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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
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
Dated: November 28, 2011
Commission File No. 001-33311
NAVIOS MARITIME HOLDINGS INC.
85 Akti Miaouli Street, Piraeus, Greece 185 38
(Address of Principal Executive Offices)
(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 þ Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(1):
Yes o No þ
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 o No þ
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 o No þ
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The information contained in this Report is incorporated by reference into the
Registration Statements on Form F-3, File Nos. 333-136936 and 333-165754, the Registration
Statement on Form S-8, File No. 333-147186 and the related prospectuses.
Operating and Financial Review and Prospects
The following is a discussion of the financial condition and results of operations of Navios
Maritime Holdings Inc. (“Navios Holdings” or the “Company” or “we”) for the three and nine month
periods ended September 30, 2011 and 2010. Navios Holdings’ financial statements have been prepared
in accordance with Generally Accepted Accounting Principles in the United States of America (U.S.
GAAP). You should read this section together with the consolidated financial statements and the
accompanying notes included in Navios Holdings’ Form 6-Ks dated August 9, 2011 and August 26, 2011,
and the management’s discussion and analysis included in Navios Holdings’ 2010 annual report on
Form 20-F filed with the Securities and Exchange Commission and the condensed consolidated
financial statements and the accompanying notes included elsewhere in this form 6-K.
This report contains forward-looking statements made pursuant to the safe harbor provisions of
the Private Securities Reform Act of 1995. These forward looking statements are based on Navios
Holdings’ current expectations and observations. Included among the factors that, in management’s
view, could cause actual results to differ materially from the forward-looking statements contained
in this report are changes in any of the following: (i) charter demand and/or charter rates; (ii)
production or demand for the types of drybulk products that are transported by Navios Holdings’
vessels; (iii) operating costs including but not limited to changes in crew salaries, insurance,
provisions, repairs, maintenance and overhead expenses; or (iv) changes in interest rates. Other
factors that might cause a difference include, but are not limited to, those discussed under Part
I, Item 3D — Risk Factors in Navios Holdings’ 2010 annual report on Form 20-F.
Recent Developments
Navios Holdings
Vessel Acquisition
On October 31, 2011, Navios Holdings agreed to acquire a 81,600 deadweight ton (“dwt”) bulk
carrier scheduled to be delivered in March 2012 from a South Korean shipyard. The purchase price
for the new vessel is approximately $35.3 million, of which $5.1 million was paid in cash.
Dividend Policy
On
November 14, 2011, the Board of Directors declared a quarterly cash dividend for the third
quarter of 2011 of $0.06 per share of common stock. This dividend is payable on January 4, 2012 to
stockholders of record on December 19, 2011. The declaration and payment of any further dividends
remain subject to the discretion of the Board, and will depend on, among other things, Navios
Holdings’ cash requirements as measured by market opportunities, debt obligations and restrictions
under its credit and other debt agreements.
Deposits for Vessel Acquisition
On November 14, 2011, Navios Holdings paid an additional installment of $5.8 million for the
acquisition of a new vessel scheduled to be delivered in April 2012, with a purchase price of
approximately $35.5 million. The remaining capital expenditures
commitment, which will be funded with
equity, amount to $0.8 million.
Navios Logistics
Acquisitions
On various dates on or prior to October 24, 2011, Navios South American Logistics Inc.
(“Navios Logistics”) used a portion of the proceeds from its offering of senior unsecured notes due
2019 to acquire three pushboats, 66 barges and one floating drydock
facility for a total cost of
approximately $56.0 million, including transportation and other related costs.
Following the acquisition of two pieces of land for $1.0 million in 2010, in September 2011,
Navios Logistics paid another $0.4 million for the acquisition of a third piece of land. All of
these pieces of land are located at the south of the Nueva Palmira Free Zone and were acquired as
part of a project to develop a new transshipment facility for mineral ores and liquid bulks.
Construction of a new silo in the Dry Port
During the third quarter of 2011, Navios Logistics commenced the construction of a new silo at
its dry port facility in Nueva Palmira, Uruguay. The silo is expected
to be completed in March 2012. As of September 30, 2011, Navios Logistics had paid $3.0 million for the silo
construction.
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Navios Partners
On November 11, 2011, Navios Holdings received $6.7 million as a dividend distribution from
its affiliate Navios Maritime Partners L.P. (“Navios Partners”).
Navios Acquisition
On November 4, 2011, of the 1,378,122 contingently returnable shares of common stock of Navios
Maritime Acquisition Corporation (“Navios Acquisition”)
that were issued on September 10, 2010 in
connection with the acquisition of seven VLCC tankers (the “VLCC
Acquisition”) and
placed in escrow, 1,160,963 shares were released to the sellers and the remaining 217,159 shares
were returned to Navios Acquisition in settlement of representations
and warranties attributable to the prior sellers. Following the return of the 217,159
shares, Navios Holdings’ ownership of the outstanding voting stock of Navios Acquisition increased
to 45.24% and its economic interest in Navios Acquisition increased to 53.96%.
Changes in Capital Structure
During the nine month period ended September 30, 2011, 8,001 shares of restricted common stock
were forfeited upon termination of employment. On March 1, March 2, March 7, and June 23, 2011,
18,281, 29,250, 68,047 and 15,000 shares, respectively, were issued following the exercise of the
options for cash at an exercise price of $3.18 per share.
Following the issuances and cancellations of the shares described above, Navios Holdings had
outstanding as of September 30, 2011, 101,686,343 shares of common stock and 8,479 shares of
preferred stock.
In October 2011, Navios Holdings repurchased 73,651 shares of its common stock for a total
cost of $0.2 million under its repurchase program (see “Liquidity and Capital Resources” for further
discussion on Navios Holdings repurchase program).
Overview
General
Navios Holdings is a global, vertically integrated seaborne shipping and logistics company
focused on the transport and transshipment of drybulk commodities, including iron ore, coal and
grain. We technically and commercially manage our owned fleet, Navios Acquisition’s fleet and
Navios Partners’ fleet, and commercially manage our chartered-in fleet. Navios Holdings has
in-house ship management expertise that allows it to oversee every step of technical management of
its owned fleet, and Navios Partners’ and Navios Acquisition’s fleet, including the shipping
operations throughout the life of the vessels and the superintendence of maintenance, repairs and
drydocking.
On August 25, 2005, pursuant to a Stock Purchase Agreement dated February 28, 2005, as
amended, by and among International Shipping Enterprises, Inc (“ISE”), Navios Holdings and all the
shareholders of Navios Holdings, ISE acquired Navios Holdings through the purchase of all of the
outstanding shares of common stock of Navios Holdings. As a result of this acquisition, Navios
Holdings became a wholly owned subsidiary of ISE. In addition, on August 25, 2005, simultaneously
with the acquisition of Navios Holdings, ISE effected a reincorporation from the State of Delaware
to the Republic of the Marshall Islands through a downstream merger with and into its newly
acquired wholly owned subsidiary, whose name was and continues to be Navios Maritime Holdings Inc.
On August 7, 2007, Navios Holdings formed Navios Partners under the laws of Marshall Islands.
Navios G.P. L.L.C. (“General Partner”), a wholly owned subsidiary of Navios Holdings, was also
formed on that date to act as the general partner of Navios Partners and received a 2% general
partner interest in Navios Partners. Navios Partners is an affiliate and is not consolidated under
Navios Holdings.
Navios Logistics
Navios Logistics is one of the largest logistics companies in the Hidrovia region of South
America, serving the storage and marine transportation needs of its customers through its port
terminals, river and coastal cabotage operations.
On January 1, 2008, pursuant to a share purchase agreement, Navios Holdings contributed (i)
$112.2 million in cash; and (ii) the authorized capital stock of its wholly owned subsidiary
Corporation Navios Sociedad Anonima (“CNSA”) in exchange for the issuance and delivery of 12,765
shares of Navios Logistics, representing 63.8% (or 67.2% excluding contingent consideration) of its
outstanding stock. Navios Logistics acquired all ownership interests in Horamar in exchange for (i)
$112.2 million in cash, of which $5.0 million was kept in escrow, payable upon the attainment of
certain EBITDA targets during specified periods through December 2008 (the “EBITDA Adjustment”);
and (ii) the issuance of 7,235 shares of Navios Logistics representing 36.2% (or 32.8% excluding
contingent consideration) of Navios Logistics’ outstanding stock, of which 1,007 shares were held
in escrow pending attainment of certain EBITDA targets. In November 2008, $2.5 million in cash and
503 shares were released from escrow when Horamar achieved the interim EBITDA target.
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On March 20, 2009, August 19, 2009, and December 30, 2009, the agreement pursuant to which
Navios Logistics acquired CNSA and Horamar was amended to postpone until June 30, 2010 the date for
determining whether the EBITDA target was achieved. On June 17, 2010, $2.5 million in cash and the
504 shares remaining in escrow were released from escrow upon the achievement of the EBITDA target
threshold. Navios Holdings currently owns 63.8% of Navios Logistics.
For a more detailed discussion about the Navios Logistics segment, please see Exhibit 99.1 to
this Form 6-K.
Navios Acquisition
On July 1, 2008, the Company completed the initial public offering (“IPO”) of its subsidiary,
Navios Acquisition. At the time of the IPO, Navios Acquisition was a
blank check company. In the offering, Navios Acquisition sold 25,300,000 units for an aggregate
purchase price of $253.0 million. Simultaneously with the completion of the IPO, the Company
purchased private placement warrants of Navios Acquisition for an aggregate purchase price of $7.6
million (“Private Placement Warrants”). Navios Acquisition, at the time, was not a controlled
subsidiary of the Company but was accounted for under the equity method due to the Company’s
significant influence over Navios Acquisition.
On May 25, 2010, after its special meeting of stockholders, Navios Acquisition announced the
approval of (a) the acquisition of 13 vessels (11 product tankers and two chemical tankers plus
options to purchase two additional product tankers) for an aggregate purchase price of $457.7
million, of which $128.7 million was paid from existing cash and the $329.0 million balance was
paid with existing and new financing pursuant to the terms and conditions of the Acquisition
Agreement by and between Navios Acquisition and Navios Holdings and (b) certain amendments to
Navios Acquisition’s amended and restated articles of incorporation.
Navios Holdings purchased 6,337,551 shares of Navios Acquisition’s common stock for $63.2
million in open market purchases. Moreover, on May 28, 2010, certain shareholders of Navios
Acquisition redeemed 10,021,399 shares pursuant to redemption rights granted in the IPO upon
de-“SPAC”-ing. As of May 28, 2010, following these transactions, Navios Holdings owned 12,372,551
shares, or 57.3%, of the outstanding common stock of Navios Acquisition. On that date, Navios
Holdings acquired control over Navios Acquisition, and consequently concluded a business
combination had occurred and consolidated the results of Navios Acquisition from that date until
March 30, 2011.
On March 30, 2011, Navios Holdings exchanged 7,676,000 shares of Navios Acquisition’s common
stock it held for non-voting Series C preferred stock of Navios Acquisition (the “Navios
Acquisition Share Exchange”) pursuant to an Exchange Agreement entered into on March 30, 2011
between Navios Acquisition and Navios Holdings. The fair value of the
exchange was $30.5 million.
Following the Navios Acquisition Share Exchange, Navios Holdings’ ownership of the outstanding
voting stock of Navios Acquisition decreased to 45% and Navios Holdings no longer controls a
majority of the voting power of Navios Acquisition. From that date
onwards, Navios Acquisition has been
considered an affiliate entity of Navios Holdings and not a controlled subsidiary of the
Company, and the investment in Navios Acquisition has been accounted for under the equity method due
to the Company’s significant influence over Navios Acquisition.
Navios Acquisition is now accounted for
under the equity method of accounting based on Navios Holdings’ economic interest in Navios
Acquisition, which was 53.7% from March 30, 2011 until
September 30, 2011 since the preferred stock is considered to
be, in-substance, common stock for accounting
purposes. See “Recent Developments” above for a discussion
of recent changes to Navios Holdings’ voting power and economic
interest in Navios Acquisition.
On March 30, 2011, based on the equity method, the Company recorded an investment in Navios
Acquisition of $103.3 million, which represents the fair value of the common stock and Series C
preferred stock that were held by Navios Holdings on such date. On March 30, 2011, the Company
calculated a loss on change in control of $35.3 million, which is equal to the fair value of the
Company’s investment in Navios Acquisition of $103.3 million less the Company’s 53.7% interest in
Navios Acquisition’s net assets on March 30, 2011.
Navios Acquisition is an owner and operator of tanker vessels focusing in the transportation
of petroleum products (clean and dirty) and bulk liquid chemicals.
Fleet
The following is the current “core fleet” employment profile (excluding Navios Logistics),
including the newbuilds to be delivered, as of November 17, 2011. The current “core fleet” consists
of 56 vessels totaling 5.8 million dwt. The 43 vessels in current operation aggregate approximately
4.5 million dwt and have an average age of 5.0 years. Navios Holdings has currently fixed 99.7%,
68.4% and 41.5% of its 2011, 2012 and 2013 available days, respectively, of its fleet (excluding
vessels which are utilized to fulfill COAs), representing contracted fees (net of commissions),
based on contracted charter rates from its current charter agreements of $312.4 million, $244.7
million and $177.4 million, respectively. Although these fees are based on contractual charter
rates, any contract is subject to performance by the counterparties and us. Additionally, the level
of these fees would decrease depending on the vessels’ off-hire days to perform periodic
maintenance. The average contractual daily charter-out rate for the core fleet (excluding vessels
which are utilized to fulfill COAs) is $25,050, $25,586 and $30,023 for 2011, 2012 and 2013,
respectively. The average daily charter-in rate for the active long-term charter-in vessels
(excluding vessels which are utilized to fulfill COAs) for 2011 is estimated at $10,601.
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Owned Vessels
| Charter- | ||||||||||||||||||||||||
| out | Profit | Expiration | ||||||||||||||||||||||
| Vessels | Type | Built | DWT | Rate(1) | Share (5) | Date(2) | ||||||||||||||||||
Navios Ionian |
Ultra Handymax | 2000 | 52,067 | 13,726 | No | 09/18/2012 | ||||||||||||||||||
Navios Celestial |
Ultra Handymax | 2009 | 58,063 | 17,550 | No | 01/24/2012 | ||||||||||||||||||
Navios Vector |
Ultra Handymax | 2002 | 50,296 | 10,830 | No | 04/14/2012 | ||||||||||||||||||
Navios Horizon |
Ultra Handymax | 2001 | 50,346 | 10,925 | No | 12/19/2011 | ||||||||||||||||||
Navios Herakles |
Ultra Handymax | 2001 | 52,061 | 13,775 | No | 02/15/2012 | ||||||||||||||||||
Navios Achilles |
Ultra Handymax | 2001 | 52,063 | 25,521 | (7) | 65%/$20,000 after March 2012 | 11/17/2013 | |||||||||||||||||
Navios Meridian |
Ultra Handymax | 2002 | 50,316 | 14,250 | No | 03/19/2012 | ||||||||||||||||||
Navios Mercator |
Ultra Handymax | 2002 | 53,553 | 29,783 | (7) | 65%/$20,000 after March 2012 | 01/12/2015 | |||||||||||||||||
Navios Arc |
Ultra Handymax | 2003 | 53,514 | 12,350 | No | 12/25/2011 | ||||||||||||||||||
Navios Hios |
Ultra Handymax | 2003 | 55,180 | 13,300 | No | 03/28/2012 | ||||||||||||||||||
Navios Kypros |
Ultra Handymax | 2003 | 55,222 | 20,778 | 50%/$19,000 | 01/28/2014 | ||||||||||||||||||
Navios Ulysses |
Ultra Handymax | 2007 | 55,728 | 31,281 | No | 10/12/2013 | ||||||||||||||||||
Navios Vega |
Ultra Handymax | 2009 | 58,792 | 15,751 | No | 05/23/2013 | ||||||||||||||||||
Navios Astra |
Ultra Handymax | 2006 | 53,468 | 12,825 | No | 11/18/2012 | ||||||||||||||||||
Navios Magellan |
Panamax | 2000 | 74,333 | 22,800 | No | 03/28/2012 | ||||||||||||||||||
Navios Star |
Panamax | 2002 | 76,662 | 16,958 | No | 12/04/2012 | ||||||||||||||||||
Navios Asteriks |
Panamax | 2005 | 76,801 | — | — | — | ||||||||||||||||||
Navios Bonavis |
Capesize | 2009 | 180,022 | 47,400 | No | 06/29/2014 | ||||||||||||||||||
Navios Happiness |
Capesize | 2009 | 180,022 | 52,345 | (7) | 50%/$32,000 after March 2012 | 05/24/2014 | |||||||||||||||||
Navios Lumen |
Capesize | 2009 | 180,661 | 29,250 | (6) | Yes | 02/14/2012 | |||||||||||||||||
| 39,830 | (6) | Yes | 12/10/2012 | |||||||||||||||||||||
| 43,193 | (6) | Yes | 12/10/2013 | |||||||||||||||||||||
| 42,690 | (6) | Yes | 12/10/2016 | |||||||||||||||||||||
| 39,305 | (6) | Yes | 12/10/2017 | |||||||||||||||||||||
Navios Stellar |
Capesize | 2009 | 169,001 | 36,974 | (9) | No | 12/22/2016 | |||||||||||||||||
Navios Phoenix |
Capesize | 2009 | 180,242 | 17,005 | No | 11/27/2012 | (8) | |||||||||||||||||
Navios Antares |
Capesize | 2010 | 169,059 | 37,590 | (9) | No | 01/19/2015 | |||||||||||||||||
| 45,875 | (9) | No | 01/19/2018 | |||||||||||||||||||||
Navios Buena Ventura |
Capesize | 2010 | 179,259 | 29,356 | 50%/$38,500 | 10/28/2020 | ||||||||||||||||||
Navios Etoile |
Capesize | 2010 | 179,234 | 29,356 | 50% in excess of $38,500 | 12/02/2020 | ||||||||||||||||||
Navios Bonheur |
Capesize | 2010 | 179,259 | 27,888 | (7) | 50%/$32,000 after March 2012 | 12/16/2013 | |||||||||||||||||
| 25,025 | (7) | 07/17/2022 | ||||||||||||||||||||||
Navios Altamira |
Capesize | 01/2011 | 179,165 | 24,674 | No | 01/27/2021 | ||||||||||||||||||
Navios Azimuth |
Capesize | 02/2011 | 179,169 | 26,469 | (7) | 50%/$34,500 after March 2012 | 09/14/2022 | |||||||||||||||||
Owned Vessels to be Delivered
| Charter- | ||||||||||||||||
| out | ||||||||||||||||
| Vessels | Type | Date | DWT | Rate(1)(10) | ||||||||||||
Navios Centaurus |
Panamax | 03/2012 | 81,600 | 12,825 | ||||||||||||
Navios Avior |
Panamax | 04/2012 | 81,600 | 12,716 | ||||||||||||
Long-term Chartered-in Vessels
| Charter- | ||||||||||||||||||||||||
| Purchase | out | Expiration | ||||||||||||||||||||||
| Vessels | Type | Built | DWT | Option(3) | Rate(1) | Date(2) | ||||||||||||||||||
Navios Primavera |
Ultra Handymax | 2007 | 53,464 | Yes | 13,300 | 10/07/2012 | ||||||||||||||||||
Navios Armonia |
Ultra Handymax | 2008 | 55,100 | No | 13,894 | 02/17/2012 | ||||||||||||||||||
Navios Serenity |
Handysize | 2011 | 34,718 | Yes (4) | 10,756 | 07/28/2012 | ||||||||||||||||||
Navios Orion |
Panamax | 2005 | 76,602 | No | 49,400 | 12/14/2012 | ||||||||||||||||||
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| Charter- | ||||||||||||||||||||||||
| Purchase | out | Expiration | ||||||||||||||||||||||
| Vessels | Type | Built | DWT | Option(3) | Rate(1) | Date(2) | ||||||||||||||||||
Navios Titan |
Panamax | 2005 | 82,936 | No | 19,000 | 11/09/2012 | ||||||||||||||||||
Navios Altair |
Panamax | 2006 | 83,001 | No | 13,063 | 09/05/2012 | ||||||||||||||||||
Navios Esperanza |
Panamax | 2007 | 75,356 | No | 14,513 | 02/19/2013 | ||||||||||||||||||
Navios Marco Polo |
Panamax | 2011 | 80,647 | Yes | 12,350 | 12/30/2011 | ||||||||||||||||||
Torm Antwerp |
Panamax | 2008 | 75,250 | Yes | — | |||||||||||||||||||
Golden Heiwa |
Panamax | 2007 | 76,662 | No | — | |||||||||||||||||||
Beaufiks |
Capesize | 2004 | 180,310 | Yes | — | |||||||||||||||||||
Rubena N |
Capesize | 2006 | 203,233 | No | — | |||||||||||||||||||
SC Lotta |
Capesize | 2009 | 169,056 | No | — | |||||||||||||||||||
Phoenix Beauty |
Capesize | 2010 | 169,150 | No | — | |||||||||||||||||||
King Ore |
Capesize | 2010 | 176,800 | No | — | |||||||||||||||||||
Chartered-in Vessels to be Delivered
| Delivery | Purchase | |||||||||||||||
| Vessels | Type | Date | Option | DWT | ||||||||||||
Navios Lyra |
Handysize | 09/2012 | Yes (4) | 34,718 | ||||||||||||
Navios Koyo |
Capesize | 12/2011 | Yes | 181,000 | ||||||||||||
Navios Obeliks |
Capesize | 07/2012 | Yes | 180,000 | ||||||||||||
Navios TBN |
Capesize | 12/2013 | Yes | 180,000 | ||||||||||||
Navios Oriana |
Ultra Handymax | 02/2012 | Yes | 61,000 | ||||||||||||
Navios TBN |
Ultra Handymax | 05/2013 | Yes | 61,000 | ||||||||||||
Navios TBN |
Ultra Handymax | 10/2013 | Yes | 61,000 | ||||||||||||
Navios TBN |
Panamax | 01/2013 | Yes | 82,100 | ||||||||||||
Navios TBN |
Panamax | 07/2013 | Yes (4) | 80,500 | ||||||||||||
Navios TBN |
Panamax | 09/2013 | Yes (4) | 80,500 | ||||||||||||
Navios TBN |
Panamax | 11/2013 | Yes (4) | 80,500 | ||||||||||||
Options to Acquire Vessels
| Delivery | ||||||||||||
| Vessels | Type | Date | DWT | |||||||||
Navios TBN |
Panamax | H2/2013 | 82,000 | |||||||||
Navios TBN |
Panamax | H2/2013 | 82,000 | |||||||||
Navios TBN |
Panamax | H1/2014 | 82,000 | |||||||||
Navios TBN |
Panamax | H1/2014 | 82,000 | |||||||||
| (1) | Daily rate net of commissions. | |
| (2) | Expected redelivery basis midpoint of full redelivery period. | |
| (3) | Generally, Navios Holdings may exercise its purchase option after three to five years of service. | |
| (4) | Navios Holdings holds the initial 50% purchase option on each vessel. | |
| (5) | Profit share based on applicable Baltic TC Average exceeding $/day rates listed. | |
| (6) | Year eight optional (option to Navios Holdings) included in the table above. Profit sharing is 100% to Navios Holdings until net daily rate of $44,850 and becomes 50/50 thereafter. | |
| (7) | Amount represents daily net rate of insurance proceeds following the default of the original charterer. The contracts for these vessels have been temporarily suspended and the vessels have been re-chartered to third parties for variable charter periods. Upon completion of the suspension period, the contracts with the original charterers will resume at amended terms. The obligations of our insurers are reduced by an amount equal to the mitigation charter hire revenues earned under the contracts with third parties and/or the original charterer or the applicable deductibles for any idle periods. The Company has filed claims for all unpaid amounts by the original charterer in respect of the employment of the vessels in the corporate rehabilitation proceedings. The disposition of these claims will be determined by the court at a future date. | |
| (8) | Subject to COA of $45,500 per day for the remaining period until first quarter of 2015. | |
| (9) | Amount represents daily rate of insurance proceeds following the default of the original charterer. These vessels have been rechartered to third parties for variable charter periods. Obligations of the insurer are reduced by an amount equal to the mitigation charter hire revenues earned under these contracts and the applicable deductibles under the insurance policy. | |
| (10) | The charter period is two years from delivery of each vessel. |
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Charter Policy and Industry Outlook
Navios Holdings’ policy has been to take a portfolio approach to managing operating risks.
This policy led Navios Holdings to time charter-out many of the vessels that it is presently
operating (i.e., vessels owned by Navios Holdings or which it has taken into its fleet under
charters having a duration of more than 12 months) for periods up to 12 years at inception to
various shipping industry counterparties considered by Navios Holdings to have appropriate credit
profiles. By doing this, Navios Holdings aims to lock in, subject to credit and operating risks,
favorable forward revenue and cash flows which it believes will cushion it against unfavorable
market conditions. In addition, Navios Holdings trades additional vessels taken in on shorter term
charters of less than 12 months duration as well as voyage charters or COAs and forward freight
agreements (“FFAs”).
In 2008 and 2009, this policy had the effect of generating Time Charter Equivalents (“TCE”)
that, while high by the average historical levels of the drybulk freight market over the last 30
years, were below those which could have been earned had the Navios Holdings’ fleet been operated
purely on short-term and/or spot employment. In 2010 and during the nine month period ended
September 2011, this chartering policy had the effect of generating TCE that were higher than spot
employment.
The average daily charter-in vessel cost for the Navios Holdings long-term charter-in fleet
(excluding vessels, which are utilized to serve voyage charters or COAs) was $10,354 per day for
the nine month period ended September 30, 2011. The average long-term charter-in hire rate per
vessel is included in the amount of long-term hire included elsewhere in this document and was
computed by (a) multiplying (i) the daily charter-in rate for each vessel by (ii) the number of
days the vessel is in operation for the year and (b) dividing such product by the total number of
vessel days for the year. These rates exclude gains and losses from FFAs. Furthermore, Navios
Holdings has the ability to increase its owned fleet through purchase options at favorable prices
relative to the current market exercisable in the future.
Navios Holdings believes that a decrease in global commodity demand from its current level,
and the delivery of drybulk carrier new buildings into the world fleet, could have an adverse
impact on future revenue and profitability. However, the operating cost advantage of Navios
Holdings’ owned vessels and long-term chartered fleet, which is chartered-in at favorable rates,
will continue to help mitigate the impact of the declines in freight rates. A reduced freight rate
environment may also have an adverse impact on the value of Navios Holdings’ owned fleet and any
purchase options that are currently in the money. In reaction to a decline in freight rates,
available ship financing has also been negatively impacted.
Navios Holdings currently owns 63.8% of Navios Logistics. Navios Logistics owns and operates
vessels, barges and push boats located mainly in Argentina, the largest bulk transfer and storage
port facility in Uruguay, and an upriver liquid port facility located in Paraguay. Operating
results for Navios Logistics are highly correlated to: (i) South American grain production and
export, in particular Argentinean, Brazilian, Paraguayan, Uruguayan and Bolivian production and
export; (ii) South American iron ore production and export, mainly from Brazil; and (iii) sales
(and logistic services) of petroleum products in the Argentine and Paraguayan markets. Navios
Holdings believes that the continuing development of these businesses will foster throughput growth
and therefore increase revenues at Navios Logistics. Should this development be delayed, grain
harvests be reduced, or the market experience an overall decrease in the demand for grain or iron
ore, the operations in Navios Logistics would be adversely affected.
Factors Affecting Navios Holdings’ Results of Operations
We believe the principal factors that will affect our future results of operations are the
economic, regulatory, political and governmental conditions that affect the shipping industry
generally and that affect conditions in countries and markets in which our vessels engage in
business. Please read “Risk Factors” included in Navios Holdings’ 2010 annual report on Form 20-F
filed with the Securities and Exchange Commission for a discussion of certain risks inherent in our
business.
Navios Holdings actively manages the risk in its operations by: (i) operating the vessels in
its fleet in accordance with all applicable international standards of safety and technical ship
management; (ii) enhancing vessel utilization and profitability through an appropriate mix of
long-term charters complemented by spot charters (time charters for short term employment) and
voyage charter or COAs; (iii) monitoring the financial impact of corporate exposure from both
physical and FFAs transactions; (iv) monitoring market and counterparty credit risk limits; (v)
adhering to risk management and operation policies and procedures; and (vi) requiring counterparty
credit approvals.
Navios Holdings believes that the important measures for analyzing trends in its results of
operations consist of the following:
| • | Market Exposure: Navios Holdings manages the size and composition of its fleet by chartering and owning vessels in order to adjust to anticipated changes in market rates. Navios Holdings aims to achieve an appropriate balance between owned vessels and long and short term chartered-in vessels and controls approximately 5.8 million dwt in drybulk tonnage. Navios Holdings’ options to extend the charter duration of vessels it has under long-term time charter (durations of over 12 months) and its purchase options on chartered vessels permit Navios Holdings to adjust the cost and the fleet size to correspond to market conditions. |
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| • | Available days: Available days is the total number of days a vessel is controlled by a company less the aggregate number of days that the vessel is off-hire due to scheduled repairs or repairs under guarantee, vessel upgrades or special surveys. The shipping industry uses available days to measure the number of days in a period during which vessels should be capable of generating revenues. | ||
| • | Operating days: Operating days is the number of available days in a period less the aggregate number of days that the vessels are off-hire due to any reason, including lack of demand or unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues. | ||
| • | Fleet utilization: Fleet utilization is obtained by dividing the number of operating days during a period by the number of available days during the period. The shipping industry uses fleet utilization to measure a company’s efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off-hire for reasons other than scheduled repairs or repairs under guarantee, vessel upgrades, special surveys or vessel positioning. | ||
| • | TCE rates: TCE rates are defined as voyage and time charter revenues less voyage expenses during a period divided by the number of available days during the period. The TCE rate is a standard shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charter hire rates for vessels on voyage charters are generally not expressed in per day amounts, while charter hire rates for vessels on time charters generally are expressed in such amounts. | ||
| • | Equivalent vessels: Equivalent vessels data is the available days of the fleet divided by the number of the calendar days in the period. |
Voyage and Time Charter
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 drydock undergoing repairs and upgrades; | ||
| • | the age, condition and specifications of the vessels; and | ||
| • | the aggregate level of supply and demand in the drybulk shipping industry. |
Time charters are available for varying periods, ranging from a single trip (spot charter) to
a long-term period 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.
Consistent with industry practice, Navios Holdings uses TCE rates, which consist of revenue
from vessels operating on time charters and voyage revenue less voyage expenses from vessels
operating on voyage charters in the spot market, as a method of analyzing fluctuations between
financial periods and as a method of equating revenue generated from a voyage charter to time
charter revenue.
TCE revenue also serves as an industry standard for measuring revenue and comparing results
between geographical regions and among competitors.
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. The average age of Navios Holdings’ owned core fleet is 5.6 years. However, as
such fleet ages or if Navios Holdings 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.
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Spot Charters, Contracts of Affreightment (COAs), and Forward Freight Agreements (FFAs)
Navios Holdings enhances vessel utilization and profitability through a mix of voyage
charters, short-term charter-out contracts, COAs and strategic backhaul cargo contracts.
Navios Holdings enters into drybulk shipping FFAs as economic hedges relating to identifiable
ship and/or cargo positions and as economic hedges of transactions the Company expects to carry out
in the normal course of its shipping business. By utilizing certain derivative instruments,
including drybulk shipping FFAs, the Company manages the financial risk associated with fluctuating
market conditions. In entering into these contracts, the Company has assumed the risks relating to
the possible inability of counterparties to meet the terms of their contracts.
As of September 30, 2011 and December 31, 2010, none of Navios Holdings’ FFAs qualified for
hedge accounting treatment. Drybulk FFAs traded by Navios Holdings that do not qualify for hedge
accounting are shown at fair value in the balance sheet and changes in fair value are recorded in
the statement of operations.
FFAs cover periods generally ranging from one month to one year and are based on time charter
rates or freight rates on specific quoted routes. FFAs are executed either over-the-counter,
between two parties, or through NOS ASA, a Norwegian clearing house, and LCH, the London clearing
house. FFAs are settled in cash monthly based on publicly quoted indices.
NOS ASA and LCH call for both base and margin collaterals, which are funded by Navios
Holdings, and which in turn substantially eliminates counterparty risk. Certain portions of these
collateral funds may be restricted at any given time as determined by NOS ASA and LCH.
At the end of each calendar quarter, the fair value of drybulk shipping FFAs traded
over-the-counter are determined from an index published in London, United Kingdom and the fair
value of those FFAs traded with NOS ASA and LCH are determined from the NOS ASA and LCH valuations
accordingly. Navios Holdings has implemented specific procedures designed to respond to credit risk
associated with over-the-counter trades, including the establishment of a list of approved
counterparties and a credit committee which meets regularly.
Statement of Operations Breakdown by Segment
Navios Holdings reports financial information and evaluates its operations by charter revenues
and not by vessel type, length of ship employment, customers or type of charter. Navios Holdings
does not use discrete financial information to evaluate the operating results for each such type of
charter. Although revenue can be identified for these types of charters, management does not
identify expenses, profitability or other financial information for these charters. The reportable
segments reflect the internal organization of the Company and are strategic businesses that offer
different products and services. The Company has three reportable segments from which it derives
its revenues: Drybulk Vessel Operations, Tanker Vessel Operations and Logistics Business. The
Drybulk Vessel Operations business consists of transportation and handling of bulk cargoes through
ownership, operation, and trading of vessels, freight, and FFAs. For Navios Holdings’ reporting
purposes, Navios Logistics is considered as one reportable segment, the Logistics Business segment.
The Logistics Business segment consists of our port terminal business, barge business and cabotage
business in the Hidrovia region of South America. Following the formation of Navios Acquisition in
2010, the Company included an additional reportable segment, the Tanker Vessel Operations business,
which consists of transportation and handling of liquid cargoes through ownership, operation, and
trading of tanker vessels. Navios Holdings measures segment performance based on net income. From
March 30, 2011, following the Navios Acquisition deconsolidation, this segment no longer exists.
For a more detailed discussion about Navios Logistics segment, refer to Exhibit 99.1 to this
Form 6-K.
Period over Period Comparisons
For the Three Month Period Ended September 30, 2011 compared to the Three Month Period Ended
September 30, 2010
The following table presents consolidated revenue and expense information for the three month
periods ended September 30, 2011 and 2010. This information was derived from the unaudited
condensed consolidated revenue and expense accounts of Navios Holdings for the respective periods.
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| Three Month | Three Month | |||||||
| Period Ended | Period Ended | |||||||
| September 30, | September 30, | |||||||
| 2011 | 2010 | |||||||
| (Expressed in thousands of U.S. dollars) | (unaudited) | (unaudited) | ||||||
Revenue |
$ | 173,810 | $ | 170,177 | ||||
Time charter, voyage and port terminal expenses |
(73,162 | ) | (69,392 | ) | ||||
Direct vessel expenses |
(28,236 | ) | (26,212 | ) | ||||
General and administrative expenses |
(12,436 | ) | (20,005 | ) | ||||
Depreciation and amortization |
(24,622 | ) | (23,864 | ) | ||||
Interest income/expense and finance cost, net |
(24,272 | ) | (22,487 | ) | ||||
Loss on derivatives |
(3 | ) | (37 | ) | ||||
Gain on sale of assets |
35 | — | ||||||
Other expense, net |
(3,437 | ) | (3,799 | ) | ||||
Income before equity in net earnings of affiliated companies |
7,677 | 4,381 | ||||||
Equity in net earnings of affiliated companies |
7,956 | 9,661 | ||||||
Income before taxes |
15,633 | 14,042 | ||||||
Income tax benefit/(expense) |
317 | (244 | ) | |||||
Net income |
15,950 | 13,798 | ||||||
Less: Net loss attributable to the noncontrolling interest |
340 | 842 | ||||||
Net income attributable to Navios Holdings common stockholders |
$ | 16,290 | $ | 14,640 | ||||
Set forth below are selected historical and statistical data for Navios Holdings for each of
the three month period ended September 30, 2011 and 2010 that the Company believes may be useful in
better understanding the Company’s financial position and results of operations.
| Three Month Period Ended | ||||||||
| September 30, | ||||||||
| 2011 | 2010 | |||||||
FLEET DATA |
||||||||
Available days |
4,096 | 4,032 | ||||||
Operating days |
4,070 | 4,024 | ||||||
Fleet utilization |
99.4 | % | 99.8 | % | ||||
Equivalent vessels |
45 | 44 | ||||||
AVERAGE DAILY RESULTS |
||||||||
Time Charter Equivalents |
$ | 22,884 | $ | 24,598 | ||||
During the three month period ended September 30, 2011, there were 64 more available days as
compared to the same period of 2010 due to an increase of 371 available days of owned vessels
mainly attributable to the delivery of the owned newbuilding vessels at various times during 2010
and first quarter of 2011. This increase was partially offset by a decrease in short and long term
fleet available days by 181 days and 126 days, respectively. Navios Holdings can increase or
decrease its fleet’s size by chartering-in vessels for long or short-term periods (less than one
year).
The average TCE rate for the three month period ended September 30, 2011 was $22,884 per day,
$1,714 per day lower than the rate achieved in the same period of 2010. This was primarily due to
the slowdown in the freight market resulting in lower charter-out daily rates in the third quarter
of 2011 than those achieved in the third quarter of 2010.
Revenue: Revenue from drybulk vessel operations for the three months ended September 30, 2011
was $105.0 million as compared to $106.8 million for the same period during 2010. The decrease in
drybulk revenue was mainly attributable to (i) a decrease in short-term charter-in and long-term
charter-in fleet available days by 181 days and 127 days, respectively, and (ii) a decrease in TCE
rate per day by 7.0% to $22,884 per day in the third quarter of 2011 as compared to $24,598 per day
in the same period of 2010. This decrease was partially offset by an increase in available days for
owned vessels by 17.5% to 2,489 days in the third quarter of 2011 from 2,118 days in the same
period of 2010.
Revenue from the logistics business was $68.8 million for the three months ended September 30,
2011 as compared to $55.3 million for the same period of 2010. This increase was mainly
attributable to (i) the new vessels, the Stavroula and the San
San H (formerly known as the Jiujiang), which commenced operations in October 2010 and March 2011, respectively; and (ii) an
increase in volumes of iron ore transportation. This increase was partially offset by a decrease in
volumes moved in the dry port terminal.
Following Navios Acquisition Share Exchange, and the deconsolidation of Navios Acquisition on
March 30, 2011, there was no revenue from tanker vessel operations for the three months ended
September 30, 2011. During the corresponding period of 2010, revenue from tanker vessel operations
for the three month period ended September 30, 2010 was $8.1 million. Following the delivery of
certain product tankers, the Ariadne Jacob on July 2, 2010 and the Colin Jacob on June 29, 2010,
and the VLCC Acquisition on September 10, 2010, Navios Acquisition
had 308 available days at a TCE rate of $26,129.
Time Charter, Voyage and Port Terminal Expenses: Time charter, voyage and port terminal
expenses increased by $3.8 million or 5.5% to $73.2 million for the three month period ended
September 30, 2011, as compared to $69.4 million for same period in 2010. Of the total amounts for
the three month period ended September 30, 2011 and 2010, $35.0 million and $23.8 million,
respectively, related to Navios Logistics. This increase was mainly due to (a) an increase in
Paraguayan liquid port’s volume and in an increase of the price of products sold; and (b) an
increase in volumes of iron ore transportation. This increase in Navios Logistics was partially
offset by a decrease in the fuel expenses of the cabotage vessels due to employment under time
charter contracts.
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The drybulk time charter, voyage and port terminal expenses decreased by $7.3 million or 16.0%
to $38.2 million for the three month period ended September 30, 2011, as compared to $45.5 million
for the same period in 2010. This was primarily due to a decrease in the short-term and long-term
fleet activity (as discussed above).
Following Navios Acquisition Share Exchange, and the deconsolidation of Navios Acquisition on
March 30, 2011, there was no time charter, voyage and port terminal expenses from tanker vessel
operations for the three month period ended September 30, 2011. During the corresponding period of
2010, time charter, voyage and port terminal expenses were below $0.1 million.
Direct
Vessel Expenses: Direct vessel expenses increased by $2.0 million or 7.6% to $28.2
million for the three month period ended September 30, 2011, as compared to $26.2 million for the
same period in 2010. Direct vessel expenses include crew costs, provisions, deck and engine stores,
lubricating oils, insurance premiums and costs for maintenance and repairs. Of the total amounts
for the three month period ended September 30, 2011 and 2010, $18.0 million and $14.6 million,
respectively, related to Navios Logistics. This increase was mainly due to (a) additional operating
expenses generated by the new vessels, the Stavroula and the San San H (formerly known as the Jiujiang), which commenced operations in October 2010 and March 2011, respectively; and (b) an
increase in crew costs, spares and maintenance costs related to the barge business.
The drybulk direct vessel expenses increased by $1.1 million or 12.1% to $10.2 million for the
three month period ended September 30, 2011, as compared to $9.1 million for the same period in
2010. The increase resulted primarily from an increase in available days for owned vessels by 17.5%
to 2,489 days in the third quarter of 2011 from 2,118 days in the same period of 2010.
Following Navios Acquisition Share Exchange, and the deconsolidation of Navios Acquisition on
March 30, 2011 as a result thereof, there were no direct vessel expenses from tanker vessel
operations for the three months ended September 30, 2011. During the corresponding period of 2010,
direct vessel expenses were $2.5 million.
General and Administrative Expenses: General and administrative expenses of Navios Holdings
are composed of the following:
| Three Month Period | Three Month Period | |||||||
| Ended | Ended | |||||||
| September 30, 2011 | September 30, 2010 | |||||||
| (Expressed in thousands of U.S. dollars) | (unaudited) | (unaudited) | ||||||
Payroll and related costs(1) |
$ | 5,354 | $ | 3,823 | ||||
Professional, legal and audit fees(1) |
1,553 | 1,041 | ||||||
Navios Acquisition |
— | 8,428 | ||||||
Navios Logistics(2) |
3,447 | 3,502 | ||||||
Other(1) |
42 | 615 | ||||||
Sub-total |
10,396 | 17,409 | ||||||
Credit risk insurance |
2,040 | 2,596 | ||||||
General and administrative expenses |
$ | 12,436 | $ | 20,005 | ||||
| (1) | Excludes the logistics business and tanker vessels business, which are reflected in the line items for Navios Logistics and Navios Acquisition. | |
| (2) | Excludes $0.1 million administrative management services provided by Navios Holdings as per administrative agreement with Navios Logistics. |
The decrease in general and administrative expenses by $7.6 million or 38.0% to $12.4 million
for the three month period ended September 30, 2011, as compared to $20.0 million for the same
period of 2010, was mainly attributable to (a) a $8.4 million decrease due to the deconsolidation
of Navios Acquisition; (b) a $0.6 million decrease in other general and administrative expenses;
(c) a $0.6 million decrease in credit risk insurance fees; and (d) a $0.1 million decrease in general
and administrative expenses attributable to the logistics business. This decrease was partially
offset by (a) a $1.6 million increase in payroll and other related costs consisting of $1.1 million
increase in payroll costs and a $0.5 million increase in stock plan expenses; and (b) a $0.5
million increase in professional, legal and audit fees.
Depreciation and Amortization: For the three month period ended September 30, 2011,
depreciation and amortization increased by $0.7 million or 2.9% to $24.6 million, as compared to
$23.9 million for the same period in 2010. The increase was primarily due to (a) an increase in
depreciation of drybulk vessels by $2.8 million due to the
increase in the number of the owned
fleet vessels; and (b) an increase of $0.3 million in amortization of favorable and unfavorable
leases. This increase was mitigated by a decrease of $2.4 million attributable to Navios
Acquisition as a result of the deconsolidation of Navios Acquisition on March 30, 2011.
