned Vessels held for sale                                        
Acrux N   Container     2010       23,338     $ 8,759     None     December 2020  
Allegro N   Container     2014       46,999     $ 9,975     None     November 2020  
Fleur N   Container     2012       41,130     $ 7,406     None     September 2020  
Ete N   Container     2012       41,139     $ 7,406     None     August 2020  
Spectrum N   Container     2009       34,333     $ 7,941     None     October 2020  
Solstice N   Container     2007       44,023     $ 8,470     None     May 2021  
Vita N   Container     2010       23,359     $ 6,882     None     September 2020  
                                                                           

 

(1) Net time charter-out rate per day (net of commissions), presented in U.S. Dollars.

 

(2) Estimated dates assuming the midpoint of the redelivery period by charterers, including owner’s extension options not declared yet.

 

(3) The premium for the Nave Equinox and the Nave Pulsar when vessels are trading on ice or follow ice breaker is $1,900 per day.

 

(4) Rate can reach a maximum of $19,780 calculated based on a formula.

 

(5) Charterer’s option to extend the charter for one year at $16,590 net per day plus ice-transit premium.

 

(6) Contract provides 100% of BITR TD3C-TCE index plus $5,000 premium. Premium of $2,500 if vessel not fitted with scrubber.

 

(7) Rate based on chemical tankers pool earnings.

 

(8) Charterer has the option to charter the vessel for an optional year at a rate of $17,063 net per day.

 

(9) Charterer’s option to extend the bareboat charter for five years at $29,751 net per day.

 

(10) Profit sharing arrangement 50% on actual pool earnings. Any adjustment by the charterers for the expense/loss will be provisionally settled on a quarterly basis and finally settled at the end of the charter period.

 

(11) Contract provides 100% of BITR TD3C-TCE index plus $2,000 up to $38,513 and 50% thereafter with $19,158 floor.

 

(12) Rate based on LR8 pool earnings.

 

(13) Contract provides 100% of BITR TD3C-TCE index plus $2,000 up to $39,006 and 50% thereafter with $18,170 floor.

 

(14) Charterer’s option to extend the charter for one year at $18,750 net per day.

 

(15) Profit sharing arrangement of 35% above $54,388, 40% above $59,388 and 50% above $69,388.

 

(16) Contract provides 100% of BITR TD3C-TCE index plus $2,000 up to $38,513 and 50% thereafter with $18,170 floor.

 

(17) Charterer’s option to extend the charter for one year at $15,800 net per day.

 

(18) Rate based on Penfield pool earnings.

 

(19) Base rate for all three years at $15,600 net per day and ceiling at $18,525 net per day with all earnings in between 100% to the owners based on TC7 adjusted index.

 

(20) Charterer’s option to extend the charter for six months at $16,788 net per day.
(21) Contract provides 100% of BITR TD3C-TCE index up to $38,759 and 50% thereafter with $17,775 floor.
(22) Charterer's option to extend the charter for one year at $16,886 net per day
(23) Charterer's option to extend the charter for 30-90 days at $12,838 net per day with the last 30 days at $15,306 net per day

 

* Bareboat chartered-in vessels with purchase option, expected to be delivered in each of the fourth quarter of 2020, and the first and the third quarters of 2021. In the second quarter of 2020, Navios Acquisition exercised its option for a fourth Japanese newbuild VLCC under a twelve year bareboat charter agreement with de-escalating purchase options and expected delivery in the second quarter of 2022.

 

Charter Policy and Industry Outlook

 

Our core fleet currently consists of 47 vessels, of which 14 are VLCCs (including four bareboat chartered-in VLCCs expected to be delivered in each of the fourth quarter of 2020, and the first and the third quarters of 2021 and the second quarter of 2022), 31 are product tankers, and two are chemical tankers. Navios Acquisition also owns seven containerships that are accounted for as held for sale. All of our vessels are currently chartered-out to quality counterparties with an average remaining charter period of approximately one year. Many of our contracts have profit sharing arrangements (see fleet table above). While all of our vessels are currently chartered-out, we intend to deploy any vessels that would become open—not chartered-out—to leading charterers in a mix of long, medium and short-term time charters, depending on the vessels’positions, seasonality and market outlook. This chartering strategy is intended to allow us to capture increased profits during strong charter markets, while developing relatively stable cash flows from longer-term time charters. We will also seek profit sharing arrangements in our employment contracts, to provide us with potential incremental revenue above the contracted minimum charter rates.

 

Using Navios Tankers Management Inc.’s (the “Manager”) global network of relationships and extensive experience in the maritime transportation industry, coupled with its commercial, financial and operational expertise, we plan to opportunistically grow our fleet through the timely and selective acquisition of high-quality newbuilding or secondhand vessels when we believe those acquisitions will result in attractive returns on invested capital and increased cash flow. We also intend to engage in opportunistic dispositions where we can achieve attractive values for our vessels as we assess the market cycle. We believe our diverse and versatile fleet, combined with the experience and long-standing relationships of Managers with participants in the maritime transportation industry, position us to identify and take advantage of attractive acquisition opportunities.

 

 

Factors Affecting Navios Acquisition’s 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. Other key factors that will be fundamental to our business, future financial condition and results of operations include:

 

the demand for seaborne transportation services;

 

the ability of Manager’s commercial and chartering operations to successfully employ our vessels at economically attractive rates, particularly as our fleet expands and our charters expire;

 

the effective and efficient technical management of our vessels;

 

the Managers ability to satisfy technical, health, safety and compliance standards of major commodity traders; and

 

the strength of and growth in the number of our customer relationships, especially with major commodity traders.

 

In addition to the factors discussed above, we believe certain specific factors will impact our consolidated results of operations. These factors include:

 

the charter hire earned by our vessels under our charters;

 

• our access to capital required to acquire additional vessels and/or to implement our business strategy;

 

• our ability to sell vessels at prices we deem satisfactory;

 

• our level of debt and the related interest expense and amortization of principal;

 

the level of any dividend to our stockholders; and

 

the recent global outbreak of novel coronavirus disease (COVID-19) or other epidemics or pandemics.

 

 

Voyage, Time Charter and Pooling Arrangements

 

Revenues are driven primarily by the number of vessels in the fleet, the number of days during which such vessels operate and the amount of daily charter hire rates that the vessels earn under charters, which, in turn, are affected by a number of factors, including:

 

the duration of the charters;

 

the level of spot market rates at the time of charters;

 

• decisions relating to vessel acquisitions and disposals;

the amount of time spent positioning vessels;

 

the amount of time that vessels spend in dry dock undergoing repairs and upgrades;

 

the age, condition and specifications of the vessels; and

 

the aggregate level of supply and demand in the tanker shipping industry.

 

Time charters are available for varying periods, ranging from a single trip (spot charter) to long-term which may be many years. In general, a long-term time charter assures the vessel owner of a consistent stream of revenue. Operating the vessel in the spot market affords the owner greater spot market opportunity, which may result in high rates when vessels are in high demand or low rates when vessel availability exceeds demand. 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 the control of management.

 

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 Company’s vessels, is determined in accordance with an agreed-upon formula, which is determined by the points awarded to each vessel in the pool based on the vessel’s age, design and other performance characteristics.

 

The cost to maintain and operate a vessel increases with the age of the vessel. Older vessels are less fuel efficient, cost more to insure and require upgrades from time to time to comply with new regulations. As of August 4, 2020, the average age of Navios Acquisition’s owned fleet was 9.0 years. But, as such fleet ages or if Navios Acquisition expands its fleet by acquiring previously owned and older vessels the cost per vessel would be expected to rise and, assuming all else, including rates, remains constant, vessel profitability would be expected to decrease.

 

Navios Acquisition reports financial information and evaluates its operations by charter revenues. Navios Acquisition does not use discrete financial information to evaluate operating results for each type of charter. As a result, management reviews operating results solely by revenue per day and operating results of the fleet and thus Navios Acquisition has determined that it operates under one reportable segment.

 

Set forth below are selected historical and statistical data for Navios Acquisition for each of the three and six month periods ended June 30, 2020 and 2019 that the Company believes may be useful in better understanding the Company’s financial position and results of operations.

 

 

    Three month period ended
June 30,
    Six month period ended
June 30,
 
    2020
(unaudited)
    2019
(unaudited)
    2020
(unaudited)
    2019
(unaudited)
 
FLEET DATA                                
Available days(1)     3,859       3,503       7,614       7,187  
Operating days(2)     3,829       3,498       7,539       7,170  
Fleet utilization(3)     99.2     99.8     99.0     99.8
Vessels operating at period end     50       39       50       39  
AVERAGE DAILY RESULTS                                
Time charter equivalent rate per day(4)   $ 28,187     $ 15,525     $ 26,339     $ 17,635  

 

 

Navios Acquisition believes that the important measures for analyzing trends in its results of operations consist of the following:

 

(1) Available days: Available days for the fleet are total calendar days the vessels were in Navios Acquisition’s 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: Operating days are 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.

 

(3) Fleet utilization: Fleet utilization is the percentage of time that Navios Acquisition’s vessels were available for generating revenue, and is determined by dividing the number of operating days during a relevant period by the number of available days during that period.

 

(4) TCE Rate: Time charter equivalent rate per day is defined as voyage and time charter revenues less voyage expenses during a period divided by the number of available days during the period. The TCE Rate per day is a standard shipping industry performance measure used primarily to present the actual daily earnings generated by vessels of various types of charter contracts for the number of available days of the fleet.

Period-over-Period Comparisons

For the Three Month Period ended June 30, 2020 compared to the Three Month Period ended June 30, 2019

The following table presents consolidated revenue and expense information for the three month periods ended June 30, 2020 and 2019. This information was derived from the unaudited condensed consolidated statements of operations of Navios Acquisition for the respective periods.

 

      For the Three
Months
Ended
June 30, 2020
(unaudited)
    For the Three
Months
Ended
June 30, 2019
(unaudited)
 
Revenue     $ 112,224     $ 58,585  
Time charter and voyage expenses       (3,450 )     (4,196
Direct vessel expenses       (3,465 )     (2,323
Vessel operating expenses (management fees entirely through related party transactions)       (29,836 )     (26,481
General and administrative expenses       (6,293 )     (6,808
Depreciation and amortization       (16,643 )     (17,320
Gain on sale of vessel             2,594  
Interest income       4       2,296  
Interest expense and finance cost       (21,680 )     (23,696
Equity in net earnings of affiliated companies             889  
Other income       156       —    
Other expense             (90
     
 
 
   
 
 
 
Net income/ (loss)     $ 31,017     $ (16,550

 

Revenue: Revenue for the three month period ended June 30, 2020 increased by $53.6 million, or 91.6%, to $112.2 million, as compared to $58.6 million for the same period of 2019. The increase was mainly attributable to an: (i) increase in revenue of $8.1 million due to the acquisition of five product tankers of Navios Europe I in December 2019; and (ii) increase in market rates during the three month period ended June 30, 2020 as compared to the same period of 2019; partially mitigated by the sale of three VLCCs in 2019. Available days of the fleet increased to 3,859 days for the three month period ended June 30, 2020, as compared to 3,503 days for the three month period ended June 30, 2019, due to the reasons mentioned above. The time charter equivalent rate, or TCE Rate, increased to $28,187 for the three month period ended June 30, 2020, from $15,525 for the three month period ended June 30, 2019. 