Interest Income/Expense and Finance Cost, Net: Interest income/expense and finance cost, net
for the three month period ended September 30, 2011 increased by $1.8 million or 8.0% to $24.3
million, as compared to $22.5 million in the same period
of 2010. This increase was mainly due to (a) a $4.2 million increase in interest expense and
finance cost attributable to Navios Logistics,
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following the issuance of $200.0 million of senior
notes in April 2011; and (b) a $0.3 million decrease in interest income attributable to Navios
Acquisition. This increase was partially offset by (a) a decrease in amortization of financing
costs and bond coupon expenses by $1.4 million; (b) a $1.0 million decrease in interest expense and
finance cost as a result of the deconsolidation of Navios Acquisition on March 30, 2011; (c) a $0.2
million increase in interest income attributable to Navios Logistics; and (d) a $0.1 million
increase in interest income attributable to Navios Holdings.
Loss on Derivatives: Loss on derivatives was below $0.1 million for both three month periods
ended September 30, 2011 and 2010, respectively. There is no gain on derivatives relating to the
logistics business and tanker vessel operations. Navios Holdings records the change in the fair
value of derivatives at each balance sheet date. The FFA market has experienced significant
volatility in the past few years and, accordingly, recognition of the changes in the fair value of
FFAs has, and can, cause significant volatility in earnings. The extent of the impact on earnings
is dependent on two factors: market conditions and Navios Holdings’ net position in the market.
Market conditions were volatile in both periods. As an indicator of volatility, selected Baltic
Exchange Panamax time charter average rates are shown below.
| Baltic | ||||
| Exchange’s | ||||
| Panamax Time | ||||
| Charter | ||||
| Average Index | ||||
August 4, 2011 |
$ | 11,772 | (a) | |
September 15, 2011 |
$ | 14,033 | (b) | |
September 30, 2011 |
$ | 13,813 | (*) | |
July 12, 2010 |
$ | 15,648 | (c) | |
September 9, 2010 |
$ | 27,329 | (d) | |
September 30, 2010 |
$ | 19,784 | (*) | |
| (a) | Low for Q3 — 2011 | |
| (b) | High for Q3 — 2011 | |
| (c) | Low for Q3 — 2010 | |
| (d) | High for Q3 — 2010 | |
| (*) | End of period rate |
Other Expense, Net: Other expense, net decreased by $0.4 million or 10.5% to $3.4 million for
the three month period ended September 30, 2011, as compared to $3.8 million for the same period in
2010. This decrease was mainly due to a decrease of $0.7 million in other expenses, net, of Navios
Logistics mainly attributable to a lower provision for bad debts as compared to the same period of
2010. This decrease
was partially offset by (a) a $0.1 million increase in net miscellaneous expenses; and (b) a $0.2
million decrease in interest income from finance leases. Other expense, net from tanker vessel
operations was less than $0.1 million for both the three month periods ended September 30, 2011 and
2010, respectively.
Equity in Net Earnings of Affiliated Companies: Equity in net earnings of affiliated companies
decreased by $1.7 million or 17.5% to $8.0 million for the three month period ended September 30,
2011, as compared to $9.7 million equity in earnings for the same period in 2010. This decrease was
mainly due to a $2.4 million decrease in investment income,
resulting from (a) a $1.1 million negative
contribution under the equity method relating to Navios Acquisition during the three month period
ended September 30, 2011; and (b) a $1.3 million net decrease in contribution relating to
Navios Partners. The overall variance of $2.4 million was mitigated by a $0.7 million increase in
the amortization of deferred gain, as described in more detail below. The Company recognizes the
gain from the sale of vessels to Navios Partners immediately in earnings only to the extent of the
interest in Navios Partners owned by third parties and defers recognition of the gain to the extent
of its own ownership interest in Navios Partners (the “deferred gain”) (see also “Related Party
Transactions”). Subsequently, the deferred gain is amortized to income over the remaining useful
life of the vessel. The recognition of the deferred gain is accelerated in the event that (i) the
vessel is subsequently sold or otherwise disposed of by Navios Partners or (ii) the Company’s
ownership interest in Navios Partners is reduced.
Income Tax Benefit/ (Expense): Income taxes decreased by $0.5 million to a gain of $0.3
million for the three month period ended September 30, 2011, as compared to a loss of $0.2 million
for the same period in 2010. The main reason was the $0.5 million decrease in loss from income
taxes of Navios Logistics.
Net Loss Attributable to the Noncontrolling Interest: Net loss attributable to noncontrolling
interest decreased by $0.5 million to $0.3 million for the three month period ended September 30,
2011, as compared to $0.8 million for the same period in 2010. This decrease was due to a $2.5
million decrease in loss attributable to the noncontrolling interest of Navios Acquisition as a
result of the deconsolidation of Navios Acquisition on March 30, 2011. This decrease was partially
offset by an increase of $2.0 million in Navios Logistics’ net income attributable to the
noncontrolling interest, mainly due to the acquisition of the
noncontrolling interests of its joint
ventures on July 25, 2011.
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For the Nine Month Period Ended September 30, 2011 compared to the Nine Month Period Ended
September 30, 2010
The following table presents consolidated revenue and expense information for the nine month
periods ended September 30, 2011 and 2010. This information was derived from the unaudited
consolidated revenue and expense accounts of Navios Holdings for the respective periods.
| Nine Month | Nine Month | |||||||
| Period Ended | Period Ended | |||||||
| September 30, 2011 | September 30, 2010 | |||||||
| (Expressed in thousands of U.S. dollars) | (unaudited) | (unaudited) | ||||||
Revenue |
$ | 520,935 | $ | 489,991 | ||||
Time charter, voyage and port terminal expenses |
(197,124 | ) | (218,123 | ) | ||||
Direct vessel expenses |
(90,481 | ) | (67,365 | ) | ||||
General and administrative expenses |
(39,121 | ) | (43,549 | ) | ||||
Depreciation and amortization |
(82,340 | ) | (71,171 | ) | ||||
Interest income/expense and finance cost, net |
(78,842 | ) | (64,878 | ) | ||||
(Loss)/gain on derivatives |
(85 | ) | 4,005 | |||||
Gain on sale of assets |
38,822 | 26,134 | ||||||
(Loss)/gain on change in control |
(35,325 | ) | 17,742 | |||||
Loss on bond extinguishment |
(21,199 | ) | — | |||||
Other expense, net |
(8,157 | ) | (10,603 | ) | ||||
Income before equity in net earnings of affiliated companies |
7,083 | 62,183 | ||||||
Equity in net earnings of affiliated companies |
22,702 | 29,417 | ||||||
Income before taxes |
29,785 | 91,600 | ||||||
Income tax benefit |
136 | 657 | ||||||
Net income |
29,921 | 92,257 | ||||||
Less: Net (income)/loss attributable to the noncontrolling interest |
(911 | ) | 193 | |||||
Preferred stock dividends of subsidiary |
(27 | ) | — | |||||
Add: Preferred stock dividends attributable to the noncontrolling interest |
12 | — | ||||||
Net income attributable to Navios Holdings common stockholders |
$ | 28,995 | $ | 92,450 | ||||
Set forth below are selected historical and statistical data for Navios Holdings for
each of the nine month periods ended September 30, 2011 and 2010 that the Company believes may be
useful in better understanding the Company’s financial position and results of operations.
| Nine Month Period Ended | ||||||||
| September 30, | ||||||||
| 2011 | 2010 | |||||||
| (unaudited) | (unaudited) | |||||||
FLEET DATA |
||||||||
Available days |
12,207 | 12,140 | ||||||
Operating days |
12,078 | 12,106 | ||||||
Fleet utilization |
98.9 | % | 99.7 | % | ||||
Equivalent vessels |
45 | 44 | ||||||
AVERAGE DAILY RESULTS |
||||||||
Time Charter Equivalents |
$ | 23,727 | $ | 25,298 | ||||
During the nine month period ended September 30, 2011, there were 67 more available days as
compared to the same period of 2010 mainly due to an increase of 1,319 available days of owned
vessels following the delivery of owned newbuilding vessels. That was offset by a decrease in
short-term and long-term fleet available days by 386 days and 866 days, respectively. Navios
Holdings can increase or decrease its fleet’s size by chartering-in vessels for long-term or
short-term periods (less than one year).
The average TCE rate for the nine month period ended September 30, 2011 was $23,727 per day,
$1,571 per day lower than the rate achieved in the same period of 2010. This was primarily due to
the slowdown in the freight market resulting in lower charter-out daily rates during the nine
months ended September 30, 2011 than those achieved in the same period of 2010.
Revenue: Revenue from drybulk vessel operations for the nine months ended September 30, 2011
was $327.9 million as compared to $338.7 million for the same period during 2010. The decrease in
drybulk revenue was mainly attributable to (i)
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a decrease in short-term charter-in and long-term
charter-in fleet available days by 386 days and 866 days, respectively, and (ii) a decrease in TCE
rate per day by 6.2% to $23,727 per day during the nine month period ended September 30, 2011 as
compared to $25,298 per day in the same period of 2010. This decrease was partially offset by an
increase in available days for owned vessels by 20.8% to 7,649 days during the nine month period
ended September 30, 2011 from 6,330 days in the same period of 2010.
Revenue from the logistics business was $167.9 million for the nine months ended September 30,
2011 as compared to $143.2 million during the same period of 2010. This increase was mainly
attributable to (i) the new vessels, the Stavroula and the San San H (formerly known as the Jiujiang), which commenced operations in October 2010 and March 2011, respectively; and (ii) an
increase in volumes of iron ore transportation. This increase was partially offset by a decrease in
volumes in the dry port terminal.
Following
the Navios Acquisition Share Exchange, and the deconsolidation of Navios Acquisition on
March 30, 2011, there was no revenue from tanker vessel operations from that date onwards. Revenue
from tanker vessel operations for the nine month period ended September 30, 2011 was $25.1 million.
Following the delivery of a chemical tanker, the Nave Polaris, on January 27, 2011, Navios
Acquisition had 874 available days and a TCE rate of $29,558. During the corresponding period of
2010, revenue from tanker vessel operations for the nine month period ended September 30, 2010 was
$8.1 million. Following the VLCC Acquisition and the acquisitions of the Colin Jacob in June 2010
and the Ariadne Jacob in July 2010, Navios Acquisition had 309 available days at a TCE of $26,084
for the nine month period ended September 30, 2010.
Time Charter, Voyage and Port Terminal Expenses: Time charter, voyage and port terminal
expenses decreased by $21.0 million or 9.6% to $197.1 million for the nine month period ended
September 30, 2011, as compared to $218.1 million for the same period in 2010. Of the total amounts
for the nine month period ended September 30, 2011 and 2010, $73.1 million and $64.8 million,
respectively, related to Navios Logistics. This increase was mainly due to (a) an increase in the
Paraguayan port’s volume; (b) an increase of volume of iron ore transportation; (c) an increase in
the operating costs of the Navios Logistics port facilities in Uruguay and Paraguay; and (d) an
increase of the price of products sold.
The drybulk time charter, voyage and port terminal expenses decreased by $29.7 million or
19.4% to $123.6 million for the nine month period ended September 30, 2011, as compared to $153.3
million for the same period in 2010. This was primarily due to a decrease in the short-term and
long-term fleet activity (as discussed above).
Time charter, voyage and port terminal expenses from tanker vessel operations for the nine
month period ended September 30, 2011 were $0.4 million. During the corresponding period of 2010,
time charter, voyage and port terminal expenses were below $0.1 million.
Direct Vessel Expenses: Direct vessel expenses increased by $23.1 million or 34.3% to $90.5
million for the nine month period ended September 30, 2011, as compared to $67.4 million for the
same period in 2010. Direct vessel expenses include crew costs, provisions, deck and engine stores,
lubricating oils, insurance premiums and costs for maintenance and repairs. Of the total amounts
for the nine month period ended September 30, 2011 and 2010, $48.0 million and $36.8 million,
respectively, related to Navios Logistics. This increase was mainly due to (a) additional operating
expenses generated by the new vessels, the Stavroula and the San San H (formerly known as the Jiujiang), which commenced operations in October 2010 and March 2011, respectively; and (b) an
increase in crew costs, and repairs and maintenance costs related to the barge business.
The drybulk direct vessel expenses increased by $6.8 million or 24.2% to $34.9 million for the
nine month period ended September 30, 2011, as compared to $28.1 million for the same period in
2010. The increase resulted primarily from an increase in available days for owned vessels by 20.8%
to 7,649 days during the nine month period ended September 30, 2011 from 6,330 days in the same
period of 2010.
Direct vessel expenses from tanker vessel operations was $7.6 million for the nine month
period ended September 30, 2011 as compared to $2.5 million for the same period in 2010. This
increase was mainly due to the increase in available days for owned vessels by 565 days to 874 days
during the nine month period ended September 30, 2011 from 309 days in the same period in 2010, as
a result of the delivery of a chemical tanker, the Nave Polaris, on January 27, 2011, the VLCC
Acquisition and the acquisitions of the Colin Jacob in June 2010 and the Ariadne Jacob in July
2010.
Following Navios Acquisition Share Exchange, and the deconsolidation of Navios Acquisition on
March 30, 2011, there were no direct vessels expenses from tanker operations from that date
onwards.
General and Administrative Expenses: General and administrative expenses of Navios Holdings
are composed of the following:
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| Nine Month Period | Nine Month Period | |||||||
| Ended | Ended | |||||||
| September 30, 2011 | September 30, 2010 | |||||||
| (Expressed in thousands of U.S. dollars) | (unaudited) | (unaudited) | ||||||
Payroll and related costs(1) |
$ | 16,777 | $ | 11,908 | ||||
Professional, legal and audit fees(1) |
4,219 | 3,488 | ||||||
Navios Acquisition |
1,025 | 8,514 | ||||||
Navios Logistics(2) |
10,118 | 9,308 | ||||||
Other(1) |
585 | 2,110 | ||||||
Sub-total |
32,724 | 35,328 | ||||||
Credit risk insurance |
6,397 | 8,221 | ||||||
General and administrative expenses |
$ | 39,121 | $ | 43,549 | ||||
| (1) | Excludes the logistics business and tanker vessels business, which are reflected in the line items for Navios Logistics and Navios Acquisition. | |
| (2) | Excludes $0.3 million administrative management services provided by Navios Holdings as per administrative agreement with Navios Logistics. |
The decrease in general and administrative expenses by $4.4 million or 10.1% to $39.1 million
for the nine month period ended September 30, 2011, as compared to $43.5 million for the same
period of 2010, was mainly attributable to (a) a $7.5 million decrease due to deconsolidation of
Navios Acquisition; (b) a $1.5 million decrease in other general and administrative expenses; and
(c) a $1.8 million decrease in credit risk insurance fees. This decrease was partially offset by (a) a
$4.9 million increase in payroll and other related costs consisting of a $3.6 million increase in
payroll costs and a $1.3 million increase in stock plan expenses; (b) a $0.7 million increase in
professional, legal and audit fees; and (c) a $0.8 million increase in general and administrative
expenses attributable to the logistics business.
Depreciation and Amortization: For the nine month period ended September 30, 2011,
depreciation and amortization increased by $11.1 million or 15.6% to $82.3 million, as compared to
$71.2 million for the same period in 2010. The increase was primarily due to (a) an increase in
depreciation of drybulk vessels by $7.4 million due to the increase in the number of the owned
fleet vessels; and (b) an increase of $5.7 million attributable to Navios Acquisition. This
increase was mitigated by (a) a $0.3 million decrease in
logistics business; and (b) a decrease of
$1.7 million in amortization of favorable and unfavorable leases.
Interest Income/Expense and Finance Cost, Net: Interest income/expense and finance cost, net
for the nine month period ended September 30, 2011 increased by $13.9 million or 21.4% to $78.8
million, as compared to $64.9 million in the same period of 2010. This increase was due to (a) a
$8.7 million increase in interest expense and finance cost attributable to Navios Logistics,
following the issuance of $200.0 million of senior notes in April 2011; (b) interest expense and
finance cost, net attributable to Navios Acquisition amounting to $7.4 million; and (c) a $0.1
million decrease in interest income attributable to Navios Holdings. This increase was partially
offset by (a) a decrease in amortization of financing costs by $1.8 million and (b) a $0.5 million
increase in interest income attributable to Navios Logistics.
(Loss)/Gain on Derivatives: Gain on derivatives decreased by $4.1 million to a loss of $0.1
million during the nine month period ended September 30, 2011, as compared to a gain of $4.0
million for the same period in 2010. Navios Holdings records the change in the fair value of
derivatives at each balance sheet date. The FFA market has experienced significant volatility in
the past few years and, accordingly, recognition of the changes in the fair value of FFAs has, and
can, cause significant volatility in earnings. The extent of the impact on earnings is dependent on
two factors: market conditions and Navios Holdings’ net position in the market. Market conditions
were volatile in both periods. As an indicator of volatility, selected Baltic Exchange Panamax time
charter average rates are shown below.
| Baltic | ||||
| Exchange’s | ||||
| Panamax Time | ||||
| Charter | ||||
| Average Index | ||||
February 2, 2011 |
$ | 10,372 | (a) | |
March 11, 2011 |
$ | 17,115 | (b) | |
September 30, 2011 |
$ | 13,813 | (*) | |
July 12, 2010 |
$ | 15,648 | (c) | |
May 20, 2010 |
$ | 37,099 | (d) | |
September 30, 2010 |
$ | 19,784 | (*) | |
| (a) | Low for nine months — 2011 | |
| (b) | High for nine months — 2011 | |
| (c) | Low for nine months — 2010 | |
| (d) | High for nine months — 2010 | |
| (*) | End of period rate |
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Gain on Sale of Assets: The gain on sale of assets for the nine month period ended September
30, 2011 was $38.8 million, which resulted from the sale of the Navios Luz and the Navios Orbiter
to Navios Partners on May 19, 2011 for a total consideration of $130.0 million, of which $120.0
million was paid in cash and $10.0 million was paid in newly issued common units of Navios
Partners. During the same period in 2010, the gain on sale of assets was $26.1 million resulting
from (a) a gain of $23.8 million from the sale of the Navios Hyperion, (b) a gain of $0.6 million
from the sale of the Navios Aurora II and (c) a gain of $1.7 from the sale of the Navios Pollux to
Navios Partners on January 8, 2010, March 18, 2010 and May 21, 2010, respectively.
Gain/(Loss) on Change in Control: On March 30, 2011, Navios Holdings completed the Navios
Acquisition Share Exchange whereby Navios Holdings exchanged 7,676,000 shares of Navios
Acquisition’s common stock it held for non-voting Series C preferred stock of Navios Acquisition
pursuant to an Exchange Agreement entered into on March 30, 2011 between Navios Acquisition and
Navios Holdings. From that date onwards, Navios Acquisition has been considered an affiliate entity of
Navios Holdings and not a controlled subsidiary of the Company, and the investment in Navios
Acquisition has been accounted for under the equity method due to the Company’s significant influence
over Navios Acquisition. Navios Acquisition
is now accounted for under the equity method of
accounting based on Navios Holdings’ 53.7% economic interest in Navios Acquisition, since the
preferred stock is considered to be, in substance, common stock from an accounting perspective. On March
30, 2011, based on the equity method, the Company recorded an investment in Navios Acquisition of
$103.3 million, which represents the fair value of the common stock and Series C preferred stock
that were held by Navios Holdings on such date. On March 30, 2011, the Company accounted a loss on
change in control of $35.3 million, which is equal to the fair value of the Company’s investment in
Navios Acquisition of $103.3 million less the Company’s portion of Navios Acquisition’s net assets
on March 30, 2011.
During the same period of 2010, the gain on change in control for the nine month period ended
September 30, 2010 was $17.7 million in connection with Navios Acquisition. Upon obtaining control
of Navios Acquisition, the investment in common shares and the investment in warrants were
remeasured to fair value, resulting in a gain of $17.7 million and noncontrolling interest (the
number of shares not controlled by the Company) was recognized at fair value, (the public share
price as of May 28, 2010 of $6.56), amounting to $60.6 million.
Loss on Bond Extinguishment: In December 2006, the Company issued $300.0 million in senior
notes at a fixed rate of 9.5% due on December 15, 2014 (the “2014 Notes”). On January 28, 2011,
Navios Holdings completed the sale of $350.0 million of 8.125% Senior Notes due 2019 (the “2019
Notes”). The net proceeds from the sale of the 2019 Notes were used to redeem all of the 2014 Notes
and pay related transaction fees and expenses and for general corporate purposes. As a result of
such transaction, we recorded expenses from bond extinguishment of $21.2 million.
Other Expense, Net: Other expense, net decreased by $2.4 million or 22.6% to $8.2 million for
the nine month period ended September 30, 2011, as compared to $10.6 million for the same period in
2010. This decrease was mainly due to (a) a $1.8 million decrease in net miscellaneous expenses mainly due
to decrease in provision for bad debts; and (b) a decrease of $1.5 million in other expenses, net
of Navios Logistics mainly due to a lower provision for bad debts as compared to the same period of
2010. This decrease was partially offset by a $0.9 million
decrease in interest income from finance leases.
Other expense, net from tanker vessel operations was less than $0.1 million for both the nine
month period ended September 30, 2011 and 2010, respectively.
Equity in Net Earnings of Affiliated Companies: Equity in net earnings of affiliated companies
decreased by $6.7 million or 22.8% to $22.7 million for the nine month period ended September 30,
2011, as compared to $29.4 million for the same period in 2010. This decrease was mainly due to (a)
a $3.0 million decrease in investment income resulting from a $1.8 million negative contribution under the
equity method relating to Navios Acquisition during the nine month
period ended September 30, 2011 and
a $1.2 million net decrease in contribution relating to Navios Partners; and
(b) a $3.7 million decrease in the amortization of deferred gain. The Company recognizes the gain
from the sale of vessels to Navios Partners immediately in earnings only to the extent of the
interest in Navios Partners owned by third parties and defers recognition of the gain to the extent
of its own ownership interest in Navios Partners (the “deferred gain”) (see also “Related Party
Transactions”). Subsequently, the deferred gain is amortized to income over the remaining useful
life of the vessel. The recognition of the deferred gain is accelerated in the event that (i) the
vessel is subsequently sold or otherwise disposed of by Navios Partners or (ii) the Company’s
ownership interest in Navios Partners is reduced.
Income Tax Benefit: Income tax benefit decreased by $0.6 million to $0.1 million for the nine
month period ended September 30, 2011, as compared to $0.7 million for the same period in 2010. The
main reason was the $0.6 million decrease in gain from income taxes of Navios Logistics.
Net (Income)/Loss Attributable to the Noncontrolling Interest: Net income attributable to the
noncontrolling interest increased by $1.1 million to $0.9 million of income for the nine month
period ended September 30, 2011, as compared to a loss of $0.2 million for the same period in 2010.
This increase was due to a $2.4 million decrease in loss attributable to the noncontrolling
interest of Navios Acquisition as a result of the deconsolidation of Navios Acquisition on March
30, 2011. This increase was partially
offset by a decrease of $1.3 million in Navios Logistics noncontrolling interest mainly due to
the acquisition of the noncontrolling interests of its joint ventures on July 25, 2011 and the fact
that Navios Logistics net income for the nine month period ended September 30, 2011 decreased
compared to the corresponding period in 2010.
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Liquidity and Capital Resources
Navios Holdings has historically financed its capital requirements with cash flows from
operations, equity contributions from stockholders, credit facilities and other debt financings.
Main uses of funds have been capital expenditures for the acquisition of new vessels, new
construction and upgrades at the port terminals, expenditures incurred in connection with ensuring
that the owned vessels comply with international and regulatory standards, repayments of credit
facilities and payments of dividends. Navios Holdings anticipates that cash on hand, internally
generated cash flows and borrowings under the existing credit facilities will be sufficient to fund
the operations of the fleet and the logistics business, including working capital requirements.
However, see “Exercise of Vessel Purchase Options”, “Working Capital Position” and “Long-term Debt
Obligations and Credit Arrangements” for further discussion of Navios Holdings’ working capital
position.
In November 2008, the Board of Directors approved a share repurchase program for up to $25.0
million of Navios Holdings’ common stock. Share repurchases are made pursuant to a program adopted
under Rule 10b5-1 under the Exchange Act. The program does not require any minimum purchase or any
specific number or amount of shares and may be suspended or reinstated at any time in Navios
Holdings’ discretion and without notice. Repurchases are subject to restrictions under the terms of
the Company’s credit facilities and indentures. There were no shares repurchased during the nine
month period ended September 30, 2011 and for the year ended December 31, 2010. In October 2011,
Navios Holdings repurchased 73,651 shares of its common stock for a total cost
of $0.2 million.
The following table presents cash flow information derived from the unaudited consolidated
statements of cash flows of Navios Holdings for the nine month periods ended September 30, 2011 and
2010.
| Nine Month Period | Nine Month Period | |||||||
| Ended September 30, | Ended September 30, | |||||||
| 2011 | 2010 | |||||||
| (Expressed in thousands of U.S. dollars) | (unaudited) | (unaudited) | ||||||
Net cash provided by operating activities |
$ | 58,045 | $ | 128,448 | ||||
Net cash used in investing activities |
(107,286 | ) | (307,955 | ) | ||||
Net cash provided by financing activities |
36,768 | 138,774 | ||||||
Decerease in cash and cash equivalents |
(12,473 | ) | (40,733 | ) | ||||
Cash and cash equivalents, beginning of the period |
207,410 | 173,933 | ||||||
Cash and cash equivalents, end of period |
$ | 194,937 | $ | 133,200 | ||||
Cash provided by operating activities for the nine month period ended September 30, 2011 as
compared to the cash provided by for the nine month period ended September 30, 2010:
Net cash provided by operating activities decreased by $70.5 million to $58.0 million for the
nine month period ended September 30, 2011, as compared to $128.5 million for the same period of
2010. In determining net cash provided by operating activities, net income is adjusted for the
effects of certain non-cash items including depreciation and amortization and unrealized gains and
losses on derivatives.
The aggregate adjustments to reconcile net income to net cash provided by operating activities
was a $103.8 million gain for the nine month period ended September 30, 2011, which consisted
mainly of the following adjustments: $82.3 million of depreciation and amortization, $3.8 million
of amortization of deferred drydock expenses, $4.3 million of amortization of deferred finance
fees, $5.6 million of expenses from bond extinguishment, $3.1 million relating to share-based
compensation, a $35.3 million loss on change in control, a $8.4 million movement in earnings in
affiliates net of dividends received and a $0.1 million relating to the provision for losses on
accounts receivable. These adjustments were partially offset by $0.2 million of unrealized gains
on FFAs, a $38.8 million gain from the sale of the Navios Luz and the Navios Orbiter to Navios
Partners and a $0.1 million increase in loss from income taxes.
The negative change in operating assets and liabilities of $75.6 million for the nine month
period ended September 30, 2011 resulted from a $39.4 million increase in accounts receivable, a
$15.1 million increase in prepaid expenses and other current assets, a $65.1 million increase in
amounts due from affiliates, $8.9 million in payments for drydock and special survey costs and a
$6.4 million decrease in other long-term liabilities. These were partially offset by a $0.7 million
decrease in restricted cash, a $42.0 million increase in accrued expenses, a $9.5 million increase
in deferred income, a $1.3 million decrease in other long-term assets, a $5.6 million increase in
accounts payable and a $0.2 million increase in derivative accounts.
The cumulative effect of the adjustments to reconcile net income to net cash provided by
operating activities was a $56.3 million gain for the nine month period ended September 30, 2010,
which consisted mainly of the following adjustments: $71.2 million of depreciation and
amortization; $2.3 million of amortization of deferred dry-dock expenses; $5.2 million of
amortization of deferred finance fees; $6.7 million provision for losses on accounts receivable;
$15.0 million of unrealized losses on FFAs; and $7.4 million relating to share-based compensation.
These adjustments were partially offset by $6.0 million of unrealized gain on Navios
Acquisition Private Placement Warrants, a $17.7 million gain on fair value investment of Navios
Acquisition, $0.9 million of unrealized gain on interest rate swaps, $26.1 million from the sales
of the Navios Hyperion, the Navios Aurora II and the Navios Pollux to Navios Partners, $0.7
million in income taxes and a $0.1 million movement in earnings in affiliates net of dividends
received.
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The negative change in operating assets and liabilities of $20.1 million for the nine month
period ended September 30, 2010 resulted from a $6.9 million increase in accounts receivable, a
$5.7 million increase in restricted cash, a $0.9 million increase in due from affiliates, a $2.4
million increase of interest payments, $8.6 million relating to payments for drydock and special
survey costs, a $21.0 million decrease in accounts payable and a $10.6 million decrease in other
long term liabilities. The negative change in operating assets and liabilities for the nine month
period ended September 30, 2010 was offset by a $5.8 million increase in derivative accounts, a
$4.1 million increase in deferred income, a $23.9 million increase in sundry liabilities and
accruals and a $2.0 million decrease in prepaid expenses and other assets.
Cash used in investing activities for the nine month period ended September 30, 2011 as
compared to the cash used in for the nine month period ended September 30, 2010:
Cash used in investing activities decreased by $200.7 million to $107.3 million for the nine
month period ended September 30, 2011, as compared to $308.0 million for the same period in 2010.
Cash used in investing activities for the nine months ended September 30, 2011 was the result
of: (a) a $72.4 million decrease due to the Navios Acquisition deconsolidation; (b) $3.0 million of
deposits for acquisitions of tanker vessels under construction; (c) $27.3 million of deposits for
the acquisition of a newbuilding bulk carrier scheduled to be delivered in the second quarter of
2012; (d) $51.5 million paid for the acquisition of the vessels Navios Azimuth, Navios Altamira and
Navios Astra, and $4.5 million paid for the delivery of the Nave Polaris on January 27, 2011; (e)
$2.1 million in payments relating to the acquisition of General Partner units following offerings
by Navios Partners; and (f) the purchase of other fixed assets amounting to $67.3 million mainly
relating to Navios Logistics. The above was partially offset by (a) $120.0 million of proceeds from
the sale of the Navios Luz and the Navios Orbiter to Navios Partners on May 19, 2011, and (b) a
$0.8 million decrease in restricted cash.
Cash used in investing activities for the nine months ended September 30, 2010 was $308.0
million and was the result of (a) the deposits for acquisitions of Capesize vessels under
construction amounting to $314.6 million and deposits for acquisitions of tanker vessels under
construction amounting to $35.4 million, (b) a $47.7 million movement in Navios Holdings’ cash
which is kept in a pledged account and may be released to the Company subject to nominations of
substitute vessels agreed to by the bank, (c) the amounts paid for the acquisition of the Navios
Vector and the Navios Melodia amounting to $30.5 million and $12.0 million, respectively, including
any additional expenses incurred from the vessels’ purchase and $78.6 million paid relating to the
acquisition of the Colin Jacob and the Ariadne Jacob that were delivered on June 29, 2010 and July
2, 2010, respectively, (d) the purchase by Navios Holdings of 6,337,551 shares of Navios
Acquisition common stock for $63.2 million in open market purchases, (e) $102.0 million paid net of
cash assumed for the VLCC Acquisition,(f) the purchase of other fixed assets amounting to $9.8
million mainly relating to Navios Logistics and (g) $3.6 million in payments relating to the
acquisition of General Partner units following offerings by Navios Partners. The above was offset
by (a) proceeds of $63.0 million, $90.0 million, and $110.0 million from the sale of the Navios
Hyperion, the Navios Aurora II, and the Navios Pollux, respectively, to Navios Partners and $18.3
million from the sale of the Vanessa, (b) net proceeds of $40.8 million from transfer of assets and
liabilities of Navios Holdings to Navios Acquisition in exchange of a cash consideration, which was
released from Navios Acquisitions’ trust account, (c) $0.2 million received in connection with the
capital lease receivable, (d) $66.3 million, representing the assumed cash of Navios Acquisition as
of the de-“SPAC”-ing and (e) a $0.8 million movement in Navios Acquisition that relates to release
of cash from trust account used to pay deposits for its vessels under
construction.
Cash provided by financing activities for the nine month period ended September 30, 2011 as
compared to the cash provided by for the nine month period ended September 30, 2010:
Cash provided by financing activities decreased by $102.0 million to $36.8 million for the
nine month period ended September 30, 2011, as compared to $138.8 million for the same period of
2010.
Cash provided by financing activities for the nine month period ended September 30, 2011 was
the result of (a) $70.5 million of loan proceeds (net of relating finance fees $0.9 million) in
connection with (i) $67.5 million of Navios Holdings’ loan proceeds for financing the acquisition
of the Navios Azimuth, the Navios Altamira, the Navios Astra (net of relating finance fees of $0.3
million), and the Navios Avior (net of relating fees of $0.2 million); and (ii) $3.0 million of
Navios Acquisition’s loan proceeds (net of relating finance fees of $0.4 million); (b) 0.4 million
of proceeds from the exercise of options to purchase common stock; (c) $341.0 million of net
proceeds from the sale of the 2019 Notes; (d) $193.2 million net proceeds from the sale of 9.25%
senior notes due 2019 of Navios Logistics; and (e) a $0.9 million decrease in restricted cash
relating to loan repayments. This was partially offset by: (a) the repayment of the 2014 Notes with
the proceeds of the sale of the 2019 Notes; (b) $239.0 million of installment payments made in
connection with Navios Holdings’ outstanding indebtedness (including Navios Acquisition and Navios
Logistics); (c) $0.9 million relating to payments for capital lease obligations; (d) $20.7 million
of dividends paid to the Company’s shareholders and (e) $8.6 million paid by Navios Logistics for
the acquisition of the noncontrolling interests in its joint ventures Thalassa Energy S.A., HS
Tankers Inc., HS Navigation Inc., HS Shipping Ltd Inc. and HS South Shipping Inc.
Cash provided by financing activities for the nine month period ended September 30, 2010 was
$138.8 million and was the
result of: (a) $249.1 million of Navios Holdings’ loan proceeds (net of relating finance fees of
$1.8 million) in connection with the drawdown of (i) $9.3 million drawdown from the loan facility
with Marfin Egnatia Bank, (ii) $14.8 million drawdown from Emporiki Bank of Greece S.A. (“Emporiki
Bank of Greece”) to finance the purchase of the Navios Antares, (iii) $36.9 million drawdown from
Commerzbank for the construction of
two Capesize vessels, (iv) $21.6 million drawdown from the loan and revolver
facility with HSH Nordbank and Commerzbank A.G., (v) $21.0 million drawdown from
Emporiki Bank of Greece for financing the construction of
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one Capesize bulk carrier, (vi) $14.0
million drawdown from DNB NOR BANK ASA to partially finance the construction of one Capesize bulk
carrier, (vii) $0.3 million of loan proceeds relating to the logistics business , (viii) $133.0
million of assumed loans of Navios Acquisition as of the de-“SPAC”-ing; (b) $75.0 million from
proceeds, net of fees, from the warrant exercise program for Navios Acquisition; (c) $128.0 million
of Navios Acquisition loan proceeds (net of relating finance fees of $7.5 million for all new loans
signed for tanker vessels), and (d) $0.4 million proceeds from issuance of common shares. The
decrease of cash provided by financing activities was offset by (a) $20.1 million of dividends paid
in the nine months ended September 30, 2010, (b) $146.8 million of installments paid in connection
with the Navios Holdings’ outstanding indebtedness, of which $3.5 million is related to
installments of Navios Logistics, (c) $65.9 million of installments paid in connection with Navios
Acquisition’s outstanding indebtedness, of which $65.0 million is associated with facilities
assumed the VLCC Acquisition and $0.9 million with Navios Acquisition’s existing credit facilities,
(d) $77.0 million of cash paid by Navios Holdings relating to the Warrant Program, (e) $0.5 million
of contributions to noncontrolling shareholders relating to the logistics business and (f) a $3.4
million increase in restricted cash required under the amendment in one of its facility agreements.
Adjusted EBITDA: EBITDA represents net income plus interest and finance costs, taxes, plus
depreciation and amortization and income taxes, if any, unless otherwise stated. Adjusted EBITDA in
this document represents EBITDA before stock based compensation. Navios Holdings believes that
Adjusted EBITDA is a basis upon which liquidity can be assessed and presents useful information to
investors regarding Navios Holdings’ ability to service and/or incur indebtedness, pay capital
expenditures, meet working capital requirements and pay dividends. Navios Holdings also believes
that Adjusted EBITDA is used (i) by prospective and current lessors
as well as potential lenders to evaluate potential transactions; and
(ii) to evaluate and price potential acquisiton candidates.
Adjusted EBITDA has limitations as an analytical tool, and should not be considered in
isolation or as a substitute for the analysis of Navios Holdings’ results as reported under U.S.
GAAP. Some of these limitations are: (i) Adjusted EBITDA does not reflect changes in, or cash
requirements for, working capital needs; and (ii) although depreciation and amortization are
non-cash charges, the assets being depreciated and amortized may have to be replaced in the future.
Adjusted EBITDA does not reflect any cash requirements for such capital expenditures. Because of
these limitations, Adjusted EBITDA should not be considered as a principal indicator of Navios
Holdings’ performance. Furthermore, our calculation of Adjusted EBITDA may not be comparable to
that reported by other companies due to differences in methods of calculation.
Adjusted EBITDA Reconciliation to Cash from Operations
| Three Months Ended | ||||||||
| September 30, | September 30, | |||||||
| 2011 | 2010 | |||||||
| (Expressed in thousands of U.S. dollars) | (unaudited) | (unaudited) | ||||||
Net cash (used in)/provided by operating activities |
$ | (15,107 | ) | $ | 73,519 | |||
Net increase/(decrease) in operating assets |
76,843 | (4,996 | ) | |||||
Net increase in operating liabilities |
(18,736 | ) | (19,338 | ) | ||||
Net interest cost |
24,272 | 22,486 | ||||||
Deferred finance charges |
(1,100 | ) | (2,134 | ) | ||||
Provision for losses on accounts receivable |
(122 | ) | (1,242 | ) | ||||
| Unrealized losses on FFA derivatives, warrants and interest rate swaps and expenses related to bond extinguishment | (23 | ) | (4,549 | ) | ||||
Earnings in affiliates, net of dividends received |
(3,005 | ) | 2,090 | |||||
Payments for drydock and special survey |
3,896 | 1,827 | ||||||
Gain on sale of assets |
35 | — | ||||||
Transaction expenses |
— | (5,619 | ) | |||||
Noncontrolling interest |
340 | 842 | ||||||
Adjusted EBITDA |
$ | 67,293 | $ | 62,886 | ||||
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| Nine Months Ended | ||||||||
| September 30, | September 30, | |||||||
| 2011 | 2010 | |||||||
| (Expressed in thousands of U.S. dollars) | (unaudited) | (unaudited) | ||||||
Net cash provided by operating activities |
$ | 58,045 | $ | 128,448 | ||||
Net increase in operating assets |
117,626 | 13,619 | ||||||
Net increase in operating liabilities |
(50,878 | ) | (2,100 | ) | ||||
Net interest cost |
78,842 | 64,877 | ||||||
Deferred finance charges |
(4,326 | ) | (5,244 | ) | ||||
Provision for losses on accounts receivable |
(119 | ) | (6,680 | ) | ||||
| Unrealized losses on FFA derivatives, warrants and interest rate swaps and expenses related to bond extinguishments | (5,327 | ) | (8,146 | ) | ||||
Earnings in affiliates, net of dividends received |
(8,407 | ) | 149 | |||||
Payments for drydock and special survey |
8,886 | 8,556 | ||||||
Noncontrolling interest |
(911 | ) | 193 | |||||
Preferred stock dividends attributable to the noncontrolling interest |
12 | — | ||||||
Preferred stock dividends of subsidiary |
(27 | ) | — | |||||
(Loss)/gain on change in control |
(35,325 | ) | 17,742 | |||||
Gain on sale of assets |
38,822 | 26,134 | ||||||
Transaction expenses |
— | (5,619 | ) | |||||
Adjusted EBITDA |
$ | 196,913 | $ | 231,929 | ||||
Adjusted EBITDA for the three months ended September 30, 2011 and 2010 was $67.3 million and
$62.9 million, respectively. The $4.4 million increase in Adjusted EBITDA was primarily due to (a)
a $3.6 million increase in revenue from $170.2 million in the third quarter of 2010 to $173.8
million in the same period of 2011; (b) a decrease in net other expenses of $0.4 million; and (c) a
decrease in general and administrative expenses of $8.0 million (excluding share-based compensation
expenses). This overall variance of $12.0 million was mitigated by (a) a $3.8 million increase in
time charter, voyage and port terminal expenses from $69.4 million in the second quarter of 2010 to
$73.2 million in the same period of 2011; (b) an increase in direct vessel expenses (excluding the
amortization of deferred dry dock and special survey costs) of $1.6 million; (c) a decrease in net
loss attributable to the noncontrolling interest of $0.5 million; and (d) a decrease in equity in
net earnings from affiliated companies of $1.7 million to $8.0 million in the second quarter of
2011 from $9.7 million in the same period of 2010.
Adjusted EBITDA for the nine months ended September 30, 2011 and 2010 was $196.9 million and
$231.9 million, respectively. The $35.0 million decrease in Adjusted EBITDA was primarily due to
(a) an increase in direct vessel expenses (excluding the amortization of deferred drydock and
special survey costs) of $21.6 million from $65.1 million for the nine month period ended September
30, 2010 to $86.7 million in the same period of 2011; (b) a $4.1 million increase in losses from
derivatives; (c) $21.2 million of expenses relating to the bond extinguishment in January 2011; (d)
a $35.3 million loss due to the deconsolidation of Navios Acquisition; (e) a $17.7 million gain
recognized as a result of the initial consolidation of Navios Acquisition as of May 28, 2010; (f) a
decrease in income attributable to the noncontrolling interest of $1.1 million; and (g) a decrease
in equity in net earnings from affiliated companies of $6.7 million to $22.7 million for the nine
month period ended September 30, 2011 from $29.4 million in the same period of 2010. The overall
variance of $107.7 million was partially offset by: (a) an increase in revenue of $30.9 million
from $490.0 million during the nine month period ended September 30, 2010 to $520.9 million in the
same period of 2011; (b) a decrease in time charter voyage expenses of $21.0 million from $218.1
million during the nine month period ended September 30, 2010 to $197.1 million in the same period
of 2011; (c) a decrease in general and administrative expenses of $5.7 million (excluding share
based compensation expenses) from $41.7 million during the nine month period ended September 30,
2010 to $36.0 million in the same period of 2011; (d) a decrease in net other expenses of $2.4
million; and (e) an increase in gain on sale of assets of $12.7 million from $26.1 million in the
nine month period ended September 30, 2010 to $38.8 million in the same period of 2011.
Long-term Debt Obligations and Credit Arrangements
Navios Holdings loans
In December 2006, the Company issued $300.0 million of 2014 Notes. On January 28, 2011, Navios
Holdings completed the sale of $350.0 million of 2019 Notes. The net proceeds from the sale of the
2019 Notes were used to redeem any and all of the outstanding 2014 Notes and pay related
transaction fees and expenses and for general corporate purposes. The effect of this transaction
was the write off of $21.2 million from deferred financing fees, which is recorded in the statement
of income under “Loss on bond extinguishment”.
Senior Notes: On January 28, 2011, the Company and its wholly owned subsidiary, Navios
Maritime Finance II (US) Inc. (“NMF” and, together with the Company, the “2019 Co-Issuers”) issued
$350.0 million in senior notes due on February 15, 2019 at a fixed rate of 8.125%. The senior notes
are fully and unconditionally guaranteed, jointly and severally and on an unsecured senior basis,
by all of the Company’s subsidiaries, other than NMF, Navios Maritime Finance (US) Inc., Navios
Acquisition and its subsidiaries, Navios Logistics and its subsidiaries and Navios GP L.L.C. The subsidiary guarantees are “full and
unconditional”, as those terms are used in Regulation S-X Rule 3-10, except that the indenture provides
for an individual subsidiary’s guarantee to be automatically released in certain customary
circumstances, such as when a subsidiary is sold or all of the assets of the subsidiary are sold,
the capital stock is sold, when the subsidiary is designated as an “unrestricted subsidiary” for
purposes of the indenture, upon liquidation or dissolution of the subsidiary or upon legal or
covenant defeasance or satisfaction and discharge of the notes.