 

Time charter and voyage expenses: Time charter and voyage expenses for the three month period ended June 30, 2020 decreased by $0.7 million, or 17.8%, to $3.5 million, as compared to $4.2 million for the same period of 2019. The decrease was mainly attributable to a $1.1 million decrease in bunkers consumption and voyage expenses related to the spot voyages incurred in the period; partially mitigated by a $0.4 million increase in brokers’commission.

Direct vessel expenses: Direct vessel expenses, comprised of the amortization of dry dock and special survey costs, of certain vessels of our fleet amounted to $3.5 million for the three month period ended June 30, 2020, as compared to $2.3 million for the three month period ended June 30, 2019.

Vessel operating expenses (management fees): Vessel operating expenses amounted to $29.8 million for the three month period ended June 30, 2020, as compared to $26.5 million for the three month period ended June 30, 2019. The increase was mainly as a result of the acquisition of five product tankers of Navios Europe I in December 2019; partially mitigated by the sale of three VLCCs in 2019. Please see Related Party Transactions for discussion on the management fees.

 

General and administrative expenses: Total general and administrative expenses for the three month period ended June 30, 2020 decreased by

$0.5 million to $6.3 million compared to $6.8 million for the three month period ended June 30, 2019, mainly due to the decrease in legal and professional fees. For the three month periods ended June 30, 2020 and 2019, the expenses charged by the Manager for administrative services were $3.0 million and $2.8 million, respectively.

 

Depreciation and amortization: Depreciation and amortization amounted to $16.6 million for the three month period ended June 30, 2020, as compared to $17.3 million for the three month period ended June 30, 2019, mainly due to the sale of three VLCCs in 2019; partially mitigated by the acquisition of five product tankers of Navios Europe I in December 2019. Depreciation of a vessel is calculated using an estimated useful life of 25 years from the date the vessel was originally delivered from the shipyard.

 

Gain on sale of vessel: There was no gain on sale of vessel for the three month period ended June 30, 2020 as compared to a $2.6 million gain from the sale of one VLCC in the second quarter of 2019.

 

Interest income: Interest income for the three month period ended June 30, 2020 decreased by $2.3 million to $0 compared to $2.3 million for the three month period ended June 30, 2019.

 

Interest expense and finance cost: Interest expense and finance cost for the three month period ended June 30, 2020 decreased by $2.0 million to $21.7 million, as compared to $23.7 million for the three month period ended June 30, 2019. The decrease was mainly due to the decrease of the weighted average interest rate for the three month period ended June 30, 2020 to 6.61% compared to 7.20% in the same period in 2019 and the decrease of the average outstanding balance. The average outstanding balance of our credit facilities (other than the 2021 Notes, as defined in “Long- Term Debt Obligations and Credit Arrangements – Ship Mortgage Notes”) decreased to $495.3 million for the three month period ended June 30,

2020 as compared to $552.8 million for the three month period ended June 30, 2019. As of June 30, 2020 and 2019, the outstanding balance under

Navios Acquisition’s total borrowings was $1,174 million and $1,198 million, respectively.

 

Equity in net earnings of affiliated companies: Equity in net earnings of affiliated companies for the three month period ended June 30, 2020 amounted to $0 as compared to $0.9 million for the three month period ended June 30, 2019 which related to income recognized for Navios Europe I and Navios Europe II.

 

Other income: Other income for the three month period ended June 30, 2020 was $0.2 million. For the comparative period of 2019 other income was $0.

 

Other expense: Other expense for the three month period ended June 30, 2020 was $0. For the comparative period of 2019 other expense was $0.1 million.

 

For the Six Month Period ended June 30, 2020 compared to the Six Month Period ended June 30, 2019

 

The following table presents consolidated revenue and expense information for the six month periods ended June 30, 2020 and 2019. This information was derived from the unaudited condensed consolidated statements of operations of Navios Acquisition for the respective periods.

 

                     
      For the Six
Months
Ended
June 30, 2020
(unaudited)
    For the Six
Months
Ended
June 30, 2019
(unaudited)
 
Revenue     $ 210,081     $ 135,704  
Time charter and voyage expenses       (9,532 )     (8,963
Direct vessel expenses       (6,605 )     (4,678
Vessel operating expenses (management fees entirely through related party transactions)       (59,673 )     (54,387
General and administrative expenses       (10,247 )     (11,945
Depreciation and amortization       (33,249 )     (35,041
Gain on sale of vessels             3,245  
Interest income       7       4,456  
Interest expense and finance cost       (43,523 )     (46,625
Impairment of receivable in affiliated company / Equity in net earnings of affiliated companies       (13,900 )     1,734  
Other income             1,333  
Other expense       (1,473 )     (522
     
 
 
   
 
 
 
Net income/ (loss)     $ 31,886     $ (15,689
                           

 

Revenue: Revenue for the six month period ended June 30, 2020 increased by $74.4 million, or 54.8%, to $210.1 million, as compared to $135.7 million for the same period of 2019. The increase was mainly attributable to an: (i) increase in revenue by $16.9 million due to the acquisition of five product tankers of Navios Europe I in December 2019; and (ii) increase in market rates during the six month period ended June 30, 2020 as compared to the same period of 2019; partially mitigated by the sale of three VLCCs in 2019. Available days of the fleet increased to 7,614 days for the six month period ended June 30, 2020, as compared to 7,187 days for the six month period ended June 30, 2019, due to the reasons mentioned above. The TCE Rate increased to $26,339 for the six month period ended June 30, 2020, from $17,635 for the six month period ended June 30, 2019.

 

Time charter and voyage expenses: Time charter and voyage expenses for the six month period ended June 30, 2020 increased by $0.5 million, or 6.3%, to $9.5 million, as compared to $9.0 million for the same period of 2019. The increase was mainly attributable to a: (a) $0.4 million increase in brokers’commission; and (b) a $0.1 million increase in bunkers consumption and voyage expenses related to the spot voyages incurred in the period.

 

Direct vessel expenses: Direct vessel expenses, comprising of the amortization of dry dock and special survey costs of certain vessels of our fleet, amounted to $6.6 million for the six month period ended June 30, 2020, as compared to $4.7 million for the six month period ended June 30, 2019.

Vessel operating expenses (management fees): Vessel operating expenses for the six month period ended June 30, 2020 increased by $5.3 million to $59.7 million, as compared to $54.4 million for the six month period ended June 30, 2019. The increase was mainly as a result of the acquisition of five product tankers of Navios Europe I in December 2019; partially mitigated by the sale of three VLCCs in 2019. Please see Related Party Transactions for discussion on the vessel operating expenses (management fees).

General and administrative expenses: Total general and administrative expenses for the six month period ended June 30, 2020 decreased by $1.7 million to $10.2 million compared to $11.9 million for the six month period ended June 30, 2019, mainly due to the decrease in legal and professional fees. For the six month periods ended June 30, 2020 and 2019, the expenses charged by the Manager for administrative services were $6.0 million and $5.6 million, respectively.

Depreciation and amortization: Depreciation decreased by $1.8 million to $33.2 million for the six month period ended June 30, 2020 as compared to $35.0 million for the six month period ended June 30, 2019, mainly due to the sale of three VLCCs in 2019; partially mitigated by the acquisition of five product tankers of Navios Europe I in December 2019. Depreciation of a vessel is calculated using an estimated useful life of 25 years from the date the vessel was originally delivered from the shipyard.

 

Gain on sale of vessels: There was no gain on sale of vessels for the six month period ended June 30, 2020 as compared to a $3.2 gain from the sale of two VLCCs in the first and second quarters of 2019.

 

Interest income: Interest income for the six month period ended June 30, 2020 decreased by $4.5 million to $0, as compared to $4.5 million for the six month period ended June 30, 2019.

 

Interest expense and finance cost: Interest expense and finance cost for the six month period ended June 30, 2020 decreased by $3.1 million to $43.5 million, as compared to $46.6 million for the six month period ended June 30, 2019. The decrease was mainly due to the decrease of the weighted average interest rate for the six month period ended June 30, 2020 to 4.40% compared to 7.23% in the same period in 2019 and the decrease of the average outstanding balance. The average outstanding balance of our credit facilities (other than the 2021 Notes, as defined in “Long- Term Debt Obligations and Credit Arrangements – Ship Mortgage Notes”) decreased to $508.4 million for the six month period ended June 30,

2020 as compared to $543.5 million for the three month period ended June 30, 2019. As of June 30, 2020 and 2019, the outstanding balance under Navios Acquisition’s total borrowings was $1,174 million and $1,198 million, respectively.

 

Impairment of receivable in affiliated company / Equity in net earnings of affiliated companies: Impairment of receivable in affiliated companies for the six month period ended June 30, 2020 amounted to $13.9 million and related to the other-than-temporary impairment recognized in the Navios Acquisition’s receivable from Navios Europe II. Equity in net earnings of affiliated companies for the six month period ended June 30, 2019 amounted to $1.7 million which related to income recognized for Navios Europe I and Navios Europe II.

Other income: Other income for the six month period ended June 30, 2020 was $0 as compared to $1.3 million for the same period in 2019.

Other expense: Other expense for the six month period ended June 30, 2020 was $1.5 million as compared to $0.5 million for the same period in 2019.

 

 

Liquidity and Capital Resources

 

Our primary short-term liquidity needs are to fund general working capital requirements, dry docking expenditures, minimum cash balance maintenance as per our credit facility agreements and debt repayment, and other obligations from time to time, while our long-term liquidity needs 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 dry docking 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, long-term borrowings and proceeds from asset sales. As of June 30, 2020, Navios Acquisition’s current assets totaled $198.2 million, while current liabilities totaled $187.2 million, resulting in a positive working capital position of $11.0 million. Navios Acquisition’s cash forecast indicates that it will generate sufficient cash for at least the next 12 months following August 6, 2020 to make the required principal and interest payments on its indebtedness and provide for the normal working capital requirements. Generally, our long-term sources of funds derive from cash from operations, long-term bank borrowings and other debt or equity financings. We expect that we will rely upon cash from operations and upon external financing sources, including bank borrowings, to fund acquisitions, expansion and investment capital expenditures and other commitments we have entered into. We cannot assure you that we will be able to secure adequate financing or obtaining additional funds on favorable terms, to meet our liquidity needs.

 

Navios Acquisition may use funds to repurchase its outstanding capital stock and/or indebtedness from time to time. Repurchases may be made in the open market, or through privately negotiated transactions or otherwise, in compliance with applicable laws, rules and regulations, at prices and on terms Navios Acquisition deems appropriate and subject to its cash requirements for other purposes, compliance with the covenants under Navios Acquisition’s debt agreements, and other factors management deems relevant.

 

In February 2018, the Board of Directors of Navios Acquisition authorized a stock repurchase program for up to $25.0 million of Navios Acquisition’s common stock, for two years. Stock repurchases were made from time to time for cash in open market transactions at prevailing market prices or in privately negotiated transactions. The timing and amount of repurchases under the program were determined by management based upon market conditions and other factors. Repurchases were made pursuant to a program adopted under Rule 10b5-1 under the Securities Exchange Act of

1934, as amended. The program did not require any minimum repurchase or any specific number or amount of shares of common stock and was suspended or reinstated at any time in Navios Acquisition’s discretion and without notice. Repurchases were subject to restrictions under Navios Acquisition’s credit facilities and indenture. Up to the expiration of the stock repurchase program in February 2020, Navios Acquisition had repurchased

735,251 shares since the program was initiated for approximately $7.5 million.

 

In the fourth quarter of 2019, Navios Acquisition repurchased $12.0 million of its 2021 Notes (as defined in “Long-Term Debt Obligations and Credit Arrangements – Ship Mortgage Notes”) from unaffiliated third parties in open market transactions for a cash consideration of $10.0 million.

 

Subsequently to June 30, 2020 Navios Acquisition repurchased $9.0 million of Ship Mortgage Notes for a cash consideration of $5.3 million.

 

In October 2019, Navios Acquisition completed a registered direct offering of 1,875,000 shares of its common stock at $8.00 per share, raising gross proceeds of $15.0 million. Total net proceeds of the above transactions, net of agents’ costs of $0.7 million and offering costs $0.9 million, amounted to $13.4 million.

 

On November 29, 2019, Navios Acquisition entered into a Continuous Offering Program Sales Agreement for the issuance and sale from time to time shares of Navios Acquisition’s common stock having an aggregate offering price of up to $25.0 million. The sales were being made pursuant to a prospectus supplement as part of a shelf registration statement which was set to expire in December 2019. Navios Acquisition went effective on a new shelf registration statement which was declared effective on December 23, 2019. Accordingly, an amended Sales Agreement was entered into on December 23, 2019. As before, the Sales Agreement contains, among other things, customary representations, warranties and covenants by Navios Acquisition and indemnification obligations of the parties thereto as well as certain termination rights for such parties. As of August 4, 2020, since the commencement of the program, Navios Acquisition has issued 516,250 shares of common stock and received net proceeds of $3.2 million.

 

 

Cash Flow

 

Cash flows for the six month period ended June 30, 2020 compared to the six month period ended June 30, 2019:

 

The following table presents cash flow information for the six month periods ended June 30, 2020 and 2019.

 

                 
   

Six month

period ended

June 30, 2020

   

Six month

period ended

June 30, 2019

 
    (unaudited)     (unaudited)  
Expressed in thousands of U.S. dollars                
Net cash provided by operating activities   $ 50,723     $ 1,545  
Net cash (used in)/ provided by investing activities     (44,623     25,738  
Net cash provided by/ (used in) financing activities     18,331       (31,930
Net increase/ (decrease) in cash, cash equivalents and restricted cash   $ 24,431     $ (4,647
Cash, cash equivalents and restricted cash, beginning of period     44,051       46,609  
Cash, cash equivalents and restricted cash, end of period   $ 68,482     $ 41,962  

Cash provided by operating activities for the six month period ended June 30, 2020 as compared to the six month period ended June 30, 2019:

Net cash provided by operating activities increased by $49.2 million to $50.7 million for the period ended June 30, 2020 as compared to $1.5 million for the period ended June 30, 2019. The increase is analyzed as follows:

The net income for the six month period ended June 30, 2020 was $31.9 million compared to net loss of $15.7 million for the six month period ended June 30, 2019. In determining net cash provided by operating activities for the six month period ended June 30, 2020, the net income was adjusted for the effect of depreciation and amortization of $33.2 million, $13.9 million impairment of receivable in affiliated company, $6.2 million for the amortization of drydock and special survey costs, $3.0 million for amortization and write-off of deferred finance fees and bond premium, and $0.2 million for stock based compensation.

 

The net cash inflow resulting from the change in operating assets, liabilities and payments for drydock and special survey costs of $37.6 million for the six month period ended June 30, 2020 mainly resulted from a $5.9 million increase in deferred revenue, a $3.8 million decrease in accounts receivable, a $2.9 million decrease in prepaid expenses, a $2.5 million decrease in inventories and an $0.9 million increase in accrued expenses. These were partially offset by a $20.4 million payment for drydock and special survey costs, a $20.1 million decrease in the balance due to related parties short-term, a $5.4 million decrease in accounts payable, a $3.9 million increase in other long term assets, a $2.0 million increase in the balance due from related parties, short-term and a $1.8 million increase in the balance due from related parties, long-term.

In determining net cash provided by operating activities for the six month period ended June 30, 2019, the net loss was adjusted for the effect of depreciation and amortization of $35.0 million, $4.6 million for the amortization of drydock and special survey costs, $2.3 million for amortization and write-off of deferred finance fees and bond premium, $1.7 million for equity in net earnings of affiliated companies, net of dividends received, $3.2 million for gain on sale of vessels, and $0.5 million for stock based compensation.

The net cash outflow resulting from the change in operating assets, liabilities and payments for drydock and special survey costs of $20.2 million for the six month period ended June 30, 2019 mainly resulted from a $15.8 million increase in the balance due from related parties, short-term, a $12.0 million decrease in the balance due to related parties, short-term, a $1.8 million decrease in accounts payable, a $1.7 million payment for drydock and special survey costs and a $0.4 million increase in prepaid expenses. These were partially offset by an $8.3 million decrease in accounts receivable, a $2.4 million decrease in the balance due from related parties, long-term, a $0.5 million increase in accrued expenses and a $0.3 million increase in deferred revenue.

Cash (used in)/ provided by investing activities for the six month period ended June 30, 2020 as compared to the six month period ended June 30, 2019:

Net cash (used in)/ provided by investing activities decreased by $70.3 million to $44.6 million outflow for the six month period ended June 30, 2020 from $25.7 million inflow for the six month period ended June 30, 2019.

Net cash used in investing activities for the six month period ended June 30, 2020, resulted from $44.6 million from Container vessel owning companies acquisition/ vessels improvements.

Net cash provided by investing activities for the six month period ended June 30, 2019, resulted from $33.3 million net proceeds from sale of vessel; partially mitigated by: (i) $5.6 million from Vessels improvements; and (ii) $2.0 million from loans to affiliates.

Cash provided by/ (used in) financing activities for the six month period ended June 30, 2020 as compared to the six month period ended June 30, 2019:

Net cash provided by/ (used in) financing activities increased by $50.2 million to $18.3 million inflow for the six month period ended June 30, 2020 from $31.9 million outflow for the six month period ended June 30, 2019.

Net cash provided by financing activities for the six month period ended June 30, 2020 resulted from: (i) $133.1 million loan proceeds, net of deferred finance costs; and (ii) $0.9 million in equity offering proceeds; and was partially mitigated by: (a) $106.1 million of loan repayments; and (b) $9.6 million of dividends paid.

Net cash used in financing activities for the six month period ended June 30, 2019 resulted from: (i) $121.5 million of loan repayments; (ii) $8.2 million of dividends paid; and (iii) $0.4 million for acquisition of treasury stock; that was partially mitigated by $98.2 million in loan proceeds, net of deferred finance costs.

 

 

Reconciliation of EBITDA and Adjusted EBITDA to Net Cash from Operating Activities

 

 

                                 
    Three Month
Period
Ended
June 30,
2020
(unaudited)
    Three Month
Period
Ended
June 30,
2019
(unaudited)
    Six Month
Period
Ended
June 30,
2020
(unaudited)
    Six Month
Period
Ended
June 30,
2019
(unaudited)
 
Expressed in thousands of U.S. dollars                                
Net cash provided by/ (used in) operating activities   $ 20,206     $ (8,343 )   $ 50,723     $ 1,545  
Net decrease/ (increase) in operating assets     12,592       (2,598 )     (1,369 )     5,443  
Net increase in operating liabilities     14,321       10,521       18,718       13,102  
Net interest cost     21,676       21,400       43,516       42,169  
Amortization and write-off of deferred finance costs and bond premium     (1,533 )     (1,319 )     (3,045 )     (2,293 )
Impairment of receivable in Navios Europe II / Equity in net earnings of affiliated companies     —         889       (13,900 )     1,734  
Payments for dry dock and special survey costs     5,473       1,570       20,421       1,662  
Gain on sale of vessels     —         2,594       —         3,245  
Stock-based compensation     (123 )     (231 )     (246 )     (460 )
   
 
 
   
 
     
 
 
   
 
   
EBITDA     72,612       24,483       114,818       66,147  
Gain on sale of vessels     —         (2,594 )     —         (3,245 )
Impairment of receivable in Navios Europe II     —         —         13,900       —    
Stock-based compensation     123       231       246       460  
Adjusted EBITDA     72,735       22,120       128,964       63,362  

 

 

    Three Month
Period
Ended
June 30,
2020
(unaudited)
    Three Month
Period
Ended
June 30,
2019
(unaudited)
    Six Month
Period
Ended
June 30,
2020
(unaudited)
    Six Month
Period
Ended
June 30,
2019
(unaudited)
 
Net cash provided by/ (used in) operating activities   $ 20,206     $ (8,343 )   $ 50,723     $ 1,545  
Net cash (used in) / provided by investing activities   $ (38,741 )   $ 8,288     $ (44,623 )   $ 25,738  
Net cash provided by/ (used in) financing activities   $ 35,949     $ (25,881 )   $ 18,331     $ (31,930 )

 

EBITDA in this document represents net income/ (loss) before interest and finance costs, before depreciation and amortization and before income taxes. Adjusted EBITDA in this document represents EBITDA excluding certain items, such as stock-based compensation, gain on sale of vessels, gain/ (loss) on debt repayment and OTTI loss on equity investment.