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The 2019
Co-Issuers have the option to redeem the notes in whole or in part, at any time (i) before February 15, 2015, at a redemption
price equal to 100% of the principal amount, plus a make-whole premium, plus accrued and unpaid
interest, if any, and (ii) on or after February 15, 2015, at a fixed price of 104.063% of the
principal amount, which price declines ratably until it reaches par in 2017, plus accrued and
unpaid interest, if any. At any time before February 15, 2014, the 2019 Co-Issuers may redeem up to
35% of the aggregate principal amount of the notes with the net proceeds of an equity offering at
108.125% of the principal amount of the notes, plus accrued and unpaid interest, if any, so long as
at least 65% of the originally issued aggregate principal amount of the notes remains outstanding
after such redemption. In addition, upon the occurrence of certain change of control events, the
holders of the notes will have the right to require the 2019 Co-Issuers to repurchase some or all
of the notes at 101% of their face amount, plus accrued and unpaid interest to the repurchase date.
Pursuant to a registration rights agreement, the 2019 Co-Issuers and the guarantors filed a
registration statement on June 21, 2011, that was declared effective on August 23, 2011. The
exchange offer of the privately placed notes with publicly registered notes with identical terms
was completed on September 30, 2011. The senior 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 2019 Notes
Co-Issuers’ properties and assets and creation or designation of restricted subsidiaries. The 2019
Co-Issuers were in compliance with the covenants as of September 30, 2011.
Ship Mortgage Notes: In November 2009, the Company and its wholly owned subsidiary, Navios
Maritime Finance (US) Inc. (together, the “Mortgage Notes Co-Issuers”) issued $400.0 million of
first priority ship mortgage notes due on November 1, 2017 at a fixed rate of 8.875%. The ship
mortgage notes are senior obligations of the Mortgage Notes Co-Issuers and are secured by first
priority ship mortgages on 15 vessels owned by certain subsidiary guarantors and other related
collateral securities. The ship mortgage notes are fully and unconditionally guaranteed, jointly
and severally by all of the Company’s direct and indirect subsidiaries that guarantee the 2019
Notes. The guarantees of the Company’s subsidiaries that own mortgage vessels are senior secured
guarantees and the guarantees of the Company’s subsidiaries that do not own mortgage vessels are
senior unsecured guarantees. At any time before November 1, 2012, the Mortgage Notes Mortgage Notes
Co-Issuers may redeem up to 35% of the aggregate principal amount of the ship mortgage notes with
the net proceeds of a public equity offering at 108.875% of the principal amount of the ship
mortgage notes, plus accrued and unpaid interest, if any, so long as at least 65% of the originally
issued aggregate principal amount of the ship mortgage notes remains outstanding after such
redemption. In addition, the Mortgage Notes Co-Issuers have the option to redeem the ship mortgage
notes in whole or in part, at any time (1) before November 1, 2013, at a redemption price equal to
100% of the principal amount plus a make whole price which is based on a formula calculated using a
discount rate of treasury bonds plus 50 bps, and (2) on or after November 1, 2013, at a fixed price
of 104.438%, which price declines ratably until it reaches par in 2015. Furthermore, upon
occurrence of certain change of control events, the holders of the ship mortgage notes may require
the Mortgage Notes Co-Issuers to repurchase some or all of the notes at 101% of their face amount.
Pursuant to the terms of a registration rights agreement, as a result of satisfying certain
conditions, the Mortgage Notes Co-Issuers and the guarantors are not obligated to file a
registration statement that would have enabled the holders of ship mortgage notes to exchange the
privately placed notes with publicly registered notes with identical terms. The ship mortgage 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 into certain transactions with affiliates, merging or consolidating or selling all
or substantially all of Mortgage Notes Co-Issuers’ properties and assets and creation or
designation of restricted subsidiaries. The Mortgage Notes Co-Issuers were in compliance with the
covenants as of September 30, 2011.
Loan Facilities:
The majority of the Company’s senior secured credit facilities include maintenance covenants,
including loan-to-value ratio covenants, based on either charter-adjusted valuations, or
charter-free valuations. As of September 30, 2011, the Company was in compliance with all of the
covenants under each of its credit facilities outlined below.
HSH/Commerzbank Facility: In February 2007, Navios Holdings entered into a secured loan
facility with HSH Nordbank and Commerzbank AG maturing on October 31, 2014. The facility was
composed of a $280.0 million term loan facility and a $120.0 million reducing revolving facility
and it has been amended and repaid as the vessels have been sold.
The loan facility requires compliance with financial covenants, including Security Value
Maintenance (“SVM”) ratio to total debt percentage and minimum liquidity. It is an event of default
under the revolving credit facility if such covenants are not complied with or if Angeliki Frangou,
the Company’s Chairman and Chief Executive Officer, beneficially owns less than 20% of the issued
stock.
On November 15, 2010, following the sale of the Navios Melodia and the Navios Fulvia to Navios
Partners, Navios Holdings fully repaid its outstanding loan balance with HSH Nordbank in respect of
the two vessels amounting to $71.9 million.
On May 19, 2011, in connection with the sale of the Navios Orbiter to Navios Partners, Navios
Holdings repaid $20.2 million of the outstanding loan associated with this vessel. As of September 30, 2011, the
outstanding amount under the revolving credit facility was $8.7 million and the outstanding amount
under the loan facility was $44.3 million.
Emporiki Facilities: In December 2007, Navios Holdings entered into a facility agreement with
Emporiki Bank of Greece of up to $154.0 million in order to partially finance the construction of
two Capesize bulk carriers. In July 2009, following an amendment of the above-mentioned agreement,
the amount of the facility has been changed to up to $130.0 million.
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On March 18, 2010, following the sale of the Navios Aurora II to Navios Partners, Navios
Holdings repaid $64.4 million and the outstanding amount of the facility has been reduced to $64.4
million. The interest rate of the amended facility is based on a margin of 175 bps. The amended
facility is repayable in 7 semi-annual installments of $2.5 million and 10 semi-annual installments
of $1.6 million with a final balloon payment of $11.3 million on the last payment date. The loan
facility requires compliance with certain financial covenants and the covenants contained in the
senior notes. As of September 30, 2011, the outstanding amount under this facility was $44.9
million.
In August 2009, Navios Holdings entered into another facility agreement with Emporiki Bank of
Greece of up to $75.0 million (divided into two tranches of $37.5 million) to partially finance the
acquisition costs of two Capesize vessels. Each tranche of the facility is repayable in 20
semi-annual installments of $1.4 million with a final payment of $10.0 million on the last payment
date. The repayment of each tranche starts six months after the delivery date of the respective
Capesize vessel. It bears interest at a rate of LIBOR plus 175 bps. On May 19, 2011, in connection
with the sale of the Navios Luz to Navios Partners, Navios Holdings repaid $37.5 million of the
outstanding loan associated with this vessel. As of September 30, 2011, the outstanding amount
under this facility was $36.1 million.
In September 2010, Navios Holdings entered into another facility agreement with Emporiki Bank
of Greece of up to $40.0 million in order to partially finance the construction of one Capesize
bulk carrier, the Navios Azimuth, which was delivered on February 14, 2011 to Navios Holdings. The
loan is repayable in 20 semi-annual equal installments of $1.5 million, with a final balloon
payment of $10.0 million on the last payment date. It bears interest at a rate of LIBOR plus 275
bps. The loan facility requires compliance with certain financial covenants and the covenants
contained in the 2019 Notes. As of September 30, 2011, the full amount was drawn and the
outstanding amount under this facility was $38.5 million.
In August 2011, Navios Holdings entered into an additional facility agreement with Emporiki
Bank of Greece for an amount up to $23.0 million in order to partially finance the construction of
a newbuilding bulk carrier. The facility is repayable in 20 semi-annual equal installments of $0.8
million after the drawdown date, with a final balloon payment of $8.0 million on the last payment
date. It bears interest at a rate of LIBOR plus 275 bps. The loan facility requires compliance with
certain covenants and the covenants contained in the senior notes. As of September 30, 2011, an
amount of $16.1 million was drawn and outstanding under this facility.
DNB Facilities: In June 2008, Navios Holdings entered into a facility agreement with DNB NOR
BANK ASA of up to $133.0 million in order to partially finance the construction of two Capesize
bulk carriers. In June 2009, following an amendment of the above-mentioned agreement, one of the
two tranches amounting to $66.5 million was cancelled following the cancellation of construction of
one Capesize bulk carrier. The interest rate of the amended facility is based on a margin of 225
bps as defined in the new agreement. The facility is repayable in nine semi-annual installments of
$2.9 million, with a final payment of $29.7 million on the last payment date. As of September 30,
2011, the outstanding amount under this facility was $55.8 million.
In August 2010, Navios Holdings entered into a facility agreement with DNB NOR BANK ASA of up
to $40.0 million in order to partially finance the construction of one Capesize bulk carrier, the
Navios Altamira, which was delivered on January 28, 2011 to Navios Holdings and amended the loan.
The loan bears interest at a rate of LIBOR plus 275 bps. The loan is repayable in 22 equal
quarterly installments of $0.6 million, with a final balloon payment of $23.9 million on the last
payment date. The loan facility requires compliance with certain financial covenants and the
covenants contained in the 2019 Notes. As of September 30, 2011, the outstanding amount under this
facility was $37.7 million.
Dekabank Facility: In February 2009 (amended and restated in May 2009), Navios Holdings
entered into a facility of up to $120.0 million with Dekabank Deutsche Girozentrale to finance the
acquisition of two Capesize vessels. The loan is repayable in 20 semi-annual installments and bears
an interest rate based on a margin of 190 bps. The loan facility requires compliance with certain
financial covenants and the covenants contained in the senior notes. Following the sale of the
Navios Pollux to Navios Partners in May 2010, an amount of $39.0 million was kept in a pledged
account pending the delivery of a substitute vessel as collateral to this facility. The amount of
$39.0 million kept in the pledged account was released to finance the delivery of the Capesize
vessel Navios Buena Ventura that was delivered to Navios Holdings on October 29, 2010. As of
September 30, 2011, $75.0 million was outstanding under this facility.
Marfin Facility: In March 2009, Navios Holdings entered into a loan facility with Marfin
Egnatia Bank of up to $110.0 million to be used to finance the pre-delivery installments for the
construction of newbuilding vessels and for general corporate purposes. It bears interest at a rate
based on a margin of 275 bps. As of September 7, 2010, the available amount of the loan facility
has been reduced to $30.0 million. On May 10, 2011, the amount of $18.9 million was drawn to
finance the acquisition of the Navios Astra. The loan is repayable beginning three months following
the drawdown in seven equal quarterly installments of $0.47 million, with a final balloon payment
of $15.6 million on the last payment date. It bears interest at a rate of LIBOR plus 275 bps. The
loan facility requires compliance with certain covenants. As of September 30, 2011, the outstanding
amount under this facility was $18.4 million.
Commerzbank Facility: In June 2009, Navios Holdings entered into a facility agreement of up to
$240.0 million (divided into four tranches of $60.0 million) with Commerzbank AG in order to
partially finance the acquisition of a Capesize vessel and the construction of three Capesize
vessels. Following the delivery of two Capesize vessels, the Navios
Melodia and the Navios Buena Ventura, on September 20, 2010 and October 29, 2010, respectively, Navios Holdings cancelled two of
the four tranches and in October 2010 fully repaid their outstanding loan balances of $53.6 million
and $54.5 million, respectively. The third and fourth tranches
of the facility are repayable
starting three months after the delivery of each Capesize vessel in 40 quarterly installments of
$0.9 million and $0.8 million, respectively, with a final payment of $24.7 million and $23.4
million, respectively, on the last payment date. It bears interest at a rate based on a margin of
225 bps. The loan facility requires compliance with certain covenants and with the covenants
contained in the 2019 Notes. As of September 30, 2011, the outstanding amount was $106.3 million.
Unsecured Bond: In July 2009, Navios Holdings issued a $20.0 million unsecured bond due in
July 2012 as a partial payment for the acquisition price of a Capesize vessel. Interest accrues on
the principal amount of the unsecured bond at the rate of 6% per annum. All accrued interest (which
will not be compounded) will be first due and payable in July 2012, which is the maturity date. The
unsecured bond may be prepaid by Navios Holdings at any time without prepayment penalty.
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Navios Logistics loans
Logistics Senior Notes
On April 12, 2011, Navios Logistics and its wholly-owned subsidiary Navios Logistics Finance
(US) Inc. (“Logistics Finance” and, together with Navios Logistics, the “Logistics Co-Issuers”) issued $200.0 million in
senior notes due on April 15, 2019 at a fixed rate of 9.25% (“the Logistics Senior Notes”). The
Logistics Senior Notes are fully and unconditionally guaranteed, jointly and severally, by all of
Navios Logistics’ direct and indirect subsidiaries except for Hidronave South American Logistics
S.A. and Logistics Finance. The subsidiary guarantees are “full
and unconditional”, as those terms are
used in Regulation S-X Rule 3-10, except that the indenture provides for an individual subsidiary’s
guarantee to be automatically released in certain customary circumstances, such as when a
subsidiary is sold or all of the assets of the subsidiary are sold,
the capital stock is sold, when
the subsidiary is designated as an “unrestricted subsidiary” for purposes of the indenture, upon
liquidation or dissolution of the subsidiary or upon legal or covenant defeasance or satisfaction
and discharge of the notes. The Logistics Co-Issuers have the option to redeem the notes in whole
or in part, at their option, at any time (i) before April 15, 2014, at a redemption price equal to
100% of the principal amount plus the applicable make-whole premium plus accrued and unpaid
interest, if any, to the redemption date and (ii) on or after April 15, 2014, at a fixed price of
106.938%, which price declines ratably until it reaches par in 2017. At any time before April 15,
2014, the Logistics Co-Issuers may redeem up to 35% of the aggregate principal amount of the
Logistics Senior Notes with the net proceeds of an equity offering at 109.25% of the principal
amount of the notes, plus accrued and unpaid interest, if any, to the redemption date so long as at
least 65% of the originally issued aggregate principal amount of the notes remains outstanding
after such redemption. In addition, upon the occurrence of certain change of control events, the
holders of the Logistics Senior Notes will have the right to require the Logistics Co-Issuers to
repurchase some or all of the notes at 101% of their face amount, plus accrued and unpaid interest
to the repurchase date.
Under a registration rights agreement, the Logistics Co-Issuers and the subsidiary guarantors
are obliged to file a registration statement prior to January 7, 2012, that enables the holders of
the Logistics Senior Notes to exchange the privately placed notes with publicly registered notes
with identical terms. The Logistics Senior Notes contain covenants which, among other things, limit
the incurrence of additional indebtedness, issuance of certain preferred stock, the payment of
dividends in excess of 6% per annum of the net proceeds received by or contributed to us in or from
any public offering, 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 Navios Logistics
properties and assets and creation or designation of restricted subsidiaries.
Marfin Facility
On
March 31, 2008, Nauticler S.A. (“Nauticler”) (a subsidiary of Navios Logistics) entered into a $70.0 million
loan facility for the purpose of providing Nauticler with investment capital to be used in
connection with one or more investment projects. In March 2009, Navios Logistics transferred its
loan facility of $70.0 million to Marfin Popular Bank Public Co. Ltd. The loan provided for an
additional one year extension and an increase in margin to 275 basis points. On March 23, 2010, the
loan was extended for one additional year, providing an increase in margin to 300 basis points. On
March 29, 2011, Marfin Popular Bank committed to amend its current loan agreement with Navios
Logistics’ subsidiary, Nauticler S.A., to provide for $40.0 million revolving credit facility.
Under this commitment, the existing margin of 300 basis points will apply and the obligations will
be secured by mortgages on four tanker vessels or alternative security over other assets acceptable
to the bank. The commitment requires that we maintain a loan-to-value ratio of 120% based on
charter-free valuations and compliance with the covenants contained in the indenture governing the
Logistics Senior Notes. The obligation of the bank under the commitment was subject to prepayment
of the $70.0 million facility and was subject to customary conditions, such as the receipt of
satisfactory appraisals, insurance, opinions and the negotiation, execution and delivery of
mutually satisfactory loan documentation. On April 12, 2011,
following the completion of the sale of the Logistics Senior Notes, Navios Logistics fully repaid the $70.0 million loan facility
with Marfin Bank using a portion of the proceeds from the Logistics Senior Notes. As of September
30, 2011, the loan documentation for the $40.0 million revolving credit facility had not been
completed and the facility had not been drawn.
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Non-Wholly Owned Subsidiaries Indebtedness
On July 25, 2011, Navios Logistics acquired the noncontrolling interests of its joint
ventures, Thalassa Energy S.A., HS Tankers Inc., HS Navigation Inc., HS Shipping Ltd. Inc. and HS
South Inc., in accordance with the terms of certain stock purchase agreements with HS Energy Ltd.,
an affiliate of Vitol S.A. Navios Logistics paid a total consideration of $8.5 million for such
noncontrolling interests ($8,6 million including transactions expenses), and simultaneously paid
$53.2 million in full and final settlement of all amounts of indebtedness of such joint ventures.
In connection with the acquisition of Horamar, Navios Logistics had assumed a $9.5 million
loan facility that was entered into by HS Shipping Ltd. Inc. in 2006, in order to finance the
building of a 8,974 dwt double hull tanker (Malva H). Since the vessel’s delivery, the interest
rate has been LIBOR plus 150 bps. The loan was repayable in installments of not less than 90% of
the amount of the last hire payment due to be paid to HS Shipping Ltd. Inc. The repayment date
should not extend beyond December 31, 2011. The loan could be pre-paid before such date, with two
days written notice. The loan also required compliance with certain covenants. This loan was repaid
in full on July 25, 2011 using a portion of the proceeds from the Logistics Senior Notes.
On September 4, 2009, HS Navigation Inc. had entered into a loan facility for an amount of up
to $18.7 million that bears interest at LIBOR plus 225 bps in order to finance the acquisition cost
of the Estefania H. The loan was repayable in installments of not less than the higher of (a) 90%
of the amount of the last hire payment due to HS Navigation Inc. prior to the repayment date, and
(b) $0.3 million, inclusive of any interest accrued in relation to the loan at that time. The loan
was repayable by May 15, 2016. The loan also required compliance with certain covenants. This loan
was repaid in full on July 25, 2011 using a portion of the proceeds from the Logistics Senior
Notes.
On December 15, 2009, HS Tankers Inc., a majority owned subsidiary of Navios Logistics, had
entered into a loan facility in order to finance the acquisition cost of the Makenita H for an
amount of $24.0 million which bore interest at LIBOR plus 225 bps. The loan was repayable in
installments of not less than the higher of (a) 90% of the amount of the last hire payment due to
HS Tankers Inc. prior to the repayment date, and (b) $0.3 million, inclusive of any interest
accrued in relation to the loan at that time. The repayment date should occur prior to March 24,
2016. The loan also required compliance with certain covenants. This loan was repaid in full on
July 25, 2011 using a portion of the proceeds from the Logistics Senior Notes.
On December 20, 2010, HS South Inc., a majority owned subsidiary of Navios Logistics, had
entered into a loan facility in order to finance the acquisition cost of the Sara H for an amount
of $14.4 million which bears interest at LIBOR plus 225 bps. The loan was repayable in installments
of not less than the higher of (a) 90% of the amount of the last hire payment due to be HS South
Inc. prior to the repayment date and (b) $0.3 million, inclusive of any interest accrued in
relation to the loan at that time. The repayment date should occur prior to May 24, 2016. The loan
also required compliance with certain covenants. This loan was repaid in full on July 25, 2011
using a portion of the proceeds from the Logistics Senior Notes.
Navios Logistics assumed a $2.3 million loan facility that was entered into, by its majority
owned subsidiary, Thalassa Energy S.A., in October 2007 in order to finance the purchase of two
self-propelled barges, the Formosa and the San Lorenzo. The loan bore interest at LIBOR plus 150
basis points. The loan was repayable in five equal installments of $0.5 million, which were made in
November 2008, June 2009, January 2010, August 2010, and March 2011. The loan was secured by a
first priority mortgage over the two self-propelled barges. As of September 30, 2011, the facility
was repaid in full.
Other Indebtedness
In connection with the acquisition of Hidronave S.A. in October 29, 2009, Navios Logistics
assumed an $0.8 million loan facility that was entered into by Hidronave S.A. in 2001 in order to
finance the construction of a pushboat (Nazira). As of September 30, 2011, the outstanding loan
balance was $0.7 million. The loan facility bears interest at a fixed rate of 600 bps. The loan is
to be repaid in equal monthly installments and the final repayment date cannot extend beyond August
10, 2021. The loan also requires compliance with certain covenants.
As of September 30, 2011, Navios Logistics and its subsidiaries were in compliance with all of
the covenants under each of its credit facilities.
The maturity table below reflects the principal payments for the next five years and
thereafter of all borrowings of Navios Holdings (including Navios Logistics) outstanding as of
September 30, 2011, based on the repayment schedule of the respective loan facilities (as described
above) and the outstanding amount due under the debt securities.
| Amounts in | ||||
| millions of | ||||
| Payment due by period | U.S. dollars | |||
September 30, 2012 |
$ | 70.3 | ||
September 30, 2013 |
65.4 | |||
September 30, 2014 |
49.3 | |||
September 30, 2015 |
66.2 | |||
September 30, 2016 |
55.6 | |||
September 30, 2017 and thereafter |
1,145.8 | |||
Total |
$ | 1,452.6 | ||
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Contractual Obligations:
| September 30, 2011 | ||||||||||||||||||||
| Payment due by period | ||||||||||||||||||||
| (Amounts in millions of U.S. dollars) | ||||||||||||||||||||
| Less than | More than | |||||||||||||||||||
| Total | 1 year | 1-3 years | 3-5 years | 5 years | ||||||||||||||||
Long-term Debt(1) (2) |
$ | 1,452.6 | $ | 70.3 | $ | 114.7 | $ | 121.8 | $ | 1,145.8 | ||||||||||
Operating Lease Obligations (Time Charters) |
1,006.1 | 105.8 | 212.8 | 206.4 | 481.1 | |||||||||||||||
Operating Lease Obligations Push Boats and Barges |
8.5 | 4.9 | 3.6 | — | — | |||||||||||||||
Capital Lease Obligations |
31.3 | 31.3 | — | — | — | |||||||||||||||
Vessel Deposits(3) |
43.9 | 43.9 | — | — | — | |||||||||||||||
Rent Obligations(4) |
$ | 15.4 | $ | 2.2 | $ | 4.1 | $ | 4.2 | $ | 4.9 | ||||||||||
| (1) | The amount identified does not include interest costs associated with the outstanding credit facilities, which for variable rate debt is based on LIBOR rates, plus the costs of complying with any applicable regulatory requirements and a margin ranging from 1.25% to 3.00% per annum and stated interest rate for fixed rate debt. | |
| (2) | Navios Holdings’ Senior and Ship Mortgage Notes have a fixed rate of 8.125% and 8.875% per annum, respectively. The Logistics Senior Notes have a fixed rate of 9.25% per annum and these amounts do not include interest costs. | |
| (3) | Future remaining contractual deposits for two Navios Holdings owned Kamsarmax vessel expected to be delivered in the first and second quarter of 2012. | |
| (4) | Navios Corporation leases approximately 11,923 square feet of space at 825 Third Avenue, New York, NY 10022, pursuant to a lease that expires on April 29, 2019. Navios ShipManagement Inc. and Navios Corporation lease approximately 2,034 square meters of space at 85 Akti Miaouli, Piraeus, Greece, pursuant to a lease that expires in 2017. On July 1, 2010, Kleimar N.V. signed a contract and currently leases approximately 632 square meters for its offices. Navios ShipManagement Inc. leases approximately 1,368 square meters of space at 85 Akti Miaouli, Piraeus, Greece, pursuant to a lease agreement that expires in 2019. On October 29, 2010, the existing lease agreement for its offices in Piraeus was amended and the Company leases, since November 2010, 253.75 less square meters. The amended lease expires in 2019. On October 29, 2010, Navios Tankers Management Inc. also entered into a lease agreement for 253.75 square meters which expires in 2019. Navios Logistics has several lease agreements with respect to its various operating offices. The table above incorporates the lease obligations of the offices indicated in this footnote. |
Working Capital Position
On September 30, 2011, Navios Holdings’ current assets totaled $410.4 million, while current
liabilities totaled $277.4 million, resulting in a positive working capital position of $133.0
million. Navios Holdings’ cash forecast indicates that it will generate sufficient cash during 2011
and 2012 to make the required principal and interest payments on its indebtedness, provide for the
normal working capital requirements of the business and remain in a positive cash position during
2011 and 2012.
While projections indicate that existing cash balances and operating cash flows will be
sufficient to service the existing indebtedness, Navios Holdings continues to review its cash flows
with a view toward increasing working capital.
Capital Expenditures
On May 30, 2011 and October 31, 2011, Navios Holdings agreed to acquire two 81,600 dwt bulk
carrier with expected delivery in March and April 2012. The
remaining capital obligations as of
September 30, 2011 amounted to approximately $43.9 million without including any drawings from
committed financing.
Dividend Policy
Currently, Navios Holdings intends to retain most of its available earnings generated by
operations for the development and growth of its business. In addition, the terms and provisions of
Navios Holdings’ current secured credit facilities and indentures limit its ability to pay
dividends in excess of certain amounts or if certain covenants are not met. However, subject to the
terms of its credit facilities and indentures, the Board of Directors may from time to time
consider the payment of dividends and on November 14, 2011, the Board of Directors declared a
quarterly cash dividend of $0.06 per share of common stock, with respect to the third quarter of
2011, payable on January 4, 2012 to stockholders of record as of December 19, 2011.
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The declaration
and payment of any dividend remains subject to the discretion of the Board, and will depend on,
among other things, Navios Holdings’ cash requirements as measured by market opportunities, debt
obligations, and restrictions contained in its credit agreements and indentures.
Concentration of Credit Risk
Accounts receivable
Concentrations of credit risk with respect to accounts receivables are limited due to Navios
Holdings’ large number of customers, who are internationally dispersed and have a variety of end
markets in which they sell. Due to these factors, management believes that no additional credit
risk beyond amounts provided for collection losses is inherent in Navios Holdings’ trade
receivables. For the nine month period ended September 30, 2011 and for the year ended December 31,
2010, no customer accounted for more than 10% of the Company’s revenue.
Cash deposits
Cash deposits in excess of amounts covered by government-provided insurance are exposed to
loss in the event of non-performance by financial institutions. The Company does maintain cash
deposits in excess of government-provided insurance limits. The Company also minimizes exposure to
credit risk by dealing with a diversified group of major financial institutions.
Off-Balance Sheet Arrangements
Charter hire payments to third parties for chartered-in vessels are treated as operating
leases for accounting purposes. Navios Holdings is also committed to making rental payments under
operating leases for its office premises. Future minimum rental payments under Navios Holdings’
non-cancelable operating leases are included in the contractual obligations above. As of September
30, 2011, Navios Holdings was contingently liable for letters of guarantee and letters of credit
amounting to $0.5 million issued by various banks in favor of various organizations and the total
amount was collateralized by cash deposits which are included as a component of restricted cash.
Navios Holdings issued no additional guarantees to third parties as of September 30, 2011 and 2010.
As of September 30, 2011, the Company’s subsidiaries in South America were contingently liable
for various claims and penalties to the local tax authorities
amounting to $5.0 million ($4.7 million as of December 31, 2010). The respective provision for such contingencies was included in
“Other long-term liabilities and deferred income”. According to the acquisition agreement, if the
Company becomes obligated to pay such amounts, the amounts involved will be reimbursed by the
previous shareholders, and, as such, the Company has recognized a receivable (included in “Other
long-term assets”) against such liability, since the management considers collection of the
receivable to be probable. The contingencies are expected to be resolved in the next four years. In
the opinion of management, the ultimate disposition of these matters will not adversely affect the
Company’s financial position, results of operations or liquidity.
On July 19, 2011, in consideration of Gunvor S.A. entering into sales of oil or petroleum
products with Petrosan, Navios Logistics has undertaken to pay to Gunvor S.A. on first demand any
obligations arising directly from the non-fulfillment of said contracts. The guarantee shall not
exceed $1.5 million and shall remain in full force and effect until December 31, 2011.
Related Party Transactions
Office rent: On January 2, 2006, Navios Corporation and Navios ShipManagement Inc., two wholly
owned subsidiaries of Navios Holdings, entered into two lease agreements with Goldland
Ktimatiki-Ikodomiki-Touristiki and Xenodohiaki Anonimos Eteria, both of which are Greek
corporations that are currently majority owned by Angeliki Frangou, Navios Holdings’ Chairman and
Chief Executive Officer. The lease agreements provide for the leasing of two facilities located in
Piraeus, Greece, of approximately 2,034.3 square meters to house the operations of most of the
Company’s subsidiaries. The total annual lease payments are €0.5 million (approximately $0.7
million) and the lease agreements expire in 2017. These payments are subject to annual adjustments
starting from the third year, which are based on the inflation rate prevailing in Greece as
reported by the Greek State at the end of each year.
On October 31, 2007, Navios ShipManagement Inc. entered into a lease agreement with Emerald
Ktimatiki-Ikodomiki-Touristiki and Xenodohiaki Anonimos Eteria, both of which are Greek
corporations that are currently majority owned by Angeliki Frangou, Navios Holdings’ Chairman and
Chief Executive Officer. The lease agreement initially provided for the leasing of one facility in
Piraeus, Greece, of approximately 1,376.5 square meters to house part of the operations of the
Company. On October 29, 2010, the existing lease agreement was amended and Navios ShipManagement
Inc. leases 253.75 less square meters. The total annual lease payments are €0.4 million
(approximately $0.5 million) and the lease agreement expires in 2019. These payments are subject to
annual adjustments starting from the third year, which are based on the inflation rate prevailing
in Greece as reported by the Greek State at the end of each year.
On October 29, 2010, Navios Tankers Management Inc. entered into a lease agreement with
Emerald Ktimatiki-Ikodomiki-Touristiki and Xenodohiaki Anonimos Eteria, both of which are Greek
corporations that are currently majority owned by Angeliki Frangou, Navios Holdings’ Chairman and
Chief Executive Officer. The lease agreement provides for the leasing of one facility in Piraeus,
Greece, of approximately 253.75 square meters to house part of the operations of the Company. The
total annual lease payments are €0.1 million (approximately $0.1 million) and the lease agreement
expires in 2019. These payments are subject to annual adjustments starting from the third year,
which are based on the inflation rate prevailing in Greece as
reported by the Greek State at the end of each year.
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Purchase of services: The Company utilizes Acropolis Chartering and Shipping Inc.
(“Acropolis”), a brokerage firm for freight and shipping charters, as a broker. Navios Holdings has
a 50% interest in Acropolis. Although Navios Holdings owns 50% of Acropolis’ stock, Navios Holdings
has agreed with the other shareholder that the earnings and amounts declared by way of dividends
will be allocated 35% to the Company with the balance to the other shareholder. Commissions paid to
Acropolis for each of the three month periods ended September 30, 2011 and 2010 were $0 and $0.04
million, respectively, and for the nine months periods ended September 30, 2011 and 2010, were
$0.02 million and $0.1 million, respectively. During the nine month period ended September 30, 2011
and 2010, the Company received dividends of $0.3 million and $0.6 million, respectively, and during
the three month period ended September 30, 2011 and 2010, the Company received dividends of $0.3
million and $0, respectively. Included in the trade accounts payable at September 30, 2011 and
December 31, 2010 was an amount of $0.1 million and $0.1 million, respectively, which was due to
Acropolis.
Management fees: Pursuant to a management agreement dated November 16, 2007, Navios Holdings
provides commercial and technical management services to Navios Partners’ vessels for a daily fixed
fee of $4,000 per owned Panamax vessel and $5,000 per owned Capesize vessel. This daily fee covers
all of the vessels’ operating expenses, including the cost of drydock and special surveys. The
daily initial term of the agreement is five years commencing from November 16, 2007. Total
management fees for the three month periods ended September 30, 2011 and 2010 amounted to $7.9
million and $5.2 million, respectively, and for the nine month periods ended September 30, 2011 and
2010, amounted to $19.6 million and $14.1 million, respectively. In October 2009, the fixed fee
period was extended for two years and the daily fees were amended to $4,500 per owned Ultra
Handymax vessel, $4,400 per owned Panamax vessel and $5,500 per owned Capesize vessel. In October
2011, the fixed fee period was further extended until December 31, 2017 and the daily fees were
amended to $4,650 per owned Ultra Handymax vessel, $4,550 per owned Panamax vessel and $5,650 per
owned Capesize vessel through December 31, 2013. From January 2014 to December 2017, Navios
Partners will reimburse Navios Holdings for all of the actual operating costs and expenses in
connection with the management of Navios Partners’ fleet.
Pursuant to a management agreement dated May 28, 2010, as amended on September 10, 2010, for
five years from the closing of Navios Acquisition’s initial vessel acquisition Navios Holdings
provides commercial and technical management services to Navios Acquisition’s vessels for a daily
fee of $6,000 per owned MR2 product tanker and chemical tanker vessel and $7,000 per owned LR1
product tanker vessel and $10,000 per owned VLCC vessel, for the first two years with the fixed
daily fees adjusted for the remainder of the term based on then-current market fees. This daily fee
covers all of the vessels’ operating expenses, other than certain extraordinary fees and costs.
During the remaining three years of the term of the Management Agreement, Navios Acquisition
expects that it will reimburse Navios Holdings for all of the actual operating costs and expenses
it incurs in connection with the management of its fleet. Actual operating costs and expenses will
be determined in a manner consistent with how the initial $6,000 and $7,000 fixed fees were
determined. Drydocking expenses will be fixed under this agreement for up to $0.3 million per
vessel and will be reimbursed at cost for VLCC vessels. Total management fees for the three month
periods ended September 30, 2011 and 2010 amounted to $9.8 million and $2.5 million, respectively,
and for the nine month period ended September 30, 2011 and 2010, amounted to $25.4 million and $2.5
million, respectively. The management fees have been eliminated upon consolidation of Navios
Acquisition through March 30, 2011.
General & administrative expenses: Pursuant to the administrative services agreement dated
November 16, 2007, Navios Holdings provides administrative services to Navios Partners which
include: bookkeeping, audit and accounting services, legal and insurance services, administrative
and clerical services, banking and financial services, advisory services, client and investor
relations and other services. Navios Holdings is reimbursed for reasonable costs and expenses
incurred in connection with the provision of these services. Total general and administrative fees
charged for the three month periods ended September 30, 2011 and 2010 amounted to $0.9 million and
$0.7 million, respectively, and for the nine month periods ended September 30, 2011 and 2010
amounted to $2.5 million and $2.0 million, respectively.
On May 28, 2010, Navios Acquisition entered into an administrative services agreement,
expiring May 28, 2015, with Navios Holdings, pursuant to which Navios Holdings provides office
space and 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. Navios Holdings is reimbursed for reasonable costs and expenses incurred in connection
with the provision of these services. Total general and administrative fees charged for the three
month periods ended September 30, 2011 and 2010 amounted to $0.4 million and $0.1 million,
respectively, and for the nine month periods ended September 30, 2011 and 2010 amounted to $1.1
million and $0.1 million, respectively.
On April 12, 2011, Navios Holdings entered into an administrative services agreement with
Navios Logistics for a term of five years, pursuant to which Navios Holdings will provide certain
administrative management services to Navios Logistics. Such services 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. Navios
Holdings is reimbursed for reasonable costs and expenses incurred in connection with the provision
of these services. Total general and administrative fees charged for the three month periods ended
September 30, 2011 and 2010 amounted to $0.1 million and $0, respectively, and for the nine month
periods ended September 30, 2011 and 2010 amounted to $0.3 million and $0, respectively.
Balance due from affiliate: Balance due from affiliate as of September 30, 2011 amounted to
$40.0 million (December 31, 2010: $2.6 million) which includes the current amounts due from Navios
Partners and Navios Acquisition, which are $9.5 million and
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$30.6 million, respectively. The
balances mainly consist of management fees, administrative fees and other expenses. Additionally,
the balance due from Navios Acquisition includes drydocking expenses.
Omnibus agreements: Navios Holdings entered into an omnibus agreement with Navios Partners
(the “Partners Omnibus Agreement”) in connection with the closing of Navios Partners’ IPO
governing, among other things, when Navios Holdings and Navios Partners may compete against each
other as well as rights of first offer on certain drybulk carriers. Pursuant to the Partners
Omnibus Agreement, Navios Partners generally agreed not to acquire or own Panamax or Capesize
drybulk carriers under time charters of three or more years without the consent of an independent
committee of Navios Partners. In addition, Navios Holdings agreed to offer to Navios Partners the
opportunity to purchase vessels from Navios Holdings when such vessels are fixed under time
charters of three or more years. The Partners Omnibus Agreement was amended in June 2009 to release
Navios Holdings for two years from restrictions on acquiring Capesize and Panamax vessels from
third parties.
Navios Acquisition entered into an omnibus agreement (the “Acquisition Omnibus Agreement”)
with Navios Holdings and 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 drybulk carriers subject to specific exceptions. Under the Acquisition Omnibus Agreement,
Navios Acquisition and its subsidiaries granted 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 it might own. These rights of first offer will not apply to a (a) sale, transfer
or other disposition of vessels between any affiliated subsidiaries, or pursuant to the terms of
any charter or other agreement with a counterparty, or (b) merger with or into, or sale of
substantially all of the assets to, an unaffiliated third party.
Sale of Vessels and Sale of Rights to Navios Partners: Upon the sale of vessels to Navios
Partners, Navios Holdings recognizes the gain immediately in earnings only to the extent of the
interest in Navios Partners owned by third parties and defers recognition of the gain to the extent
of its own ownership interest in Navios Partners (the “deferred gain”). Subsequently, the deferred
gain is amortized to income over the remaining useful life of the vessel. The recognition of the
deferred gain is accelerated in the event that (i) the vessel is subsequently sold or otherwise
disposed of by Navios Partners or (ii) the Company’s ownership interest in Navios Partners is
reduced. In connection with the public offerings of common units by Navios Partners, a pro rata
portion of the deferred gain is released to income upon dilution of the Company’s ownership
interest in Navios Partners. As of September 30, 2011 and December 31, 2010, the unamortized
deferred gain for all vessels and rights sold totaled $43.7 million and $38.6 million,
respectively, and for the three months ended September 30, 2011 and 2010, Navios Holdings
recognized $2.7 million and $2.0 million, respectively, of the deferred gain in “Equity in net
earnings of affiliated companies”. For the nine months ended September 30, 2011 and 2010, Navios
Holdings recognized $9.3 million and $13.0 million, respectively, of the deferred gain in “Equity
in net earnings of affiliated companies”.
Purchase of Shares in Navios Acquisition: During 2010, Navios Holdings purchased 6,337,551
shares of Navios Acquisition’s common stock for $63.2 million in open market purchases. Moreover,
on May 28, 2010, certain shareholders of Navios Acquisition redeemed 10,021,399 shares pursuant to
redemption rights granted in Navios Acquisition’s IPO upon de-“SPAC”-ing. As of May 28, 2010,
following these transactions, Navios Holdings owned 12,372,551 shares, or 57.3%, of the outstanding
common stock of Navios Acquisition. At that date, Navios Holdings acquired control over Navios
Acquisition, consequently concluded a business combination had occurred and consolidated the
results of Navios Acquisition from that date onwards. As a result of gaining control, Navios
Holdings recognized the effect of $17.7 million, which represents the fair value of the shares that
exceed the carrying value of the Company’s ownership of 12,372,551 shares of Navios Acquisition’s
common stock, in the statements of income under “Gain/(loss) on change in control”. On November 19,
2010, following Navios Acquisition public offering of 6,500,000 shares of common stock at $5.50 per
share, Navios Holdings’ interest in Navios Acquisition decreased to 53.7%.
Pursuant to the Exchange Agreement signed on March 30, 2011, Navios Holdings completed the
Navios Acquisition Share Exchange, whereby Navios Holdings exchanged 7,676,000 shares of Navios
Acquisition’s common stock it held for 1,000 non-voting Series C Convertible Preferred Stock of
Navios Acquisition.
As of March 30, 2011 and onwards, following the Navios Acquisition Share Exchange, Navios
Holdings owned 18,331,551 shares or 45% of the outstanding voting stock of Navios Acquisition. As a
result, from March 30, 2011, Navios Acquisition has been considered an affiliate entity of Navios
Holdings and not a controlled subsidiary of the Company, and the investment in Navios
Acquisition has been accounted for under the equity method due to the Company’s significant influence
over Navios Acquisition. From March 30, 2011, Navios Acquisition
is now accounted for under the
equity method based on Navios Holdings’ 53.7% economic interest since the preferred stock is
considered to be, in substance, common stock for accounting purposes.
On November 4, 2011, of the 1,378,122 contingently returnable shares of common stock of Navios
Acquisition that were issued on September 10, 2010, in
connection with the VLCC Acquisition and placed in escrow, 1,160,963 shares were released to the sellers and the remaining 217,159 shares
were returned to Navios Acquisition in settlement of representations
and warranties attributable to the prior sellers. Following the return of the 217,159
shares, Navios Holdings’ ownership of the outstanding voting stock of Navios Acquisition increased
to 45.24% and its economic interest in Navios Acquisition increased to 53.96%.
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Acquisition of Eleven Product Tanker and Two Chemical Tanker Vessels: On April 8, 2010,
pursuant to the terms and conditions of the Acquisition Agreement by and between Navios Acquisition
and Navios Holdings, Navios Acquisition agreed to acquire 13 vessels (11 product tankers and two
chemical tankers) plus options to purchase two additional product tankers, for an aggregate
purchase price of $457.7 million.
Navios Acquisition Warrant Exercise Program: On September 2, 2010, Navios Acquisition
announced the successful completion of its warrant program (the “Warrant Exercise Program”). Under
the Warrant Exercise Program, holders of publicly traded warrants (“Public Warrants”) had the
opportunity to exercise the Public Warrants on enhanced terms through August 27, 2010. Navios
Holdings exercised 13,635,000 private warrants for a total $77.0 million in cash. Navios Holdings
currently holds no warrants of Navios Acquisition.
The Navios Holdings Credit Facility: In connection with the VLCC Acquisition, Navios
Acquisition entered into a $40.0 million credit facility with Navios Holdings. The $40.0 million
facility has a margin of LIBOR plus 300 bps and a term of 18 months, maturing on April 1, 2012.
Pursuant to an amendment in October 2010, the facility will be available for multiple drawings up
to a limit of $40.0 million. Pursuant to an amendment dated November 8, 2011, the maturity of the
facility was extended to December 2014. Following the issuance of the notes in October 2010 and
during the first half of 2011, Navios Acquisition prepaid $33.6 million of this facility and,
during the third quarter of 2011, Navios Acquisition drew down on
$29.6 million from the facility.
As of September 30, 2011, the outstanding amount under this facility was $36.0 million and was
recorded under “Loan receivable from affiliate companies”.
Quantitative and Qualitative Disclosures about Market Risks
Navios Holdings is exposed to certain risks related to interest rate, foreign currency and
charter rate risks. To manage these risks, Navios Holdings uses interest rate swaps (for interest
rate risk) and FFAs (for charter rate risk).
Interest Rate Risk:
Debt Instruments — On September 30, 2011 and December 31, 2010, Navios Holdings had a total
of $1,452.6 million and $2,082.1 million, respectively, in long-term indebtedness. The debt is
dollar denominated and bears interest at a floating rate, except for the senior notes, the ship
mortgage notes and certain Navios Logistics’ loans discussed “Liquidity and Capital Resources” that
bears interest at a fixed rate.