We use Adjusted EBITDA as liquidity measure and reconcile EBITDA and Adjusted EBITDA to net cash provided by operating activities, the most comparable U.S. GAAP liquidity measure. EBITDA in this document is calculated as follows: net cash provided by 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 in operating liabilities; (iii) net interest cost; (iv) amortization and write-off of deferred finance costs and bond premium; (v) impairment of receivable in Navios Europe II / Equity in net earnings of affiliated companies; (vi) payments for dry dock and special survey costs; (vii) gain on sale of vessel; and (viii) stock- based compensation. Navios Acquisition believes that EBITDA and Adjusted EBITDA are each the basis upon which liquidity can be assessed and present useful information to investors regarding Navios Acquisition’s ability to service and/or incur indebtedness, pay capital expenditures, meet working capital requirements and pay dividends. Navios Acquisition also believes that EBITDA and Adjusted EBITDA are 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 and Adjusted EBITDA have limitations as an analytical tool, and should not be considered in isolation or as a substitute for the analysis of Navios Acquisition’s results as reported under U.S. GAAP. Some of these limitations are: (i) EBITDA and Adjusted EBITDA do 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 and Adjusted EBITDA do not reflect any cash requirements for such capital expenditures. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as a principal indicator of Navios Acquisition’s performance. Furthermore, our calculation of EBITDA and Adjusted EBITDA may not be comparable to that reported by other companies due to differences in methods of calculation.

Adjusted EBITDA affected by the items described in the table above, for the three month period ended June 30, 2020 increased by $50.6 million to $72.7 million, as compared to $22.1 million for the same period of 2019. The increase in Adjusted EBITDA was mainly due to a: (a) $53.6 million increase in revenue; (b) $0.7 million decrease in time charter and voyage expenses; (c) $0.4 million decrease in general and administrative expenses (excluding stock-based compensation); and (d) $0.2 million increase in other expense; partially mitigated by a: (i) $3.4 million increase in operating expenses mainly due to the acquisition of the five product tankers of Navios Europe I in December 2019 and to the amendment of the fees under the management agreement, that was also partially impacted by the sale of three VLCCs in 2019; and (ii) $0.9 million decrease in equity in net earnings of affiliated companies.

Adjusted EBITDA affected by the items described in the table above, for the six month period ended June 30, 2020 increased by $65.6 million to $129.0 million, as compared to $63.4 million for the same period of 2019. The increase in Adjusted EBITDA was mainly due to a: (a) $74.4 million increase in revenue; and (b) $1.5 million decrease in general and administrative expenses (excluding stock-based compensation); partially mitigated by a: (i) $5.3 million increase in operating expenses mainly due to the acquisition of the five product tankers of Navios Europe I in December 2019 and to the amendment of the fees under the management agreement, that was also partially impacted by the sale of three VLCCs in 2019; (ii) $1.7 million decrease in equity in net earnings of affiliated companies; (iii) $1.3 million decrease in other income; (iv) $1.0 million increase in other expense; (v) $0.6 million increase in time charter and voyage expenses; and (vi) $0.4 million increase in direct vessel expenses (other than amortization of dry dock and special survey cost).

 

Long-Term Debt Obligations and Credit Arrangements

 

Ship Mortgage Notes

 

8 1/8% First Priority Ship Mortgages: On November 13, 2013, the Company and its wholly owned subsidiary, Navios Acquisition Finance (US) Inc. (“Navios Acquisition Finance” and together with the Company, the 2021 Co-Issuers”) issued $610.0 million in first priority ship mortgage notes (the “Existing Notes”) due on November 15, 2021 at a fixed rate of 8.125%.

 

On March 31, 2014, the Company completed a sale of $60.0 million of its first priority ship mortgage notes due in 2021 (the “Additional Notes,”

and together with the Existing Notes, the “2021 Notes”). The terms of the Additional Notes are identical to the Existing Notes and were issued at

103.25% plus accrued interest from November 13, 2013.

 

The 2021 Notes are fully and unconditionally guaranteed on a joint and several basis by all of Navios Acquisitions subsidiaries with the exception of Navios Acquisition Finance (a co-issuer of the 2021 Notes) and the exception of Navios Midstream subsidiaries.

 

The 2021 Co-Issuers currently have the option to redeem the 2021 Notes in whole or in part, at a fixed price of 106.094% of the principal amount, which price declines ratably until it reaches par in 2019, plus accrued and unpaid interest, if any.

 

In addition, upon the occurrence of certain change of control events, the holders of the 2021 Notes will have the right to require

the 2021 Co-Issuers to repurchase some or all of the 2021 Notes at 101% of their face amount, plus accrued and unpaid interest to the repurchase date.

 

The 2021 Notes contain covenants which, among other things, limit the incurrence of additional indebtedness, issuance of certain preferred stock, the payment of dividends, redemption or repurchase of capital stock or making restricted payments and investments, creation of certain liens, transfer or sale of assets, entering in transactions with affiliates, merging or consolidating or selling all or substantially all of the 2021 Co-Issuers’ properties and assets and creation or designation of restricted subsidiaries.

 

Following the acquisition of the Star N and the Hector N MR1 product tankers from Navios Europe I, the vessels were offered as collateral under its ship mortgage notes, in substitution of an amount of $25.4 million that was held as cash collateral from the sale proceeds of the Nave Electron.

 

In the fourth quarter of 2019, Navios Acquisition repurchased $12.0 million of its ship mortgage notes for a cash consideration of $10.0 million resulting in a gain on bond repurchase of $1.9 million net of deferred fees written-off.

 

Subsequently to June 30, 2020, Navios Acquisition repurchased $9.0 million of Ship Mortgage Notes for a cash consideration of $5.3 million.

 

The 2021 Co-Issuers were in compliance with the covenants as of June 30, 2020.

 

The Existing Notes and the Additional Notes are treated as a single class for all purposes under the indenture including, without limitation, waivers, amendments, redemptions and other offers to purchase and the Additional Notes rank evenly with the Existing Notes. The Additional Notes and the Existing Notes have different CUSIP numbers.

 

Guarantees

 

The Company’s 2021 Notes are fully and unconditionally guaranteed on a joint and several basis by all of the Company’s subsidiaries with the exception of Navios Acquisition Finance (a co-issuer of the 2021 Notes) and the exception of Navios Midstream subsidiaries. The Company’s 2021 Notes are unregistered. The guarantees of our subsidiaries that own mortgaged vessels are senior secured guarantees and the guarantees of our subsidiaries that do not own mortgaged vessels are senior unsecured guarantees. All subsidiaries, including Navios Acquisition Finance and Navios Midstream subsidiaries are 100% owned. Navios Acquisition does not have any independent assets or operations.

 

 

Credit Facilities

 

As of June 30, 2020, the Company had secured credit facilities with various commercial banks with a total outstanding balance of $0.2 billion.

 

The purpose of the facilities was to finance the construction or acquisition of vessels or refinance existing indebtedness. All of the facilities are denominated in U.S. Dollars and bear interest based on LIBOR plus spread ranging from 230 bps to 410 bps per annum. The facilities are repayable in either semi-annual or quarterly installments, followed by balloon payments with maturities, ranging from November 2020 to October 2027. See also “Contractual obligations” below.

 

On December 6, 2010, Navios Acquisition entered into a loan agreement with Eurobank Ergasias S.A. of up to $52.0 million out of which $46.2 million has been drawn (divided into two tranches of $23.1 million each) to partially finance the acquisition costs of two LR1 product tanker vessels. Each tranche of the facility was repayable in 32 equal quarterly installments of $0.3 million each with a final balloon payment of $13.3 million, to be repaid on the last repayment date. The maturity date of the loan was in the third and fourth quarter of 2020. The repayment of each tranche started three months after the delivery date of the respective vessel. It bore interest at a rate of LIBOR plus 300 bps. The loan also required compliance with certain financial covenants. The outstanding balance under the facility of amount of $27.5 million was fully prepaid in June 2020.

 

In November 2015, Navios Acquisition, entered into a term loan facility of up to $125.0 million (divided into five tranches) with Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda Banken AB for the: (i) financing of the purchase price of the Nave Spherical; and (ii) the refinancing of the existing facility with Deutsche Bank AG Filiale Deutschlandgescäft and Skandinaviska Enskilda Banken AB, dated July 18, 2014. Four of the five tranches of the facility are repayable in 20 quarterly installments of between approximately $0.4 million and $1.9 million, each with a final balloon repayment to be made on the last repayment date. The fifth tranche is repayable in 16 quarterly installments of between approximately $0.07 million and $0.8 million, each. The maturity date of the loan is in the fourth quarter of 2020. The credit facility bears interest at LIBOR plus 295 bps per annum. On March 23, 2018, Navios Acquisition prepaid $26.8 million, being the respective tranche of the Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda Banken AB facility that was drawn to finance the Nave Equinox and the Nave Pyxis, which substituted the Nave Galactic as collateral vessels under the 8 1/8% 2021 Notes. On June 18, 2020, Navios Acquisition prepaid $16.3 million, being the respective tranche of the Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda Banken AB facility that was drawn to finance the Nave Sextans. As of June 30, 2020, the outstanding balance under this facility was $19.1 million.

 

In December 2019, Navios Acquisition entered into a loan agreement with Deutsche Bank AG Filiale Deutschlandgeschäft of up to $32.5 million in order to finance one MR1 and two LR1s acquired from Navios Europe I. The facility was repayable in one single repayment on the last repayment date. The facility matured in June 2020 and bore interest at LIBOR plus 400 bps per annum. In the second quarter of 2020, Navios Acquisition fully repaid the amount of $32.5 million.

 

In June 2020, Navios Acquisition entered into a loan agreement with Eurobank S.A. of $20.8 million in order to refinance two LR1s. The facility is repayable in 16 quarterly installments of $0.8 million each with a final balloon payment of $8.0 million repayable on the last repayment date. The facility matures in June 2024 and bears interest at LIBOR plus 300 bps per annum. As of June 30, 2020, an amount of $20.8 million was outstanding under this facility.

 

In June 2020, Navios Acquisition entered into a loan agreement with Hamburg Commercial Bank AG of $41.7 million in order to acquire seven containerships. The facility is repayable in 4 quarterly installments with a final balloon payment of $21.7 million repayable on the last repayment date. The facility matures in May 2021 and bears interest at LIBOR plus 375 bps per annum. As of June 30, 2020, an amount of $41.7 million was outstanding under this facility and is presented under “Liabilities associated with assets held for sale”. (Please refer to Note 7)

 

Amounts drawn under the facilities are secured by first preferred mortgages on Navios Acquisition’s vessels and other collateral and are guaranteed by each vessel-owning subsidiary. The credit facilities contain a number of restrictive covenants that prohibit or limit Navios Acquisition from, among other things: incurring or guaranteeing indebtedness; entering into affiliate transactions; changing the flag, class, management or ownership of Navios Acquisition’s vessels; changing the commercial and technical management of Navios Acquisition’s vessels; selling Navios Acquisition’s vessels; and subordinating the obligations under each credit facility to any general and administrative costs relating to the vessels, including the fixed daily fee payable under the Management Agreement. The credit facilities also require Navios Acquisition to comply with the ISM Code and ISPS Code and to maintain valid safety management certificates and documents of compliance at all times.

 

As of June 30, 2020, no amount was available to be drawn from the Company’s facilities.

 

Sale and Leaseback Agreements

 

As of June 30, 2020, the Company had sale and leaseback agreements with various unrelated third parties with a total outstanding balance of $0.4 billion.

 

As of June 30, 2020 and December 31, 2019, the deposits under the sale and leaseback agreements were $9.1 million and $5.5 million, respectively, and are presented under “Other long term assets” in the condensed consolidated balance sheets.

 

In June 2020, Navios Acquisition entered into sale and leaseback agreements with unrelated third parties for $72.1 million in order to refinance one MR1, one MR2 and two LR1s. Navios Acquisition has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transaction was determined to be a failed sale. The agreements will be repaid through periods ranging from four to seven years in consecutive quarterly installments of up to $1.8 million each, with a repurchase obligation of up to $27.0 million in total. The sale and leaseback arrangements bear interest at LIBOR plus a margin ranging from 390 bps to 410 bps per annum, depending on the vessel financed. As of June 30, 2020, the outstanding balance under the agreements was $72.1 million. 

 

Amounts drawn under the facilities are secured by first preferred mortgages on Navios Acquisition’s vessels and other collateral and are guaranteed by each vessel-owning subsidiary. The credit facilities contain a number of restrictive covenants that prohibit or limit Navios Acquisition from, among other things: incurring or guaranteeing indebtedness; entering into affiliate transactions; changing the flag, class, management or ownership of Navios Acquisition’s vessels; changing the commercial and technical management of Navios Acquisition’s vessels; selling Navios Acquisition’s vessels; and subordinating the obligations under each credit facility to any general and administrative costs relating to the vessels, including the fixed daily fee payable under the Management Agreement. The credit facilities also require Navios Acquisition to comply with the ISM Code and ISPS Code and to maintain valid safety management certificates and documents of compliance at all times.

 

As of June 30, 2020, the Company was in compliance with its covenants.

 

 

Off-Balance Sheet Arrangements – Legal Proceedings

 

The Company is involved in various disputes and arbitration proceedings arising in the ordinary course of business. Provisions have been recognized in the financial statements for all such proceedings where 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 Company’s financial position, results of operations or liquidity.

 

 

Contractual Obligations

 

The following table summarizes our long-term contractual obligations as of June 30, 2020:

 

 
 

 

                                         
    Payments due by period (Unaudited)  

(In thousands of U.S. dollars)

  Less than
1 year
    1-3 years     3-5 years     More than
5 years
    Total  
Long-term debt obligations(1)   $ 102,608     $ 824,984     $ 125,052     $ 121,263     $ 1,173,907  
Lease Obligations (Time Charters) for vessels to be delivered(2)     10,397       59,174       66,960       264,952       401,483  
Total contractual obligations   $ 113,005       884,158       192,012       386,215     $ 1,575,390  

 

(1) The amount identified does not include interest costs associated with the outstanding credit facilities, which are based on LIBOR, plus the costs of complying with any applicable regulatory requirements and a margin ranging from 230 bps to 410 bps per annum or the $670.0 million 2021 Notes fixed rate of 8.125%.

 

(2) In August 2018, Navios Acquisition agreed to the main terms of a 12-year bareboat charter-in agreement with de-escalating purchase options for two newbuild Japanese VLCCs delivering in each of the fourth quarter of 2020 and the first quarter of 2021. In the first quarter of 2019, we exercised our option for a third VLCC newbuilding under a bareboat operating lease with an expected delivery in the second quarter of 2021. In the second quarter of 2020, Navios Acquisition exercised its option for a fourth Japanese newbuild VLCC under a bareboat operating lease with an expected delivery in the second quarter of 2022.

Navios Acquisition leases office space in Monaco pursuant to a five year lease agreement, dated July 1, 2018, that expires in June 2023, for a monthly rent of approximately $0.01 million.

Related Party Transactions

Vessel operating expenses (management fees): Pursuant to the Management Agreement dated May 28, 2010 and as amended in May 2012, May 2014, May 2016 and May 2018, the Manager provided commercial and technical management services to Navios Acquisition’s vessels for a fixed daily fee of: (a) $6,500 per MR2 product tanker and chemical tanker vessel; (b) $7,150 per LR1 product tanker vessel; and (c) the current daily fee of $9,500 per VLCC, through May 2020.

Following the Merger with Navios Midstream, completed on December 13, 2018, the Management Agreement covers vessels acquired.

On August 29, 2019, Navios Acquisition entered into a sixth amendment (the “Sixth Amendment”) to the Management Agreement (as amended, the “Management Agreement”) with Navios Tankers Management Inc. The Sixth Amendment, among other changes, extends the duration of the Management Agreement until January 1, 2025, with an automatic renewal for an additional five years, unless earlier terminated by either party, and provides for payment of a termination fee by Navios Acquisition in the event the Management Agreement is terminated on or before December 31, 2024. The Sixth Amendment also sets forth the management fees for the period through December 31, 2019 and the two-year period commencing January 1, 2020, which management fees exclude dry-docking expenses, which are reimbursed at cost by Navios Acquisition: (a) $7,150 and $7,225, respectively, daily rate per owned LR1 product tanker vessel; (b) $6,500 and $6,825, respectively, daily rate per owned MR2 product tanker vessel and chemical tanker vessel; (c) $9,500 and $9,650, respectively, daily rate per VLCC tanker vessel; and (d) effective in both periods, $50 per vessel daily rate for technical and commercial management services. Commencing January 1, 2022, the fees described in subsections (a) through (c) are subject to an annual increase of 3%, unless otherwise agreed and provides for payment of a termination fee, equal to the fees charged for the full calendar year preceding the termination date, by Navios Acquisition in the event the Management Agreement is terminated on or before December 31, 2024.

Following the liquidation of Navios Europe I (“Liquidation of Navios Europe I”) in December 2019, which resulted in the acquisition of three MR1 product tankers and two LR1 product tankers, as per the terms of the Management Agreement, management fees are fixed for two years commencing from January 1, 2020 at: (a) $6,825 per day per MR1, MR2 product tanker and chemical tanker; (b) $7,225 per day per LR1 product tanker vessel; and (c) $9,500 per VLCC. The Management Agreement also provides for a technical and commercial management fee of $50 per day per vessel and an annual increase of 3% after January 1, 2022 for the remaining period unless agreed otherwise.

Following the Liquidation of Navios Europe II, Navios Acquisition acquired seven containerships on June 29, 2020. As per the amendment to the Management Agreement dated June 26, 2020, the management fees are fixed at: (a) $5,250 per day per Container vessel of 1,500 TEU up to 1,999 TEU; and (b) $6,100 per day per Container vessel of 2,000 TEU up to 3,450 TEU.

 

Drydocking expenses are reimbursed at cost for all vessels.

 

For the six month periods ended June 30, 2020 and 2019 certain extraordinary fees and costs related to regulatory requirements, including ballast water treatment system installation and exhaust gas cleaning system installation and under Company’s Management Agreement amounted to $3.7 million and $5.6 million, respectively, and are presented under “Container vessel owning companies acquisition/ vessels improvements” in the condensed Consolidated Statements of Cash Flows. (Please refer to Note 5)

Total vessel operating expenses for the three month periods ended June 30, 2020 and 2019 amounted to $29.8 million and $26.5 million, respectively. Total vessel operating expenses for the six month periods ended June 30, 2020 and 2019 amounted to $59.6 million and $54.4 million, respectively.

General and administrative expenses: On May 28, 2010, Navios Acquisition entered into an Administrative Services Agreement with the Manager, pursuant to which the Manager provides certain administrative management services to Navios Acquisition 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 incurred in connection with the provision of these services. In May 2014, Navios Acquisition extended the duration of its existing Administrative Services Agreement with the Manager, until May 2020.

In August 2019, Navios Acquisition extended the duration of its existing Administrative Services Agreement with the Manager until January 1, 2025, to be automatically renewed for another five years. The agreement also provides for payment of a termination fee, equal to the fees charged for the full calendar year preceding the termination date, by Navios Acquisition in the event the Administrative Services Agreement is terminated on or before December 31, 2024.

Following the Liquidation of Navios Europe I in December 2019, Navios Acquisition acquired three MR1 product tankers and two LR1 product tankers. The Administrative Services Agreement also covers the vessels acquired.

Following the Liquidation of Navios Europe II, Navios Acquisition acquired seven containerships on June 29, 2020. The Administrative Services Agreement also covers the vessels acquired.

For each of the three month periods ended June 30, 2020 and 2019, the expense arising from administrative services rendered by the Manager amounted to $3.0 million and $2.8 million, respectively. For each of the six month periods ended June 30, 2020 and 2019 the expense arising from administrative services rendered by the Manager amounted to $6.0 million and $5.6 million, respectively.

Balance due from/ (to) related parties (exluding Navios Europe II): Balance due from related parties (both short and long-term) as of June 30, 2020, was $16.7 million (December 31, 2019: $14.7) and balance due to related parties as of June 30, 2020 was $0 (December 31, 2019:$32.2 million). The balances mainly consisted of administrative expenses, costs related to regulatory requirements including ballast water treatment system, special survey and dry docking expenses, as well as operating expenses and working capital deposits, in accordance with the Management Agreement. The balance due from related parties excludes the amount of the working capital deposits, in accordance with the Management Agreement of $1.8 million for the seven containerships acquired after the liquidation of Navios Europe II. The amount of $1.8 million is included under “Assets held for sale” in the condensed consolidated balance sheets.

Navios Midstream Merger Agreement: On December 13, 2018, Navios Acquisition completed the Merger contemplated by the Merger Agreement, dated as of October 7, 2018, by and among Navios Acquisition, its direct wholly-owned subsidiary Merger Sub, Navios Midstream and NAP General Partner. Pursuant to the Merger Agreement, Merger Sub merged with and into Navios Midstream, with Navios Midstream surviving as a wholly-owned subsidiary of Navios Acquisition.