The interest on the loan facilities is at a floating rate and, therefore, changes in interest
rates would affect on their interest rate and related interest expense. The interest rate on the
senior notes and the ship mortgage notes is fixed and, therefore, changes in interest rates affect
their value, which as of September 30, 2011 was $900.4 million, but do not affect the related
interest expense. Amounts drawn under the facilities and the ship mortgage notes are secured by the
assets of Navios Holdings and its subsidiaries. A change in the LIBOR rate of 100 basis points
would change interest expense for 2011 by $5.1 million.
For a detailed discussion of Navios Holdings’ debt instruments refer to section “Long-term
Debt Obligations and Credit Arrangements” included elsewhere in this document.
Foreign Currency Risk
Foreign Currency: In general, the shipping industry is a U.S. dollar dominated industry.
Revenue is set mainly in U.S. dollars, and approximately 70.7% of Navios Holdings’ expenses are
also incurred in U.S. dollars. Certain of our expenses are paid in foreign currencies and a one
percent change in the exchange rates of the various currencies at September 30, 2011 would increase
or decrease net income by approximately $1.0 million.
FFAs Derivative Risk:
Forward Freight Agreements (FFAs) — Navios Holdings enters into FFAs as economic hedges
relating to identifiable ship and/or cargo positions and as economic hedges of transactions that
Navios Holdings expects to carry out in the normal course of its shipping business. By using FFAs,
Navios Holdings manages the financial risk associated with fluctuating market conditions. The
effectiveness of a hedging relationship is assessed at its inception and then throughout the period
of its designation as a hedge. If an FFA qualifies for hedge accounting, any gain or loss on the
FFA, as accumulated in “Accumulated Other Comprehensive Income,” is first recognized when measuring
the profit or loss of related transaction. For FFAs that qualify for hedge accounting, the changes
in fair values of the effective portion representing unrealized gains or losses are recorded in
“Accumulated Other Comprehensive Income” in the stockholders’ equity while the unrealized gains or
losses of the FFAs not qualifying for hedge accounting together with the ineffective portion of
those qualifying for hedge accounting are recorded in the statement of operations under “Loss on
Forward Freight Agreements.” The gains included in “Accumulated Other Comprehensive Income” will be
reclassified to earnings under “Revenue” in the statement of operations in the same period or
periods during which the hedged forecasted transaction affects earnings. During the three and nine
month periods ended September 30, 2011 and 2010, and for the year ended December 31, 2010, no
amounts were included in “Accumulated Other Comprehensive Income” and reclassified to earnings.
At September 30, 2011 and December 31, 2010, none of the “mark to market” positions of the
open dry bulk FFA contract qualified for hedge accounting treatment. Dry bulk FFAs traded by the
Company that do not qualify for hedge accounting are shown at fair value in the balance sheet and
changes in fair value are recorded in the statement of operations.
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Navios Holdings is exposed to market risk in relation to its FFAs and could suffer substantial
losses from these activities in the event expectations are incorrect. Navios Holdings trades FFAs
with an objective of both economically hedging the risk on the fleet, specific vessels or freight
commitments and taking advantage of short term fluctuations in market prices. As there was no
position deemed to be open as of September 30, 2011, a ten percent change in underlying freight
market indices has had no effect on the net income.
Critical Accounting Policies
The Navios Holdings’ interim consolidated financial statements have been prepared in
accordance with U.S. GAAP. The preparation of these financial statements requires Navios Holdings
to make estimates in the application of its accounting policies based on the best assumptions,
judgments and opinions of management. Following is a discussion of the accounting policies that
involve a higher degree of judgment and the methods of their application that affect the reported
amount of assets and liabilities, revenues and expenses and related disclosure of contingent assets
and liabilities at the date of its financial statements. Actual results may differ from these
estimates under different assumptions or conditions.
Critical accounting policies are those that reflect significant judgments or uncertainties,
and potentially result in materially different results under different assumptions and conditions.
Navios Holdings has described below what it believes are its most critical accounting policies that
involve a high degree of judgment and the methods of their application. For a description of all of
Navios Holdings’ significant accounting policies, see Note 2 to the consolidated financial
statements included in Navios Holdings’ 2010 annual report on Form 20-F and in Navios Holdings’
Form 6-Ks dated August 9, 2011 and August 26, 2011, filed with the Securities and Exchange
Commission and Note 2 to the condensed consolidated financial statements appearing elsewhere in
this Form 6-K.
Use of Estimates: The preparation of consolidated financial statements in conformity with the
U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the
financial statements and the reported amounts of revenues and expenses during the reporting
periods. On an on-going basis, management evaluates the estimates and judgments, including those
related to uncompleted voyages, future drydock dates, the carrying value of investments in
affiliates, the selection of useful lives for tangible assets, expected future cash flows from
long-lived assets to support impairment tests, provisions necessary for accounts receivables,
provisions for legal disputes, pension benefits, and contingencies. Management bases its estimates
and judgments on historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results could differ from those estimates under different assumptions and/or conditions.
Accounting for Derivative Financial Instruments and Hedge Activities: The Company enters into
drybulk shipping FFAs as economic hedges relating to identifiable ship and/or cargo positions and
as economic hedges of transactions the Company expects to carry out in the normal course of its
shipping business. By utilizing certain derivative instruments, including drybulk shipping FFAs,
the Company manages the financial risk associated with fluctuating market conditions. In entering
into these contracts, the Company has assumed the risk that might arise from the possible inability
of counterparties to meet the terms of their contracts.
The Company also trades drybulk shipping FFAs which are cleared through NOS ASA, a Norwegian
clearing house and LCH, the London clearing house. NOS ASA and LCH call for both base and margin
collaterals, which are funded by Navios Holdings, and which in turn substantially eliminate
counterparty risk. Certain portions of these collateral funds may be restricted at any given time
as determined by NOS ASA and LCH. At the end of each calendar quarter, the fair value of drybulk
shipping FFAs traded over-the-counter are determined from an index published in London, United
Kingdom and the fair value of those FFAs traded with NOS ASA and LCH are determined from the NOS
and LCH valuations accordingly.
The Company records all of its derivative financial instruments and hedges as economic hedges
except for those qualifying for hedge accounting. Gains or losses of instruments qualifying for
hedge accounting as cash flow hedges are reflected under “Accumulated Other Comprehensive Income”
in stockholders’ equity, while those instruments that do not meet the criteria for hedge accounting
are reflected in the statements of income. For FFAs that qualify for hedge accounting, the changes
in fair values of the effective portion representing unrealized gain or losses are recorded under
“Accumulated Other Comprehensive Income” in stockholders’ equity while the unrealized gains or
losses of the FFAs not qualifying for hedge accounting, together with the ineffective portion of
those qualifying for hedge accounting are recorded in the statement of operations under
“Gain/(loss) on derivatives”. The gains included in “Accumulated Other Comprehensive Income” are
being reclassified to earnings under “Revenue” in the statements of income in the same period or
periods during which the hedged forecasted transaction affects earnings. During the nine month
period ended September 30, 2011 and 2010, no amounts were included in “Accumulated Other
Comprehensive Income” and reclassified to earnings.
The Company classifies cash flows related to derivative financial instruments within cash
provided by operating activities in the consolidated statements of cash flows.
Stock-based Compensation: On October 18, 2007 and December 16, 2008, the Compensation
Committee of the Board of Directors authorized the issuance of restricted common stock, restricted
stock units and stock options in accordance with the Company’s stock option plan for its employees,
officers and directors. The Company awarded shares of restricted
common stock and restricted stock
units to its employees, officers and directors and stock options to its officers and directors,
based on service conditions only, which vest over two or three years and three years, respectively.
On December 17, 2009 and December 16, 2010, the Company authorized the issuance of shares of
restricted common stock, restricted stock units and stock options in accordance with the Company’s
stock option plan for its employees, officers and directors. The awards on December 17, 2009 and
December 16, 2010 of restricted common stock and restricted stock units to its employees, officers
and directors vest over three years.
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The fair value of stock option grants is determined with reference to option pricing models,
principally adjusted Black-Scholes models. The fair value of restricted stock and restricted stock
units is determined by reference to the quoted stock price on the date of grant. Compensation
expense, net of estimated forfeitures, is recognized based on a graded expense model over the
vesting period.
Impairment of Long-lived Assets: Vessels, other fixed assets, other long lived assets and
certain identifiable intangibles held and used by Navios Holdings are reviewed periodically for
potential impairment whenever events or changes in circumstances indicate that the carrying amount
of a particular asset may not be fully recoverable. In accordance with accounting for long-lived
assets, management determines projected undiscounted cash flows for each asset and compares it to
its carrying amount. In the event that projected undiscounted cash flows for an asset is less than
its carrying amount, management reviews fair values and compares them to the asset’s carrying
amount. In the event that impairment occurs, an impairment charge is recognized by comparing the
asset’s carrying amount to its fair value. For the purposes of assessing impairment, long
lived-assets are grouped at the lowest levels for which there are separately identifiable cash
flows.
For the three and nine month period ended September 30, 2011 and 2010, the management of
Navios Holdings, after considering various indicators, including but not limited to the market
price of its long-lived assets, its contracted revenues and cash flows and the economic outlook,
concluded that no triggering event occurred on the long-lived assets of Navios Holdings.
Although management believes the underlying indicators supporting this assessment are
reasonable, if charter rate trends and the length of the current market downturn continue,
management may be required to perform impairment analysis in the future that could expose Navios
Holdings to material impairment charges in the future.
No impairment loss was recognized for any of the periods presented.
Vessel, Port Terminal, Tanker Vessels, Barges, Push boats and Other Fixed Assets, net:
Vessels, port terminal, tanker vessels, barges, push boats and other fixed assets acquired as parts
of business combinations are recorded at fair value on the date of acquisition. Vessels acquired as
asset acquisitions are stated at historical cost, which consists of the contract price and any
material expenses incurred upon acquisition (improvements and delivery expenses). Subsequent
expenditures for major improvements and upgrading are capitalized, provided they appreciably extend
the life, increase the earnings capacity or improve the efficiency or safety of the vessels. The
cost and related accumulated depreciation of assets retired or sold are removed from the accounts
at the time of sale or retirement and any gain or loss is included in the accompanying consolidated
statements of income.
Expenditures for routine maintenance and repairs are expensed as incurred.
Depreciation is computed using the straight line method over the useful life of the vessels,
after considering the estimated residual value.
Annual depreciation rates used, which approximate the useful life of the assets, are:
Vessels
|
25 years | |
Port facilities and transfer station
|
3 to 40 years | |
Tanker vessels, barges and push boats
|
15 to 44 years | |
Furniture, fixtures and equipment
|
3 to 10 years | |
Computer equipment and software
|
5 years | |
Leasehold improvements
|
shorter of lease term or 6 years |
Management estimates the residual values of the Company’s vessels based on a scrap value of
$285 per lightweight ton, as the Company believes this level is common in the shipping industry.
Management estimates the useful life of its vessels to be 25 years from the vessel’s original
construction. However, when regulations place limitations over the ability of a vessel to trade on
a worldwide basis, its useful life is re-estimated to end at the date such regulations become
effective. An increase in the useful life of a vessel or in its residual value would have the
effect of decreasing the annual depreciation charge and extending it into later periods. A decrease
in the useful life of a vessel or in its residual value would have the effect of increasing the
annual depreciation charge.
Deferred Drydock and Special Survey Costs: The Company’s vessels, barges and push boats are
subject to regularly scheduled drydocking and special surveys which are carried out every 30 and 60
months, respectively for oceangoing vessels and
every 84 months for pushboats and barges, to coincide with the renewal of the related certificates
issued by the Classification Societies, unless a further extension is obtained in rare cases and
under certain conditions. The costs of drydocking and special surveys is deferred and amortized
over the above periods or to the next drydocking or special survey date if such has been
determined. Unamortized drydocking or special survey costs of vessels, barges and push boats sold
are written off to income in the year the vessel, barge or push boat is sold.
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Goodwill and Other Intangibles:
(i) Goodwill: As required by the accounting guidance, goodwill acquired in a business
combination initiated after June 30, 2001 is not to be amortized. Goodwill is tested for impairment
at the reporting unit level at least annually and written down with a charge to operations if its
carrying amount exceeds the estimated implied fair value.
The Company will evaluate impairment of goodwill using a two-step process. First, the
aggregate fair value of the reporting unit is compared to its carrying amount, including goodwill.
The Company determines the fair value of the reporting unit based on a combination of discounted
cash flow analysis and an industry market multiple.
If the fair value of a reporting unit exceeds the carrying amount, no impairment exists. If
the carrying amount of the reporting unit exceeds the fair value, then the Company must perform the
second step to determine the implied fair value of the reporting unit’s goodwill and compare it
with its carrying amount. The implied fair value of goodwill is determined by allocating the fair
value of the reporting unit to all the assets and liabilities of that reporting unit, as if the
reporting unit had been acquired in a business combination and the fair value of the reporting unit
was the purchase price. If the carrying amount of the goodwill exceeds the implied fair value, then
goodwill impairment is recognized by writing the goodwill down to its implied fair value.
No impairment loss was recognized for any of the periods presented.
(ii) Intangibles Other than Goodwill: Navios Holdings’ intangible assets and liabilities
consist of favorable lease terms, unfavourable lease terms, customer relationships, trade name,
port terminal operating rights, backlog assets and liabilities. The fair value of the trade name
was determined based on the “relief from royalty” method which values the trade name based on the
estimated amount that a company would have to pay in an arms-length transaction to use that trade
name. The asset is being amortized under the straight line method over 32 years.
The fair value of customer relationships was determined based on the “excess earnings” method,
which relies upon the future cash flow generating ability of the asset. The asset is amortized
under the straight line method over 20 years.
Other intangibles that are being amortized, such as the amortizable portion of favorable
leases, port terminal operating rights, and backlog assets and liabilities, would be considered
impaired if their carrying value could not be recovered from the future undiscounted cash flows
associated with the asset. Vessel purchase options, which are included in favorable lease terms,
are not amortized and would be considered impaired if the carrying value of an option, when added
to the option price of the vessel, exceeded the fair value of the vessel.
When intangible assets or liabilities associated with the acquisition of a vessel are
identified, they are recorded at fair value. Fair value is determined by reference to market data
and the discounted amount of expected future cash flows. Where charter rates are higher than market
charter rates, an asset is recorded, being the difference between the acquired charter rate and the
market charter rate for an equivalent vessel. Where charter rates are less than market charter
rates, a liability is recorded, being the difference between the assumed charter rate and the
market charter rate for an equivalent vessel. The determination of the fair value of acquired
assets and assumed liabilities requires us to make significant assumptions and estimates of many
variables including market charter rates, expected future charter rates, the level of utilization
of our vessels and our weighted average cost of capital. The use of different assumptions could
result in a material change in the fair value of these items, which could have a material impact on
our financial position and results of operations.
The amortizable value of favorable and unfavorable leases is amortized over the remaining life
of the lease term and the amortization expense is included in the statement of operations in the
Depreciation and Amortization line item. The amortizable value of favorable leases would be
considered impaired if its fair market value could not be recovered from the future undiscounted
cash flows associated with the asset. Vessel purchase options that have not been exercised, which
are included in favorable lease terms, are not amortized and would be considered impaired if the
carrying value of an option, when added to the option price of the vessel, exceeded the fair value
of the vessel. As of September 30, 2011 there was no impairment of intangible assets.
Vessel purchase options, which are included in favorable leases, are not amortized and when
the purchase option is exercised the asset will be capitalized as part of the cost of the vessel
and will be depreciated over the remaining useful life of the vessel. Vessel purchase options which
are included in unfavorable lease terms are not amortized and when the purchase option is exercised
by the charterer and the underlying vessel is sold, it will be recorded as part of “gain/loss on
sale of the assets”. If the option is not exercised at the expiration date, it will be written-off
to the statements of income.
Investment in Available for Sale Securities: The Company classifies its existing marketable
equity securities as available-for-sale. These securities are carried at fair value, with
unrealized gains and losses excluded from earnings and reported directly in stockholders’ equity as
a component of other comprehensive income (loss) unless an unrealized loss is considered
“other-than-temporary,” in which case it is transferred to the statements of income. Management
evaluates securities for other than temporary impairment (“OTTI”) 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 cost, (2) the financial condition and near-term prospects of the investee,
and (3) the intent and ability of the Company to retain its investment in the investee for a period
of time sufficient to allow for any anticipated recovery in fair value.
As of September 30, 2011 and December 31, 2010, the Company’s unrealized holding loss/gain
related to these AFS Securities included in “Accumulated Other Comprehensive Income” were $1.9
million loss and $32.6 million gain, respectively. Based on the Company’s OTTI analysis, management
considers the decline in market valuation of these securities to be temporary.
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However, there is
the potential for future impairment charges relative to these equity securities if their fair
values do not recover and our OTTI analysis indicates such write downs are necessary.
Recent Accounting Pronouncements
Fair Value Disclosures
In January 2010, the Financial Accounting Standards Board (“FASB”) issued amended standards
requiring additional fair value disclosures. The amended standards require disclosures of transfers
in and out of Levels 1 and 2 of the fair value hierarchy, as well as requiring gross basis
disclosures for purchases, sales, issuances and settlements within the Level 3 reconciliation.
Additionally, the update clarifies the requirement to determine the level of disaggregation for
fair value measurement disclosures and to disclose valuation techniques and inputs used for both
recurring and nonrecurring fair value measurements in either Level 2 or Level 3. Navios Holdings
adopted the new guidance in the first quarter of fiscal year 2010, except for the disclosures
related to purchases, sales, issuance and settlements within Level 3, which is effective for Navios
Holdings beginning in the first quarter of fiscal year 2011. The adoption of the new standard did
not have a significant impact on Navios Holdings’ consolidated financial statements.
Supplementary Pro Forma Information for Business Combinations
In December 2010, the FASB issued an amendment of the Accounting Standards Codification
regarding Business Combinations. This amendment affects any public entity as defined by Topic 805
that enters into business combinations that are material on an individual or aggregate basis. The
amendments specify that if a public entity presents comparative financial statements, the entity
should disclose revenue and earnings of the combined entity as though the business combination(s)
that occurred during the current year had occurred as of the beginning of the comparable prior
annual reporting period only. The amendments in this update also expand the supplemental pro forma
disclosures under Topic 805 to include a description of the nature and amount of material,
nonrecurring pro forma adjustments directly attributable to the business combination included in
the reported pro forma revenue and earnings. The amendments are effective for business combinations
for which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after December 15, 2010. Navios Holdings adopted these new requirements in fiscal
2011 and the adoption did not have a significant impact on Navios Holdings’ consolidated financial
statements.
Fair Value Measurement
In May 2011, FASB issued amendments to achieve common fair value measurement and disclosure
requirements. The new guidance (i) prohibits the grouping of financial instruments for purposes of
determining their fair values when the unit of accounting is specified in another guidance, unless
the exception provided for portfolios applies and is used; (ii) prohibits the application of a
blockage factor in valuing financial instruments with quoted prices in active markets and (iii)
extends that prohibition to all fair value measurements. Premiums or discounts related to size as a
characteristic of the entity’s holding (that is, a blockage factor) instead of as a characteristic
of the asset or liability (for example, a control premium), are not permitted. A fair value
measurement that is not a Level 1 measurement may include premiums or discounts other than blockage
factors when market participants would incorporate the premium or discount into the measurement at
the level of the unit of accounting specified in another guidance. The new guidance aligns the fair
value measurement of instruments classified within an entity’s shareholders’ equity with the
guidance for liabilities. As a result, an entity should measure the fair value of its own equity
instruments from the perspective of a market participant that holds the instruments as assets. The
disclosure requirements have been enhanced. The most significant change will require entities, for
their recurring Level 3 fair value measurements, to disclose quantitative information about
unobservable inputs used and to include a description of the valuation processes used by the
entity, and a qualitative discussion about the sensitivity of the measurements. In addition,
entities must report the level in the fair value hierarchy of assets and liabilities not recorded
at fair value but where fair value is disclosed. The new guidance is effective for interim and
annual periods beginning on or after December 15, 2011, with early adoption prohibited. The new
guidance will require prospective application. The adoption of the new standard is not expected to
have a significant impact on Navios Holdings’ consolidated financial statements.
Presentation of Comprehensive Income
In June 2011, the FASB issued an update in the presentation of comprehensive income. According
to the update, an entity has the option to present the total of comprehensive income, the
components of net income, and the components of other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. The
statement of other comprehensive income should immediately follow the statement of net income and
include the components of other comprehensive income and a total for other comprehensive income,
along with a total for comprehensive income. Regardless of whether an entity chooses to present
comprehensive income in a single continuous statement or in two separate but consecutive
statements, the entity is required to present on the face of the financial statements
reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components
of net income and the components of other comprehensive income are presented. The amendments in
this update do not change the items that must be reported in other comprehensive income or when an
item of other comprehensive income must be reclassified to net income. For public entities, the
amendments are effective for fiscal years, and interim periods within those years, beginning after
December 15, 2011. Early adoption is permitted, because compliance with the amendments is already
permitted. The amendments do not require any transition disclosures. The adoption of the new
amendments is not expected to have a significant impact on Navios
Holdings’ consolidated financial statements.
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Table of Contents
Goodwill Impairment guidance
In September 2011, the FASB issued an update to simplify how public entities, both public and
nonpublic, test goodwill for impairment. The amendments in the update permit an entity to first
assess qualitative factors to determine whether it is more likely than not that the fair value of a
reporting unit is less than its carrying amount on a basis for determining whether it is necessary
to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not
threshold is defined as having a likelihood of more than 50 percent. The amendments are effective
for annual and interim goodwill impairment tests performed for fiscal years beginning after
December 15, 2011. Early adoption is permitted including for annual and interim impairment tests
performed as of a date before September 15, 2011, if an entity’s financial statements for the most
recent annual or interim period have not yet been issued. The amendment will be adopted by Navios
Holdings effective beginning in the first quarter of 2012. The adoption of the new amendments is
not expected to have a significant impact on Navios Holdings’ consolidated financial
statements.
34
NAVIOS MARITIME HOLDINGS INC.
Index
F-1
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of U.S. dollars — except share data)
| September 30, | ||||||||||||
| 2011 | December 31, | |||||||||||
| Note | (unaudited) | 2010 | ||||||||||
ASSETS |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
4 | $ | 194,937 | 207,410 | ||||||||
Restricted cash |
17,557 | 34,790 | ||||||||||
Accounts receivable, net |
108,353 | 70,388 | ||||||||||
Short-term derivative assets |
8 | 1,316 | 1,420 | |||||||||
Due from affiliate companies |
11 | 40,060 | 2,603 | |||||||||
Prepaid expenses and other current assets |
48,202 | 33,354 | ||||||||||
Total current assets |
410,425 | 349,965 | ||||||||||
Deposits for vessel acquisitions |
5 | 27,308 | 377,524 | |||||||||
Vessels, port terminal and other fixed assets, net |
5 | 1,783,180 | 2,249,677 | |||||||||
Long-term derivative assets |
8 | 45 | 149 | |||||||||
Restricted cash |
— | 18,787 | ||||||||||
Other long-term assets |
67,426 | 60,132 | ||||||||||
Loan receivable from affiliate companies |
11 | 36,000 | — | |||||||||
Investments in affiliates |
3,14 | 115,590 | 18,695 | |||||||||
Investments in available for sale securities |
74,506 | 99,078 | ||||||||||
Intangible assets other than goodwill |
6 | 249,257 | 327,703 | |||||||||
Goodwill |
160,336 | 175,057 | ||||||||||
Total noncurrent assets |
2,513,648 | 3,326,802 | ||||||||||
Total assets |
$ | 2,924,073 | $ | 3,676,767 | ||||||||
LIABILITIES AND EQUITY |
||||||||||||
Current liabilities |
||||||||||||
Accounts payable |
$ | 54,970 | $ | 49,496 | ||||||||
Dividends payable |
6,101 | 7,214 | ||||||||||
Accrued expenses |
86,781 | 62,417 | ||||||||||
Deferred income and cash received in advance |
11 | 27,922 | 17,682 | |||||||||
Short-term derivative liability |
8 | — | 245 | |||||||||
Current portion of capital lease obligations |
31,330 | 1,252 | ||||||||||
Current portion of long-term debt |
7 | 70,307 | 63,297 | |||||||||
Total current liabilities |
277,411 | 201,603 | ||||||||||
Senior and ship mortgage notes, net of discount |
7 | 945,395 | 1,093,787 | |||||||||
Long-term debt, net of current portion |
7 | 432,273 | 918,826 | |||||||||
Capital lease obligations, net of current portion |
— | 31,009 | ||||||||||
Unfavorable lease terms |
6 | 46,400 | 56,875 | |||||||||
Other long-term liabilities and deferred income |
11 | 40,827 | 36,020 | |||||||||
Deferred tax liability |
19,920 | 21,104 | ||||||||||
Total noncurrent liabilities |
1,484,815 | 2,157,621 | ||||||||||
Total liabilities |
1,762,226 | 2,359,224 | ||||||||||
Commitments and contingencies |
10 | — | — | |||||||||
Stockholders’ equity |
||||||||||||
Preferred stock — $0.0001 par value, authorized
1,000,000 shares, 8,479 issued and outstanding as
of September 30, 2011 and December 31, 2010,
respectively. |
— | — | ||||||||||
F-2
Table of Contents
| September 30, | ||||||||||||
| 2011 | December 31, | |||||||||||
| Note | (unaudited) | 2010 | ||||||||||
Common stock — $0.0001 par value, authorized
250,000,000 shares, issued and outstanding
101,686,343 and 101,563,766 as of September 30,
2011 and December 31, 2010, respectively. |
9 | 10 | 10 | |||||||||
Additional paid-in capital |
9 | 541,646 | 531,265 | |||||||||
Accumulated other comprehensive (loss)/income |
(1,909 | ) | 32,624 | |||||||||
Retained earnings |
505,109 | 495,684 | ||||||||||
Total Navios Holdings’ stockholders’ equity |
1,044,856 | 1,059,583 | ||||||||||
Noncontrolling interest |
116,991 | 257,960 | ||||||||||
Total stockholders’equity |
1,161,847 | 1,317,543 | ||||||||||
Total liabilities and stockholders’ equity |
$ | 2,924,073 | $ | 3,676,767 | ||||||||
See unaudited notes to condensed consolidated financial statements
F-3
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Expressed in thousands of U.S. dollars — except share and per share data)
| Three Month | Three Month | Nine Month | Nine Month | |||||||||||||||||
| Period Ended | Period Ended | Period Ended | Period Ended | |||||||||||||||||
| September 30, 2011 | September 30, 2010 | September 30, 2011 | September 30, 2010 | |||||||||||||||||
| Note | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||
Revenue |
12 | $ | 173,810 | $ | 170,177 | $ | 520,935 | $ | 489,991 | |||||||||||
Time charter, voyage and port
terminal expenses |
(73,162 | ) | (69,392 | ) | (197,124 | ) | (218,123 | ) | ||||||||||||
Direct vessel expenses |
(28,236 | ) | (26,212 | ) | (90,481 | ) | (67,365 | ) | ||||||||||||
General and administrative
expenses |
(12,436 | ) | (20,005 | ) | (39,121 | ) | (43,549 | ) | ||||||||||||
Depreciation and amortization |
5,6 | (24,622 | ) | (23,864 | ) | (82,340 | ) | (71,171 | ) | |||||||||||
Interest income/expense and
finance cost, net |
(24,272 | ) | (22,487 | ) | (78,842 | ) | (64,878 | ) | ||||||||||||
(Loss)/gain on derivatives |
8 | (3 | ) | (37 | ) | (85 | ) | 4,005 | ||||||||||||
Gain on sale of assets |
5 | 35 | — | 38,822 | 26,134 | |||||||||||||||
(Loss)/gain on change in control |
3,8,11 | — | — | (35,325 | ) | 17,742 | ||||||||||||||
Loss on bond extinguishment |
7 | — | — | (21,199 | ) | — | ||||||||||||||
Other expense, net |
(3,437 | ) | (3,799 | ) | (8,157 | ) | (10,603 | ) | ||||||||||||
Income before equity in net
earnings of affiliated
companies |
7,677 | 4,381 | 7,083 | 62,183 | ||||||||||||||||
Equity in net earnings of
affiliated companies |
11 | 7,956 | 9,661 | 22,702 | 29,417 | |||||||||||||||
Income before taxes |
$ | 15,633 | $ | 14,042 | $ | 29,785 | $ | 91,600 | ||||||||||||
Income tax benefit/(expense) |
317 | (244 | ) | 136 | 657 | |||||||||||||||
Net income |
15,950 | 13,798 | 29,921 | 92,257 | ||||||||||||||||
Less: Net loss/(income)
attributable to the
noncontrolling interest |
340 | 842 | (911 | ) | 193 | |||||||||||||||
Preferred stock dividends of
subsidiary |
— | — | (27 | ) | — | |||||||||||||||
Preferred stock dividends
attributable to the
noncontrolling interest |
— | — | 12 | — | ||||||||||||||||
Net income attributable to
Navios Holdings common
stockholders |
$ | 16,290 | $ | 14,640 | $ | 28,995 | $ | 92,450 | ||||||||||||
Income attributable to Navios
Holdings common stockholders,
basic |
13 | $ | 15,863 | $ | 14,038 | $ | 27,727 | $ | 90,833 | |||||||||||
Income attributable to Navios
Holdings common stockholders,
diluted |
13 | $ | 16,290 | $ | 14,962 | $ | 28,995 | $ | 93,407 | |||||||||||
Basic net earnings per share
attributable to Navios Holdings
common stockholders |
$ | 0.16 | $ | 0.14 | $ | 0.27 | $ | 0.90 | ||||||||||||
Weighted average number of
shares, basic |
13 | 100,963,351 | 100,559,330 | 100,922,197 | 100,485,842 | |||||||||||||||
Diluted net earnings per share
attributable to Navios Holdings
common stockholders |
$ | 0.15 | $ | 0.13 | $ | 0.26 | $ | 0.81 | ||||||||||||
Weighted average number of
shares, diluted |
13 | 110,260,735 | 116,807,405 | 110,299,623 | 115,145,274 | |||||||||||||||
See unaudited notes to condensed consolidated financial statements.
F-4
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of U.S. dollars)
| Nine Month | Nine Month | |||||||||||
| Period Ended | Period Ended | |||||||||||
| September 30, 2011 | September 30, 2010 | |||||||||||
| Note | (unaudited) | (unaudited) | ||||||||||
OPERATING ACTIVITIES: |
||||||||||||
Net income |
$ | 29,921 | $ | 92,257 | ||||||||
Adjustments to reconcile net income to net cash provided by operating
activities: |
||||||||||||
Non cash adjustments |
103,758 | 56,266 | ||||||||||
Increase in operating assets |
(117,626 | ) | (13,619 | ) | ||||||||
Increase in operating liabilities |
50,878 | 2,100 | ||||||||||
Payments for drydock and special survey costs |
(8,886 | ) | (8,556 | ) | ||||||||
Net cash provided by operating activities |
58,045 | 128,448 | ||||||||||
INVESTING ACTIVITIES: |
||||||||||||
Deconsolidation of Navios Acquisition |
(72,425 | ) | — | |||||||||
Acquisition of subsidiary, net of cash assumed |
— | (98,913 | ) | |||||||||
Decrease/(increase) in restricted cash for asset acquisitions |
778 | (46,871 | ) | |||||||||
Acquisition of General Partner units |
(2,052 | ) | (3,566 | ) | ||||||||
Acquisition of vessels |
5 | (56,059 | ) | (121,087 | ) | |||||||
Deposits for vessel acquisitions |
5 | (30,297 | ) | (349,987 | ) | |||||||
Receipts from finance lease |
— | 181 | ||||||||||
Proceeds from sale of assets |
5 | 120,000 | 322,082 | |||||||||
Purchase of property and equipment |
5 | (67,231 | ) | (9,794 | ) | |||||||
Net cash used in investing activities |
(107,286 | ) | (307,955 | ) | ||||||||
FINANCING ACTIVITIES: |
||||||||||||
Proceeds from long-term loan, net of deferred finance fees |
7 | 70,528 | 377,090 | |||||||||
Repayment of long-term debt |
7 | (239,004 | ) | (212,683 | ) | |||||||
Repayment of senior notes |
7 | (300,000 | ) | — | ||||||||
Proceeds from issuance of senior notes, net of deferred finance fees |
7 | 534,188 | — | |||||||||
Dividends paid |
(20,710 | ) | (20,143 | ) | ||||||||
Issuance of common stock |
415 | 415 | ||||||||||
Payments of obligations under capital leases |
5 | (931 | ) | — | ||||||||
Decrease/(increase) in restricted cash |
920 | (3,375 | ) | |||||||||
Proceeds from warrant exercise |
— | (2,060 | ) | |||||||||
Acquisition of noncontrolling interest |
7 | (8,638 | ) | — | ||||||||
Dividends to noncontrolling shareholders |
— | (470 | ) | |||||||||
Net cash provided by financing activities |
36,768 | 138,774 | ||||||||||
Decrease in cash and cash equivalents |
(12,473 | ) | (40,733 | ) | ||||||||
Cash and cash equivalents, beginning of period |
207,410 | 173,933 | ||||||||||
Cash and cash equivalents, end of period |
$ | 194,937 | $ | 133,200 | ||||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
||||||||||||
Cash paid for interest |
$ | 52,441 | $ | 54,144 | ||||||||
Cash paid for income taxes |
$ | 834 | $ | 478 | ||||||||
Non-cash investing and financing activities |
||||||||||||
| For issuance of preferred stock in connection with the acquisition of vessels see Note 5 and 9. | $ | — | $ | 33,715 | ||||||||
Equity in net earnings of affiliated companies |
$ | 22,702 | $ | 29,417 | ||||||||
Dividends declared but not paid |
$ | 6,101 | $ | 6,061 | ||||||||
See unaudited notes to condensed consolidated financial statements.
F-5
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Expressed in thousands of U.S. dollars — except share data)
| Accumulated | Total | |||||||||||||||||||||||||||||||||||||||
| Number of | Number of | Additional | Other | Navios Holdings’ | ||||||||||||||||||||||||||||||||||||
| Preferred | Preferred | Common | Common | Paid-in | Retained | Comprehensive | Stockholders’ | Noncontrolling | ||||||||||||||||||||||||||||||||
| Shares | Stock | Shares | Stock | Capital | Earnings | Income/(Loss) | Equity | Interest | Total Equity | |||||||||||||||||||||||||||||||
Balance
December 31, 2009 |
8,201 | — | 100,874,199 | 10 | 533,729 | 376,585 | 15,156 | 925,480 | 135,270 | 1,060,750 | ||||||||||||||||||||||||||||||
Net income |
— | — | — | — | — | 92,450 | — | 92,450 | (193 | ) | 92,257 | |||||||||||||||||||||||||||||
Other comprehensive
income: |
||||||||||||||||||||||||||||||||||||||||
— Unrealized
holding gains on
investments in
available-for-sale
securities |
— | — | — | — | — | — | 13,359 | 13,359 | — | 13,359 | ||||||||||||||||||||||||||||||
Total comprehensive
income |
105,809 | (193 | ) | 105,616 | ||||||||||||||||||||||||||||||||||||
Noncontrolling
interest of Navios
Acquisition |
— | — | — | — | — | — | — | — | 60,556 | 60,556 | ||||||||||||||||||||||||||||||
Consultancy fees of
Navios Acquisition |
— | — | — | — | — | — | — | — | 5,619 | 5,619 | ||||||||||||||||||||||||||||||
| Warrant exercise (net of $3,300 of program related expenses) | — | — | — | — | (24,115 | ) | — | — | (24,115 | ) | 22,055 | (2,060 | ) | |||||||||||||||||||||||||||
Vanship shares |
— | — | — | — | — | — | — | — | 10,744 | 10,744 | ||||||||||||||||||||||||||||||
Release of Escrow
of Navios Logistics |
— | — | — | — | — | — | — | — | 10,869 | 10,869 | ||||||||||||||||||||||||||||||
| Contribution to noncontrolling shareholders of Navios Logistics | — | — | — | — | — | — | — | — | (467 | ) | (467 | ) | ||||||||||||||||||||||||||||
Issuance of
preferred stock |
6,450 | — | — | — | 33,710 | — | — | 33,710 | — | 33,710 | ||||||||||||||||||||||||||||||
Stock-based
compensation
expenses |
— | — | 142,979 | — | 2,234 | — | — | 2,234 | — | 2,234 | ||||||||||||||||||||||||||||||
Dividends declared/
paid |
— | — | — | — | — | (19,731 | ) | — | (19,731 | ) | — | (19,731 | ) | |||||||||||||||||||||||||||
Balance September
30, 2010
(unaudited) |
14,651 | $ | — | 101,017,178 | $ | 10 | $ | 545,558 | $ | 449,304 | $ | 28,515 | $ | 1,023,387 | $ | 244,453 | $ | 1,267,840 | ||||||||||||||||||||||
Balance December
31, 2010 |
8,479 | — | 101,563,766 | 10 | 531,265 | 495,684 | 32,624 | 1,059,583 | 257,960 | 1,317,543 | ||||||||||||||||||||||||||||||
Net income |
— | — | — | — | — | 28,995 | — | 28,995 | 911 | 29,906 | ||||||||||||||||||||||||||||||
Other comprehensive
loss: |
||||||||||||||||||||||||||||||||||||||||
— Unrealized
holding losses on
investments in
available-for-sale
securities |
— | — | — | — | — | — | (34,533 | ) | (34,533 | ) | — | (34,533 | ) | |||||||||||||||||||||||||||
Total comprehensive
loss |
(5,538 | ) | 911 | (4,627 | ) | |||||||||||||||||||||||||||||||||||
Stock-based
compensation
expenses |
— | — | 122,577 | — | 3,456 | — | — | 3,456 | 3,456 | |||||||||||||||||||||||||||||||
| Dividends paid by subsidiary to noncontrolling shareholders on common stock and preferred stock | — | — | — | — | — | — | — | — | (1,148 | ) | (1,148 | ) | ||||||||||||||||||||||||||||
| Preferred stock dividends of subsidiary attributable to the noncontrolling interest | — | — | — | — | — | — | — | — | 15 | 15 | ||||||||||||||||||||||||||||||
Navios Acquisition
deconsolidation
(Note 3) |
— | — | — | — | — | — | — | — | (125,184 | ) | (125,184 | ) | ||||||||||||||||||||||||||||
| Navios Logistics acquisition of noncontrolling interest (including transaction expenses) (Note 7) | — | — | — | — | 6,925 | — | — | 6,925 | (15,563 | ) | (8,638 | ) | ||||||||||||||||||||||||||||
Dividends declared/
paid |
— | — | — | — | — | (19,570 | ) | — | (19,570 | ) | — | (19,570 | ) | |||||||||||||||||||||||||||
Balance September
30, 2011(unaudited) |
8,479 | $ | — | 101,686,343 | $ | 10 | $ | 541,646 | $ | 505,109 | $ | (1,909 | ) | $ | 1,044,856 | $ | 116,991 | $ | 1,161,847 | |||||||||||||||||||||
See unaudited notes to condensed consolidated financial statements.
F-6
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTE 1 — DESCRIPTION OF BUSINESS
On August 25, 2005, pursuant to a Stock Purchase Agreement dated February 28, 2005, as
amended, by and among International Shipping Enterprises, Inc. (“ISE”), Navios Maritime Holdings
Inc. (“Navios Holdings” or the “Company”) and all the shareholders of Navios Holdings, ISE acquired
Navios Holdings through the purchase of all of the outstanding shares of common stock of Navios
Holdings. As a result of this acquisition, Navios Holdings became a wholly owned subsidiary of ISE.
In addition, on August 25, 2005, simultaneously with the acquisition of Navios Holdings, ISE
effected a reincorporation from the State of Delaware to the Republic of the Marshall Islands
through a downstream merger with and into its newly acquired wholly owned subsidiary, whose name
was and continues to be Navios Maritime Holdings Inc.
Navios Holdings is a global, vertically integrated seaborne shipping and logistics company
focused on the transport and transshipment of drybulk commodities, including iron ore, coal and
grain.
Navios Logistics
On January 1, 2008, pursuant to a share purchase agreement, Navios Holdings contributed (i)
$112,200 in cash and (ii) the authorized capital stock of its wholly owned subsidiary Corporacion
Navios Sociedad Anonima (“CNSA”) in exchange for the issuance and delivery of 12,765 shares of
Navios South American Logistics Inc. (“Navios Logistics”), representing 63.8% (or 67.2% excluding
contingent consideration) of its outstanding stock. Navios Logistics acquired all ownership
interests in the Horamar Group (“Horamar”) in exchange for (i) $112,200 in cash, of which $5,000
was initially kept in escrow and payable upon the attainment of certain EBITDA targets during
specified periods through December 2008 (the “EBITDA Adjustment”) and (ii) the issuance of 7,235
shares of Navios Logistics representing 36.2% (or 32.8% excluding contingent consideration) of
Navios Logistics’ outstanding stock, of which 1,007 shares were initially kept in escrow pending
attainment of certain EBITDA targets. In November 2008, $2,500 in cash and 503 shares were released
from escrow when Horamar achieved the interim EBITDA target. As a result, Navios Holdings owned
65.5% (excluding 504 shares that remained in escrow as of such November 2008 date) of Navios
Logistics.
On March 20, 2009, August 19, 2009, and December 30, 2009, the agreement pursuant to which
Navios Logistics acquired CNSA and Horamar was amended to postpone until June 30, 2010 the date for
determining whether the EBITDA target was achieved. On June 17, 2010, $2,500 in cash and the 504
shares remaining in escrow were released from escrow upon the achievement of the EBITDA target
threshold. Following the release of the remaining shares that were held in escrow, Navios Holdings
currently owns 63.8% of Navios Logistics.
Navios Logistics is one of the largest companies in the Hidrovia region of South America,
serving the storage and marine transportation needs of its customers through two port storage and
transfer facilities, one for grain commodities and the other for refined petroleum products, and a
diverse fleet consisting of vessels, barges and pushboats.
Navios Acquisition
On July 1, 2008, the Company completed the initial public offering, or the IPO, of its former
subsidiary, Navios Maritime Acquisition Corporation (“Navios Acquisition”) (NYSE: NNA). At the time
of the IPO, Navios Acquisition was a blank check
company. In the offering, Navios Acquisition sold 25,300,000 units for an aggregate purchase price
of $253,000. Each unit consisted of one share of Navios Acquisition’s common stock and one warrant.
Navios Acquisition, at the time, was not a controlled subsidiary of the Company but was accounted
for under the equity method due to the Company’s significant influence over Navios Acquisition.
Navios Holdings purchased 6,337,551 shares of Navios Acquisition’s common stock for $63,230 in
open market purchases. Moreover, on May 28, 2010, certain shareholders of Navios Acquisition
redeemed 10,021,399 shares pursuant to redemption rights granted in the IPO upon de-“SPAC”-ing. As
of May 28, 2010, following these transactions, Navios Holdings owned 12,372,551 shares of the
outstanding common stock of Navios Acquisition. On that date, Navios Holdings acquired control over
Navios Acquisition, and consequently concluded a business combination had occurred and consolidated
the results of Navios Acquisition from that date until March 30, 2011.
F-7
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
On March 30, 2011, Navios Holdings exchanged 7,676,000 shares of Navios Acquisition common
stock it held for 1,000 shares of non-voting Series C preferred stock of Navios Acquisition
pursuant to an Exchange Agreement between Navios Acquisition and Navios Holdings (“Navios
Acquisition Share Exchange”). The fair value of the exchange was $30,474. Following the Navios
Acquisition Share Exchange, Navios Holdings had 45% of the voting power and 53.7% of the economic
interest in Navios Acquisition , since the preferred stock is considered, in substance common stock
for accounting purposes. See Notes 3 and 16 for a discussion of recent changes to Navios Holdings’
voting power and economic interest in Navios Acquisition. As a result, from March 30, 2011, Navios
Acquisition has been considered an affiliate entity and not as a controlled subsidiary of the
Company, and the investment in Navios Acquisition has been accounted for under the equity method
due to Navios Holdings’ significant influence over Navios Acquisition.