 

Omnibus Agreements

Acquisition Omnibus Agreement: Navios Acquisition entered into an omnibus agreement (the “Acquisition Omnibus Agreement”) with Navios Maritime Holdings Inc. (“Navios Holdings”) and Navios Maritime Partners L.P. (“Navios Partners”) in connection with the closing of Navios Acquisition’s initial vessel acquisition, pursuant to which, among other things, Navios Holdings and Navios Partners agreed not to acquire, charter-in or own liquid shipment vessels, except for container vessels and vessels that are primarily employed in operations in South America without the consent of an independent committee of Navios Acquisition. In addition, Navios Acquisition, under the Acquisition Omnibus Agreement, agreed to cause its subsidiaries not to acquire, own, operate or charter-in drybulk carriers under specific exceptions. Under the Acquisition Omnibus Agreement, Navios Acquisition and its subsidiaries grant to Navios Holdings and Navios Partners a right of first offer on any proposed sale, transfer or other disposition of any of its drybulk carriers and related charters owned or acquired by Navios Acquisition. Likewise, Navios Holdings and Navios Partners agreed to grant a similar right of first offer to Navios Acquisition for any liquid shipment vessels they 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 existing terms of any charter or other agreement with a counterparty; or (b) merger with or into, or sale of substantially all of the assets to, an unaffiliated third party.

Midstream Omnibus Agreement: Navios Acquisition entered into an omnibus agreement (the “Midstream Omnibus Agreement”), with Navios Midstream, Navios Holdings and Navios Partners in connection with the Navios Midstream IPO, pursuant to which Navios Acquisition, Navios Midstream, 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, liquefied petroleum gas (“LPG”) tankers or chemical tankers under time charters of five or more years without the consent of the Navios Midstream General Partner. The Midstream Omnibus Agreement contains significant exceptions that have allowed Navios Acquisition, Navios Holdings, Navios Partners or any of their controlled affiliates to compete with Navios Midstream under specified circumstances.

Under the Midstream Omnibus Agreement, Navios Midstream and its subsidiaries have 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 have agreed (and will cause its subsidiaries to agree) to grant a similar right of first offer to Navios Midstream for any of the VLCCs, crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankers under charter for five or more years it might own. These rights of first offer do 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 Containers Omnibus Agreement: In connection with the Navios Maritime Containers Inc. (“Navios Containers”) private placement and listing on the Norwegian over-the-counter market effective June 8, 2017, Navios Acquisition entered into an omnibus agreement with Navios Containers, Navios Midstream, Navios Holdings and Navios Partners, pursuant to which Navios Acquisition, Navios Holdings, Navios Partners and Navios Midstream have 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.

Navios Midstream General Partner Option Agreement with Navios Holdings: Navios Acquisition entered into an option agreement, dated November 18, 2014, with Navios Holdings under which Navios Acquisition grants Navios Holdings the option to acquire any or all of the outstanding membership interests in Navios Midstream General Partner and all of the incentive distribution rights in Navios Midstream representing the right to receive an increasing percentage of the quarterly distributions when certain conditions are met. The option shall expire on November 18, 2024. Any such exercise shall relate to not less than twenty-five percent of the option interest and the purchase price for the acquisition of all or part of the option interest shall be an amount equal to its fair market value.

 Balance due from Navios Europe II: Navios Holdings, Navios Acquisition and Navios Partners have made available to Navios Europe II revolving loans up to $43.5 million to fund working capital requirements. In March 2017, the availability under the Navios Revolving Loans II was increased by $14.0 million.

 The decline in the fair value of the investment was considered as other-than-temporary and, therefore, an aggregate loss of $13.9 million was recognized and included in the accompanying condensed consolidated statements of income for the three month period ended March 31, 2020, and the six month period ended June 30, 2020, as "Impairment of receivable in affiliated company/ Equity in net earnings of affiliated companies." The fair value of the Company's investment was determined based on the liquidation value of Navios Europe II, determined on the individual fair values assigned to the assets and liabilities of Navios Europe II.

Following the Liquidation of Navios Europe II, the balance due from Navios Europe II as of June 30, 2020 was $0. The balance due from Navios Europe II as of December 31, 2019 was $44.9 million which included the Navios Revolving Loans II of $20.7 million, the non-current amount of $7.6 million related to the accrued interest income earned under the Navios Term Loans II under the caption “Due from related parties, long-term” and the accrued interest income earned under the Navios Revolving Loans II of $16.7 million under the caption “Due from related parties, short-term.”

Quantitative and Qualitative Disclosures about Market Risks

Foreign Exchange Risk

Our functional and reporting currency is the U.S. dollar. We engage in worldwide commerce with a variety of entities. Although our operations may expose us to certain levels of foreign currency risk, our transactions are predominantly U.S. dollar denominated. Transactions in currencies other than U.S. dollars are translated at the exchange rate in effect at the date of each transaction. Differences in exchange rates during the period between the date a transaction denominated in a foreign currency is consummated and the date on which it is either settled or translated, are recognized in the statements of income.

Interest Rate Risk

As of June 30, 2020, Navios Acquisition had a total of $1,174.0 million in long-term and short-term indebtedness. Borrowings under our credit facilities bear interest at rates based on a premium over LIBOR in U.S dollars except for the interest rate on the Existing Notes and the Additional Notes which is fixed. Therefore, we are exposed to the risk that our interest expense may increase if interest rates rise. For the three month period ended June 30, 2020, we paid interest on our outstanding debt at a weighted average interest rate of 6.61%. A 1% increase in LIBOR would have increased our interest expense for the three month period ended June 30, 2020 by $1.3 million. For the six month period ended June 30, 2020, we paid interest on our outstanding debt at a weighted average interest rate of 4.40%. A 1% increase in LIBOR would have increased our interest expense for the six month period ended June 30, 2020 by $2.6 million.

Concentration of Credit Risk

Financial instruments, which potentially subject us to significant concentrations of credit risk, consist principally of trade accounts receivable. We closely monitor our exposure to customers for credit risk. We have policies in place to ensure that we trade with customers with an appropriate credit history. For the six month period ended June 30, 2020, Navig8 Chemicals Shipping and Trading Co (“Navig8”) accounted for 32.4% and China ZhenHua Oil Co., Ltd accounted for 14.4% respectively, of Navios Acquisition’s revenue. For the year ended December 31, 2019, Navig8 and COSCO Shipping Tanker (Dalian) Co., Ltd. accounted for 34.6%, and 10.0%, respectively, of Navios Acquisition’s revenue.

Cash and Cash Equivalents

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. Navios Acquisition does maintain cash deposits and equivalents in excess of government-provided insurance limits. Navios Acquisition also minimizes exposure to credit risk by dealing with a diversified group of major financial institutions.

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 expenses in the current and foreseeable economic environment.

 

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which provides guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying generally accepted accounting principles to contract modifications, hedging relationships, and other transactions impacted by reference rate reform. The provisions of ASU 2020-04 apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. Adoption of the provisions of ASU 2020-04 is optional and is effective from March 12, 2020 through December 31, 2022. We are currently evaluating the impact of ASU 2020-04 on our condensed consolidated financial statements.

In August 2018, FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”. This update modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, and earlier adoption is permitted. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

In October 2018, FASB issued ASU 2018-17, Consolidation (Topic 810): “Targeted Improvements to Related Party Guidance for Variable Interest Entities” (“ASU 2018-17”). ASU 2018-17 provides that indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. This is consistent with how indirect interests held through related parties under common control are considered for determining whether a reporting entity must consolidate a Variable Interest Entity (“VIE”). For Public business entities the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU is effective for periods beginning after December 15, 2019, with an election to adopt early. The ASU requires only a one-step quantitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value. It eliminates Step 2 of the current two-step goodwill impairment test, under which a goodwill impairment loss is measured by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

In June 2016, FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This standard requires entities to measure all expected credit losses of financial assets held at a reporting date based on historical experience, current conditions, and reasonable and supportable forecasts in order to record credit losses in a more timely matter. ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The standard is effective for interim and annual reporting periods beginning after December 15, 2019, although early adoption is permitted for interim and annual periods beginning after December 15, 2018. In November 2018, FASB issued ASU 2018-19 “Codification Improvements to topic 326, Financial Instruments-Credit Losses”. The amendments in this update clarify that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new leasing standard, ASC 842. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

Critical Accounting Policies

Navios Acquisition’s interim consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires Navios Acquisition to make estimates in the application of our accounting policies based on the best assumptions, judgments and opinions of management. 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. Other than as described below, all significant accounting policies are as described in Note 2 to the consolidated financial statements included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2019 filed with the SEC on March 6, 2020. It is the Company’s policy to dispose of vessels and other fixed assets when suitable opportunities occur and not necessarily to keep them until the end of their useful life. The Company classifies assets and disposal groups as being held for sale when the following criteria are met: management has committed to a plan to sell the asset (disposal group); the asset (disposal group) is available for immediate sale in its present condition; an active program to locate a buyer and other actions required to complete the plan to sell the asset (disposal group) have been initiated; the sale of the asset (disposal group) is probable, and transfer of the asset (disposal group) is expected to qualify for recognition as a completed sale within one year; the asset (disposal group) is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Long-lived assets or disposal groups classified as held for sale are measured at the lower of their carrying amount or fair value less cost to sell. These assets are not depreciated once they meet the criteria to be held for sale.

Exhibit List

Exhibit Number

 

4.1 Seventh Amendment to the Management Agreement, dated as of December 13, 2019, by and between Navios Maritime Acquisition Corporation and Navios Tankers Management Inc.

4.2 Eighth Amendment to the Management Agreement, dated as of June 26, 2020, by and between Navios Maritime Acquisition Corporation and Navios Tankers Management Inc.

4.3 Loan Agreement, dated June 25, 2020, of up to $20.8 million, among Aphrodite Shipping Corporation and Dione Shipping Corporation, Eurobank S.A. HSH Nordbank AG, and the Banks and Financial Institutions listed therein

4.4 Loan Agreement, dated June 26, 2020, of up to $41.7 million, among Cerulean Shipping Corporation, Cadmium Shipping Corporation, Celadon Shipping Corporation, Buff Shipping Corporation, Brandeis Shipping Corporation, Boysenberry Shipping Corporation and Bole Shipping Corporation, Hamburg Commercial Bank AG, and the Banks and Financial Institutions listed therein

4.5 Sample Bareboat Charter and Memorandum of Agreement, dated June 12, 2020, for the sale and leaseback transaction among Great Rhodes Limited, Great Skyros Limited, Great Crete Limited and Great Rhea Limited, being subsidiaries of AVIC International Leasing Co., Ltd., and Rhodes Shipping Corporation, Skyros Shipping Corporation, Crete Shipping Corporation and Rhea Shipping Corporation, being wholly owned subsidiaries of Navios Maritime Acquisition Corporation, providing for the sale and leaseback of the Nave Cassiopeia, Nave Sextans, Nave Cetus and Perseus N, respectively.

 

 

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 2020 AND AUDITED CONDENSED

CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 2019 F-2

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30,

2020 AND 2019 F-3

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR SIX MONTH PERIOD ENDED

JUNE 30, 2020 AND 2019 F-4

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2020 AND 2019 F-5

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) F-6

 

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of U.S. Dollars except share data)

 

                         
    Notes     June 30,
2020
(unaudited)
    December 31,
2019
 
ASSETS                        
Current assets                        
Cash and cash equivalents     3     $ 67,718     $ 43,561  
Restricted cash     3       764       490  
Accounts receivable, net             29,563       34,235  
Due from related parties, short term     8,13       2,039       16,688  
Prepaid expenses and other current assets     4       9,703       12,826  
Inventories     4       5,440       6,208  
Assets held for sale             83,006        
Total current assets             198,233       114,008  
Vessels, net     5       1,318,656       1,348,251  
Goodwill             1,579       1,579  
Other long-term assets     2,11       9,383       5,456  
Deferred dry dock and special survey costs, net             43,169       37,133  
Investment in affiliates     8             6,650  
Due from related parties, long-term     8,11,13       14,658       42,878  
Total non-current assets             1,387,445       1,441,947  
Total assets           $ 1,585,678     $ 1,555,955  
LIABILITIES AND STOCKHOLDERS’ EQUITY                        
Current liabilities                        
Accounts payable           $ 9,776     $ 15,355  
Accrued expenses     10       14,078       14,337  
Due to related parties, short-term     13             32,150  
Dividends payable     8       4,809       4,711  
Deferred revenue             8,290       2,433  
Current portion of long-term debt, net of deferred finance costs     11       99,956       172,953  
Liabilities associated with assets held for sale             50,323        
Total current liabilities             187,232       241,939  
Long-term debt, net of current portion, premium and net of deferred finance costs     11       1,061,078       1,000,164  
Total non-current liabilities             1,061,078       1,000,164  
Total liabilities           $ 1,248,310     $ 1,242,103  
Commitments and contingencies     14                    
Stockholders’ equity                        
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares of Series C issued and outstanding as of June 30, 2020 and December 31, 2019     15                    
Common stock, $0.0001 par value; 250,000,000 shares authorized; 16,089,890 and 15,873,391 issued and outstanding as of June 30, 2020 and December 31, 2019, respectively     15       2       2  
Additional paid-in capital     15       512,905       521,275  
Accumulated deficit             (175,539)     (207,425)  
Total stockholders’ equity             337,368       313,852  
Total liabilities and stockholders’ equity           $ 1,585,678     $ 1,555,955  

 

 

See unaudited condensed notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in thousands of U.S. dollars- except share and per share data)

 

 

 

 

                                         
    Notes     For the Three
Months
Ended
June 30, 2020
(unaudited)
    For the Three
Months
Ended
June 30, 2019
(unaudited)
    For the Six
Months
Ended
June 30, 2020
(unaudited)
    For the Six
Months
Ended
June 30, 2019
(unaudited)
 
Revenue     2,14     $ 112,224     $ 58,585     $ 210,081     $ 135,704  
Time charter and voyage expenses             (3,450)     (4,196)       (9,532)     (8,963)  
Direct vessel expenses             (3,465)     (2,323)       (6,605)     (4,678)  
Vessel operating expenses (management fees entirely through related party transactions)     13       (29,836)     (26,481)       (59,673)     (54,387)  
General and administrative expenses     13       (6,293)     (6,808)       (10,247)     (11,945)  
Depreciation and amortization     5,6       (16,643)     (17,320)       (33,249)     (35,041)  
Gain on sale of vessels     5             2,594             3,245  
Interest income     8,13       4       2,296       7       4,456  
Interest expense and finance cost     11       (21,680)     (23,696)       (43,523)     (46,625)  
Impairment of receivable in affiliated company / Equity in net earnings of affiliated companies     8             889       (13,900)     1,734  
Other income             156                      1,333  
Other expense                   (90)       (1,473)     (522)  
           
 
 
   
 
 
   
 
 
   
 
 
 
Net income/ (loss)           $ 31,017     $ (16,550)     $ 31,886     $ (15,689)  
           
 
 
   
 
 
   
 
 
   
 
 
 
Dividend declared on restricted shares             (47)     (65)       (94)     (131)  
Undistributed loss attributable to Series C participating preferred shares                                        (13)  
           
 
 
   
 
 
   
 
 
   
 
 
 
Net income/ (loss) attributable to common stockholders, basic     17     $ 30,970     $ (16,615)     $ 31,792     $ (15,833)  
           
 
 
   
 
 
   
 
 
   
 
 
 
Undistributed loss attributable to Series C participating preferred shares                                        13    
Net income/ (loss) attributable to common stockholders, diluted     17     $ 30,970     $ (16,615)     $ 31,792     $ (15,820)  
           
 
 
   
 
 
   
 
 
   
 
 
 
Net income/ (loss) per share, basic     17     $ 1.95     $ (1.23)     $ 2.01     $ (1.18)  
Weighted average number of shares, basic             15,888,354       13,510,361       15,803,166       13,414,547  
Net income/ (loss) per share, diluted             1.93       (1.23)       1.99       (1.18)  
Weighted average number of shares, diluted             16,043,704       13,510,361       15,958,897       13,414,547  

 

 

 

See unaudited condensed notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of U.S. dollars)

 

 

                         
    Notes     For the Six Months
Ended June 30, 2020
(unaudited)
    For the Six Months
Ended June 30, 2019
(unaudited)
 
Operating Activities                        
Net income/ (loss)           $ 31,886     $ (15,689)  
Adjustments to reconcile net income/ (loss) to net cash provided by operating activities:                        
Depreciation and amortization     5,6       33,249       35,041  
Amortization and write-off of deferred finance fees and bond premium     11       3,045       2,293  
Amortization of dry dock and special survey costs             6,167       4,626  
Stock based compensation     15       246       460  
Gain on sale of vessels                   (3,245)  
Impairment loss relating to the investment in Navios Europe II             13,900        
Equity in net earnings of affiliated companies, net of dividends received                   (1,734)  
Changes in operating assets and liabilities:                        
Decrease/(increase) in prepaid expenses and other current assets             2,918       (413)  
Decrease in inventories             2,489          
Decrease in accounts receivable             3,772       8,343  
Increase in due from related parties, short-term             (2,038)     (15,804)  
Increase in other long term assets             (3,927)         
(Increase)/ decrease in due from related parties, long-term             (1,845)     2,431  
Decrease in accounts payable             (5,362)     (1,834)  
Increase in accrued expenses             860       476  
Payments for dry dock and special survey costs             (20,421)     (1,662)  
Decrease in due to related parties, short-term             (20,073)     (12,029)  
Increase in deferred revenue             5,857       285  
           
 
 
   
 
 
 
Net cash provided by operating activities           $ 50,723     $ 1,545  
           
 
 
   
 
 
 
Investing Activities                        
Loans to affiliates     13             (2,000)  
Container vessel owning companies acquisition/ vessels improvements     5       (44,623)     (5,563)  
Net cash proceeds from sale of vessel     5             33,301  
           
 
 
   
 
 
 
Net cash (used in)/ provided by investing activities           $ (44,623)   $ 25,738  
           
 
 
   
 
 
 
Financing Activities                        
Loan proceeds, net of deferred finance costs     11,8       133,054       98,201  
Loan repayments     11       (106,107)     (121,525)  
Dividend paid     9       (9,564)     (8,240)  
Acquisition of treasury stock                   (366)  
Net proceeds from equity offering             948          
           
 
 
   
 
 
 
Net cash provided by/ (used in) financing activities           $ 18,331     $ (31,930)  
           
 
 
   
 
 
 
Net increase/(decrease) in cash, cash equivalents and restricted cash             24,431       (4,647)  
Cash, cash equivalents and restricted cash, beginning of period             44,051       46,609  
           
 
 
   
 
 
 
Cash, cash equivalents and restricted cash, end of period           $ 68,482     $ 41,962  
           
 
 
   
 
 
 
Supplemental disclosures of cash flow information                        
Cash interest paid           $ 40,212     $ 44,525  
Non-cash investing activities                        
Accrued interest on loan to affiliate           $     $ 1,734  
Container vessel owning companies acquisition           $ 37,658     $  
Non-cash financing activities                        
Stock based compensation           $ 246     $ 460  
Deferred finance costs           $ 215     $ 492  
Other long term assets           $     $ 3,095  

 

See unaudited condensed notes to consolidated financial statements.

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in thousands of U.S. dollars, except share data)

 

 

 

 

 

                                           
    Preferred Stock     Common Stock                    
    Number of
Preferred
Shares
    Amount     Number of
Common
Shares
    Amount     Additional
Paid-in
Capital
    Accumulated
deficit
    Total
Stockholders’
Equity
 
Balance, December 31, 2019     0             15,873,391     $ 2     $ 521,275     $ (207,425)     $ 313,852  
Stock based compensation (see Note 15)     -         -         -         -         123       -         123  
Continuous Offering Program (see Note 15)     -         -         63,545                304                304  
Dividend paid/ declared (see Note 9)     -         -         -         -         (4,755)       -         (4,755)  
Net income     -         -         -         -         -         869       869  
Balance, March 31, 2020 (unaudited)     0       -         15,936,936     $ 2     $ 516,947     $ (206,556)     $ 310,393  
Stock based compensation (see Note 15)     -         -         -         -         123       -         123  
Continuous Offering Program (see Note 15)     -         -         152,954                  644        -         644    
Dividend paid/ declared (see Note 9)     -         -         -         -         (4,809)       -         (4,809)  
Net income     -         -         -         -         -         31,017       31,017  
Balance, June 30, 2020 (unaudited)     0       -         16,089,890     $ 2     $ 512,905     $ (175,539)     $ 337,368  
           

 

 

 

                                                         
    Preferred Stock     Common Stock                    
    Number of
Preferred
Shares
    Amount     Number of
Common
Shares
    Amount     Additional
Paid-in
Capital
    Accumulated
deficit
    Total
Stockholders’
Equity
 
Balance, December 31, 2018     1,000     $ -         13,280,927     $ 1     $ 522,335     $ (141,984)     $ 380,352  
Conversion of preferred stock to common     (1,000)       -         511,733       -         -         -         -    
Stock based compensation     -         -         -         -         229       -         229  
Acquisition of treasury stock     -         -         (64,289)       -         (366)       -         (366)  
Dividend paid/ declared     -         -         -         -         (4,121)       -         (4,121)  
Net income     -         -         -         -         -         861       861  
Balance, March 31, 2019 (unaudited)     0       $ -         13,728,371     $ 1     $ 518,077     $ (141,123)     $ 376,955  
Stock based compensation     -         -         -         -         231       -         231  
Dividend paid/ declared     -         -         -         -         (4,119)       -         (4,119)  
Net loss     -         -         -         -         -         (16,550)       (16,550)  
Balance, June 30, 2019 (unaudited)     0       $ -         13,728,371     $ 1     $ 514,189     $ (157,673)     $ 356,517  
           

See unaudited condensed notes to consolidated financial statements.