Navios Acquisition is an owner and operator of tanker vessels focusing in the transportation
of petroleum products (clean and dirty) and bulk liquid chemicals.
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 Holdings’ consolidated financial positions, statement of changes in equity, statements of income and cash flows for the periods presented. Adjustments consist of normal, recurring entries. 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 United States generally accepted accounting principles (“GAAP”) for complete financial statements. The December 31, 2010 balance sheet data was derived from audited financial statements, but do not include all disclosures required by U.S. GAAP. These interim financial statements should be read in conjunction with the Company’s consolidated financial statements and notes included on Form 6-K dated August 9, 2011 and in Navios Holdings’ 2010 management discussion and analysis in the annual report filed on Form 20-F with the Securities and Exchange Commission (“SEC”). | |
| (b) | Principles of consolidation: The accompanying interim consolidated financial statements include the accounts of Navios Holdings, a Marshall Islands corporation, and its majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidated statements. |
Subsidiaries: Subsidiaries are those entities in which the Company has an interest of more
than one half of the voting rights 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 that are 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.
Investments in Affiliates: 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 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. 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.
F-8
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
Entities included in the consolidation:
| Effective | ||||||||||||
| Nature / | Ownership | Country of | Statement of Operations | |||||||||
| Company Name | Vessel Name | Interest | Incorporation | 2011 | 2010 | |||||||
Navios Maritime Holdings Inc.
|
Holding Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Navios Corporation
|
Sub-Holding Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Navios International Inc.
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Navimax Corporation
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Navios Handybulk Inc.
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Hestia Shipping Ltd.
|
Operating Company | 100 | % | Malta | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Anemos Maritime Holdings Inc.
|
Sub-Holding Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Navios ShipManagement Inc.
|
Management Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
NAV Holdings Limited
|
Sub-Holding Company | 100 | % | Malta | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Kleimar N.V.
|
Operating Company/Vessel Owning Company |
100 | % | Belgium | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Kleimar Ltd.
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Bulkinvest S.A.
|
Operating Company | 100 | % | Luxembourg | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Primavera Shipping Corporation
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Ginger Services Co.
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Aquis Marine Corp.
|
Sub-Holding Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 3/23 — 9/30 | ||||||
Navios Tankers Management Inc.
|
Management Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 3/24 — 9/30 | ||||||
Astra Maritime Corporation
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Achilles Shipping Corporation
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Apollon Shipping Corporation
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Herakles Shipping Corporation
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Hios Shipping Corporation
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Ionian Shipping Corporation
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Kypros Shipping Corporation
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Meridian Shipping Enterprises Inc.
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Mercator Shipping Corporation
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Arc Shipping Corporation
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Horizon Shipping Enterprises Corporation
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Magellan Shipping Corporation
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Aegean Shipping Corporation
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Star Maritime Enterprises Corporation
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Corsair Shipping Ltd.
|
Vessel Owning Company | 100 | % | Marshall Is | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Rowboat Marine Inc.
|
Vessel Owning Company | 100 | % | Marshall Is | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Hyperion Enterprises Inc.
|
Vessel Owning Company | 100 | % | Marshall Is. | — | 1/1 — 1/7 | ||||||
Beaufiks Shipping Corporation
|
Vessel Owning Company | 100 | % | Marshall Is | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Nostos Shipmanagement Corp.
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Aegean Sea Maritime Holdings Inc.
|
Sub-Holding Company | 100 | % | Marshall Is. | — | 3/18 — 5/27 | ||||||
Amorgos Shipping Corporation
|
Vessel Owning Company | 100 | % | Marshall Is. | — | 3/18 — 5/27 | ||||||
Andros Shipping Corporation
|
Vessel Owning Company | 100 | % | Marshall Is. | — | 3/18 — 5/27 | ||||||
Antiparos Shipping Corporation (3)
|
Vessel Owning Company | 100 | % | Marshall Is. | — | 3/18 — 5/27 | ||||||
F-9
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Effective | ||||||||||||
| Nature / | Ownership | Country of | Statement of Operations | |||||||||
| Company Name | Vessel Name | Interest | Incorporation | 2011 | 2010 | |||||||
Ikaria Shipping Corporation (3)
|
Vessel Owning Company | 100 | % | Marshall Is. | — | 3/18 — 5/27 | ||||||
Kos Shipping Corporation (3)
|
Vessel Owning Company | 100 | % | Marshall Is. | — | 3/18 — 5/27 | ||||||
Mytilene Shipping Corporation (3)
|
Vessel Owning Company | 100 | % | Marshall Is. | — | 3/18 — 5/27 | ||||||
Skiathos Shipping Corporation (3)
|
Vessel Owning Company | 100 | % | Marshall Is. | — | 3/18 — 5/27 | ||||||
Syros Shipping Corporation (3)
|
Vessel Owning Company | 100 | % | Marshall Is. | — | 3/18 — 5/27 | ||||||
Skopelos Shipping Corporation
|
Vessel Owning Company | 100 | % | Cayman Is. | — | 3/18 — 5/27 | ||||||
Sifnos Shipping Corporation (3)
|
Vessel Owning Company | 100 | % | Marshall Is. | — | 3/18 — 5/27 | ||||||
Ios Shipping Corporation
|
Vessel Owning Company | 100 | % | Cayman Is. | — | 3/18 — 5/27 | ||||||
Thera Shipping Corporation (3)
|
Vessel Owning Company | 100 | % | Marshall Is. | — | 3/18 — 5/27 | ||||||
Rhodes Shipping Corporation
|
Vessel Owning Company | 100 | % | Marshall Is. | — | 3/18 — 5/27 | ||||||
Crete Shipping Corporation (3)
|
Vessel Owning Company | 100 | % | Marshall Is. | — | 3/18 — 5/27 | ||||||
Tinos Shipping Corporation (3)
|
Vessel Owning Company | 100 | % | Marshall Is. | — | 3/18 — 5/27 | ||||||
Portorosa Marine Corporation
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Shikhar Ventures S.A
|
Vessel Owning Company | 100 | % | Liberia | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Sizzling Ventures Inc.
|
Operating Company | 100 | % | Liberia | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Rheia Associates Co.
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Taharqa Spirit Corp.
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Rumer Holding Ltd.
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Chilali Corp.
|
Vessel Owning Company | 100 | % | Marshall Is. | — | 1/1 — 3/17 | ||||||
Pharos Navigation S.A.
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Pueblo Holdings Ltd.
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Surf Maritime Co.
|
Vessel Owning Company | 100 | % | Marshall Is. | — | 1/1 — 5/19 | ||||||
Quena Shipmanagement Inc.
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 5/18 | 1/1 — 9/30 | ||||||
Orbiter Shipping Corp.
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Aramis Navigation
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
White Narcissus Marine S.A.
|
Vessel Owning Company | 100 | % | Panama | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Navios G.P. L.L.C.
|
Operating Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Pandora Marine Inc.
|
Vessel Owning Company | 100 | % | Marshall Is. | — | 1/1 — 9/30 | ||||||
Floral Marine Ltd.
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Red Rose Shipping Corp.
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Customized Development S.A.
|
Vessel Owning Company | 100 | % | Liberia | — | 1/1 — 9/30 | ||||||
Highbird Management Inc.
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Ducale Marine Inc.
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Kohylia Shipmanagement S.A.
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 5/18 | 1/1 — 9/30 | ||||||
Vector Shipping Corporation
|
Vessel Owning Company | 100 | % | Marshall Is. | 1/1 — 9/30 | 2/16 — 9/30 | ||||||
Faith Marine Ltd.
|
Vessel Owning Company | 100 | % | Liberia | 1/1 — 9/30 | 5/19 — 9/30 | ||||||
Navios Maritime Finance (US) Inc.
|
Operating Company | 100 | % | Delaware | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Navios Maritime Finance II (US) Inc.
|
Operating Company | 100 | % | Delaware | 1/12 — 9/30 | — | ||||||
Solange Shipping Ltd. (2)
|
Vessel Owning Company | 100 | % | Marshall Is. | 5/16 — 9/30 | — | ||||||
Tulsi Shipmanagement Co. (2)
|
Vessel Owning Company | 100 | % | Marshall Is. | 4/20 — 9/30 | — | ||||||
Cinthara Shipping Ltd. (2)
|
Vessel Owning Company | 100 | % | Marshall Is. | 4/28 — 9/30 | — | ||||||
Rawlin Services Co. (2)
|
Vessel Owning Company | 100 | % | Marshall Is. | 5/3 — 9/30 | — | ||||||
Mauve International S.A. (2)
|
Vessel Owning Company | 100 | % | Marshall Is. | 5/16 — 9/30 | — | ||||||
F-10
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Effective | ||||||||||||
| Nature / | Ownership | Country of | Statement of Operations | |||||||||
| Company Name | Vessel Name | Interest | Incorporation | 2011 | 2010 | |||||||
| Navios Maritime Acquisition Corporation and Subsidiaries (1) : | ||||||||||||
Navios Maritime Acquisition Corporation
|
Sub-Holding Company | 53.7 | % | Marshall Is. | 1/1—3/30 | 5/28 — 9/30 | ||||||
Aegean Sea Maritime Holdings Inc.
|
Sub-Holding Company | 53.7 | % | Marshall Is. | 1/1—3/30 | 5/28 — 9/30 | ||||||
Amorgos Shipping Corporation
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 1/1—3/30 | 5/28 — 9/30 | ||||||
Andros Shipping Corporation
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 1/1—3/30 | 5/28 — 9/30 | ||||||
Antiparos Shipping Corporation
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 1/1—3/30 | 5/28 — 9/30 | ||||||
Ikaria Shipping Corporation
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 1/1—3/30 | 5/28 — 9/30 | ||||||
Kos Shipping Corporation
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 1/1—3/30 | 5/28 — 9/30 | ||||||
Mytilene Shipping Corporation
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 1/1—3/30 | 5/28 — 9/30 | ||||||
Skiathos Shipping Corporation
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 1/1—3/30 | 5/28 — 9/30 | ||||||
Syros Shipping Corporation
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 1/1—3/30 | 5/28 — 9/30 | ||||||
Skopelos Shipping Corporation
|
Vessel Owning Company | 53.7 | % | Cayman Is. | 1/1—3/30 | 5/28 — 9/30 | ||||||
Sifnos Shipping Corporation
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 1/1—3/30 | 5/28 — 9/30 | ||||||
Ios Shipping Corporation
|
Vessel Owning Company | 53.7 | % | Cayman Is. | 1/1—3/30 | 5/28 — 9/30 | ||||||
Serifos Shipping Corporation
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 1/1—3/30 | — | ||||||
Thera Shipping Corporation
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 1/1—3/30 | 5/28 — 9/30 | ||||||
Shinyo Dream Limited
|
Vessel Owning Company | 53.7 | % | Hong Kong | 1/1—3/30 | 9/10 — 9/30 | ||||||
Shinyo Kannika Limited
|
Vessel Owning Company | 53.7 | % | Hong Kong | 1/1—3/30 | 9/10 — 9/30 | ||||||
Shinyo Kieran Limited
|
Vessel Owning Company | 53.7 | % | British Virgin Is. | 1/1—3/30 | 9/10 — 9/30 | ||||||
Shinyo Loyalty Limited
|
Vessel Owning Company | 53.7 | % | Hong Kong | 1/1—3/30 | 9/10 — 9/30 | ||||||
Shinyo Navigator Limited
|
Vessel Owning Company | 53.7 | % | Hong Kong | 1/1—3/30 | 9/10 — 9/30 | ||||||
Shinyo Ocean Limited
|
Vessel Owning Company | 53.7 | % | Hong Kong | 1/1—3/30 | 9/10 — 9/30 | ||||||
Shinyo Saowalak Limited
|
Vessel Owning Company | 53.7 | % | British Virgin Is. | 1/1—3/30 | 9/10 — 9/30 | ||||||
Crete Shipping Corporation (3)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 1/1—3/30 | 5/28 — 9/30 | ||||||
Rhodes Shipping Corporation (3)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 1/1—3/30 | 5/28 — 9/30 | ||||||
Tinos Shipping Corporation (3)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 1/1—3/30 | 5/28 — 9/30 | ||||||
Folegandros Shipping Corporation (3)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 1/1—3/30 | — | ||||||
Navios Acquisition Finance (US) Inc.
|
Operating Company | 53.7 | % | Delaware | 1/1—3/30 | — | ||||||
| (1) | As of March 30, 2011, following the Navios Acquisition Share Exchange, Navios Holdings’ ownership of the voting stock of Navios Acquisition decreased to 45% and Navios Holdings no longer controls a majority of the voting power of Navios Acquisition. As a result, from March 30, 2011, Navios Acquisition has not been consolidated and has been accounted for under the equity method of accounting based on Navios Holdings’ 53.7% economic interest in Navios Acquisition since the preferred stock is considered in substance common stock for accounting purposes. On November 4, 2011, following the return of the 217,159 shares to Navios Acquisition, Navios Holdings’ ownership of the outstanding voting stock of Navios Acquisition increased to 45.24% and its economic interest in Navios Acquisition increased to 53.96% (see Notes 3 and 16). | |
| (2) | Each company has the option over a shipbuilding contract of a bulk carrier vessel (Note 5). | |
| (3) | Each company has the rights over a shipbuilding contract of a tanker vessel. |
F-11
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Effective | ||||||||||||
| Nature / | Ownership | Country of | Statement of Operations | |||||||||
| Company Name | Vessel Name | Interest | Incorporation | 2011 | 2010 | |||||||
| Navios South American Logistics and Subsidiaries: | ||||||||||||
Navios South American Logistics Inc.
|
Sub-Holding Company | 63.8 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Corporacion Navios S.A.
|
Operating Company | 63.8 | % | Uruguay | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Nauticler S.A.
|
Sub-Holding Company | 63.8 | % | Uruguay | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Compania Naviera Horamar S.A.
|
Vessel-Operating Management Company | 63.8 | % | Argentina | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Compania de Transporte Fluvial Int S.A.
|
Sub-Holding Company | 63.8 | % | Uruguay | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Ponte Rio S.A.
|
Operating Company | 63.8 | % | Uruguay | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Thalassa Energy S.A.
|
Barge-Owning Company | 39.9 | % | Argentina | 1/1 — 7/24 | 1/1 — 9/30 | ||||||
| 63.8 | % | 7/25 — 9/30 | — | |||||||||
HS Tankers Inc.
|
Tanker-Owning Company | 32.5 | % | Panama | 1/1 — 7/24 | 1/1 — 9/30 | ||||||
| 63.8 | % | 7/25 — 9/30 | — | |||||||||
HS Navigation Inc.
|
Tanker-Owning Company | 32.5 | % | Panama | 1/1 — 7/24 | 1/1 — 9/30 | ||||||
| 63.8 | % | 7/25 — 9/30 | — | |||||||||
HS Shipping Ltd Inc.
|
Tanker-Owning Company | 39.9 | % | Panama | 1/1 — 7/24 | 1/1 — 9/30 | ||||||
| 63.8 | % | 7/25 — 9/30 | — | |||||||||
HS South Inc.
|
Tanker-Owning Company | 39.9 | % | Panama | 1/1 — 7/24 | 1/1 — 9/30 | ||||||
| 63.8 | % | 7/25 — 9/30 | — | |||||||||
Petrovia Internacional S.A.
|
Land-Owning Company | 63.8 | % | Uruguay | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Mercopar S.A.
|
Operating/Barge-Owning Company | 63.8 | % | Paraguay | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Navegacion Guarani S.A.
|
Operating/Barge and Pushboat- Owning Company | 63.8 | % | Paraguay | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Hidrovia OSR S.A.
|
Tanker-Owning Company/Oil Spill Response & Salvage Services |
63.8 | % | Paraguay | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Mercofluvial S.A.
|
Operating/Barge and Pushboat-Owning Company | 63.8 | % | Paraguay | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
| Petrolera San Antonio S.A. (PETROSAN) | POA Facility-Owning Operating Company | 63.8 | % | Paraguay | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Stability Oceanways S.A.
|
Barge and Pushboat-Owning Operating Company | 63.8 | % | Panama | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
| Hidronave South American Logistics S.A. | Pushboat-Owning Company | 32.5 | % | Brazil | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Navarra Shipping Corporation
|
Tanker-Owning Company | 63.8 | % | Marshall Is. | 1/1 — 9/30 | 4/1 — 9/30 | ||||||
Pelayo Shipping Corporation
|
Tanker-Owning Company | 63.8 | % | Marshall Is. | 1/1 — 9/30 | 4/1 — 9/30 | ||||||
Varena Maritime Services S.A.
|
Barge and Pushboat-Owning Operating Company | 63.8 | % | Panama | 4/14 — 9/30 | — | ||||||
Navios Logistics Finance (US) Inc.
|
Operating Company | 100 | % | Delaware | 1/16 — 9/30 | — | ||||||
F-12
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
Affiliates included in the financial statements accounted for under the equity method:
| Nature / | Ownership | Country of | Statement of Operations | |||||||||
| Company Name | Vessel Name | Interest | Incorporation | 2011 | 2010 | |||||||
Navios Maritime Partners L.P. (*)
|
Sub-Holding Company | 17.22 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Navios Maritime Operating L.L.C. (*)
|
Operating Company | 17.22 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Libra Shipping Enterprises Corporation (*)
|
Vessel Owning Company | 17.22 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Alegria Shipping Corporation (*)
|
Vessel Owning Company | 17.22 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Felicity Shipping Corporation (*)
|
Vessel Owning Company | 17.22 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Gemini Shipping Corporation (*)
|
Vessel Owning Company | 17.22 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Galaxy Shipping Corporation (*)
|
Vessel Owning Company | 17.22 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Prosperity Shipping Corporation (*)
|
Vessel Owning Company | 17.22 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Fantastiks Shipping Corporation (*)
|
Vessel Owning Company | 17.22 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Aldebaran Shipping Corporation (*)
|
Vessel Owning Company | 17.22 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Aurora Shipping Enterprises Ltd. (*)
|
Vessel Owning Company | 17.22 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Sagittarius Shipping Corporation (*)
|
Vessel Owning Company | 17.22 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Palermo Shipping S.A. (*)
|
Vessel Owning Company | 17.22 | % | Marshall Is. | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Customized Development S.A. (*)
|
Vessel Owning Company | 17.22 | % | Liberia | 1/1 — 9/30 | — | ||||||
Pandora Marine Inc. (*)
|
Vessel Owning Company | 17.22 | % | Marshall Is. | 1/1 — 9/30 | — | ||||||
Hyperion Enterprises Inc. (*)
|
Vessel Owning Company | 17.22 | % | Marshall Is. | 1/1 — 9/30 | 1/8 — 9/30 | ||||||
Chilali Corp. (*)
|
Vessel Owning Company | 17.22 | % | Marshall Is. | 1/1 — 9/30 | 3/18 — 9/30 | ||||||
JTC Shipping Trading Ltd. (*)
|
Operating Company | 17.22 | % | Malta | 1/1 — 9/30 | 3/18 — 9/30 | ||||||
Surf Maritime Co. (*)
|
Vessel Owning Company | 17.22 | % | Marshall Is. | 1/1 — 9/30 | 5/20 — 9/30 | ||||||
Orbiter Shipping Corp.
|
Vessel Owning Company | 17.22 | % | Marshall Is. | 5/19 — 9/30 | — | ||||||
Kohylia Shipmanagement S.A.
|
Vessel Owning Company | 17.22 | % | Marshall Is. | 5/19 — 9/30 | — | ||||||
Acropolis Chartering & Shipping Inc.
|
Brokerage Company | 50 | % | Liberia | 1/1 — 9/30 | 1/1 — 9/30 | ||||||
Navios Maritime Acquisition
Corporation (***)
|
Sub-Holding Company | 53.7 | % | Marshall Is. | 3/31 — 9/30 | 1/1 — 5/27 | ||||||
Aegean Sea Maritime Holdings Inc. (***)
|
Sub-Holding Company | 53.7 | % | Marshall Is. | 3/31 — 9/30 | — | ||||||
Amorgos Shipping Corporation (***)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 3/31 — 9/30 | — | ||||||
Andros Shipping Corporation (***)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 3/31 — 9/30 | — | ||||||
Antiparos Shipping Corporation (**)(***)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 3/31 — 9/30 | — | ||||||
Ikaria Shipping Corporation (**)(***)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 3/31 — 9/30 | — | ||||||
Kos Shipping Corporation (**)(***)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 3/31 — 9/30 | — | ||||||
Mytilene Shipping Corporation (**)(***)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 3/31 — 9/30 | — | ||||||
Skiathos Shipping Corporation (**)(***)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 3/31 — 9/30 | — | ||||||
Syros Shipping Corporation (**)(***)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 3/31 — 9/30 | — | ||||||
Skopelos Shipping Corporation (***)
|
Vessel Owning Company | 53.7 | % | Cayman Is. | 3/31 — 9/30 | — | ||||||
Sifnos Shipping Corporation (**)(***)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 3/31 — 9/30 | — | ||||||
Ios Shipping Corporation (***)
|
Vessel Owning Company | 53.7 | % | Cayman Is. | 3/31 — 9/30 | — | ||||||
Thera Shipping Corporation (**)(***)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 3/31 — 9/30 | — | ||||||
Shinyo Dream Limited (***)
|
Vessel Owning Company | 53.7 | % | Hong Kong | 3/31 — 9/30 | — | ||||||
Shinyo Kannika Limited (***)
|
Vessel Owning Company | 53.7 | % | Hong Kong | 3/31 — 9/30 | — | ||||||
Shinyo Kieran Limited (***)
|
Vessel Owning Company | 53.7 | % | British Virgin Is. | 3/31 — 9/30 | — | ||||||
Shinyo Loyalty Limited (***)
|
Vessel Owning Company | 53.7 | % | Hong Kong | 3/31 — 9/30 | — | ||||||
Shinyo Navigator Limited (***)
|
Vessel Owning Company | 53.7 | % | Hong Kong | 3/31 — 9/30 | — | ||||||
Shinyo Ocean Limited (***)
|
Vessel Owning Company | 53.7 | % | Hong Kong | 3/31 — 9/30 | — | ||||||
Shinyo Saowalak Limited (***)
|
Vessel Owning Company | 53.7 | % | British Virgin Is. | 3/31 — 9/30 | — | ||||||
Crete Shipping Corporation (**)(***)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 3/31 — 9/30 | — | ||||||
Rhodes Shipping Corporation (**)(***)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 3/31 — 9/30 | — | ||||||
Tinos Shipping Corporation (**)(***)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 3/31 — 9/30 | — | ||||||
Folegandros Shipping Corporation (**)(***)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 3/31 — 9/30 | — | ||||||
Navios Acquisition Finance (US) Inc (***)
|
Operating Company | 53.7 | % | Delaware | 3/31 — 9/30 | — | ||||||
Serifos Shipping Corporation (**)(***)
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 3/31 — 9/30 | — | ||||||
Amindra Navigation Co.
|
Operating Company | 53.7 | % | Marshall Is. | 4/28 — 9/30 | — | ||||||
Kithira Shipping Corporation
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 6/7 — 9/30 | — | ||||||
Antikithira Shipping Corporation
|
Vessel Owning Company | 53.7 | % | Marshall Is. | 6/7 — 9/30 | — | ||||||
F-13
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| (*) | Percentage does not include the ownership of 3,131,415, 1,174,219, 788,370 and 507,916 common units received in relation to the sale of the Navios Hope, the Navios Aurora II, both the Navios Fulvia and the Navios Melodia, and both the Navios Luz and the Navios Orbiter, respectively, to Navios Maritime Partners L.P. (“Navios Partners”) since these are considered available-for-sale securities. | |
| (**) | Each company has the rights over a shipbuilding contract of a tanker vessel. | |
| (***) | As of March 30, 2011, following the Navios Acquisition Share Exchange, Navios Holdings’ ownership of the voting stock of Navios Acquisition decreased to 45% and Navios Holdings no longer controls a majority of the voting power of Navios Acquisition. As a result, from March 30, 2011, Navios Acquisition has not been consolidated and has been accounted for under the equity method of accounting based on Navios Holdings’ 53.7% economic interest in Navios Acquisition since the preferred stock is considered in substance common stock for accounting purposes. On November 4, 2011, following the return of the 217,159 shares to Navios Acquisition, Navios Holdings’ ownership of the outstanding voting stock of Navios Acquisition increased to 45.24% and its economic interest in Navios Acquisition increased to 53.96% (see Notes 3 and 16). | |
| (c) | Use of estimates: The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, management evaluates the estimates and judgments, including those related to uncompleted voyages, future drydock dates, the carrying value of investments in affiliates, the selection of useful lives for tangible assets, expected future cash flows from long-lived assets to support impairment tests, provisions necessary for accounts receivables, provisions for legal disputes, pension benefits, and contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions and/or conditions. | |
| (d) | Recent Accounting Pronouncements: |
Fair Value Disclosures
In January 2010, the Financial Accounting Standards Board (“FASB”) issued amended standards
requiring additional fair value disclosures. The amended standards require disclosures of transfers
in and out of Levels 1 and 2 of the fair value hierarchy, as well as requiring gross basis
disclosures for purchases, sales, issuances and settlements within the Level 3 reconciliation.
Additionally, the update clarifies the requirement to determine the level of disaggregation for
fair value measurement disclosures and to disclose valuation techniques and inputs used for both
recurring and nonrecurring fair value measurements in either Level 2 or Level 3. Navios Holdings
adopted the new guidance in the first quarter of fiscal 2010, except for the disclosures related to
purchases, sales, issuance and settlements, which was effective for Navios Holdings beginning in
the first quarter of fiscal year 2011. The amendment will be adopted by Navios Holdings effective
beginning in the first quarter of 2012. The adoption of the new standards did not have and is not
expected to have a significant impact on Navios Holdings’ consolidated financial statements.
Supplementary Pro Forma Information for Business Combinations
In December 2010, the FASB issued an amendment of the Accounting Standards Codification
regarding Business Combinations. This amendment affects any public entity as defined by Topic 805
that enters into business combinations that are material on an individual or aggregate basis. The
amendments specify that if a public entity presents comparative financial statements, the entity
should disclose revenue and earnings of the combined entity as though the business combination(s)
that occurred during the current year had occurred as of the beginning of the comparable prior
annual reporting period only. The amendments in this update also expand the supplemental pro forma
disclosures under Topic 805 to include a description of the nature and amount of material,
nonrecurring pro forma adjustments directly attributable to the business combination included in
the reported pro forma revenue and earnings. The amendments are effective for business combinations
for which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after December 15, 2010. Navios Holdings adopted these new requirements in fiscal
2011 and the adoption did not have a significant impact on Navios Holdings’ consolidated financial
statements.
F-14
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
Fair Value Measurement
In May 2011, the FASB issued amendments to achieve common fair value measurement and
disclosure requirements. The new guidance (i) prohibits the grouping of financial instruments for
purposes of determining their fair values when the unit of accounting is specified in another
guidance, unless the exception provided for portfolios applies and is used; (ii) prohibits
application of a blockage factor in valuing financial instruments with quoted prices in active
markets and (iii) extends that prohibition to all fair value measurements. Premiums or discounts
related to size as a characteristic of the entity’s holding (that is, a blockage factor) instead of
as a characteristic of the asset or liability (for example, a control premium), are not permitted.
A fair value measurement that is not a Level 1 measurement may include premiums or discounts other
than blockage factors when market participants would incorporate the premium or discount into the
measurement at the level of the unit of accounting specified in another guidance. The new guidance
aligns the fair value measurement of instruments classified within an entity’s shareholders’ equity
with the guidance for liabilities. As a result, an entity should measure the fair value of its own
equity instruments from the perspective of a market participant that holds the instruments as
assets. The disclosure requirements have been enhanced. The most significant change will require
entities, for their recurring Level 3 fair value measurements, to disclose quantitative information
about unobservable inputs used, a description of the valuation processes used by the entity, and a
qualitative discussion about the sensitivity of the measurements. In addition, entities must report
the level in the fair value hierarchy of assets and liabilities not recorded at fair value but
where fair value is disclosed. The new guidance is effective for interim and annual periods
beginning on or after December 15, 2011, with early adoption prohibited. The new guidance will
require prospective application. The adoption of the new standard is not expected to have a
significant impact on Navios Holdings’ consolidated financial statements.
Presentation of Comprehensive Income
In June 2011, the FASB issued an update in the presentation of comprehensive income. According
to the update an entity has the option to present the total of comprehensive income, the components
of net income, and the components of other comprehensive income either in a single continuous
statement of comprehensive income or in two separate but consecutive statements. The statement of
other comprehensive income should immediately follow the statement of net income and include the
components of other comprehensive income and a total for other comprehensive income, along with a
total for comprehensive income. Regardless of whether an entity chooses to present comprehensive
income in a single continuous statement or in two separate but consecutive statements, the entity
is required to present on the face of the financial statements reclassification adjustments for
items that are reclassified from other comprehensive income to net income in the statement(s) where
the components of net income and the components of other comprehensive income are presented. The
amendments in this Update do not change the items that must be reported in other comprehensive
income or when an item of other comprehensive income must be reclassified to net income. For public
entities, the amendments are effective for fiscal years, and interim periods within those years,
beginning after December 15, 2011. Early adoption is permitted, because compliance with the
amendments is already permitted. The amendments do not require any transition disclosures. The
adoption of the new amendments is not expected to have a significant impact on Navios Holdings’
consolidated financial statements.
Goodwill
Impairment Guidance
In September 2011, the FASB issued an update to simplify how public entities test goodwill for
impairment. The amendments in the update permit an entity to first assess qualitative factors to
determine whether it is more likely than not that the fair value of a reporting unit is less than
its carrying amount on a basis for determining whether it is necessary to perform the two-step
goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as
having a likelihood of more than 50 percent. The amendments are effective for annual and interim
goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early
adoption is permitted including for annual and interim impairment tests performed as of a date
before September 15, 2011, if an entity’s financial statements for the most recent annual or
interim period have not yet been issued. The amendment will be adopted by Navios Holdings effective
beginning in the first quarter of 2012. The adoption of the new amendments is not expected to have
a significant impact on Navios Holdings’ consolidated financial statements.
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTE 3: ACQUISITION/DECONSOLIDATION
Navios Acquisition acquired assets from Navios Holdings upon de-“SPAC”-ing
On May 25, 2010, after its special meeting of stockholders, Navios Acquisition announced the
approval of (a) the acquisition from Navios Holdings of 13 vessels (11 product tankers and two
chemical tankers plus options to purchase two additional product tankers) for an aggregate purchase
price of $457,659, of which $128,659 was to be paid from existing cash and the $329,000 balance
with existing and new debt financing pursuant to the terms and conditions of the Acquisition
Agreement by and between Navios Acquisition and Navios Holdings and (b) certain amendments to
Navios Acquisition’s amended and restated articles of incorporation.
Following the consummation of the transactions described in the Acquisition Agreement, Navios
Holdings was released from all debt and equity commitments for the above vessels and Navios
Acquisition reimbursed Navios Holdings for equity payments made prior to the stockholders’ meeting
under the purchase contracts for the vessels, plus all associated payments previously made by
Navios Holdings, which in the aggregate amounted to $76,485.
On May 28, 2010, certain shareholders of Navios Acquisition redeemed their shares pursuant to
redemption rights granted in the IPO upon de-“SPAC”-ing, and Navios Holdings’ ownership of Navios
Acquisition increased to 57.3%. At that point, Navios Holdings obtained control over Navios
Acquisition and, consequently, concluded that a business combination had occurred and consolidated
Navios Acquisition from that date onwards until March 30, 2011.
Goodwill of $13,143 arising from the transaction is not tax deductable and has been
allocated to the Company’s Tanker Vessel Operations.
In connection with the business combination, the Company (i) re-measured its previously-held
equity interests in Navios Acquisition to fair value and recognized the difference between fair
value and the carrying value as a gain, (ii) recognized 100% of the identifiable assets and
liabilities of Navios Acquisition at their fair values, (iii) recognized a 42.7% noncontrolling
interest at fair value, and (iv) recognized goodwill for the excess of the fair value of the
noncontrolling interest and its previously-held equity interests in Navios Acquisition over the
fair value of the identifiable assets and liabilities of Navios Acquisition. The fair value of the
Company’s previously-held investment in the common stock of Navios Acquisition, as well as the fair
value of the noncontrolling interest as of May 28, 2010, were both calculated based on the closing
price of Navios Acquisition’s common stock on that date. The difference between the Company’s legal
ownership percentage of 57.3% (based on common stock outstanding) and the percentage derived by
dividing the $95,232 allocated to the Company’s investment in Navios Acquisition by the total value
ascribed to Navios Acquisition’s net assets (including goodwill) of $155,788 is a result of
treating the Company’s investment in Navios Acquisition’s warrants as a previously-held equity
interest for purposes of calculating goodwill in accordance with ASC 805.
VLCC Acquisition
On September 10, 2010, Navios Acquisition consummated the acquisition of seven very large
crude carrier tankers (“VLCC”), referred to herein as the VLCC Acquisition, for $134,270 of cash
and the issuance of 1,894,918 shares totaling $10,745 (of which 1,378,122 shares were deposited
into a one year escrow to provide for indemnity and other claims). The 1,894,918 shares were valued
using the closing price of the stock on the date before the acquisition of $5.67. The VLCC
Acquisition was treated as a business combination and assets and liabilities were recorded at fair
value. On November 4, 2011, of the 1,378,122 contingently returnable shares of common stock of
Navios Acquisition that were issued on September 10, 2010 and deposited into escrow for the VLCC Acquisition,
1,160,963 shares were released to the sellers and the remaining
217,159 shares were returned to Navios
Acquisition in settlement of representations and warranties attributable to the prior sellers. See
also Note 16.
If the VLCC Acquisition had been consummated as of January 1, 2010, Navios Holdings’s
pro-forma revenues and net income for the three month period ended September 30, 2010 would have
been $504,814 and $91,770, respectively, and Navios Holdings’ pro-forma revenues and net income and
for the nine month period ended September 30, 2010 would have been $539,991 and $102,967,
respectively.
Transaction costs amounted to $8,019 and have been fully expensed. Transaction costs includes
$5,619, which was the fair value of the 3,000 preferred shares issued to a third party as
compensation for consulting services (see Note 9).
Goodwill of $1,579 arising from the transaction is not tax deductible and has been allocated
to the Company’s Tanker Vessel operations.
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
Deconsolidation of Navios Acquisition
On March 30, 2011, Navios Holdings completed the Navios Acquisition Share Exchange whereby
Navios Holdings exchanged 7,676,000 shares of Navios Acquisition’s common stock it held for
non-voting Series C preferred stock of Navios Acquisition pursuant to an Exchange Agreement entered
into on March 30, 2011 between Navios Acquisition and Navios Holdings. The fair value of the
exchange was $30,474, which was based on the share price of the publicly traded common shares of
Navios Acquisition on March 30, 2011. Following the Navios Acquisition Share Exchange, Navios
Holdings’ ownership of the outstanding voting stock of Navios Acquisition decreased to 45% and
Navios Holdings no longer controls a majority of the voting power of Navios Acquisition. From that
date onwards, Navios Acquisition has been considered as an affiliate entity of Navios Holdings and
not as a controlled subsidiary of the Company, and the investment in Navios Acquisition has been
accounted for under the equity method due to the Company’s significant influence over Navios
Acquisition. Navios Acquisition has been accounted for under the equity method of accounting based
on Navios Holdings’ economic interest in Navios Acquisition, which was 53.7% from March 30, 2011
until September 30, 2011 since the preferred stock is considered to be, in substance, common stock
for accounting purposes. See “VLCC Acquisition” above and Note 16 for a discussion of recent
changes to Navios Holdings’ voting power and economic interest in Navios Acquisition.
On March 30, 2011, based on the equity method, the Company recorded an investment in Navios
Acquisition of $103,250, which represents the fair value of the common stock and Series C preferred
stock (in-substance common stock) that were held by Navios Holdings on such date. On March 30, 2011,
the Company calculated a loss on change in control of $35,325, which was calculated as the fair
value of the Company’s equity method investment in Navios Acquisition of $103,250 less the
Company’s 53.7% interest in Navios Acquisition’s net assets on March 30, 2011.
NOTE 4: CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
| September 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
Cash on hand and at banks |
$ | 78,800 | $ | 114,615 | ||||
Short-term deposits and highly liquid funds |
116,137 | 92,795 | ||||||
Total cash and cash equivalents |
$ | 194,937 | $ | 207,410 | ||||
Short-term deposits and highly liquid funds are comprised of deposits with banks with original
maturities of less than 90 days.
NOTE 5: VESSELS, PORT TERMINAL AND OTHER FIXED ASSETS
| Accumulated | Net Book | |||||||||||
| Vessels | Cost | Depreciation | Value | |||||||||
Balance December 31, 2010 |
$ | 1,548,383 | $ | (127,082 | ) | $ | 1,421,301 | |||||
Additions |
133,874 | (47,574 | ) | 86,300 | ||||||||
Disposals |
(81,454 | ) | 4,707 | (76,747 | ) | |||||||
Balance September 30, 2011 |
$ | 1,600,803 | $ | (169,949 | ) | $ | 1,430,854 | |||||
| Accumulated | Net Book | |||||||||||
| Port Terminals (Navios Logistics) | Cost | Depreciation | Value | |||||||||
Balance December 31, 2010 |
$ | 65,258 | $ | (9,031 | ) | $ | 56,227 | |||||
Additions |
5,696 | (1,870 | ) | 3,826 | ||||||||
Disposals |
(152 | ) | 103 | (49 | ) | |||||||
Balance September 30, 2011 |
$ | 70,802 | $ | (10,798 | ) | $ | 60,004 | |||||
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Accumulated | Net Book | |||||||||||
| Tanker vessels, barges and pushboats (Navios Logistics) | Cost | Depreciation | Value | |||||||||
Balance December 31, 2010 |
$ | 278,837 | $ | (42,637 | ) | $ | 236,200 | |||||
Additions |
59,680 | (11,182 | ) | 48,498 | ||||||||
Balance September 30, 2011 |
$ | 338,517 | $ | (53,819 | ) | $ | 284,698 | |||||
| Accumulated | Net Book | |||||||||||
| Tanker vessels (Navios Acquisition) | Cost | Depreciation | Value | |||||||||
Balance December 31, 2010 |
$ | 538,751 | $ | (9,092 | ) | $ | 529,659 | |||||
Additions |
31,774 | (7,198 | ) | 24,576 | ||||||||
Navios Acquisition deconsolidation |
(570,525 | ) | 16,290 | (554,235 | ) | |||||||
Balance September 30, 2011 |
$ | — | $ | — | $ | — | ||||||
| Accumulated | Net Book | |||||||||||
| Other fixed assets | Cost | Depreciation | Value | |||||||||
Balance December 31, 2010 |
$ | 8,767 | $ | (2,477 | ) | $ | 6,290 | |||||
Additions |
1,926 | (592 | ) | 1,334 | ||||||||
Balance September 30, 2011 |
$ | 10,693 | $ | (3,069 | ) | $ | 7,624 | |||||
| Accumulated | Net Book | |||||||||||
| Total | Cost | Depreciation | Value | |||||||||
Balance December 31, 2010 |
$ | 2,439,996 | $ | (190,319 | ) | $ | 2,249,677 | |||||
Additions |
232,950 | (68,416 | ) | 164,534 | ||||||||
Disposals |
(81,606 | ) | 4,810 | (76,796 | ) | |||||||
Navios Acquisition deconsolidation |
(570,525 | ) | 16,290 | (554,235 | ) | |||||||
Balance September 30, 2011 |
$ | 2,020,815 | $ | (237,635 | ) | $ | 1,783,180 | |||||
Sale of Vessels
On May 19, 2011, Navios Holdings sold the Navios Luz, a 2010 built Capesize vessel of 179,144
deadweight ton (“dwt”), and the Navios Orbiter, a 2004 built Panamax vessel, to Navios Partners for
a total consideration of $130,000, of which $120,000 was paid in cash and $10,000 was paid through
the receipt of 507,916 newly issued common units of Navios Partners (see Note 11). The book value
of both vessels was $76,746, resulting in a gain from the sale of $53,214, of which $38,787 had
been recognized at the time of sale in the statements of income under “Gain on sale of assets” and
the remaining $14,427 representing the profits derived from Navios Holdings’ 27.1% interest in
Navios Partners has been deferred under “Other long term liabilities and deferred income” and is
being amortized over the remaining useful lives of the assets or until the assets are sold.
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
Vessel Acquisitions
On January 28, 2011, Navios Holdings took delivery of the Navios Altamira, a new, 179,165 dwt
2010-built Capesize vessel, from a South Korean shipyard for an acquisition price of $55,427, of
which $15,427 was paid in cash and the remaining amount of $40,000 was funded through a loan (see
Note 7).
On February 14, 2011, Navios Holdings took delivery of the Navios Azimuth, a new, 179,169 dwt
2011-built Capesize vessel from a South Korean shipyard for a purchase price of approximately
$55,672, of which $14,021 was paid in cash, $40,000 was financed through a loan and the remaining
amount was funded through the issuance of 300 shares of preferred stock issued on January 27, 2010,
which have a nominal value of $3,000 and a fair value of $1,651 (see Note 9).
On February 21, 2011, Navios exercised its purchase option to acquire the Navios Astra, a
53,468 dwt Ultra-Handymax vessel and former long-term chartered-in vessel in operation, was
delivered to Navios Holdings’ owned fleet. The Navios Astra’s acquisition price was $22,775, of
which $1,513 was the unamortized portion of the favorable lease term. On May 10, 2011, the amount
of $18,850 was drawn to finance the acquisition of the Navios Astra (see Note 7).
Deposits for vessels acquisitions
On May 30, 2011, Navios Holdings agreed to acquire a 81,600 dwt bulk carrier vessel, the
Navios Avior, scheduled to be delivered in April 2012 by a South Korean shipyard. The purchase
price for the new vessel is approximately $35,500, which was partially funded with a credit
facility for an amount of up to $23,000 provided by Emporiki Bank of Greece (see Note 7 and
Note16). As of September 30, 2011, $26,872 has been paid as deposits.
Navios Logistics
During the first quarter of 2010, Navios Logistics began the construction of a grain drying
and conditioning facility at its dry port facility in Nueva Palmira, Uruguay. The facility, which
has been operational since May 16, 2011, has been financed entirely with funds provided by Navios
Logistics’ dry port operations. For the construction of the facility, Navios Logistics paid $848
during the nine month period ended September 30, 2011 and $3,043 during the year ended December 31,
2010.
During the nine month period ended September 30, 2011, Navios Logistics purchased two
pushboats named William Hank and Lonny Fugate for $10,819 and another pushboat named WW Dyer for
$6,360. Additionally, Navios Logistics paid $19,836 for the acquisition of 66 dry barges, $14,728
relating to transportation and other related costs associated with the acquired pushboats and
barges, and $4,300 for the acquisition of a floating drydock facility.
Additionally, during the nine month period ended September 30, 2011, Navios Logistics
performed some improvements relating to its vessels, the Malva H, the Estefania H and the San San
H, amounting to $44, $611 and $1,070, respectively.
In June 2010, Navios Logistics entered into long-term bareboat agreements for two new product
tankers, the Stavroula and the San San H (formely known as the Jiujiang), each with a capacity of
16,871 dwt. The San San H and the Stavroula were delivered in June and July 2010, respectively.
Both tankers are chartered-in for a two-year period, and Navios Logistics has the obligation to
purchase the vessels immediately upon the expiration of their respective charter periods. The
purchase price of the vessels (including direct costs) amounted to approximately $19,643 and
$17,904, respectively. As of September 30, 2011, the obligations for these vessels were accounted
for as capital leases and the lease payments during the nine month period ended September 30, 2011
for both vessels were $931.
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTE 6: INTANGIBLE ASSETS OTHER THAN GOODWILL
Intangible assets as of September 30, 2011 consisted of the following:
Navios Holdings
| Acquisition | Accumulated | Disposal/Transfer to | Net Book Value | |||||||||||||
| Cost | Amortization | Vessel Cost | September 30, 2011 | |||||||||||||
Trade name |
$ | 100,420 | $ | (21,056 | ) | $ | — | $ | 79,364 | |||||||
Port terminal operating rights |
34,060 | (5,299 | ) | — | 28,761 | |||||||||||
Customer relationships |
35,490 | (6,654 | ) | — | 28,836 | |||||||||||
Favorable lease terms (*) |
237,644 | (123,835 | ) | (1,513 | ) | 112,296 | ||||||||||
Total Intangible assets |
407,614 | (156,844 | ) | (1,513 | ) | 249,257 | ||||||||||
Unfavorable lease terms |
(127,513 | ) | 81,113 | — | (46,400 | ) | ||||||||||
Total |
$ | 280,101 | $ | (75,731 | ) | $ | (1,513 | ) | $ | 202,857 | ||||||
Intangible assets as of December 31, 2010 consisted of the following:
Navios Holdings (excluding Navios Acquisition)
| Accumulated | Disposal/Transfer | Net Book Value | ||||||||||||||
| Acquisition Cost | Amortization | to Vessel Cost | December 31, 2010 | |||||||||||||
Trade name |
$ | 100,420 | $ | (18,172 | ) | $ | — | $ | 82,248 | |||||||
Port terminal operating rights |
34,060 | (4,605 | ) | — | 29,455 | |||||||||||
Customer relationships |
35,490 | (5,323 | ) | — | 30,167 | |||||||||||
Favorable construction contracts |
7,600 | — | (7,600 | ) | — | |||||||||||
Favorable lease terms (*) |
250,674 | (123,178 | ) | (655 | ) | 126,841 | ||||||||||
Total Intangible assets |
428,244 | (151,278 | ) | (8,255 | ) | 268,711 | ||||||||||
Unfavorable lease terms |
(127,513 | ) | 76,249 | — | (51,264 | ) | ||||||||||
Total |
$ | 300,731 | $ | (75,029 | ) | $ | (8,255 | ) | $ | 217,447 | ||||||
Navios Acquisition
| Acquisition | Accumulated | Disposal/Transfer to | Net Book Value | |||||||||||||
| Cost | Amortization | Vessel Cost | December 31, 2010 | |||||||||||||
Purchase options |
3,158 | — | — | 3,158 | ||||||||||||
Favorable lease terms |
57,070 | (1,236 | ) | — | 55,834 | |||||||||||
Total intangible assets |
60,228 | (1,236 | ) | — | 58,992 | |||||||||||
Unfavorable lease terms |
(5,819 | ) | 208 | — | (5,611 | ) | ||||||||||
Total |
$ | 54,409 | $ | (1,028 | ) | $ | — | $ | 53,381 | |||||||
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UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
Total Navios Holdings
| Accumulated | Disposal/Transfer | Net Book Value | ||||||||||||||
| Acquisition Cost | Amortization | to Vessel Cost | December 31, 2010 | |||||||||||||
Total intangible assets |
$ | 488,472 | $ | (152,514 | ) | $ | (8,255 | ) | $ | 327,703 | ||||||
Total unfavorable lease terms |
(133,332 | ) | 76,457 | — | (56,875 | ) | ||||||||||
Total |
$ | 355,140 | $ | (76,057 | ) | $ | (8,255 | ) | $ | 270,828 | ||||||
| (*) | On April 28, 2010 and on February 21, 2011, the Navios Vector, a 50,296 dwt Ultra-Handymax vessel, and the Navios Astra, a 53,468 dwt Ultra-Handymax vessel, both former long-term chartered-in vessels in operation, were delivered, respectively, to Navios Holdings’ owned fleet. The unamortized amounts of $655 of the Navios Vector’s and $1,513 of the Navios Astra’s favorable leases were included as an adjustment to the carrying value of the vessels. |
Amortization expense, net for the three and nine month periods ended September 30, 2011
amounted to $4,407 and $13,924, respectively ($4,279 and $14,953 for the three and nine month
periods ended September 30, 2010, respectively).
The remaining aggregate amortization of acquired intangibles as of September 30, 2011 will be as
follows:
| Within one | Year | Year | ||||||||||||||||||||||||||
| Description | year | Year Two | Three | Four | Year Five | Thereafter | Total | |||||||||||||||||||||
Trade name |
$ | 3,860 | $ | 3,853 | $ | 3,853 | $ | 3,853 | $ | 3,853 | $ | 60,092 | $ | 79,364 | ||||||||||||||
Favorable lease terms |
17,331 | 15,004 | 12,955 | 11,472 | 11,324 | 13,220 | 81,306 | |||||||||||||||||||||
Unfavorable lease
terms |
(6,181 | ) | (5,428 | ) | (4,933 | ) | (3,924 | ) | (2,452 | ) | (7,592 | ) | (30,510 | ) | ||||||||||||||
Port terminal
operating rights |
917 | 917 | 917 | 917 | 917 | 24,176 | 28,761 | |||||||||||||||||||||
Customer relationships |
1,775 | 1,775 | 1,775 | 1,775 | 1,775 | 19,961 | 28,836 | |||||||||||||||||||||
Total |
$ | 17,702 | $ | 16,121 | $ | 14,567 | $ | 14,093 | $ | 15,417 | $ | 109,857 | $ | 187,757 | ||||||||||||||
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTE 7: BORROWINGS
Borrowings, as of September 30, 2011, consisted of the following:
| September 30, | ||||
| Navios Holdings loans | 2011 | |||
Loan Facility HSH Nordbank and Commerzbank A.G. |
$ | 44,301 | ||
Revolver Facility HSH Nordbank and Commerzbank A.G. |
8,656 | |||
Commerzbank A.G. |
106,344 | |||
Dekabank Deutsche Girozentrale |
75,000 | |||
Loan Facility Emporiki Bank ($130,000) |
44,948 | |||
Loan Facility Emporiki Bank ($75,000) |
36,125 | |||
Loan Facility Emporiki Bank ($40,000) |
38,500 | |||
Loan Facility Emporiki Bank ($23,000) |
16,132 | |||
Loan Marfin |
18,379 | |||
Loan DNB NOR Bank ($40,000) |
37,710 | |||
Loan DNB NOR Bank ($66,500) |
55,800 | |||
Unsecured bonds |
20,000 | |||
Ship mortgage notes |
400,000 | |||
Senior notes |
350,000 | |||
Total Navios Holdings loans |
$ | 1,251,895 | ||
| September 30, | ||||
| Navios Logistics loans | 2011 | |||
Senior notes |
$ | 200,000 | ||
Other long-term loans |
685 | |||
Total Navios Logistics loans |
$ | 200,685 | ||
| September 30, | ||||
| Total Navios Holdings loans (including Navios Logistics loans) | 2011 | |||
Total borrowings |
$ | 1,452,580 | ||
Less: unamortized discount |
(4,605 | ) | ||
Less: current portion |
(70,307 | ) | ||
Total long-term borrowings |
$ | 1,377,668 | ||
Navios Holdings loans
In December 2006, the Company issued $300,000 in senior notes at a fixed rate of 9.5% due on
December 15, 2014 (“2014 Notes”). On January 28, 2011, Navios Holdings completed the sale of
$350,000 of 8.125% Senior Notes due 2019 (the “2019 Notes”). The net proceeds from the sale of the
2019 Notes were used to redeem any and all of Navios Holdings’ outstanding 2014 Notes and pay
related transaction fees and expenses and for general corporate purposes. The effect of this
transaction was the write off of $21,199 from deferred financing fees, which is recorded in the
statement of income under “Loss on bond extinguishment”.
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
Senior Notes: On January 28, 2011, the Company and its wholly owned subsidiary, Navios
Maritime Finance II (US) Inc. (“NMF” and, together with the Company, the “2019 Co-Issuers”) issued
$350,000 in senior notes due on February 15, 2019 at a fixed rate of 8.125%. The senior notes are
fully and unconditionally guaranteed, jointly and severally and on an unsecured senior basis, by
all of the Company’s subsidiaries, other than NMF, Navios Maritime Finance (US) Inc., Navios
Maritime Acquisition Corporation and its subsidiaries, Navios South American Logistics Inc. and its
subsidiaries and Navios GP L.L.C. The subsidiary guarantees are “full and unconditional”, as those
terms are used in Regulation S-X Rule 3-10, except that the indenture provides for an individual
subsidiary’s guarantee to be automatically released in certain customary circumstances, such as
when a subsidiary is sold or all of the assets of the subsidiary are
sold, the capital stock is
sold, when the subsidiary is designated as an “unrestricted subsidiary” for purposes of the
indenture, upon liquidation or dissolution of the subsidiary or upon legal or covenant defeasance
or satisfaction and discharge of the notes. The 2019 Co-Issuers have the option to redeem the notes
in whole or in part, at any time (i) before February 15, 2015, at a redemption price equal to 100%
of the principal amount, plus a make-whole premium, plus accrued and unpaid interest, if any, and
(ii) on or after February 15, 2015, at a fixed price of 104.063% of the principal amount, which
price declines ratably until it reaches par in 2017, plus accrued and unpaid interest, if any. At
any time before February 15, 2014, the 2019 Co-Issuers may redeem up to 35% of the aggregate
principal amount of the notes with the net proceeds of an equity offering at 108.125% of the
principal amount of the notes, plus accrued and unpaid interest, if any, so long as at least 65% of
the originally issued aggregate principal amount of the notes remains outstanding after such
redemption. In addition, upon the occurrence of certain change of control events, the holders of
the notes will have the right to require the 2019 Co-Issuers to repurchase some or all of the notes
at 101% of their face amount, plus accrued and unpaid interest to the repurchase date. Pursuant to
a registration rights agreement, the 2019 Co-Issuers and the guarantors filed a registration
statement on June 21, 2011, that was declared effective on August 23, 2011. The exchange offer of
the privately placed notes with publicly registered notes with identical terms was completed on
September 30, 2011. The senior 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 2019 Co-Issuers’ properties and
assets and creation or designation of restricted subsidiaries. The 2019 Co-Issuers were in
compliance with the covenants as of September 30, 2011.
Ship Mortgage Notes: In November 2009, the Company and its wholly owned subsidiary, Navios
Maritime Finance (US) Inc. (together, the “Mortgage Notes Co-Issuers”) issued $400,000 of first
priority ship mortgage notes due on November 1, 2017 at a fixed rate of 8.875%. The ship mortgage
notes are senior obligations of the Mortgage Notes Co-Issuers and are secured by first priority
ship mortgages on 15 vessels owned by certain subsidiary guarantors and other related collateral
securities. The ship mortgage notes are fully and unconditionally guaranteed, jointly and severally
by all of the Company’s direct and indirect subsidiaries that guarantee the 2019 Notes. The
guarantees of the Company’s subsidiaries that own mortgage vessels are senior secured guarantees
and the guarantees of the Company’s subsidiaries that do not own mortgage vessels are senior
unsecured guarantees.
At any time before November 1, 2012, the Mortgage Notes Co-Issuers may redeem up to 35% of the
aggregate principal amount of the ship mortgage notes with the net proceeds of a public equity
offering at 108.875% of the principal amount of the ship mortgage notes, plus accrued and unpaid
interest, if any, so long as at least 65% of the originally issued aggregate principal amount of
the ship mortgage notes remains outstanding after such redemption. In addition, the Mortgage Notes
Co-Issuers have the option to redeem the ship mortgage notes in whole or in part, at any time (1)
before November 1, 2013, at a redemption price equal to 100% of the principal amount plus a make
whole price which is based on a formula calculated using a discount rate of treasury bonds plus 50
bps, and (2) on or after November 1, 2013, at a fixed price of 104.438%, which price declines
ratably until it reaches par in 2015. Furthermore, upon occurrence of certain change of control
events, the holders of the ship mortgage notes may require the Mortgage Notes Co-Issuers to
repurchase some or all of the notes at 101% of their face amount. Pursuant to the terms of a
registration rights agreement, as a result of satisfying certain conditions, the Mortgage Notes
Co-Issuers and the guarantors are not obligated to file a registration statement that would have
enabled the holders of ship mortgage notes to exchange the privately placed notes with publicly
registered notes with identical terms. The ship mortgage 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 into certain
transactions with affiliates, merging or consolidating or selling all or substantially all of the
Mortgage Notes Co-Issuers’ properties and assets and creation or designation of restricted
subsidiaries. The Mortgage Notes Co-Issuers were in compliance with the covenants as of September
30, 2011.
Loan Facilities:
The majority of the Company’s senior secured credit facilities include maintenance covenants,
including loan-to-value ratio covenants, based on either charter-adjusted valuations, or
charter-free valuations. As of September 30, 2011, the Company was in compliance with all of the
covenants under each of its credit facilities outlined below.
F-23
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
HSH/Commerzbank Facility: In February 2007, Navios Holdings entered into a secured loan
facility with HSH Nordbank and Commerzbank AG maturing on October 31, 2014. The facility was
composed of a $280,000 term loan facility and a $120,000 reducing revolving facility and it has
been amended and repaid as the vessels have been sold.
The loan facility requires compliance with financial covenants, including Security Value
Maintenance (“SVM”) ratio to total debt percentage and minimum liquidity. It is an event of default
under the revolving credit facility if such covenants are not complied with or if Angeliki Frangou,
the Company’s Chairman and Chief Executive Officer, beneficially owns less than 20% of the issued
stock.
On November 15, 2010, following the sale of the Navios Melodia and the Navios Fulvia to Navios
Partners, Navios Holdings fully repaid its outstanding loan balance with HSH Nordbank in respect of
the two vessels amounting to $71,898.
On May 19, 2011, in connection with the sale of the Navios Orbiter to Navios Partners, Navios
Holdings repaid $20,217 of the outstanding loan associated with this vessel. As of September 30,
2011, the outstanding amount under the revolving credit facility was $8,656 and the outstanding
amount under the loan facility was $44,301.
Emporiki Facilities: In December 2007, Navios Holdings entered into a facility agreement with
Emporiki Bank of Greece of up to $154,000 in order to partially finance the construction of two
Capesize bulk carriers. In July 2009, following an amendment of the above-mentioned agreement, the
amount of the facility has been changed to up to $130,000.
On March 18, 2010, following the sale of the Navios Aurora II to Navios Partners, Navios
Holdings repaid $64,350 and the outstanding amount of the facility has been reduced to $64,350. The
interest rate of the amended facility is based on a margin of 175 bps. The amended facility is
repayable in 7 semi-annual installments of $2,462 and 10 semi-annual installments of $1,641 with a
final balloon payment of $11,304 on the last payment date. The loan facility requires compliance
with certain financial covenants and the covenants contained in the 2019 Notes. As of September 30,
2011, the outstanding amount under this facility was $44,948.
In August 2009, Navios Holdings entered into an additional facility agreement with Emporiki
Bank of Greece of up to $75,000 (divided into two tranches of $37,500) to partially finance the
acquisition costs of two Capesize vessels. Each tranche of the facility is repayable in 20
semi-annual installments of $1,375 with a final payment of $10,000 on the last payment date. The
repayment of each tranche starts six months after the delivery date of the respective Capesize
vessel. It bears interest at a rate of LIBOR plus 175 bps. On May 19, 2011, in connection with the
sale of the Navios Luz to Navios Partners, Navios Holdings repaid $37,500 of the outstanding loan
associated with this vessel. As of September 30, 2011, the outstanding amount under this facility
was $36,125.
In September 2010, Navios Holdings entered into another facility agreement with Emporiki Bank
of Greece of up to $40,000 in order to partially finance the construction of one Capesize bulk
carrier, the Navios Azimuth, which was delivered on February 14, 2011 to Navios Holdings. The loan
is repayable in 20 semi-annual equal installments of $1,500, with a final balloon payment of
$10,000 on the last payment date. It bears interest at a rate of LIBOR plus 275 bps. The loan
facility requires compliance with certain financial covenants and the covenants contained in the
2019 Notes. As of September 30, 2011, the full amount was drawn and the outstanding amount under
this facility was $38,500.
In August 2011, Navios Holdings entered into an additional facility agreement with Emporiki
Bank of Greece for an amount up to $23,000 in order to partially finance the construction of a
newbuilding bulk carrier, the Navios Avior, which is expected to be delivered in April 2012 (see
Note 5). The facility is repayable in 20 semi-annual equal installments of $750 after the drawdown
date, with a final balloon payment of $8,000 on the last payment date. It bears interest at a rate
of LIBOR plus 275 bps. The loan facility requires compliance with certain covenants and with the
covenants contained in the 2019 Notes. As of September 30, 2011, an amount of $16,132 was drawn and
outstanding under this facility.
DNB Facilities: In June 2008, Navios Holdings entered into a facility agreement with DNB NOR
BANK ASA of up to $133,000 in order to partially finance the construction of two Capesize bulk
carriers. In June 2009, following an amendment of the above-mentioned agreement, one of the two
tranches amounting to $66,500 was cancelled following the cancellation of construction of one
Capesize bulk carrier. The interest rate of the amended facility is based on a margin of 225 bps as
defined in the new agreement. The facility is repayable in nine semi-annual installments of $2,900,
with a final payment of $29,700 on the last payment date. As of September 30, 2011, the outstanding
amount under this facility was $55,800.
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
In August 2010, Navios Holdings entered into a facility agreement with DNB NOR BANK ASA of up
to $40,000 in order to partially finance the construction of one Capesize bulk carrier, the Navios
Altamira, which was delivered on January 28, 2011 to Navios Holdings, and amended the loan. The
loan bears interest at a rate of LIBOR plus 275 bps. The loan is repayable in 22 equal quarterly
installments of $628, with a final balloon payment of $23,894 on the last payment date. The loan
facility requires compliance with certain financial covenants and the covenants contained in the
2019 Notes. As of September 30, 2011, the outstanding amount under this facility was $37,710.
Dekabank Facility: In February 2009 (amended and restated in May 2009), Navios Holdings
entered into a facility of up to $120,000 with Dekabank Deutsche Girozentrale to finance the
acquisition of two Capesize vessels. The loan is repayable in 20 semi-annual installments and bears
an interest rate based on a margin of 190 bps. The loan facility requires compliance with certain
financial covenants and the covenants contained in the 2019 Notes. Following the sale of the Navios
Pollux to Navios Partners in May 2010, an amount of $39,000 was kept in a pledged account pending
the delivery of a substitute vessel as collateral to this facility. The amount of $39,000 kept in
the pledged account was released to finance the delivery of the Capesize vessel Navios Buena
Ventura that was delivered to Navios Holdings on October 29, 2010. As of September 30, 2011,
$75,000 was outstanding under this facility.
Marfin Facility: In March 2009, Navios Holdings entered into a loan facility with Marfin
Egnatia Bank of up to $110,000 to be used to finance the pre-delivery installments for the
construction of newbuilding vessels and for general corporate purposes. It bears interest at a rate
based on a margin of 275 bps. As of September 7, 2010, the available amount of the loan facility
has been reduced to $30,000. On May 10, 2011, the amount of $18,850 was drawn to finance the
acquisition of the Navios Astra. The loan is repayable beginning three months following the
drawdown in seven equal quarterly installments of $471, with a final balloon payment of $15,553 on
the last payment date. It bears interest at a rate of LIBOR plus 275 bps. The loan facility
requires compliance with certain covenants. As of September 30, 2011, the outstanding amount under
this facility was $18,379.
Commerzbank Facility: In June 2009, Navios Holdings entered into facility agreement of up to
$240,000 (divided into four tranches of $60,000) with Commerzbank AG in order to partially finance
the acquisition of a Capesize vessel and the construction of three Capesize vessels. Following the
delivery of two Capesize vessels, the Navios Melodia and the Navios Buena Ventura, on September 20,
2010 and October 29, 2010, respectively, Navios Holdings cancelled two of the four tranches and in
October 2010 fully repaid their outstanding loan balances of $53,600 and $54,500, respectively. The
third and fourth tranches of the facility are repayable starting three months after the delivery of
each Capesize vessel in 40 quarterly installments of $882 and $835, respectively, with a final
payment of $24,706 and $23,384, respectively, on the last payment date. It bears interest at a rate
based on a margin of 225 bps. The loan facility requires compliance with certain covenants and with
the covenants contained in the 2019 Notes. As of September 30, 2011, the outstanding amount was
$106,344.
Unsecured Bond: In July 2009, Navios Holdings issued a $20,000 unsecured bond due in July 2012
as a partial payment for the acquisition price of a Capesize vessel. Interest accrues on the
principal amount of the unsecured bond at the rate of 6% per annum. All accrued interest (which
will not be compounded) will be first due and payable in July 2012, which is the maturity date. The
unsecured bond may be prepaid by Navios Holdings at any time without prepayment penalty.
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
Navios Logistics loans
Logistics Senior Notes
On April 12, 2011, Navios Logistics and its wholly-owned subsidiary Navios Logistics Finance
(US) Inc. (“Logistics Finance” and, together the “Logistics Co-Issuers”) issued $200,000 in senior
notes due on April 15, 2019 at a fixed rate of 9.25% (“the Logistics Senior Notes”). The Logistics
Senior Notes are fully and unconditionally guaranteed, jointly and severally, by all of Navios
Logistics’ direct and indirect subsidiaries except for Hidronave South American Logistics S.A. and
Navios Logistics Finance (US) Inc. The subsidiary guarantees are “full and unconditional”, as those
terms are used in Regulation S-X Rule 3-10, except that the indenture provides for an individual
subsidiary’s guarantee to be automatically released in certain customary circumstances, such as
when a subsidiary is sold or all of the assets of the subsidiary are
sold, the capital stock is
sold, when the subsidiary is designated as an “unrestricted subsidiary” for purposes of the
indenture, upon liquidation or dissolution of the subsidiary or upon legal or covenant defeasance
or satisfaction and discharge of the notes. The Logistics Co-Issuers have the option to redeem the
notes in whole or in part, at their option, at any time (i) before April 15, 2014, at a redemption
price equal to 100% of the principal amount plus the applicable make-whole premium plus accrued and
unpaid interest, if any, to the redemption date and (ii) on or after April 15, 2014, at a fixed
price of 106.938%, which price declines ratably until it reaches par in 2017. At any time before
April 15, 2014, the Logistics Co-Issuers may redeem up to 35% of the aggregate principal amount of
the Logistics Senior Notes with the net proceeds of an equity offering at 109.25% of the principal
amount of the notes, plus accrued and unpaid interest, if any, to the redemption date so long as at
least 65% of the originally issued aggregate principal amount of the notes remains outstanding
after such redemption. In addition, upon the occurrence of certain change of control events, the
holders of the Logistics Senior Notes will have the right to require the Logistics Co-Issuers to
repurchase some or all of the notes at 101% of their face amount, plus accrued and unpaid interest
to the repurchase date.
Under a registration rights agreement, the Logistics Co-Issuers and the subsidiary guarantors
are obliged to file a registration statement prior to January 7, 2012, that enables the holders of
the Logistics Senior Notes to exchange the privately placed notes with publicly registered notes
with identical terms. The Logistics Senior Notes contain covenants which, among other things, limit
the incurrence of additional indebtedness, issuance of certain preferred stock, the payment of
dividends, in excess of 6% per annum of the net proceeds received by or contributed to Navios
Logistics in or from any public offering, 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 Navios Logistics properties and assets and creation or designation of restricted
subsidiaries.
The net proceeds from the Senior Notes were approximately $193,207 after deducting fees and
estimated expenses relating to the offering.
Marfin Facility
On March 31, 2008, Nauticler S.A. (“Nauticler”)(a subsidiary of Navios Logistics) entered into
a $70,000 loan facility for the purpose of providing Nauticler with investment capital to be used
in connection with one or more investment projects. In March 2009, Navios Logistics transferred
its loan facility of $70,000 to Marfin Popular Bank Public Co. Ltd. The loan provided for an
additional one year extension and an increase in margin to 275 basis points. On March 23, 2010, the
loan was extended for one additional year, providing an increase in margin to 300 basis points. On
March 29, 2011, Marfin Popular Bank committed to amend its current loan agreement with Nauticler to
provide for a $40,000 revolving credit facility. Under this commitment, the existing
margin of 300 basis points will apply and the obligations will be secured by mortgages on four
tanker vessels or alternative security over other assets acceptable to the bank. The commitment
requires that we maintain a loan-to-value ratio of 120% based on charter-free valuations and
compliance with the covenants contained in the indenture governing the Logistics Senior Notes. The
obligation of the bank under the commitment was subject to prepayment of the $70,000 facility and
is subject to customary conditions, such as the receipt of satisfactory appraisals, insurance,
opinions and the negotiation, execution and delivery of mutually
satisfactory loan documentation. On April 12, 2011, following the completion of the sale of $200,000 of
Logistics Senior Notes, Navios Logistics fully repaid the $70,000 loan facility with Marfin Popular
Bank using a portion of the proceeds from the Logistics Senior Notes. As of September 30, 2011, the
loan documentation for the $40,000 revolving credit facility had not been completed and the
facility had not been drawn.
F-26
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
Non-Wholly Owned Subsidiaries’ Indebtedness
On July 25, 2011, Navios Logistics acquired the noncontrolling interests of its joint ventures
Thalassa Energy S.A., HS Tankers Inc., HS Navigation Inc., HS Shipping Ltd .Inc. and HS South Inc.,
in accordance with the terms of certain stock purchase agreements with HS Energy Ltd., an affiliate
of Vitol S.A. Navios Logistics paid total consideration of $8,500 for such noncontrolling interests
($8,638 including transactions expenses), and simultaneously paid $53,155 million in full and final
settlement of all amounts of indebtedness of such joint ventures.
In connection with the acquisition of Horamar, Navios Logistics had assumed a $9,500 loan
facility that was entered into by HS Shipping Ltd. Inc. in 2006, in order to finance the building
of a 8,974 dwt double hull tanker, the Malva H. After the vessel’s delivery, the interest rate had
been LIBOR plus 150 bps. The loan was repayable in installments of at least 90% of the amount of
the last hire payment due to be paid to HS Shipping Ltd. Inc. The repayment date should not extend
beyond December 31, 2011. The loan could be pre-paid before such date, with two days written
notice. The loan also required compliance with certain covenants. This loan was repaid in full on
July 25, 2011 using a portion of the proceeds from the Logistics Senior Notes.
Navios Logistics assumed a $2,286 loan facility that was entered into by its majority owned
subsidiary, Thalassa Energy S.A., in October 2007 to finance the purchase of two self-propelled
barges, the Formosa and the San Lorenzo. The loan bore interest at LIBOR plus 150 basis points. The
loan was repayable in five equal installments of $457, which were made in November 2008, June 2009,
January 2010, August 2010, and March 2011. The loan was secured by a first priority mortgage over
the two self-propelled barges. As of September 30, 2011, the loan had been fully repaid.
On September 4, 2009, HS Navigation Inc. had entered into a loan facility for an amount of up
to $18,710 that bore interest at LIBOR plus 225 bps in order to finance the acquisition cost of the
Estefania H. The loan was repayable in installments that should not be less than the higher of (a)
90% of the amount of the last hire payment due to HS Navigation Inc. prior to the repayment date,
and (b) $250, inclusive of any interest accrued in relation to the loan at that time. The loan was
repayable by May 15, 2016 and could have been prepaid before such date with two days written
notice. The loan also required compliance with certain covenants. This loan was repaid in full on
July 25, 2011 using a portion of the proceeds from the Logistics Senior Notes.
On December 15, 2009, HS Tankers Inc., a majority owned subsidiary of Navios Logistics, had
entered into a loan facility in order to finance the acquisition cost of the Makenita H for an
amount of $24,000 which bore interest at LIBOR plus 225 bps. The loan was repayable in installments
that should not be less than the higher of (a) 90% of the amount of the last hire payment due to HS
Tankers Inc. prior to the repayment date, and (b) $250, inclusive of any interest accrued in
relation to the loan at that time. The loan was repayable by March 24, 2016 and could have been
prepaid before such date with two days written notice. The loan also required compliance with
certain covenants. This loan was repaid in full on July 25, 2011 using a portion of the proceeds
from the Logistics Senior Notes.
On December 20, 2010, HS South Inc., a majority owned subsidiary of Navios Logistics, had
entered into a loan facility in order to finance the acquisition cost of the Sara H for an amount
of $14,385 which bore interest at LIBOR plus 225 bps. The loan was repayable in installments that
should not be less than the higher of (a) 90% of the amount of the last hire payment due to be HS
South Inc. prior to the repayment date and (b) $250, inclusive of any interest accrued in relation
to the loan at that time. The loan was repayable by May 24, 2016 and could have been prepaid before
such date with two days written notice. The loan also required compliance with certain covenants.
This loan was repaid in full on July 25, 2011 using a portion of the proceeds from the Logistics
Senior Notes.
Other Indebtedness
In connection with the acquisition of Hidronave S.A. on October 29, 2009, Navios Logistics
assumed an $817 loan facility that was entered into by Hidronave S.A. in 2001 in order to finance
the construction of a pushboat (Nazira). As of September 30, 2011, the outstanding loan balance was
$684. The loan facility bears interest at a fixed rate of 600 bps. The loan is to be repaid in
equal monthly installments of $6 each and the final repayment date cannot extend beyond August 10,
2021. The loan also requires compliance with certain covenants.
F-27
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
As of September 30, 2011, Navios Logistics and its subsidiaries were in compliance with all of
the covenants under each of its credit facilities.
The maturity table below reflects the principal payments for the next five years and
thereafter of all borrowings of Navios Holdings (including Navios Logistics) outstanding as of
September 30, 2011, based on the repayment schedules of the respective loan facilities (as
described above) and the outstanding amount due under the debt securities.
| Amounts in | ||||
| thousands of | ||||
| Payment due by period | U.S. dollars | |||
September 30, 2012 |
$ | 70,307 | ||
September 30, 2013 |
65,374 | |||
September 30, 2014 |
49,337 | |||
September 30, 2015 |
66,199 | |||
September 30, 2016 |
55,584 | |||
September 30, 2017 and thereafter |
1,145,779 | |||
Total |
$ | 1,452,580 | ||
NOTE 8: DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Warrants
The Company accounts for the Navios Acquisition warrants, which were obtained in connection
with its investment in Navios Acquisition, in accordance with the guidance for accounting for
derivative instruments and hedging activities. In accordance with the applicable accounting
guidance, the Company before acquiring control over Navios Acquisition, recorded the Navios
Acquisition warrants in the consolidated balance sheets under “Long-term derivative assets” at fair
value, with changes in fair value recorded in “Gain/(loss) on derivatives” in the consolidated
statements of income.
Prior to the consolidation of Navios Acquisition, Navios Holdings valued the Navios
Acquisition warrants at fair value amounting to $14,069 (fair value of $9,120 in respect of
7,600,000 Private Placement warrants at $1.20 per warrant and fair value of $4,949 in respect of
6,035,000 sponsor warrants at $0.82 per warrant), and changes in fair value were recorded in
“Gain/(loss) on derivatives” in the consolidated statements of income amounting to $5,888. All
warrants have been exercised pursuant to the Navios Acquisition Warrant Exercise Program (see Note
11).
During the three and nine month period ended September 30, 2010, the changes in net unrealized
holding gains on warrants amounted to $0 and $5,888, respectively.
Upon obtaining control of Navios Acquisition, the investment in shares of common stock and the
investment in warrants were remeasured to fair value resulting in a gain of $17,742 recorded in the
statements of income under “Gain/(loss) on change in control” and noncontrolling interest was
recognized at fair value, being the number of shares not controlled by the Company at the public
share price as of May 28, 2010 of $6.56, amounting to $60,556.
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
Interest rate risk
The Company from time to time enters into interest rate swap contracts as economic hedges to
its exposure to variability in its floating rate long-term debt. Under the terms of the interest
rate swaps, the Company and the bank agreed to exchange at specified intervals, the difference
between paying fixed rate and floating rate interest calculated by reference to the agreed
principal amounts and maturities. Interest rate swaps allow the Company to convert long-term
borrowings issued at floating rates into equivalent fixed rates. Even though the interest rate
swaps were entered into for economic hedging purposes, the derivatives described below do not
qualify for accounting purposes as cash flow hedges under the related accounting guidance, as the
Company does not have currently written contemporaneous documentation identifying the risk being
hedged and both on a prospective and retrospective basis, performed an effective test supporting
that the hedging relationship is highly effective. Consequently, the Company recognizes the change
in fair value of these derivatives in the statements of income.
For the nine month periods ended September 30, 2011, and 2010, the realized loss on interest
rate swaps was $0 and $965, respectively. As of September 30, 2011 and December 31, 2010, the
outstanding net liability was $0. The movement in the unrealized gain/(loss) for the three month
periods ended September 30, 2011 and 2010, was $0 and $(268), respectively, and for the nine month
periods ended September 30, 2011 and 2010 was $0 and $942, respectively.
There are no swap agreements as of September 30, 2011, as all swap agreements expired during
2010.
Forward Freight Agreements (FFAs)
The Company trades in the FFAs market with both an objective to utilize them as economic
hedging instruments that are highly effective in reducing the risk on specific vessel(s), freight
commitments, or the overall fleet or operations, and to take advantage of short-term fluctuations
in the market prices. FFAs trading generally have not qualified as hedges for accounting purposes,
except as discussed below.
Drybulk shipping FFAs generally have the following characteristics: they cover periods from
one month to one year; they can be based on time charter rates or freight rates on specific quoted
routes; they are executed between two parties and give rise to a certain degree of credit risk
depending on the counterparties involved and they are settled monthly based on publicly quoted
indices.
For FFAs that qualify for hedge accounting the changes in fair values of the effective portion
representing unrealized gain or losses are recorded under “Accumulated Other Comprehensive Income”
in stockholders’ equity while the unrealized gains or losses of the FFAs not qualifying for hedge
accounting, together with the ineffective portion of those qualifying for hedge accounting, are
recorded in the statements of income under “Gain/(loss) on derivatives”. The gains included in
“Accumulated Other Comprehensive Income” are being reclassified to earnings under “Revenue” in the
statements of income in the same period or periods during which the hedged forecasted transaction
affects earnings. There were no amounts during the nine month periods ended September 30, 2011 and
2010, which have been included in “Accumulated Other Comprehensive Income” and reclassified to
earnings.
At September 30, 2011 and December 31, 2010, none of the “mark to market” positions of the
open dry bulk FFA contract, qualified for hedge accounting treatment. Dry bulk FFAs traded by the
Company that do not qualify for hedge accounting are shown at fair value through the statement of
operations.
The net losses from FFAs recorded in the statement of income amounted to $3 and $57 for the
three month periods ended September 30, 2011 and 2010, respectively, and $85 and $1,861 for the
nine month periods ended September 30, 2011 and 2010, respectively.
During each of the three month periods ended September 30, 2011 and 2010, the changes in net
unrealized (losses)/gains on FFAs amounted to $(24) and $4,817, respectively, and for the nine
month periods ended September 30, 2011 and 2010, the changes in net unrealized gains/(losses) on
FFAs amounted to $246 and $(14,976), respectively.
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
The open drybulk shipping FFAs at net contracted (strike) rate after consideration of the fair
value settlement rates is summarized as follows:
| September 30, | December 31, | |||||||
| Forward Freight Agreements (FFAs) | 2011 | 2010 | ||||||
Long-term FFA derivative asset |
45 | 149 | ||||||
Short-term FFA derivative asset |
105 | — | ||||||
Short-term FFA derivative liability |
— | (245 | ) | |||||
Net fair value on FFA contracts |
$ | 150 | $ | (96 | ) | |||
NOS FFAs portion of fair value transferred to NOS derivative account (*) |
$ | 92 | $ | 92 | ||||
LCH FFAs portion of fair value transferred to LCH derivative account (**) |
$ | 1,119 | $ | 1,328 | ||||
Reconciliation of balances
Total of balances related to derivatives and financial instruments:
| September 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
FFAs |
$ | 150 | $ | (96 | ) | |||
NOS FFAs portion of fair value transferred to NOS derivative account (*) |
92 | 92 | ||||||
LCH FFAs portion of fair value transferred to LCH derivative account (**) |
1,119 | 1,328 | ||||||
Total |
$ | 1,361 | $ | 1,324 | ||||
Balance Sheet Values
| September 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
Total short-term derivative asset |
$ | 1,316 | $ | 1,420 | ||||
Total long-term derivative asset |
45 | 149 | ||||||
Total short-term derivative liability |
— | (245 | ) | |||||
Total |
$ | 1,361 | $ | 1,324 | ||||
| (*) | NOS: The Norwegian Futures and Options Clearing House (NOS Clearing ASA). | |
| (**) | LCH: The London Clearing House. |
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of
financial instrument:
Cash and cash equivalents: The carrying amounts reported in the consolidated balance sheets
for interest bearing deposits approximate their fair value because of the short maturity of these
investments.
Restricted Cash: The carrying amounts reported in the consolidated balance sheets for interest
bearing deposits approximate their fair value because of the short maturity of these investments.
Borrowings: The carrying amounts of the floating rate loans approximates their fair value. The
senior and ship mortgage notes are fixed rate borrowings and their fair value, which was determined
based on quoted market prices, is indicated in the table below.
Accounts receivable, net: Carrying amounts are considered to approximate fair value due to the
short-term nature of these accounts receivables and because there were no significant changes in
interest rates. All amounts that are assumed to be uncollectible are written off and/or reserved.
Accounts payable: The carrying amounts of accounts payable reported in the balance sheet
approximates their fair value due to the short-term nature of these accounts payable and because
there were no significant changes in interest rates.
Investment in available for sale securities: The carrying amount of the investment in
available-for-sale securities reported in the balance sheet represents unrealized gains and losses
on these securities, which are reflected directly in equity unless an unrealized loss is considered
“other-than-temporary”, in which case it is transferred to the statements of income.
Forward freight agreements, net: The fair value of forward freight agreements is the estimated
amount that the Company would receive or pay to terminate the agreement at the reporting date by
obtaining quotes from brokers or exchanges.
The estimated fair values of the Company’s financial instruments are as follows:
| September 30, 2011 | December 31, 2010 | |||||||||||||||
| Book Value | Fair Value | Book Value | Fair Value | |||||||||||||
Cash and cash equivalents |
$ | 194,937 | $ | 194,937 | $ | 207,410 | $ | 207,410 | ||||||||
Restricted cash |
$ | 17,557 | $ | 17,557 | $ | 53,577 | $ | 53,577 | ||||||||
Accounts receivable, net |
$ | 108,353 | $ | 108,353 | $ | 70,388 | $ | 70,388 | ||||||||
Accounts payable |
$ | (54,970 | ) | $ | (54,970 | ) | $ | (49,496 | ) | $ | (49,496 | ) | ||||
Senior and ship mortgage notes, net of
discount |
$ | (945,395 | ) | $ | (900,400 | ) | $ | (1,093,787 | ) | $ | (1,152,752 | ) | ||||
Long-term debt, including current portion |
$ | (502,580 | ) | $ | (502,580 | ) | $ | (982,123 | ) | $ | (982,123 | ) | ||||
Investments in available for sale securities |
$ | 74,506 | $ | 74,506 | $ | 99,078 | $ | 99,078 | ||||||||
Forward Freight Agreements, net |
$ | 1,361 | $ | 1,361 | $ | 1,324 | $ | 1,324 | ||||||||
F-31
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
The following tables set forth our assets and liabilities that are measured at fair value on a
recurring basis categorized by fair value hierarchy level. As required by the fair value guidance,
assets and liabilities are categorized in their entirety based on the lowest level of input that is
significant to the fair value measurement.
| Fair Value Measurements as of September 30, 2011 | ||||||||||||||||
| Quoted Prices in | Significant Other | Significant | ||||||||||||||
| Active Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| Assets | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
FFAs |
$ | 1,361 | $ | 1,361 | $ | — | $ | — | ||||||||
Investments in available for sale securities |
74,506 | 74,506 | — | — | ||||||||||||
Total |
$ | 75,867 | $ | 75,867 | $ | — | $ | — | ||||||||
| Fair Value Measurements as of December 31, 2010 | ||||||||||||||||
| Quoted Prices in | Significant Other | Significant | ||||||||||||||
| Active Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| Assets | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
FFAs |
$ | 149 | $ | 149 | $ | — | $ | — | ||||||||
Investments in available for sale securities |
99,078 | 99,078 | — | — | ||||||||||||
Total |
$ | 99,227 | $ | 99,227 | $ | — | $ | — | ||||||||
| Fair Value Measurements as of December 31, 2010 | ||||||||||||||||
| Quoted Prices in | Significant Other | Significant | ||||||||||||||
| Active Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| Liabilities | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
FFAs |
$ | 245 | $ | 245 | $ | — | $ | — | ||||||||
Total |
$ | 245 | $ | 245 | $ | — | $ | — | ||||||||
The Company’s FFAs are valued based on published quoted market prices. Investments in
available for sale securities are valued based on published quoted market prices. Where possible,
the Company verifies the values produced by its pricing models to market prices. Valuation models
require a variety of inputs, including contractual terms, market prices, yield curves, credit
spreads, measures of volatility, and correlations of such inputs. The Company’s derivatives trade
in liquid markets, and as such, model inputs can generally be verified and do not involve
significant management judgment. Such instruments are typically classified within Level l of the
fair value hierarchy.
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTE 9: PREFERRED AND COMMON STOCK
Share Repurchase Program
In November 2008, the Board of Directors approved a share repurchase program for up to $25,000
of Navios Holdings’ common stock. Share repurchases were made pursuant to a program adopted under
Rule 10b5-1 under the Exchange Act. The program did not require any minimum purchase or any
specific number or amount of shares and may be suspended or reinstated at any time in Navios
Holdings’ discretion and without notice. Repurchases are subject to restrictions under the terms of
the Company’s credit facilities and indentures. There were no shares repurchased during the nine
month period ended September 30, 2011 and during the year ended December 31, 2010. In October 2011,
Navios Holdings repurchased 73,651 shares for a total cost of $221 (See also Note 16).
Issuances to Employees and Exercise of Options
On March 1, March 2, March 7, 2011 and June 23, 2011, 18,281, 29,250, 68,047 and 15,000
shares, respectively, were issued following the exercise of the options for cash at an exercise
price of $3.18 per share.
Vested, Surrendered and Forfeited
During the nine month period ended September 30, 2011, 8,001 restricted shares of common stock
were forfeited upon termination of employment.
Following the issuances and cancellations of the shares, described above, Navios Holdings had
as of September 30, 2011, 101,686,343 shares of common stock and 8,479 shares of preferred stock
outstanding.
NOTE 10: COMMITMENTS AND CONTINGENCIES
As of September 30, 2011, the Company was contingently liable for letters of guarantee and
letters of credit amounting to $490 (December 31, 2010: $1,098) issued by various banks in favor of
various organizations and the total amount was collateralized by cash deposits, which were included
as a component of restricted cash.
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 the financial statements were
issued. In the opinion of management, the ultimate disposition of these matters is immaterial and
will not adversely affect the Company’s financial position, results of operations or liquidity.
In connection with the acquisition of Horamar, Navios Logistics recorded liabilities for
certain pre-acquisition contingencies amounting to $6,632 ($2,907 relating to VAT-related matters,
$1,703 for withholding tax-related matters, $1,511 relating to provisions for claims and others and
$511 for income tax-related matters) that were included in the allocation of the purchase price
based on their respective fair values. As it relates to these contingencies, the prior owners of
Horamar agreed to indemnify Navios Logistics in the event that any of the above contingencies
materialize before certain agreed-upon dates, extending through January 2020. As of September 30,
2011, the remaining liability related to these pre-acquisition contingencies amounted to $5,037
($4,674 as of December 31, 2010) and was entirely offset by an indemnification asset for the same
amount, which is reflected in other non-current assets.