 

 

NOTE 1: DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

 

 

Navios Maritime Acquisition Corporation (Navios Acquisition” or the “Company”) (NYSE: NNA) owns a large fleet of modern crude oil, refined petroleum product and chemical tankers providing world-wide marine transportation services. The Company’s strategy is to charter its vessels to international oil companies, refiners and large vessel operators under long, medium and short-term contracts. The Company is committed to providing quality transportation services and developing and maintaining long-term relationships with its customers. The operations of Navios Acquisition are managed by Navios Tankers Management Inc. (the “Manager”).

 

Navios Acquisition was incorporated in the Republic of the Marshall Islands on March 14, 2008. On July 1, 2008, Navios Acquisition completed its initial public offering (“IPO”). On May 28, 2010, Navios Acquisition consummated the vessel acquisition which constituted its initial business combination. Following such transaction, Navios Acquisition commenced its operations as an operating company.

 

On November 22, 2019, an agreement was reached to liquidate Navios Europe I. As a result of the liquidation, which was completed in December

2019 (“Liquidation of Navios Europe I”), Navios Acquisition acquired five vessel owning companies.

 

In October 2019, Navios Acquisition completed a registered direct offering of 1,875,000 shares of its common stock at $8.00 per share, raising gross proceeds of $15,000. Total net proceeds of the above transactions, net of agents’ costs of $675 and offering costs of $957, amounted to $13,368.

 

On November 29, 2019, Navios Acquisition entered into a Continuous Offering Program Sales Agreement for the issuance and sale from time to time shares of Navios Acquisition’s common stock having an aggregate offering price of up to $25,000. The sales were being made pursuant to a prospectus supplement as part of a shelf registration statement which was set to expire in December 2019. Navios Acquisition went effective on a new shelf registration statement which was declared effective on December 23, 2019. Accordingly, an updated Continuous Offering Program Sales Agreement (the “Sales Agreement”) was entered into on December 23, 2019. As before, the updated Sales Agreement contains, among other things, customary representations, warranties and covenants by Navios Acquisition and indemnification obligations of the parties thereto as well as certain termination rights for such parties. As of June 30, 2020, since the program commencement Navios Acquisition has issued 486,519 shares of common stock having received net proceeds of $3,047.

 

On April 21, 2020, an agreement was reached to liquidate Navios Europe II. As a result of the liquidation, which was completed in June 2020 (“Liquidation of Navios Europe II”), Navios Acquisition acquired seven vessel owning companies. The vessels are containerships and meet the criteria to be accounted for as held for sale.

 

As of June 30, 2020, Navios Maritime Holdings Inc. (“Navios Holdings”) had 30.2% of the voting power and 30.5% of the economic interest in Navios Acquisition.

 

As of June 30, 2020, Navios Acquisition had: 16,089,890 shares of common stock outstanding.

 

 

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 Acquisition’s unaudited condensed consolidated balance sheets, statement of changes in equity, statements of operations and cash flows for the periods presented. The results of operations for the interim periods 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 accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements. All such adjustments are deemed to be of a normal recurring nature. These interim financial statements should be read in conjunction with the Company’s consolidated financial statements and notes included in Navios Acquisition’s 2019 Annual Report filed on Form 20-F with the Securities and Exchange Commission (“SEC”).

 

 

 

(ab) Recent accounting pronouncements

 

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which provides guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying generally accepted accounting principles to contract modifications, hedging relationships, and other transactions impacted by reference rate reform. The provisions of ASU 2020-04 apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. Adoption of the provisions of ASU 2020-04 is optional and is effective from March 12, 2020 through December 31, 2022. The company is currently evaluating the impact of ASU 2020-04 on our condensed consolidated financial statements.

 

In August 2018, FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”. This update modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, and earlier adoption is permitted. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

 

In October 2018, FASB issued ASU 2018-17, Consolidation (Topic 810): “Targeted Improvements to Related Party Guidance for Variable Interest Entities” (“ASU 2018-17”). ASU 2018-17 provides that indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. This is

consistent with how indirect interests held through related parties under common control are considered for determining whether a reporting entity must consolidate a Variable Interest Entity (“VIE). For Public business entities the amendments are effective for fiscal years beginning after December 15,

2019, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

 

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill

Impairment. The ASU is effective for periods beginning after December 15, 2019, with an election to adopt early. The ASU requires only

a one-step quantitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value. It eliminates Step 2 of the current two-step goodwill impairment test, under which a goodwill impairment loss is measured by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The adoption of this new accounting guidance did not have a material effect on the Companys consolidated financial statements.

 

In June 2016, FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This standard requires entities to measure all expected credit losses of financial assets held at a reporting date based on historical experience, current conditions, and reasonable and supportable forecasts in order to record credit losses in a more timely matter. ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The standard is effective for interim and annual reporting periods beginning after December 15, 2019, although early adoption is permitted for interim and annual periods beginning after December 15, 2018. In November 2018, FASB issued ASU 2018-19 “Codification Improvements to topic 326, Financial Instruments-Credit Losses”. The amendments in this update clarify that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new leasing standard, ASC 842. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

 

(b) Principles of consolidation:

The accompanying consolidated financial statements include the accounts of Navios Acquisition, a Marshall Islands corporation, and its majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidated statements.

 

The Company also consolidates entities that are determined to be variable interest entities (“VIEs”) as defined in the accounting guidance, if it determines that it is the primary beneficiary. A variable interest entity is defined as a legal entity where either (a) equity interest holders as a group lack the characteristics of a controlling financial interest, including decision making ability and an interest in the entity’s residual risks and rewards, or (b) the equity holders have not provided sufficient equity investment to permit the entity to finance its activities without additional subordinated financial support, or (c) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual returns of the entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights.

 

Based on internal forecasts and projections that take into account reasonably possible changes in Company’s trading performance, management believes that the Company has adequate financial resources to continue in operation and meet its financial commitments, including but not limited to capital expenditures and debt service obligations, for a period of at least twelve months from the date of issuance of these consolidated financial statements. Accordingly, the Company continues to adopt the going concern basis in preparing its financial statements.

 

(c) Equity method investments:

Affiliates are entities over which the Company generally has between 20% and 50% of the voting rights, or over which the Company has significant influence, but it does not exercise control. Investments in these entities are accounted for under the equity method of accounting. Under this method, the Company records an investment in the stock of an affiliate at cost, and adjusts the carrying amount for its share of the earnings or losses of the affiliate subsequent to the date of investment and reports the recognized earnings or losses in income. Dividends received from an affiliate reduce the carrying amount of the investment. The Company recognizes gains and losses in earnings for the issuance of shares by its affiliates, provided that the issuance of such shares qualifies as a sale of such shares. When the Company’s share of losses in an affiliate equals or exceeds its interest in the affiliate, the Company does not recognize further losses, unless the Company has incurred obligations or made payments on behalf of the affiliate.

 

Navios Acquisition evaluates its equity method investments, for other than temporary impairment, on a quarterly basis. Consideration is given to (1) the length of time and the extent to which the fair value has been less than the carrying value, (2) the financial condition and near-term prospects and (3) the intent and ability of the Company to retain its investments for a period of time sufficient to allow for any anticipated recovery in fair value.

 

(d) Subsidiaries:

Subsidiaries are those entities in which the Company has an interest of more than one half of the voting rights and/or otherwise has power to govern the financial and operating policies. The acquisition method of accounting is used to account for the acquisition of subsidiaries if deemed to be a business combination. The cost of an acquisition is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition. The excess of the cost of acquisition over the fair value of the net assets acquired and liabilities assumed is recorded as goodwill.

 

 

As of June 30, 2020, the entities included in these consolidated financial statements were: 

                   

Navios Maritime Acquisition

Corporation and Subsidiaries:

  Nature  

Country of

Incorporation

  2020   2019  
Company Name                  
Aegean Sea Maritime Holdings Inc.   Sub-Holding Company   Marshall Is.   1/1 – 6/30   1/1 – 6/30  
Amorgos Shipping Corporation   Vessel-Owning Company   Marshall Is.   1/1 – 6/30   1/1 – 6/30  
Andros Shipping Corporation   Vessel-Owning Company   Marshall Is.   1/1 – 6/30   1/1 – 6/30  
Antikithira Shipping Corporation   Vessel-Owning Company(8)   Marshall Is.   1/1 – 6/30   1/1 – 6/30  
Antiparos Shipping Corporation   Vessel-Owning Company(8)   Marshall Is.   1/1 – 6/30   1/1 – 6/30  
Amindra Navigation Co.   Sub-Holding Company   Marshall Is.   1/1 – 6/30   1/1 – 6/30  
Crete Shipping Corporation   Vessel-Owning Company   Marshall Is.   1/1 – 6/30   1/1 – 6/30  
Folegandros Shipping Corporation   Vessel-Owning Company(8)   Marshall Is.   1/1 – 6/30   1/1 – 6/30  
Ikaria Shipping Corporation   Vessel-Owning Company(8)   Marshall Is.   1/1 – 6/30   1/1 – 6/30  
Ios Shipping Corporation   Vessel-Owning Company(8)   Cayman Is.   1/1 – 6/30   1/1 – 6/30  
Kithira Shipping Corporation   Vessel-Owning Company(8)   Marshall Is.   1/1 – 6/30   1/1 – 6/30  
Kos Shipping Corporation   Vessel-Owning Company(8)   Marshall Is.   1/1 – 6/30   1/1 – 6/30  
Mytilene Shipping Corporation   Vessel-Owning Company(8)   Marshall Is.   1/1 – 6/30   1/1 – 6/30  
Navios Maritime Acquisition Corporation   Holding Company   Marshall Is.   1/1 – 6/30   1/1 – 6/30  
Navios Acquisition Finance (U.S.) Inc.   Co-Issuer   Delaware   1/1 – 6/30   1/1 – 6/30  
Rhodes Shipping Corporation   Vessel-Owning Company   Marshall Is.   1/1 – 6/30   1/1 – 6/30  
Serifos Shipping Corporation   Vessel-Owning Company(8)   Marshall Is.   1/1 – 6/30   1/1 – 6/30  
Shinyo Loyalty Limited   Former Vessel-Owning Company(1)   Hong Kong   1/1 – 6/30   1/1 – 6/30  
Shinyo Navigator Limited   Former Vessel-Owning Company(2)   Hong Kong   1/1 – 6/30   1/1 – 6/30  
Sifnos Shipping Corporation   Vessel-Owning Company(8)   Marshall Is.   1/1 – 6/30   1/1 – 6/30  
Skiathos Shipping Corporation   Vessel-Owning Company(8)   Marshall Is.   1/1 – 6/30