On July 19, 2011, in consideration of Gunvor S.A. entering into sales of oil or petroleum
products with Petrosan, the Company has undertaken to pay to Gunvor S.A. on first demand any
obligations arising directly from the non-fulfillment of said contracts. The guarantee shall not
exceed $1,500 and shall remain in full force and effect until December 31, 2011.
The Company is subject to legal proceedings, claims and contingencies arising in the ordinary
course of business. When such amounts can be estimated and the contingency is probable, management
accrues the corresponding liability. While the ultimate outcome of lawsuits or other proceedings
against the Company cannot be predicted with certainty, management does not believe the costs of
such actions will have a material effect on the Company’s consolidated financial position, results
of operations, or cash flows.
The Company, in the normal course of business, entered into contracts to time charter-in
vessels for various periods through September 2024.
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
As of September 30, 2011, the Company’s future minimum commitments, net of commissions under
chartered-in vessels, barges and pushboats were as follows:
| Amounts | ||||
| in thousands of | ||||
| U.S. Dollars | ||||
September 30, 2012 |
$ | 110,760 | ||
September 30, 2013 |
104,090 | |||
September 30, 2014 |
112,357 | |||
September 30, 2015 |
107,099 | |||
September 30, 2016 |
99,331 | |||
September 30, 2017 and thereafter |
481,083 | |||
Total |
$ | 1,014,720 | ||
NOTE 11: TRANSACTIONS WITH RELATED PARTIES
Office rent: On January 2, 2006, Navios Corporation and Navios ShipManagement Inc., two wholly
owned subsidiaries of Navios Holdings, entered into two lease agreements with Goldland
Ktimatiki-Ikodomiki-Touristiki and Xenodohiaki Anonimos Eteria, both of which are Greek
corporations that are currently majority owned by Angeliki Frangou, Navios Holdings’ Chairman and
Chief Executive Officer. The lease agreements provide for the leasing of two facilities located in
Piraeus, Greece, of approximately 2,034.3 square meters to house the operations of most of the
Company’s subsidiaries. The total annual lease payments are €473 (approximately $643) and the lease
agreements expire in 2017. These payments are subject to annual adjustments starting from the third
year, which are based on the inflation rate prevailing in Greece as reported by the Greek State at
the end of each year.
On October 31, 2007, Navios ShipManagement Inc. entered into a lease agreement with Emerald
Ktimatiki-Ikodomiki-Touristiki and Xenodohiaki Anonimos Eteria, both of which are Greek
corporations that are currently majority owned by Angeliki Frangou, Navios Holdings’ Chairman and
Chief Executive Officer. The lease agreement initially provided for the leasing of one facility in
Piraeus, Greece, of approximately 1,376.5 square meters to house part of the operations of the
Company. On October 29, 2010, the existing lease agreement was amended and Navios ShipManagement
Inc. leases 253.75 less square meters. The total annual lease payments are €370 (approximately
$503) and the lease agreement expires in 2019. These payments are subject to annual adjustments
starting from the third year, which are based on the inflation rate prevailing in Greece as
reported by the Greek State at the end of each year.
On October 29, 2010, Navios Tankers Management Inc. entered into a lease agreement with
Emerald Ktimatiki-Ikodomiki-Touristiki and Xenodohiaki Anonimos Eteria, both of which are Greek
corporations that are currently majority owned by Angeliki Frangou, Navios Holdings’ Chairman and
Chief Executive Officer. The lease agreement provides for the leasing of one facility in Piraeus,
Greece, of approximately 253.75 square meters to house part of the operations of the Company. The
total annual lease payments are €79 (approximately $107) and the lease agreement expires in 2019.
These payments are subject to annual adjustments starting from the third year, which are based on
the inflation rate prevailing in Greece as reported by the Greek State at the end of each year.
Purchase of services: The Company utilizes Acropolis Chartering and Shipping Inc.
(“Acropolis”), a brokerage firm for freight and shipping charters, as a broker. Navios Holdings has
a 50% interest in Acropolis. Although Navios Holdings owns 50% of Acropolis’ stock, Navios Holdings
has agreed with the other shareholder that the earnings and amounts declared by way of dividends
will be allocated 35% to the Company with the balance to the other shareholder. Commissions paid to
Acropolis for each of the three month periods ended September 30, 2011 and 2010 were $0 and $39,
respectively, and for the nine months periods ended September 30, 2011 and 2010, were $17 and $95,
respectively. During the nine month periods ended September 30, 2011 and 2010, the Company received
dividends of $252 and $616, respectively and during the three month period ended September 30, 2011
and 2010, the Company received dividends of $252 and $0, respectively. Included in the trade
accounts payable at September 30, 2011 and December 31, 2010 was an amount of $120 and $121,
respectively, which was due to Acropolis.
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
Management fees: Pursuant to a management agreement dated November 16, 2007, Navios Holdings
provides commercial and technical management services to Navios Partners’ vessels for a daily fixed
fee of $4 per owned Panamax vessel and $5 per owned Capesize vessel. This daily fee covers all of
the vessels’ operating expenses, including the cost of drydock and special surveys. The daily
initial term of the agreement is five years commencing from November 16, 2007. Total management
fees for the three month periods ended September 30, 2011 and 2010 amounted to $7,903 and $5,170,
respectively and for the nine month periods ended September 30, 2011 and 2010, amounted to $19,607
and $14,064, respectively. On October 27, 2009, the fixed fee period was extended for two years and
the daily fees were amended to $4.5 per owned Ultra Handymax vessel, $4.4 per owned Panamax vessel
and $5.5 per owned Capesize vessel. In October 2011, the fixed fee period was further extended
until December 31, 2017 and the daily fees were amended to $4.7 per owned Ultra Handymax vessel,
$4.6 per owned Panamax vessel and $5.7 per owned Capesize vessel through December 31, 2013. From
January 2014 to December 2017, Navios Partners will reimburse Navios Holdings for all of the actual
operating costs and expenses in connection with the management of Navios Partners’ fleet.
Pursuant to a management agreement dated May 28, 2010, as amended on September 10, 2010, for
five years from the closing of Navios Acquisition’s initial vessel acquisition. Navios Holdings
provides commercial and technical management services to Navios Acquisition’s vessels for a daily
fee of $6 per owned MR2 product tanker and chemical tanker vessel and $7 per owned LR1 product
tanker vessel and $10 per owned VLCC vessel, for the first two years with the fixed daily fees
adjusted for the remainder of the term based on then-current market fees. This daily fee covers all
of the vessels’ operating expenses, other than certain extraordinary fees and costs. During the
remaining three years of the term of the Management Agreement, Navios Acquisition expects that it
will reimburse Navios Holdings for all of the actual operating costs and expenses it incurs in
connection with the management of its fleet. Actual operating costs and expenses will be determined
in a manner consistent with how the initial $6 and $7 fixed fees were determined. Drydocking
expenses will be fixed under this agreement for up to $300 per vessel and will be reimbursed at
cost for VLCC vessels. Total management fees for the three month periods ended September 30, 2011
and 2010 amounted to $9,768 and $2,534, respectively, and for the nine month periods ended
September 30, 2011 and 2010, amounted to $25,408 and $2,548, respectively. The management fees have
been eliminated upon consolidation of Navios Acquisition through March 30, 2011.
General & administrative expenses: Pursuant to the administrative services agreement dated
November 16, 2007, Navios Holdings provides administrative services to Navios Partners which
include: bookkeeping, audit and accounting services, legal and insurance services, administrative
and clerical services, banking and financial services, advisory services, client and investor
relations and other services. Navios Holdings is reimbursed for reasonable costs and expenses
incurred in connection with the provision of these services. Total general and administrative fees
charged for the three month periods ended September 30, 2011 and 2010 amounted to $900 and $698,
respectively, and for the nine month periods ended September 30, 2011 and 2010 amounted to $2,547
and $2,000, respectively.
On May 28, 2010, Navios Acquisition entered into an administrative services agreement,
expiring May 28, 2015, with Navios Holdings, pursuant to which Navios Holdings provides office
space and 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. Navios Holdings is reimbursed for reasonable costs and expenses incurred in connection
with the provision of these services. Total general and administrative fees charged for the three
month periods ended September 30, 2011 and 2010 amounted to $423 and $91, respectively, and for the
nine month periods ended September 30, 2011 and 2010 amounted to $1,077 and $140, respectively.
On April 12, 2011, Navios Holdings entered into an administrative services agreement with
Navios Logistics for a term of five years, pursuant to which Navios Holdings provides certain
administrative management services to Navios Logistics. Such services 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. Navios
Holdings is reimbursed for reasonable costs and expenses incurred in connection with the provision
of these services. Total general and administrative fees charged for the three month periods ended
September 30, 2011 and 2010 amounted to $125 and $0, respectively, and for the nine month periods
ended September 30, 2011 and 2010 amounted to $250 and $0, respectively.
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
Balance due from affiliate: Balance due from affiliate as of September 30, 2011 amounted to
$40,060 (December 31, 2010: $2,603) which includes the current amounts due from Navios Partners and
Navios Acquisition, which are $9,472 and $30,588, respectively. The balances mainly consist of
management fees, administrative fees and other expenses. Additionally, the balance due from Navios
Acquisition includes drydocking expenses.
Omnibus agreements: Navios Holdings entered into an omnibus agreement with Navios Partners
(the “Partners Omnibus Agreement”) in connection with the closing of Navios Partners’ IPO
governing, among other things, when Navios Holdings and Navios Partners may compete against each
other as well as rights of first offer on certain drybulk carriers. Pursuant to the Partners
Omnibus Agreement, Navios Partners generally agreed not to acquire or own Panamax or Capesize
drybulk carriers under time charters of three or more years without the consent of an independent
committee of Navios Partners. In addition, Navios Holdings agreed to offer to Navios Partners the
opportunity to purchase vessels from Navios Holdings when such vessels are fixed under time
charters of three or more years. The Partners Omnibus Agreement was amended in June 2009 to release
Navios Holdings for two years from restrictions on acquiring Capesize and Panamax vessels from
third parties.
Navios Acquisition entered into an omnibus agreement (the “Acquisition Omnibus Agreement”)
with Navios Holdings and 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 drybulk carriers subject to specific exceptions. Under the Acquisition Omnibus Agreement,
Navios Acquisition and its subsidiaries granted 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 it might own. These rights of first offer will not apply to a (a) sale, transfer
or other disposition of vessels between any affiliated subsidiaries, or pursuant to the terms of
any charter or other agreement with a counterparty, or (b) merger with or into, or sale of
substantially all of the assets to, an unaffiliated third party.
Sale of Vessels and Sale of Rights to Navios Partners:.Upon the sale of vessels to Navios
Partners, Navios Holdings recognizes the gain immediately in earnings only to the extent of the
interest in Navios Partners owned by third parties and defers recognition of the gain to the extent
of its own ownership interest in Navios Partners (the “deferred gain”). Subsequently, the deferred
gain is amortized to income over the remaining useful life of the vessel. The recognition of the
deferred gain is accelerated in the event that (i) the vessel is subsequently sold or otherwise
disposed of by Navios Partners or (ii) the Company’s ownership interest in Navios Partners is
reduced. In connection with the public offerings of common units by Navios Partners, a pro rata
portion of the deferred gain is released to income upon dilution of the Company’s ownership
interest in Navios Partners. As of September 30, 2011 and December 31, 2010, the unamortized
deferred gain for all vessels and rights sold totaled $43,747 and $38,599, respectively, and for
the three months ended September 30, 2011 and 2010, Navios Holdings recognized $2,745 and $2,073,
respectively, of the deferred gain in “Equity in net earnings of affiliated companies”. For the
nine months ended September 30, 2011 and 2010, Navios Holdings recognized $9,280 and $12,992,
respectively, of the deferred gain in “Equity in net earnings of affiliated companies”.
Purchase of Shares in Navios Acquisition: Refer to Note 3 for transactions related to the
share purchase of Navios Acquisition.
As
of March 30, 2011, following the Navios Acquisition Share Exchange (see Note 3), Navios
Holdings owned 18,331,551 shares or 45% of the outstanding voting stock of Navios Acquisition (see
Note 1, 3). As a result, from March 30, 2011, Navios Acquisition has been considered as an
affiliate entity of Navios Holdings and not as a controlled subsidiary of the Company, and the
investment in Navios Acquisition has been accounted for under the equity method due to the
Company’s significant influence over Navios Acquisition. Navios Acquisition has been accounted for
under the equity method of accounting based on Navios Holdings’ economic interest in Navios
Acquisition, which was 53.7% from March 30, 2011 until September 30, 2011 since the preferred stock
is considered to be in substance common stock for accounting
purposes. See Note 3 and Note 16 for a
discussion of recent changes to Navios Holdings’ voting power and economic interest in Navios
Acquisition.
Acquisition of Eleven Product Tanker and Two Chemical Tanker Vessels: On April 8, 2010,
pursuant to the terms and conditions of the Acquisition Agreement by and between Navios Acquisition
and Navios Holdings, Navios Acquisition agreed to acquire 13 vessels (11 product tankers and two
chemical tankers) plus options to purchase two additional product tankers, for an aggregate
purchase price of $457,659 (see Note 3).
F-36
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
Navios Acquisition Warrant Exercise Program: On September 2, 2010, Navios Acquisition
announced the successful completion of its warrant program (the “Warrant Exercise Program”). Under
the Warrant Exercise Program, holders of publicly traded warrants (“Public Warrants”) had the
opportunity to exercise the Public Warrants on enhanced terms through August 27, 2010. Navios
Holdings exercised 13,635,000 private warrants for a total $77,037 in cash. Navios Holdings
currently holds no warrants of Navios Acquisition.
The Navios Holdings Credit Facility: In connection with the VLCC Acquisition, Navios
Acquisition entered into a $40,000 credit facility with Navios Holdings. The $40,000 facility has a
margin of LIBOR plus 300 bps and a term of 18 months, maturing on April 1, 2012. Pursuant to an
amendment in October 2010, the facility will be available for multiple drawings up to a limit of
$40,000.” Pursuant to an amendment dated November 8, 2011, the maturity of the facility was
extended to December 2014. Following the issuance of the notes in October 2010 and during the first
half of 2011, Navios Acquisition prepaid $33,609 of this facility and, during the third quarter of
2011, Navios Acquisition drew down on $29,609 from the facility. As of September 30, 2011, the
outstanding amount under this facility was $36,000 and was recorded under “Loan receivable from
affiliate companies”.
NOTE 12: SEGMENT INFORMATION
The Company has three reportable segments from which it derives its revenues: Drybulk Vessel
Operations, Tanker Vessel Operations and Logistics Business. The reportable segments reflect the
internal organization of the Company and are strategic businesses that offer different products and
services. Starting in 2008, following the acquisition of Horamar and the formation of Navios
Logistics, the Company renamed its Port Terminal Segment as its Logistics Business Segment to
include the activities of Horamar, which provides similar products and services in the region that
Navios Holdings’ existing port facility currently operates. The Drybulk Vessel Operations business
consists of transportation and handling of bulk cargoes through ownership, operation, and trading
of vessels, freight, and FFAs. The Logistics Business Segment consists of our port terminal
business, barge business and cabotage business in the Hidrovia region of South America. Following
the formation of Navios Acquisition and its consolidation with Navios Holdings from May 25, 2010,
the Company included an additional reportable segment, the Tanker Vessel Operations business, which
consisted of transportation and handling of liquid cargoes through ownership, operation, and
trading of tanker vessels.
The Company measures segment performance based on net income. Inter-segment sales and
transfers are not significant and have been eliminated and are not included in the following
tables. Summarized financial information concerning each of the Company’s reportable segments is as
follows:
F-37
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NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Drybulk Vessel Operations | Logistics Business | Tanker Vessel Operations | Total | |||||||||||||||||||||||||||||
| Three Month | Three Month | Three Month | Three Month | Three Month | Three Month | Three Month | Three Month | |||||||||||||||||||||||||
| Period Ended | Period Ended | Period Ended | Period Ended | Period Ended | Period Ended | Period Ended | Period Ended | |||||||||||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||||||
Revenue |
$ | 104,963 | $ | 106,773 | $ | 68,847 | $ | 55,302 | $ | — | $ | 8,102 | $ | 173,810 | $ | 170,177 | ||||||||||||||||
Loss on derivatives |
(3 | ) | (37 | ) | — | — | — | — | (3 | ) | (37 | ) | ||||||||||||||||||||
Interest income/expense and
finance cost, net |
(19,161 | ) | (20,186 | ) | (5,111 | ) | (1,113 | ) | — | (1,188 | ) | (24,272 | ) | (22,487 | ) | |||||||||||||||||
Depreciation and amortization |
(19,091 | ) | (15,958 | ) | (5,531 | ) | (5,530 | ) | — | (2,376 | ) | (24,622 | ) | (23,864 | ) | |||||||||||||||||
Equity in net earnings of
affiliated companies |
7,956 | 9,661 | — | — | — | — | 7,956 | 9,661 | ||||||||||||||||||||||||
Net income/(loss)
attributable to Navios
Holdings common stockholders |
17,264 | 17,726 | (974 | ) | 930 | — | (4,016 | ) | 16,290 | 14,640 | ||||||||||||||||||||||
Total assets |
2,479,390 | 2,701,459 | 444,683 | 378,508 | — | 716,024 | 2,924,073 | 3,795,991 | ||||||||||||||||||||||||
Capital expenditures |
26,960 | 33,691 | 33,795 | 4,589 | — | 73,190 | 60,755 | 111,470 | ||||||||||||||||||||||||
Goodwill |
56,240 | 56,239 | 104,096 | 105,048 | — | 15,137 | 160,336 | 176,424 | ||||||||||||||||||||||||
Investments in affiliates |
115,590 | 16,556 | — | — | — | — | 115,590 | 16,556 | ||||||||||||||||||||||||
Cash and cash equivalents |
137,094 | 60,252 | 57,843 | 32,742 | — | 40,206 | 194,937 | 133,200 | ||||||||||||||||||||||||
Restricted cash (including
current and non current
portion) |
17,557 | 160,750 | — | 461 | — | 37,443 | 17,557 | 198,654 | ||||||||||||||||||||||||
Long term debt (including
current and non current
portion) |
$ | 1,247,290 | $ | 1,477,735 | $ | 200,685 | $ | 114,756 | $ | — | $ | 612,981 | $ | 1,447,975 | $ | 2,205,472 | ||||||||||||||||
| Drybulk Vessel Operations | Logistics Business | Tanker Vessel Operations | Total | |||||||||||||||||||||||||||||
| Nine Month | Nine Month | Nine Month | Nine Month | Nine Month | Nine Month | Nine Month | Nine Month | |||||||||||||||||||||||||
| Period Ended | Period Ended | Period Ended | Period Ended | Period Ended | Period Ended | Period Ended | Period Ended | |||||||||||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||||||
Revenue |
$ | 327,897 | $ | 338,720 | $ | 167,908 | $ | 143,143 | $ | 25,130 | $ | 8,128 | $ | 520,935 | $ | 489,991 | ||||||||||||||||
(Loss)/gain on derivatives |
(85 | ) | 4,005 | — | — | — | — | (85 | ) | 4,005 | ||||||||||||||||||||||
Interest income/expense
and finance cost, net |
(59,222 | ) | (60,471 | ) | (11,270 | ) | (3,153 | ) | (8,350 | ) | (1,254 | ) | (78,842 | ) | (64,878 | ) | ||||||||||||||||
Depreciation and
amortization |
(57,686 | ) | (51,919 | ) | (16,609 | ) | (16,872 | ) | (8,045 | ) | (2,380 | ) | (82,340 | ) | (71,171 | ) | ||||||||||||||||
Equity in net earnings of
affiliated companies |
22,702 | 29,417 | — | — | — | — | 22,702 | 29,417 | ||||||||||||||||||||||||
Net income/(loss)
attributable to Navios
Holdings common
stockholders |
65,148 | 94,426 | 628 | 2,122 | (36,781 | ) | (4,098 | ) | 28,995 | 92,450 | ||||||||||||||||||||||
Total assets |
2,479,390 | 2,701,459 | 444,683 | 378,508 | — | 716,024 | 2,924,073 | 3,795,991 | ||||||||||||||||||||||||
Capital expenditures |
79,112 | 357,687 | 66,947 | 9,201 | 7,528 | 113,980 | 153,587 | 480,868 | ||||||||||||||||||||||||
Goodwill |
56,240 | 56,239 | 104,096 | 105,048 | — | 15,137 | 160,336 | 176,424 | ||||||||||||||||||||||||
Investments in affiliates |
115,590 | 16,566 | — | — | — | — | 115,590 | 16,566 | ||||||||||||||||||||||||
Cash and cash equivalents |
137,094 | 60,252 | 57,843 | 32,742 | — | 40,206 | 194,937 | 133,200 | ||||||||||||||||||||||||
Restricted cash
(including current and
non current portion) |
17,557 | 160,750 | — | 461 | — | 37,443 | 17,557 | 198,654 | ||||||||||||||||||||||||
Long term debt (including
current and non current
portion) |
$ | 1,247,290 | $ | 1,477,735 | $ | 200,685 | $ | 114,756 | $ | — | $ | 612,981 | $ | 1,447,975 | $ | 2,205,472 | ||||||||||||||||
F-38
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTE 13: EARNINGS PER COMMON SHARE
Earnings per share are calculated by dividing net income by the average number of shares of
Navios Holdings outstanding during the period.
| Three Month | Three Month | |||||||
| Period Ended | Period Ended | |||||||
| September 30, 2011 | September 30, 2010 | |||||||
Numerator: |
||||||||
Net income attributable to Navios Holdings common stockholders |
$ | 16,290 | $ | 14,640 | ||||
Less: |
||||||||
Dividend on preferred stock |
(427 | ) | (602 | ) | ||||
Income available to Navios Holdings common stockholders, basic |
$ | 15,863 | $ | 14,038 | ||||
Plus: |
||||||||
Dividend on preferred stock |
427 | 602 | ||||||
Interest on convertible debt and amortization of convertible bond discount |
— | 322 | ||||||
Income available to Navios Holdings common stockholders, diluted |
$ | 16,290 | $ | 14,962 | ||||
Denominator: |
||||||||
Denominator for basic net income per share attributable to Navios Holdings
common stockholders — weighted average shares |
100,963,351 | 100,559,330 | ||||||
Dilutive potential common shares |
818,384 | 654,229 | ||||||
Convertible preferred stock and convertible debt |
8,479,000 | 15,593,846 | ||||||
Dilutive effect of securities |
9,297,384 | 16,248,075 | ||||||
Denominator for diluted net income per share attributable to Navios Holdings
common stockholders — adjusted weighted shares and assumed conversions |
110,260,735 | 116,807,405 | ||||||
Basic net income per share attributable to Navios Holdings common stockholders |
$ | 0.16 | $ | 0.14 | ||||
Diluted net income per share attributable to Navios Holdings common stockholders |
$ | 0.15 | $ | 0.13 | ||||
F-39
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Nine Month | Nine Month | |||||||
| Period Ended | Period Ended | |||||||
| September 30, 2011 | September 30, 2010 | |||||||
Numerator: |
||||||||
Net income attributable to Navios Holdings common stockholders |
$ | 28,995 | $ | 92,450 | ||||
Less: |
||||||||
Dividend on preferred stock |
(1,268 | ) | (1,617 | ) | ||||
Income available to Navios Holdings common stockholders, basic |
$ | 27,727 | $ | 90,833 | ||||
Plus |
||||||||
Dividend on preferred stock |
1,268 | 1,617 | ||||||
Interest on convertible debt and amortization of convertible bond discount |
— | 957 | ||||||
Income available to Navios Holdings common stockholders, diluted |
$ | 28,995 | $ | 93,407 | ||||
Denominator: |
||||||||
Denominator for basic net income per share attributable to Navios
Holdings common stockholders — weighted average shares |
100,922,197 | 100,485,842 | ||||||
Dilutive potential common shares |
885,780 | 738,308 | ||||||
Convertible preferred stock and convertible debt |
8,479,000 | 13,920,400 | ||||||
Dilutive effect of securities |
9,377,427 | 14,659,432 | ||||||
Denominator for diluted net income per share attributable to Navios
Holdings common stockholders — adjusted weighted shares and assumed
conversions |
110,299,623 | 115,145,274 | ||||||
Basic net income per share attributable to Navios Holdings common
stockholders |
$ | 0.27 | $ | 0.90 | ||||
Diluted net income per share attributable to Navios Holdings common
stockholders |
$ | 0.26 | $ | 0.81 | ||||
For
the three and nine month periods ended September 30, 2011 and
September 30, 2010, dilutive potential common shares include
restricted stock, restricted units and stock options.
NOTE 14: INVESTMENT IN AFFILIATES
Navios Maritime Partners L.P.
On August 7, 2007, Navios Holdings formed Navios Partners under the laws of Marshall Islands.
Navios Partners is considered an affiliate entity of Navios Holdings and is not a controlled
subsidiary of the Company. Navios GP L.L.C. (the “General Partner”), a wholly owned subsidiary of
Navios Holdings, was also formed on that date to act as the general partner of Navios Partners and
received a 2% general partner interest.
Navios Partners is engaged in the seaborne transportation services of a wide range of drybulk
commodities including iron ore, coal, grain and fertilizer, chartering its vessels under medium to
long-term charters. The operations of Navios Partners are managed by Navios Shipmanagement Inc.
(the “Manager”), from its offices in Piraeus, Greece.
As of September 30, 2011 and December 31, 2010, the carrying amount of the investment in
Navios Partners (subordinated units and general partner units) accounted for under the equity
method was $10,200 and $12,218, respectively. The common units received from the sale of certain
vessels to Navios Partners totaling 5,601,920 were accounted for under investment in available for
sale securities. As of September 30, 2011 and December 31, 2010, the carrying amount of the
investment in available for sale common units was $74,506 and $99,078, respectively.
Dividends received during the three month periods ended September 30, 2011 and 2010 were
$6,664 and $5,499, respectively, and for the nine month periods ended September 30, 2011 and 2010
were $18,976 and $15,661, respectively.
F-40
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
Acropolis Chartering and Shipping Inc.
Navios Holdings has a 50% interest in Acropolis, a brokerage firm for freight and shipping
charters. Although Navios Holdings owns 50% of Acropolis’ stock, Navios Holdings agreed with the
other shareholder that the earnings and amounts declared by way of dividends will be allocated 35%
to the Company with the balance to the other shareholder. As of September 30, 2011 and December 31,
2010, the carrying amount of the investment was $529 and $385, respectively. During the three month
periods ended September 30, 2011 and 2010, the Company received $252 and $0, respectively, and
during the nine month periods ended September 30, 2011 and 2010, the Company received $252 and
$616, respectively.
Navios Maritime Acquisition Corporation
On July 1, 2008, the Company completed the IPO of units in its noncontrolled subsidiary,
Navios Acquisition. At the time of the IPO, Navios Acquisition was a blank check company. In the
offering, Navios Acquisition sold 25,300,000 units for an aggregate purchase price of $253,000.
Each unit consisted of one share of Navios Acquisition’s common stock and one Sponsor Warrant.
Navios Acquisition at the time was not a controlled subsidiary of the Company but was accounted for
under the equity method due to the Company’s significant influence over Navios Acquisition.
On May 28, 2010, certain stockholders of Navios Acquisition redeemed their shares
pursuant to redemption rights granted in the IPO upon de-“SPAC”-ing, and Navios Holdings’ ownership
of Navios Acquisition increased to 57.3%. At that point, Navios Holdings obtained control over
Navios Acquisition and, consequently, concluded that a business combination had occurred and has
consolidated the results of Navios Acquisition from that date onwards (see Note 1, 3) until March
30, 2011.
F-41
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
In connection with the Navios Acquisition Share Exchange, Navios Holdings exchanged 7.676.000
shares of Navios Acquisition common stock it held for 1,000 shares of non-voting Series C preferred
stock of Navios Acquisition. The fair value of the exchange was $30,474. Following the Navios
Acquisition Share Exchange, Navios Holdings had 45% of the voting power and 53.7% of the economic
interest in Navios Acquisition. As a result, from March 30,
2011, Navios Acquisition has been
considered as an affiliate entity of Navios Holdings and not as a controlled subsidiary of the
Company, and the investment in Navios Acquisition has been accounted for under the equity method
due to the Company’s significant influence over Navios Acquisition. Navios Acquisition has been
accounted for under the equity method of accounting based on Navios Holdings’ economic interest in
Navios Acquisition which was 53.7% from March 30, 2011 until September 30, 2011 since the preferred
stock is considered to be in substance common stock for accounting
purposes. See Note 3 and Note 16 for
a discussion of recent changes to Navios Holdings’ voting power and economic interest in Navios
Acquisition.
Dividends received during the three month periods ended September 30, 2011 and 2010 were
$1,300 and $0, respectively, and for the nine month periods ended September 30, 2011 and 2010 were
$3,901 and $0, respectively.
Summarized financial information of the affiliated companies is presented below:
| September 30, 2011 | December 31, 2010 | |||||||||||||||
| Navios | Navios | Navios | Navios | |||||||||||||
| Balance Sheet | Partners | Acquisition | Partners | Acquisition | ||||||||||||
Current assets |
$ | 65,968 | $ | 81,129 | $ | 55,612 | $ | 81,202 | ||||||||
Noncurrent assets |
863,684 | 1,064,616 | 785,273 | 923,885 | ||||||||||||
Current liabilities |
55,648 | 69,595 | 45,425 | 29,025 | ||||||||||||
Noncurrent liabilities |
308,196 | 836,137 | 303,957 | 722,334 | ||||||||||||
| Three Month Period Ended | Three Month Period Ended | |||||||||||||||
| September 30, 2011 | September 30, 2010 | |||||||||||||||
| Navios | Navios | Navios | Navios | |||||||||||||
| Income Statement | Partners | Acquisition | Partners | Acquisition | ||||||||||||
Revenue |
$ | 48,011 | $ | 31,127 | $ | 38,074 | $ | 8,102 | ||||||||
Net income/(loss) |
16,563 | (2,767 | ) | 16,345 | (6,512 | ) | ||||||||||
| Nine Month Period Ended | Nine Month Period Ended | |||||||||||||||
| September 30, 2011 | September 30, 2010 | |||||||||||||||
| Navios | Navios | Navios | Navios | |||||||||||||
| Income Statement | Partners | Acquisition | Partners | Acquisition | ||||||||||||
Revenue |
$ | 136,490 | $ | 82,274 | $ | 100,742 | $ | 8,128 | ||||||||
Net income/(loss) |
46,674 | (6,372 | ) | 42,114 | (9,118 | ) | ||||||||||
NOTE 15: OTHER FINANCIAL INFORMATION
The Company’s 8.125% senior notes issued on January 28, 2011 are fully and unconditionally
guaranteed on a joint and several basis by all of the Company’s subsidiaries with the exception of
NMF, Navios Maritime Finance (US) Inc., Navios Acquisition and its subsidiaries and Navios
Logistics and its subsidiaries and designated as unrestricted subsidiaries or those not required by
the indenture (see Note 7). The subsidiary guarantees are “full and unconditional”, as those terms
are used in Regulation S-X Rule 3-10, except that the indenture provides for an individual subsidiary’s
guarantee to be automatically released in certain customary circumstances, such as when a
subsidiary is sold or all of the assets of the subsidiary are sold,
the capital stock is sold, when
the subsidiary is designated as an “unrestricted subsidiary” for purposes of the indenture, upon
liquidation or dissolution of the subsidiary or upon legal or covenant defeasance or satisfaction
and discharge of the notes. All subsidiaries, except for the non-guarantor subsidiaries of Navios
Logistics, are 100% owned. As of March 30, 2011, following the Navios Acquisition Share Exchange,
Navios Acquisition is no longer a subsidiary of Navios Holdings.
F-42
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
As a result, from March 30, 2011, Navios Acquisition has been considered an affiliate entity
and not as a controlled subsidiary of the Company, and the investment in Navios Acquisition has
been accounted for under the equity method due to Navios Holdings’ significant influence over
Navios Acquisition. Navios Acquisition has been accounted for under the equity method of accounting
based on Navios Holdings’ economic interest in Navios Acquisition, which was 53.7% from March 30,
2011 until September 30, 2011 since the preferred stock is considered to be in substance common
stock for accounting purposes. These condensed consolidating statements of Navios Holdings, the
guarantor subsidiaries and the non-guarantor subsidiaries have been prepared in accordance on an
equity basis as permitted by U.S. GAAP.
| Navios | ||||||||||||||||||||
| Maritime | Other | |||||||||||||||||||
| Holdings Inc. | Guarantor | Non Guarantor | ||||||||||||||||||
| Issuer | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||||||
Income Statement for the three
months ended September 30, 2011 |
||||||||||||||||||||
Revenue |
$ | — | 104,963 | 68,847 | — | 173,810 | ||||||||||||||
Time charter, voyage and port terminal
expenses |
— | (38,185 | ) | (34,977 | ) | — | (73,162 | ) | ||||||||||||
Direct vessel expenses |
— | (9,423 | ) | (18,813 | ) | — | (28,236 | ) | ||||||||||||
General and administrative expenses |
(3,820 | ) | (5,014 | ) | (3,602 | ) | — | (12,436 | ) | |||||||||||
Depreciation and amortization |
(708 | ) | (18,383 | ) | (5,531 | ) | — | (24,622 | ) | |||||||||||
Interest income/expense and finance
cost, net |
(16,600 | ) | (2,559 | ) | (5,113 | ) | — | (24,272 | ) | |||||||||||
Loss on derivatives |
— | (3 | ) | — | — | (3 | ) | |||||||||||||
Gain on sale of assets |
— | — | 35 | — | 35 | |||||||||||||||
Other income/(expense), net |
6 | (87 | ) | (3,356 | ) | — | (3,437 | ) | ||||||||||||
(Loss)/income before equity in net
earnings of affiliated companies |
(21,122 | ) | 31,309 | (2,510 | ) | — | 7,677 | |||||||||||||
Income/(loss) from subsidiaries |
33,645 | (3,081 | ) | — | (30,564 | ) | — | |||||||||||||
Equity in net earnings of affiliated companies |
3,767 | 4,189 | — | — | 7,956 | |||||||||||||||
Income/(loss) before taxes |
16,290 | 32,417 | (2,510 | ) | (30,564 | ) | 15,633 | |||||||||||||
Income tax (expense)/benefit |
— | (220 | ) | 537 | — | 317 | ||||||||||||||
Net income/(loss) |
16,290 | 32,197 | (1,973 | ) | (30,564 | ) | 15,950 | |||||||||||||
Less: Net loss attributable to the
noncontrolling interest |
— | — | 340 | — | 340 | |||||||||||||||
Net income/(loss) attributable to
Navios Holdings common stockholders |
$ | 16,290 | 32,197 | (1,633 | ) | (30,564 | ) | 16,290 | ||||||||||||
F-43
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Navios | ||||||||||||||||||||
| Maritime | Other | |||||||||||||||||||
| Holdings Inc. | Guarantor | Non Guarantor | ||||||||||||||||||
| Issuer | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||||||
Income Statement for the three months
ended September 30, 2010 |
||||||||||||||||||||
Revenue |
$ | — | $ | 102,851 | $ | 67,326 | $ | — | $ | 170,177 | ||||||||||
Time charter, voyage and logistics business
expenses |
— | (45,438 | ) | (23,954 | ) | — | (69,392 | ) | ||||||||||||
Direct vessel expenses |
— | (7,418 | ) | (18,794 | ) | — | (26,212 | ) | ||||||||||||
General and administrative expenses |
(3,504 | ) | (4,483 | ) | (12,018 | ) | — | (20,005 | ) | |||||||||||
Depreciation and amortization |
(708 | ) | (16,103 | ) | (7,053 | ) | — | (23,864 | ) | |||||||||||
Interest income/expense and finance cost, net |
(18,759 | ) | (508 | ) | (3,220 | ) | — | (22,487 | ) | |||||||||||
Gain/(loss) on derivatives |
5,888 | (5,925 | ) | — | — | (37 | ) | |||||||||||||
Gain/(loss) on change in control |
17,742 | (17,742 | ) | — | — | — | ||||||||||||||
Other
(expense)/income, net |
(23,602 | ) | 23,747 | (3,944 | ) | — | (3,799 | ) | ||||||||||||
(Loss)/income before equity in net earnings
of affiliated companies |
(22,943 | ) | 28,981 | (1,657 | ) | — | 4,381 | |||||||||||||
Income/(loss) from subsidiaries |
30,141 | 3,032 | — | (33,173 | ) | — | ||||||||||||||
Equity in net earnings of affiliated companies |
7,442 | 2,219 | — | — | 9,661 | |||||||||||||||
Income/(loss) before taxes |
14,640 | 34,232 | (1,657 | ) | (33,173 | ) | 14,042 | |||||||||||||
Income taxes |
— | (76 | ) | (168 | ) | — | (244 | ) | ||||||||||||
Net income/(loss) |
14,640 | 34,156 | (1,825 | ) | (33,173 | ) | 13,798 | |||||||||||||
Less: Net loss attributable to the
noncontrolling interest |
— | — | 842 | — | 842 | |||||||||||||||
Net income/(loss) attributable to Navios
Holdings common stockholders |
$ | 14,640 | $ | 34,156 | $ | (983 | ) | $ | (33,173 | ) | $ | 14,640 | ||||||||
F-44
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Navios | ||||||||||||||||||||
| Maritime | Other | |||||||||||||||||||
| Holdings Inc. | Guarantor | Non Guarantor | ||||||||||||||||||
| Issuer | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||||||
Income Statement for the nine
months ended September 30, 2011 |
||||||||||||||||||||
Revenue |
$ | — | 318,304 | 202,631 | — | 520,935 | ||||||||||||||
Time charter, voyage and port
terminal expenses |
— | (123,341 | ) | (73,783 | ) | — | (197,124 | ) | ||||||||||||
Direct vessel expenses |
— | (32,511 | ) | (57,970 | ) | — | (90,481 | ) | ||||||||||||
General and administrative expenses |
(11,329 | ) | (16,216 | ) | (11,576 | ) | — | (39,121 | ) | |||||||||||
Depreciation and amortization |
(2,102 | ) | (54,429 | ) | (25,809 | ) | — | (82,340 | ) | |||||||||||
Interest income/expense and
finance cost, net |
(50,946 | ) | (7,867 | ) | (20,029 | ) | — | (78,842 | ) | |||||||||||
Loss on derivatives |
— | (85 | ) | — | — | (85 | ) | |||||||||||||
Loss on change in control |
(35,325 | ) | — | — | — | (35,325 | ) | |||||||||||||
Gain on sale of assets |
— | 38,787 | 35 | — | 38,822 | |||||||||||||||
Loss on bond extinguishment |
(21,199 | ) | — | — | — | (21,199 | ) | |||||||||||||
Other expense, net |
(100 | ) | (854 | ) | (7,203 | ) | — | (8,157 | ) | |||||||||||
(Loss)/income before equity in net
earnings of affiliated companies |
(121,001 | ) | 121,788 | 6,296 | — | 7,083 | ||||||||||||||
Income/(loss) from subsidiaries |
136,971 | 5,882 | — | (142,853 | ) | — | ||||||||||||||
Equity in net earnings of
affiliated companies |
13,025 | 9,677 | — | — | 22,702 | |||||||||||||||
Income/(loss) before taxes |
28,995 | 137,347 | 6,296 | (142,853 | ) | 29,785 | ||||||||||||||
Income tax (expense)/ benefit |
— | (220 | ) | 356 | — | 136 | ||||||||||||||
Net income/(loss) |
28,995 | 137,127 | 6,652 | (142,853 | ) | 29,921 | ||||||||||||||
Less: Net income attributable to
the noncontrolling interest |
— | — | (911 | ) | — | (911 | ) | |||||||||||||
Add: Preferred stock dividends
attributable to the noncontrolling
interest |
— | — | 12 | — | 12 | |||||||||||||||
Less: Preferred stock dividends of
subsidiaries |
— | — | (27 | ) | — | (27 | ) | |||||||||||||
Net income/(loss) attributable to
Navios Holdings common
stockholders |
$ | 28,995 | 137,127 | 5,726 | (142,853 | ) | 28,995 | |||||||||||||
F-45
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Navios | ||||||||||||||||||||
| Maritime | Other | |||||||||||||||||||
| Holdings Inc. | Guarantor | Non Guarantor | ||||||||||||||||||
| Issuer | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||||||
Income Statement for the nine months
ended September 30, 2010 |
||||||||||||||||||||
Revenue |
$ | — | $ | 321,942 | $ | 168,049 | $ | — | $ | 489,991 | ||||||||||
Time charter, voyage and logistics business
expenses |
— | (153,159 | ) | (64,964 | ) | — | (218,123 | ) | ||||||||||||
Direct vessel expenses |
— | (23,459 | ) | (43,906 | ) | — | (67,365 | ) | ||||||||||||
General and administrative expenses |
(11,706 | ) | (13,744 | ) | (18,099 | ) | — | (43,549 | ) | |||||||||||
Depreciation and amortization |
(2,102 | ) | (46,487 | ) | (22,582 | ) | — | (71,171 | ) | |||||||||||
Interest expense and finance cost, net |
(54,936 | ) | (3,275 | ) | (6,667 | ) | — | (64,878 | ) | |||||||||||
Gain/(loss) on derivatives |
5,888 | (1,883 | ) | — | — | 4,005 | ||||||||||||||
Gain on sale of assets |
— | 26,134 | — | — | 26,134 | |||||||||||||||
Gain on change in control |
17,742 | — | — | — | 17,742 | |||||||||||||||
Other income/(expense), net |
86 | (1,983 | ) | (8,706 | ) | — | (10,603 | ) | ||||||||||||
(Loss)/income before equity in net earnings
of affiliated companies |
(45,028 | ) | 104,086 | 3,125 | — | 62,183 | ||||||||||||||
Income/(loss) from subsidiaries |
121,532 | 8,291 | — | (129,823 | ) | — | ||||||||||||||
Equity in net earnings of affiliated companies |
15,946 | 13,471 | — | 29,417 | ||||||||||||||||
Income/(loss) before taxes |
92,450 | 125,848 | 3,125 | (129,823 | ) | 91,600 | ||||||||||||||
Income tax
(expense)/benefit |
— | (219 | ) | 876 | 657 | |||||||||||||||
Net
income/(loss) |
92,450 | 125,629 | 4,001 | (129,823 | ) | 92,257 | ||||||||||||||
Less: Net loss attributable to the
noncontrolling interest |
— | — | 193 | — | 193 | |||||||||||||||
Net
income/(loss) attributable to Navios Holdings
common stockholders |
$ | 92,450 | $ | 125,629 | $ | 4,194 | $ | (129,823 | ) | $ | 92,450 | |||||||||
F-46
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Navios | ||||||||||||||||||||
| Maritime | Other | Non | ||||||||||||||||||
| Holdings Inc. | Guarantor | Guarantor | ||||||||||||||||||
| Balance Sheet as of September 30, 2011 | Issuer | Subsidiaries | Subsidiaries | Eliminations | Total | |||||||||||||||
Current assets |
||||||||||||||||||||
Cash and cash equivalents |
30,143 | 106,952 | 57,842 | — | 194,937 | |||||||||||||||
Restricted cash |
15,059 | 2,498 | — | — | 17,557 | |||||||||||||||
Accounts receivable, net |
— | 86,372 | 21,981 | — | 108,353 | |||||||||||||||
Intercompany receivables |
116,396 | — | 62,981 | (179,377 | ) | — | ||||||||||||||
Short-term derivative asset |
— | 1,316 | — | — | 1,316 | |||||||||||||||
Due from affiliate companies |
1,300 | 37,888 | 872 | — | 40,060 | |||||||||||||||
Prepaid expenses and other current assets |
5,321 | 27,667 | 15,214 | — | 48,202 | |||||||||||||||
Total current assets |
168,219 | 262,693 | 158,890 | (179,377 | ) | 410,425 | ||||||||||||||
Deposits for vessel acquisitions |
— | 27,308 | — | — | 27,308 | |||||||||||||||
Vessels, port terminal and other fixed
assets, net |
— | 1,433,362 | 349,818 | — | 1,783,180 | |||||||||||||||
Investments in subsidiaries |
1,377,572 | 268,985 | — | (1,646,557 | ) | — | ||||||||||||||
Investments in available for sale securities |
74,506 | — | — | — | 74,506 | |||||||||||||||
Investments in affiliates |
115,051 | 539 | — | — | 115,590 | |||||||||||||||
Other long-term assets |
16,221 | 33,797 | 17,408 | — | 67,426 | |||||||||||||||
Loan receivable from affiliate companies |
36,000 | — | — | — | 36,000 | |||||||||||||||
Long-term derivative asset |
— | 45 | — | — | 45 | |||||||||||||||
Goodwill and other intangibles |
98,710 | 141,813 | 169,070 | — | 409,593 | |||||||||||||||
Total noncurrent assets |
1,718,060 | 1,905,849 | 536,296 | (1,646,557 | ) | 2,513,648 | ||||||||||||||
Total assets |
1,886,279 | 2,168,542 | 695,186 | (1,825,934 | ) | 2,924,073 | ||||||||||||||
LIABILITIES AND EQUITY |
||||||||||||||||||||
Account payable |
— | 26,048 | 28,922 | — | 54,970 | |||||||||||||||
Accrued expenses |
18,590 | 46,556 | 21,635 | — | 86,781 | |||||||||||||||
Dividends payable |
6,101 | — | — | — | 6,101 | |||||||||||||||
Deferred income and cash received in advance |
— | 27,922 | — | — | 27,922 | |||||||||||||||
Intercompany Payables/ Due to affiliate
companies |
— | 178,685 | 692 | (179,377 | ) | — | ||||||||||||||
Current portion of capital lease obligations |
— | — | 31,330 | — | 31,330 | |||||||||||||||
Current portion of long-term debt |
7,382 | 62,856 | 69 | — | 70,307 | |||||||||||||||
Total current liabilities |
32,073 | 342,067 | 82,648 | (179,377 | ) | 277,411 | ||||||||||||||
Long-term debt, net of current portion |
809.350 | 367,702 | 200,616 | — | 1,377,668 | |||||||||||||||
Other long-term liabilities and deferred
income |
— | 35,450 | 5,377 | — | 40,827 | |||||||||||||||
Unfavorable lease terms |
— | 46,400 | — | 46,400 | ||||||||||||||||
Deferred tax liability |
— | — | 19,920 | — | 19,920 | |||||||||||||||
Total noncurrent liabilities |
809,350 | 449,552 | 225,913 | — | 1,484,815 | |||||||||||||||
Total liabilities |
841,423 | 791,619 | 308,561 | (179,377 | ) | 1,762,226 | ||||||||||||||
Noncontrolling interest |
— | — | 116,991 | — | 116,991 | |||||||||||||||
Total Navios Holdings stockholders’ equity |
1,044,856 | 1,376,923 | 269,634 | (1,646,557 | ) | 1,044,856 | ||||||||||||||
Total liabilities and stockholders’ equity |
1,886,279 | 2,168,542 | 695,186 | (1,825,934 | ) | 2,924,073 | ||||||||||||||
F-47
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Navios | ||||||||||||||||||||
| Maritime | Other | Non | ||||||||||||||||||
| Holdings Inc. | Guarantor | Guarantor | ||||||||||||||||||
| Balance Sheet as of December 31, 2010 | Issuer | Subsidiaries | Subsidiaries | Eliminations | Total | |||||||||||||||
Current assets |
||||||||||||||||||||
Cash and cash equivalent |
$ | 6,323 | $ | 97,676 | $ | 103,411 | $ | — | $ | 207,410 | ||||||||||
Restricted cash |
15,726 | 3,488 | 15,576 | — | 34,790 | |||||||||||||||
Accounts receivable, net |
— | 48,731 | 21,657 | — | 70,388 | |||||||||||||||
Intercompany receivables |
173,796 | — | 77,705 | (251,501 | ) | — | ||||||||||||||
Short term derivative assets |
— | 1,420 | — | — | 1,420 | |||||||||||||||
Due from affiliate companies |
— | 3,422 | (819 | ) | — | 2,603 | ||||||||||||||
Prepaid expenses and other current assets |
164 | 17,410 | 15,780 | — | 33,354 | |||||||||||||||
Total current assets |
196,009 | 172,147 | 233,310 | (251,501 | ) | 349,965 | ||||||||||||||
Deposit for vessel acquisitions |
— | 80,834 | 296,690 | — | 377,524 | |||||||||||||||
Vessels, port terminal and other fixed
assets, net |
— | 1,345,983 | 903,694 | — | 2,249,677 | |||||||||||||||
Loan receivable from Navios Acquisition |
12,391 | — | (12,391 | ) | — | — | ||||||||||||||
Restricted cash |
— | — | 18,787 | — | 18,787 | |||||||||||||||
Long term derivative assets |
— | 149 | — | — | 149 | |||||||||||||||
Investments in subsidiaries |
1,405,723 | 256,178 | — | (1,661,901 | ) | — | ||||||||||||||
Investment in available for sale securities |
99,078 | — | — | — | 99,078 | |||||||||||||||
Investment in affiliates |
18,301 | 394 | — | — | 18,695 | |||||||||||||||
Deferred financing costs, net |
13,321 | 3,779 | 20,655 | — | 37,755 | |||||||||||||||
Deferred drydock and special survey costs,
net |
— | 9,312 | 2,695 | — | 12,007 | |||||||||||||||
Other long term assets |
— | 4,932 | 5,438 | — | 10,370 | |||||||||||||||
Goodwill and other intangibles |
100,812 | 155,838 | 246,110 | — | 502,760 | |||||||||||||||
Total noncurrent assets |
1,649,626 | 1,857,399 | 1,481,678 | (1,661,901 | ) | 3,326,802 | ||||||||||||||
Total assets |
1,845,635 | 2,029,546 | 1,714,988 | (1,913,402 | ) | 3,676,767 | ||||||||||||||
LIABILITIES AND EQUITY |
||||||||||||||||||||
Current liabilities |
||||||||||||||||||||
Accounts payable |
— | 22,120 | 27,376 | — | 49,496 | |||||||||||||||
Accrued expenses |
7,465 | 31,546 | 23,406 | — | 62,417 | |||||||||||||||
Deferred income and cash received in
advance |
— | 14,299 | 3,383 | — | 17,682 | |||||||||||||||
Dividends payable |
6,094 | — | 1,120 | — | 7,214 | |||||||||||||||
Intercompany Payables |
— | 243,967 | 7,534 | (251,501 | ) | — | ||||||||||||||
Short term derivative liability |
— | 245 | — | — | 245 | |||||||||||||||
Capital lease obligations |
— | — | 1,252 | — | 1,252 | |||||||||||||||
Current portion of long term debt |
7,929 | 29,361 | 26,007 | — | 63,297 | |||||||||||||||
Total current liabilities |
21,488 | 341,538 | 90,078 | (251,501 | ) | 201,603 | ||||||||||||||
Long term debt, net of current portion |
764,564 | 340,717 | 907,332 | — | 2,012,613 | |||||||||||||||
Capital lease obligations, net of current
portion |
— | — | 31,009 | — | 31,009 | |||||||||||||||
Other long term liabilities |
— | 30,983 | 5,037 | — | 36,020 | |||||||||||||||
Unfavorable lease terms |
— | 51,264 | 5,611 | — | 56,875 | |||||||||||||||
Deferred tax liability |
— | — | 21,104 | — | 21,104 | |||||||||||||||
Total noncurrent liabilities |
764,564 | 422,964 | 970,093 | — | 2,157,621 | |||||||||||||||
Total liabilities |
786,052 | 764,502 | 1,060,171 | (251,501 | ) | 2,359,224 | ||||||||||||||
Noncontrolling interest |
— | — | 257,960 | — | 257,960 | |||||||||||||||
Total Navios Holdings stockholders’ equity |
1,059,583 | 1,265,044 | 396,857 | (1,661,901 | ) | 1,059,583 | ||||||||||||||
Total liabilities and stockholders’ equity |
$ | 1,845,635 | $ | 2,029,546 | $ | 1,714,988 | $ | (1,913,402 | ) | $ | 3,676,767 | |||||||||
F-48
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Navios | ||||||||||||||||||||
| Maritime | Other | Non | ||||||||||||||||||
| Cash flow statement for the nine months ended | Holdings Inc. | Guarantor | Guarantor | |||||||||||||||||
| September 30, 2011 | Issuer | Subsidiaries | Subsidiaries | Eliminations | Total | |||||||||||||||
Net cash provided by/(used in) operating activities |
$ | 9,781 | $ | (32,451 | ) | $ | 80,715 | $ | — | $ | 58,045 | |||||||||
Cash flows from investing activities |
||||||||||||||||||||
Acquisition of vessels |
— | (51,526 | ) | (4,533 | ) | — | (56,059 | ) | ||||||||||||
Decrease in restricted cash for asset acquisitions |
— | — | 778 | — | 778 | |||||||||||||||
Acquisition of General Partner units |
(2,052 | ) | — | — | — | (2,052 | ) | |||||||||||||
Deposits for vessel acquisitions |
— | (27,302 | ) | (2,995 | ) | — | (30,297 | ) | ||||||||||||
Proceeds from sale of assets |
— | 120,000 | — | — | 120,000 | |||||||||||||||
Purchase of property and equipment |
— | (284 | ) | (66,947 | ) | — | (67,231 | ) | ||||||||||||
Deconsolidation of Navios Acquisition |
— | — | (72,425 | ) | — | (72,425 | ) | |||||||||||||
Dividends from affiliates/associates |
1,300 | — | (1,300 | ) | — | — | ||||||||||||||
Net cash (used in)/provided by investing activities |
(752 | ) | 40,888 | (147,422 | ) | — | (107,286 | ) | ||||||||||||
Cash flows from financing activities |
||||||||||||||||||||
Issuance of common stock |
415 | — | — | — | 415 | |||||||||||||||
Proceeds from long-term loan, net of deferred finance fees |
18,578 | 48,918 | 3,032 | — | 70,528 | |||||||||||||||
Repayment of long-term debt |
(26,219 | ) | (49,025 | ) | (163,760 | ) | — | (239,004 | ) | |||||||||||
Repayment of Senior Notes |
(300,000 | ) | — | — | — | (300,000 | ) | |||||||||||||
Proceeds from issuance of Senior Notes, net of deferred
finance fees |
340,981 | — | 193,207 | — | 534,188 | |||||||||||||||
Acquisition of noncontrolling interest |
— | — | (8,638 | ) | — | (8,638 | ) | |||||||||||||
Dividends paid |
(19,563 | ) | — | (1,147 | ) | — | (20,710 | ) | ||||||||||||
Increase/ (decrease) in restricted cash |
599 | 946 | (625 | ) | — | 920 | ||||||||||||||
Payments of obligations under capital leases |
— | — | (931 | ) | — | (931 | ) | |||||||||||||
Net cash provided by financing activities |
14,791 | 839 | 21,138 | — | 36,768 | |||||||||||||||
Net increase/(decrease) in cash and cash equivalents |
23,820 | 9,276 | (45,569 | ) | — | (12,473 | ) | |||||||||||||
Cash and cash equivalents, at beginning of period |
6,323 | 97,676 | 103,411 | — | 207,410 | |||||||||||||||
Cash and cash equivalents, at end of period |
$ | 30,143 | $ | 106,952 | $ | 57,842 | $ | — | $ | 194,937 | ||||||||||
F-49
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Navios | ||||||||||||||||||||
| Maritime | ||||||||||||||||||||
| Holdings | Other | Non | ||||||||||||||||||
| Cash flow statement for the nine months ended | Inc. | Guarantor | Guarantor | |||||||||||||||||
| September 30, 2010 | Issuer | Subsidiaries | Subsidiaries | Eliminations | Total | |||||||||||||||
Net cash provided by (used in) operating
activities |
$ | 160,652 | $ | (149,439 | ) | $ | 117,235 | $ | — | $ | 128,448 | |||||||||
Cash flows from investing activities |
||||||||||||||||||||
Consolidation of subsidiary, net of cash assumed |
(63,230 | ) | — | (35,683 | ) | — | (98,913 | ) | ||||||||||||
Acquisition of General Partner units |
(3,566 | ) | — | — | — | (3,566 | ) | |||||||||||||
Restricted cash for asset acquisitions |
(8,649 | ) | (39,000 | ) | 778 | — | (46,871 | ) | ||||||||||||
Acquisition of Vessels |
— | (30,636 | ) | (90,451 | ) | — | (121,087 | ) | ||||||||||||
Deposits for vessel acquisitions |
— | (297,757 | ) | (52,230 | ) | — | (349,987 | ) | ||||||||||||
Receipts from finance lease |
— | 181 | — | — | 181 | |||||||||||||||
Proceeds from sale of assets |
— | 322,082 | — | — | 322,082 | |||||||||||||||
Purchase of property and equipment |
— | (593 | ) | (9,201 | ) | — | (9,794 | ) | ||||||||||||
Net cash used in investing activity |
(75,445 | ) | (45,723 | ) | (186,787 | ) | — | (307,955 | ) | |||||||||||
Cash flows from financing activities |
||||||||||||||||||||
| Proceeds from long-term loan, net of deferred finance fees | 30,449 | 209,340 | 137,301 | — | 377,090 | |||||||||||||||
Proceeds from warrant exercise |
(77,038 | ) | — | 74,978 | — | (2,060 | ) | |||||||||||||
Repayment on long-term debt and payment of
principal |
(25,124 | ) | (97,105 | ) | (90,454 | ) | — | (212,683 | ) | |||||||||||
Dividends paid |
(20,143 | ) | — | — | — | (20,143 | ) | |||||||||||||
Issuance of capital surplus |
415 | — | — | — | 415 | |||||||||||||||
Increase in restricted cash |
(3,375 | ) | — | — | — | (3,375 | ) | |||||||||||||
Contributions to noncontrolling shareholders |
— | — | (470 | ) | — | (470 | ) | |||||||||||||
Net cash (used in)/provided by financing
activities |
(94,816 | ) | 112,235 | 121,355 | — | 138,774 | ||||||||||||||
| Net (decrease)/increase in cash and cash equivalents | (9,609 | ) | (82,927 | ) | 51,803 | — | (40,733 | ) | ||||||||||||
Cash and cash equivalents, beginning of period |
115,535 | 27,594 | 30,804 | — | 173,933 | |||||||||||||||
Cash and cash equivalents, end of period |
$ | 105,926 | $ | (55,333 | ) | $ | 82,607 | $ | — | $ | 133,200 | |||||||||
F-50
Table of Contents
NAVIOS MARITIME HOLDINGS INC.
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTE 16: SUBSEQUENT EVENTS
| (a) | On October 31, 2011, Navios Holdings agreed to acquire a 81,600 dwt bulk carrier scheduled to be delivered in March 2012 by a South Korean shipyard. The aggregate purchase price for the new vessel is approximately $35,250, of which $5,050 was paid in cash. | |
| (b) | In October 2011, Navios Holdings repurchased 73,651 shares of its common stock for a total cost of $221. | |
| (c) | In October 2011, Navios Holdings further extended the fixed fee period for ship management services of Navios Partners’ owned fleet until December 31, 2017. The daily fees were amended to $4.7 per owned Ultra Handymax vessel, $4.6 per owned Panamax vessel and $5.7 per owned Capesize vessel through December 31, 2013. From January 2014 to December 2017, Navios Partners will reimburse Navios Holdings for all of the actual operating costs and expenses in connection with the management of Navios Partners’ fleet. | |
| (d) | On November 4, 2011, of the 1,378,122 contingently returnable shares of common stock of Navios Acquisition that were issued on September 10, 2010 and deposited into escrow for the VLCC Acquisition, 1,160,963 shares were released to the sellers and the remaining 217,159 shares were returned to Navios Acquisition in settlement of representations and warranties attributable to the prior sellers. Navios Holdings’ ownership of the outstanding voting stock of Navios Acquisition increased to 45.24% and its economic interest in Navios Acquisition increased to 53.96%. See also Note 3. | |
| (e) | Pursuant to an agreement dated November 8, 2011, the availability of the Navios Holdings $40,000 credit facility provided to Navios Acquisition was extended from April 2012 to December 2014. | |
| (f) | On November 14, 2011, the Board of Directors declared a quarterly cash dividend in respect of the second quarter of 2011 of $0.06 per common share payable on January 4, 2012 to stockholders of record as of December 19, 2011. | |
| (g) | On November 11, 2011, Navios Holdings received an amount of $6,664 as a dividend distribution from its affiliate, Navios Partners. |
F-51
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NAVIOS MARITIME HOLDINGS INC. |
||||
| By: | /s/ Angeliki Frangou | |||
| Angeliki Frangou | ||||
| Chief Executive Officer Date: November 28, 2011 |
||||
Table of Contents
EXHIBIT INDEX
| Exhibit No. | Exhibit | |
10.1
|
Letter Agreement, dated November 8, 2011. | |
99.1
|
Navios South American Logistics Inc. Operating and Financial Review and Prospects and Condensed Consolidated Financial Statements for the three and nine month periods ended September 30, 2011.* |
| * | Furnished solely in connection with Navios Logistics’ reporting obligations under the Indenture governing the Logistics Senior Notes. |
Exhibit 10.1
LETTER OF AMENDMENT Nr. 2
TO AN AGREEMENT DATED 7 SEPTEMBER 2010
TO AN AGREEMENT DATED 7 SEPTEMBER 2010
Dated as of 8th November 2011
| To: | NAVIOS MARITIME ACQUISITION CORPORATION Trust Company Complex Ajeltake Road Ajeltake Island Majuro-Marshall Islands (the “Borrower”) |
|
| Att: | Mr. Leonidas Korres |
Dear Sirs,
| Re: | Agreement dated 7 September 2010 (together with all amendments thereto or supplements thereof the “Agreement”) made between the Borrower and Navios Maritime Holdings Inc. of the Republic of the Marshall Islands (“Navios”). |
We refer to the Agreement and all terms not otherwise defined herein shall have the meaning
ascribed to them in the Agreement.
In view of your request to extend availability under the Loan until December 31, 2014, we hereby
agree as follows:
1. To amend the following clauses of the Agreement to read as follows:
“5.1 The Borrower must repay the Loan thereon in full on December 31, 2014 (time being of the
essence).”
2. The Borrower shall pay Navios a fee of four-hundred thousand Dollars ($400,000) in two (2) equal
installments, by April 1, 2012 and November 8, 2012.
All other terms of the Agreement shall remain unaltered and in full force and effect.
It is hereby expressly stated that notwithstanding the amendments (including Letter of Amendment
Nr. 1) and/or additions to the Agreement referred to in this letter of amendment nr.2 all the
Finance Documents shall remain in full force and effect.
[SIGNATURE PAGE FOLLOWS]
Please confirm your agreement to the terms and conditions of this letter of amendment nr.2 by
signing the enclosed copy of this letter of amendment nr.2 and returning it to us.
Yours faithfully,
| NAVIOS MARITIME HOLDINGS INC. |
||||
| By: | /s/ George Achniotis | |||
| Name: | George Achniotis | |||
| Title: | Chief Financial Officer | |||
We hereby
agree to and accept this letter of amendment nr.2.
Date: 8th November 2011
| NAVIOS MARITIME ACQUISITION CORPORATION |
||||
| By: | /s/ Leonidas Korres | |||
| Name: | Leonidas Korres | |||
| Title: | Chief Financial Officer | |||
2
Exhibit 99.1
Furnished pursuant to Section 4.17 of the Indenture governing the 91/4% Senior Notes due 2019
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
Dated: November 28, 2011
Commission File No. _________
NAVIOS SOUTH AMERICAN LOGISTICS INC.
Luis A. de Herrera 1248, World Trade Center, Torre B, Montevideo, Uruguay
(Address of Principal Executive Offices)
(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 o Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(1):
Yes o No o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(7):
Yes o No o
1
Operating and Financial Review and Prospects
The following is a discussion of the financial condition and results of operations of Navios
South American Logistics Inc. (“Navios Logistics” or the “Company”) for each of the three and nine
month periods ended September 30, 2011 and 2010. All of these financial statements have been
prepared in accordance with generally accepted accounting principles in the United States of
America (“U.S. GAAP”). You should read this section together with the condensed consolidated
financial statements including the notes to those financial statements for the periods mentioned
above which are included elsewhere in this report.
This report contains forward-looking statements. These forward-looking statements are based on
Navios Logistics’ current expectations and observations. See “Forward-Looking Statements” and “Risk
Factors” in the annual report on Form 20-F of Navios Maritime Holdings Inc. (“Navios Holdings”) for
the year ended December 31, 2010 for the factors that, in Navios Logistics’ view, could cause
actual results to differ materially from the forward-looking statements contained in this report.
This Exhibit 99.1 is being furnished solely in connection with Navios Logistics’ reporting
obligations under the Indenture governing the Senior Notes (as defined below).
Recent Developments
Acquisitions
On various dates on or prior to October 24, 2011, Navios Logistics used a portion of the
proceeds from its offering of senior unsecured notes due 2019 to acquire three pushboats, 66 barges
and one floating drydock facility for a total cost of approximately $56.0 million, including transportation
and other related costs.
Following the acquisition of two pieces of land for $1.0 million in 2010, in September 2011,
Navios Logistics paid another $0.4 million for the acquisition of a third piece of land. All of
these pieces of land are located at the south of the Nueva Palmira Free Zone and were acquired as
part of a project to develop a new transshipment facility for mineral ores and liquid bulks.
Construction of a new silo in the Dry Port
During the third quarter of 2011, Navios Logistics commenced the construction of a new silo at
its dry port facility in Nueva Palmira, Uruguay. The silo is expected
to be completed in March 2012. As of September 30, 2011, Navios Logistics had paid $3.0 million for the silo
construction.
Overview
General
Navios Logistics has been incorporated under the laws of the Republic of the Marshall Islands
since December 17, 2007. Navios Logistics is one of the largest logistics companies in the Hidrovia
region of South America. Navios Logistics serves the storage and marine transportation needs of its
customers through two port storage and transfer facilities, one for dry bulk commodities,
agricultural, forest and mineral-related exports and the other for refined petroleum products, and
a diverse fleet, consisting of vessels, barges and pushboats. Navios Logistics has combined its
ports in Uruguay and Paraguay with its versatile fleet to create an end-to-end logistics solution
for customers seeking to transport mineral and grain commodities and liquid cargoes through the
Hidrovia region. Navios Logistics provides transportation for liquid cargo (hydrocarbons such as
crude oil, gas oil, naphtha, fuel oil and vegetable oils), liquefied cargo (liquefied petroleum gas
(LPG)) and dry cargo (cereals, cotton pellets, soybeans, wheat, limestone (clinker), mineral iron,
and rolling stones).
On January 1, 2008, pursuant to a share purchase agreement, Navios Holdings contributed (i)
$112.2 million in cash and (ii) the authorized capital stock of its wholly owned subsidiary,
Corporacion Navios Sociedad Anonima (“CNSA”), in exchange for the issuance and delivery of 12,765
of Navios Logistics’ shares, representing 63.8% (or 67.2% excluding contingent consideration) of
Navios Logistics’ outstanding stock. Navios Logistics acquired all ownership interests in the
Horamar Group (“Horamar”) in exchange for (i) $112.2 million in cash, of which $5.0 million was
kept in escrow, payable upon the attainment of certain EBITDA targets during specified periods
through December 2008 (the “EBITDA Adjustment”) and (ii) the issuance of 7,235 of Navios Logistics’
shares representing 36.2% (or 32.8% excluding contingent consideration) of Navios Logistics’
outstanding stock, of which 1,007 shares were kept in escrow pending attainment of certain EBITDA
targets. CNSA owned and operated the largest bulk transfer and storage port terminal in Uruguay.
Horamar was a privately held Argentina-based group specializing in the transportation and storage
of liquid cargoes and the transportation of drybulk cargoes in South America along the Hidrovia
river system. The combination of CNSA and Horamar under the Navios Logistics umbrella created one
of the largest logistics companies in the Hidrovia Region of South America.
In November 2008, $2.5 million in cash and 503 shares were released from escrow when Horamar
achieved the interim EBITDA target. As a result, Navios Holdings owned 65.5% (excluding 504 shares
that remained in escrow as of such November 2008 date) of Navios Logistics’ stock.
On March 20, 2009, August 19, 2009, and December 30, 2009, the agreement pursuant to which
Navios Logistics acquired CNSA and Horamar was amended to postpone until June 30, 2010 the date for
determining whether the EBITDA target was achieved. On June 17, 2010, $2.5 million in cash and the
504 shares remaining in escrow were released from escrow upon the achievement of the EBITDA target
threshold.
The 1,007 shares held in escrow have been reflected as part of Navios Logistics’ outstanding
shares from the date of issuance since these shares were irrevocably issued on January 1, 2008 with
the identity of the ultimate recipient to be determined at a future date. Following the achievement
of the EBITDA targets mentioned above, the shares were delivered to Horamar shareholders. Following
the release of the remaining shares that were held in escrow, Navios Holdings currently owns 63.8%
of Navios Logistics’ stock.
On July 25, 2011, Navios Logistics acquired the noncontrolling interests of its joint
ventures, Thalassa Energy S.A., HS Tankers Inc., HS Navigation Inc., HS Shipping Ltd. Inc. and HS
South Inc., in accordance with the terms of certain stock purchase
2
agreements with HS Energy Ltd., an affiliate of Vitol S.A. (“Vitol”). Navios Logistics paid a total
consideration of $8.5 million for such noncontrolling interests.
Ports
Navios Logistics owns two port storage and transfer facilities, one for agricultural, forest
and mineral-related exports and the other for refined petroleum products. Navios Logistics’ port
facility in Nueva Palmira, Uruguay moved 3.0 million tons of dry cargo during both the nine month
periods ended September 30, 2011 and 2010, and its port facility in San Antonio, Paraguay moved
approximately 0.2 million cubic meters of liquid fuels (primarily diesel and naphtha) during the
nine month period ended September 30, 2011 as compared to approximately 0.3 million cubic meters in
the same period of 2010.
Fleet
Navios Logistics’ current core fleet consists of a total of 303 vessels, barges and pushboats.
Navios Logistics owns four product tanker vessels totaling 47,482 deadweight tons (“dwt”), two
self-propelled barges totaling 11,600 cubic meters, two small inland oil tankers totaling 3,900
dwt, 223 dry barges totaling 264,500 dwt, three LPG barges with a capacity of 4,752 cubic meters,
22 tank barges with a capacity of 66,800 cubic meters, and 20 pushboats.
The rest of Navios Logistics’ current core fleet is chartered-in under long-term charter-in
contracts with an average remaining duration of approximately 1.1 years. Long-term charter-in
contracts are considered to be charter-in contracts with a duration of more than one year at
inception. Navios Logistics currently has entered into charter-in contracts having a minimum
remaining duration of 0.6 years and a maximum remaining duration of 3.0 years. Navios Logistics
charters-in and operates a fleet of 23 tank barges totaling 58,700 cubic meters and two pushboats.
In addition, in June 2010, Navios Logistics entered into long-term bareboat agreements for two new
product tankers, the Stavroula and the San San H (formerly known as the Jiujiang), each with a
capacity of 16,871 dwt.
Chartering Arrangements
Navios Logistics continually monitors developments in the shipping and logistics industry and
makes decisions on an individual vessel and segment basis, as well as based on its view of overall
market conditions in order to implement its overall business strategy. In its barge business,
Navios Logistics typically operates under a mix of time charters and contracts of affreightment
(“CoAs”) with durations of one to five years, some of which have minimum guaranteed volumes, and
spot contracts. In its cabotage business, Navios Logistics typically operates under time charters
with durations in excess of one year at inception. Some of its charters provide fixed pricing,
minimum volume requirements and fuel price adjustment formulas. On other occasions, Navios
Logistics engages in CoAs, which allow the Company flexibility in transporting a certain cargo to
its destination.
Factors Affecting Navios Logistics’ Results of Operations
Contract rates
The shipping and logistics industry has been highly volatile during the last several years. In
order to have a full utilization of Navios Logistics’ fleet and storage capacity, the Company must
be able to renew the contracts on its fleet and ports on the expiration or termination of its
current contracts. This ability depends upon economic conditions in the sectors in which the
vessels, barges and pushboats operate, changes in the supply and demand for vessels, barges and
pushboats, and changes in the supply and demand for the transportation and storage of commodities.
Weather conditions
As Navios Logistics specializes in the transportation and storage of liquid cargoes and dry
bulk cargoes along the Hidrovia, any changes adversely affecting the region, such as low water
levels, could reduce or limit Navios Logistics’ ability to effectively transport cargo.
Droughts and other adverse weather conditions, including any possible effects of climate
change, could result in a decline in production of the agricultural products Navios Logistics
transports and stores, and this could likely result in a reduction in demand for services.
Seasonality
One significant factor that affects Navios Logistics’ results of operations and revenues from
quarter to quarter, particularly in the first and last quarters of each year, is seasonality.
Generally, the high season for the barge business is the period between February and July as a
result of the South American harvest and higher river levels. Expected growth in soybean and
minerals production and transportation may offset part of this seasonality. During the South
American late spring and summer, mainly from November to January, the low level of water in the
northern Hidrovia could adversely affect Navios Logistics’ operations because the water level is
not high enough to accommodate the draft of a heavily laden vessel. Such low levels also adversely
impact Navios Logistics’ ability to employ convoys as the water level towards the banks of the
river may be too low to permit vessel traffic even if the middle of the river is deep enough to
permit passage. With respect to dry port terminal operations in Uruguay, the high season is mainly
from April to
3
September, in tandem with the arrival of the first barges down-river and with the oceangoing
vessels’ logistics operations. The liquid port terminal operations in Paraguay and Navios Logistics
cabotage business are not significantly affected by seasonality as the operations of the port and
Navios Logistics’ cabotage business are primarily linked to refined petroleum products.
For a detailed discussion of Navios Logistics’ foreign currency transactions and inflation and
fuel price increases refer to the section “Quantitative and Qualitative Disclosures about Market
Risks” included elsewhere in this document.
Statement of Operations Breakdown by Segments
Historically, the Company had two reportable segments, Logistics Business and Dry Port
Terminal Business. Since Navios Logistics was formed by the business combination between CNSA and
Horamar, Navios Logistics has grown its vessel fleet through acquisitions of vessels, barges and
pushboats. Additionally, Navios Logistics expanded its Uruguayan port terminal with the
construction of a new silo, the acquisition of additional land, and the installation of a grain
drying and conditioning facility, which has been operational since May 16, 2011. Following these
recent business developments, beginning in 2011, the Company reports its operations based on three
reportable segments: Port Terminal Business, Barge Business and Cabotage Business. The Port
Terminal Business aggregates the dry port terminal operations (previously identified as the Dry
Port Terminal Business) and the liquid port terminal operations previously included in the
Logistics Business segment. The previously identified Logistics Business segment has been split to
form the Barge Business segment and the Cabotage Business segment. Historical information has been
reclassified in accordance with the new reportable segments.
Period over Period Comparisons of Navios Logistics
The following table presents consolidated revenue and expense information for each of the
three and nine month periods ended September 30, 2011 and 2010. This information was derived from
the unaudited condensed consolidated financial statements.
| Three Month | Three Month | Nine Month | Nine Month | |||||||||||||
| Period Ended | Period Ended | Period Ended | Period Ended | |||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (Expressed in thousands of U.S. dollars ) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
Time charter, voyage and port terminal revenues |
$ | 44,058 | $ | 38,979 | $ | 123,861 | $ | 101,581 | ||||||||
Sales of products |
24,789 | 16,323 | 44,047 | 41,562 | ||||||||||||
Time charter, voyage and port terminal expenses |
(11,103 | ) | (8,600 | ) | (30,817 | ) | (26,213 | ) | ||||||||
Direct vessels expenses |
(18,068 | ) | (14,552 | ) | (48,006 | ) | (36,762 | ) | ||||||||
Cost of products sold |
(23,873 | ) | (15,236 | ) | (42,320 | ) | (38,554 | ) | ||||||||
Depreciation and amortization |
(5,531 | ) | (5,197 | ) | (16,609 | ) | (16,539 | ) | ||||||||
General and administrative expenses |
(3,572 | ) | (3,500 | ) | (10,368 | ) | (9,308 | ) | ||||||||
Interest income/(expense) and finance cost, net |
(5,112 | ) | (1,113 | ) | (11,271 | ) | (3,153 | ) | ||||||||
Gain on sale of assets |
36 | — | 36 | — | ||||||||||||
Other expense, net |
(3,327 | ) | (4,017 | ) | (7,168 | ) | (8,669 | ) | ||||||||
(Loss)/income before income taxes and
noncontrolling interest |
$ | (1,703 | ) | $ | 3,087 | $ | 1,385 | $ | 3,945 | |||||||
Income tax benefit/(expense) |
389 | (326 | ) | 356 | 718 | |||||||||||
Net (loss)/income |
(1,314 | ) | 2,761 | 1,741 | 4,663 | |||||||||||
Less: Net income attributable to the noncontrolling
interest |
(213 | ) | (1,304 | ) | (758 | ) | (1,338 | ) | ||||||||
Net (loss)/income attributable to Navios Logistics’
stockholders |
$ | (1,527 | ) | $ | 1,457 | $ | 983 | $ | 3,325 | |||||||
For the three month period ended September 30, 2011 compared to the three month period ended
September 30, 2010
Time Charter, Voyage and Port Terminal Revenues: For the three month period ended September
30, 2011, Navios Logistics revenue increased by $5.1 million or 13.1% to $44.1 million, as compared
to $39.0 million for the same period during 2010. Revenue from the cabotage business increased by
$3.6 million or 33.3% to $14.4 million for the three months period ended September 30, 2011, as
compared to $10.8 million for the same period during 2010. This increase was mainly attributable to
the new vessels, the Stavroula and the San San H, which commenced operations in October 2010 and
March 2011, respectively. Revenue from the barge business increased by $1.8 million or 8.4% to
$23.2 million for the three months period ended September 30, 2011, as compared to
$21.4 million for the same period during 2010. This was mainly attributable to the increase in
volumes in iron ore transportation. This overall increase was mitigated by a $0.3 million decrease
in revenue from the port terminal business. Revenue from the port terminal business decreased by
$0.3 million or 4.4% to $6.5 million for the three month period ended September 30, 2011, as
compared to $6.8 million for the same period during 2010. The decrease was mainly attributable to a
decrease in volumes moved.
4
Sales of Products: For the three month period ended September 30, 2011, Navios Logistics’
sales of products increased by $8.5 million or 52.1% to $24.8 million, as compared to $16.3 million
for the same period during 2010. The increase was mainly attributable to an increase in the
Paraguayan liquid port’s volume and to an increase in the price of products sold.
Time Charter, Voyage and Port Terminal Expenses: Time charter, voyage and port terminal
expenses increased by $2.5 million or 29.1% to $11.1 million for the three month period ended
September 30, 2011, as compared to $8.6 million for the same period during 2010. This increase was
due to an increase in time charter and voyage expenses of the barge business by $2.8 million or
46.7% to $8.8 million for the three month period ended September 30, 2011, as compared to $6.0
million for the same period in 2010. This was mainly attributable to the increase in volumes in
iron ore transportation. This increase was mitigated by a decrease in time charter and voyage
expenses of the cabotage business by $0.3 million or 50.0% to $0.3 million for the three month
period ended September 30, 2011, as compared to $0.6 million for the same period in 2010. This
decrease was mainly attributable to a decrease in the fuel expenses of the cabotage vessels due to
increase in operating days under time charter contracts. In the port terminal business, expenses
amounted to $2.0 million for both three month periods ended September 30, 2011 and 2010.
Direct Vessels Expenses: Direct vessels expenses increased by $3.5 million or 24.0% to $18.1
million for the three month period ended September 30, 2011, as compared to $14.6 million for the
same period in 2010. Direct vessels expenses of the cabotage business increased by $2.6 million or
44.8% to $8.4 million for the three month period ended September 30, 2011, as compared to $5.8
million for the same period in 2010. The increase resulted primarily from the additional operating
expenses generated by the Stavroula and the San San H, which commenced operations in October 2010
and March 2011, respectively. Direct vessels expenses of the barge business increased by $0.9
million or 10.2% to $9.7 million for the three month period ended September 30, 2011, as compared
to $8.8 million for the same period in 2010. The increase resulted primarily from the increase in
crew costs, spares and maintenance. Direct vessels expenses include crew costs, victualling costs,
dockage expenses, lubricants, spares, insurance, maintenance and repairs.
Cost of Products Sold: For the three month period ended September 30, 2011, Navios Logistics’
cost of products sold increased by $8.7 million or 57.2% to $23.9 million, as compared to $15.2
million for the same period during 2010. The increase was mainly attributable to an increase in the
Paraguayan liquid port’s volumes and to an increase in the price of products sold.
Depreciation and Amortization: Depreciation and amortization increased by $0.3 million to $5.5
million for the three month period ended September 30, 2011, as compared to $5.2 million for the
same period of 2010. The depreciation of tangible assets and the amortization of intangible assets
for the three month period ended September 30, 2011 amounted to $4.4 million and $1.1 million,
respectively. Depreciation and amortization in the barge business increased by $0.2 million to $3.6
million for the three month period ended September 30, 2011, as compared to $3.4 million for the
same period during 2010. The increase resulted primarily from the additional depreciation generated
by new acquisitions of barges, pushboats and other fixed assets. Depreciation and amortization
in the cabotage business for the three month period ended September 30, 2011 increased by $0.1
million to $1.1 million, as compared with $1.0 million for the same period during 2010. The
increase resulted primarily from the additional depreciation generated by the new vessels the Stavroula and the San
San H, which commenced operations in October 2010 and March 2011, respectively.
Depreciation and amortization in the port terminal business amounted to $0.9 million for both three
month periods ended September 30, 2011 and September 30, 2010.
General and Administrative Expenses: General and administrative expenses increased by $0.1
million or 2.9% to $3.6 million for the three month period ended September 30, 2011, as compared to
$3.5 million for the same period during 2010. General and administrative expenses relating to the
barge business increased by $0.1 million or 3.6% to $2.9 million, as compared to $2.8 million for
the same period during 2010. The increase was mainly attributable to an increase in salaries and
other administrative costs. General and administrative expenses relating to the cabotage and the
ports businesses were $0.1 million and $0.6 million for both three month periods ended September
30, 2011 and 2010, respectively.
Interest Income/(Expense) and Finance Costs, Net: Interest income/(expense) and finance costs,
net increased by $4.0 million to $5.1 million for the three month period ended September 30, 2011,
as compared to $1.1 million for the same period of 2010. For the three month period ended September
30, 2011, interest expense amounted to $4.9 million, other finance costs amounted to $0.5 million
and interest income amounted to $0.3 million. For the three month period ended September 30, 2010,
interest expense amounted to $1.1 million, other finance costs amounted to $0.2 million and interest
income amounted to $0.2 million. The main reason for the increase was the interest generated by the
Senior Notes issued in April 2011.
Other Expense, Net: Other expense, net decreased by $0.7 million to $3.3 million for the three
month period ended September 30, 2011, as compared to $4.0 million for the same period of 2010.
Other expense, net of the barge business decreased by $1.5 million to $1.2 million for the three
month period ended September 30, 2011, as compared to $2.7 million for the same period in 2010.
This decrease was mainly attributable to a decrease in the provision for losses on accounts
receivable. Other expense, net of the port terminal business increased by $0.7 million to $0.7
million for the three month period ended September 30, 2011, as compared to
$0 for the same period in 2010. This increase was mainly attributable to foreign currency exchange
losses.
5
Other expense, net for the
cabotage business increased by $0.1 million to $1.4 million for
the three month period ended September 30, 2011, as compared to $1.3 million for the same period in
2010. This increase was due mainly to an increase in taxes other-than income taxes.
Income Tax Benefit/ (Expense): Income taxes decreased by $0.7 million to $0.4 million of
benefit for the three month period ended September 30, 2011, as compared to a $0.3 million expense
for the same period in 2010. The variation was mainly due to $1.0 million of higher income tax
benefit in Argentina due to the increase of deferred tax assets carried forward which was mitigated
by $0.3 million increase in income tax charges due to increase of operations in Argentina. Income
taxes in the port terminal business decreased by $0.2 million to an expense of $0.3 million for the
three month period ended September 30, 2011, as compared to an expense of $0.5 million for the same
period in 2010. Income taxes in the cabotage business increased by $0.2 million to an expense of
$0.4 million for the three month period ended September 30, 2011, as compared to an expense of $0.2
million for the same period in 2010. Income taxes of the barge
business decreased by $0.6
million to $1.0 million of benefit for the three month period ended September 30, 2011, as compared
to $0.4 million of benefit for the same period in 2010.
Net Income Attributable to the Noncontrolling Interest: Net income attributable to the
noncontrolling interest decreased by $1.1 million or 84.6% to $0.2 million for the three month
period ended September 30, 2011, as compared to $1.3 million for the same period during 2010. This
was mainly due to the acquisition of the noncontrolling interests in the cabotage business.
For the nine month period ended September 30, 2011 compared to the nine month period ended
September 30, 2010
Time Charter, Voyage and Port Terminal Revenues: For the nine month period ended September 30,
2011, Navios Logistics’ revenue increased by $22.3 million or 21.9% to $123.9 million, as compared
to $101.6 million for the same period during 2010. Revenue from the port terminal business
increased by $0.1 million or 0.5% to $18.4 million for the nine month period ended September 30,
2011, as compared to $18.3 million for the same period of 2010. The increase was mainly
attributable to an increase in tariffs in the dry port terminal of $0.5 million mitigated by a $0.4
million decrease in storage services provided by the liquid port terminal. Revenue from the
cabotage business increased by $13.9 million or 52.3% to $40.5 million for the nine months period
ended September 30, 2011, as compared to $26.6 million for the same period during 2010. This
increase was mainly attributable to the new vessels, the Stavroula and the San San H, which
commenced operations in October 2010 and March 2011, respectively. Revenue from the barge business
increased by $8.3 million or 14.6% to $65.0 million for the nine months period ended September 30,
2011, as compared to $56.7 million for the same period during 2010. This increase was mainly
attributable to the increase in volumes in iron ore transportation.
Sales of Products: For the nine month period ended September 30, 2011, Navios Logistics’ sales
of products increased by $2.4 million or 5.8% to $44.0 million, as compared to $41.6 million for
the same period during 2010. The increase was mainly attributable to an increase in the price of
products sold.
Time Charter, Voyage and Port Terminal Expenses: Time charter, voyage and port
terminal expenses increased by $4.6 million or 17.6% to $30.8 million for the nine month period
ended September 30, 2011, as compared to $26.2 million for the same period during 2010. This
increase is due to an increase in time charter and voyage expenses of the barge business by $4.2
million or 22.1% to $23.2 million for the nine month period ended September 30, 2011, as compared
to $19.0 million for the same period in 2010. This was mainly attributable to the increase in
volumes in iron ore transportation. In the port terminal business, expenses increased by $1.1
million or 20.0% to $6.6 million for the nine month period ended September 30, 2011, as compared to
$5.5 million for the same period in 2010. This is attributable to a $0.8 million increase of
expenses in Navios Logistics’ dry port in Uruguay mainly from salaries, and a $0.3 million increase
in expenses of the liquid port in Paraguay. The overall increase was offset by a $0.7 million or
41.2% decrease in time charter and voyage expenses of the cabotage business to $1.0 million for the
nine month period ended September 30, 2011, as compared to $1.7 million for the same period during
2010. This decrease was mainly attributable to a decrease in the fuel expenses of the cabotage
vessels due to increase in operating days under time charter contracts.
Direct Vessels Expenses: Direct vessels expenses increased by $11.2 million or 30.4% to $48.0
million for the nine month period ended September 30, 2011, as compared to $36.8 million for the
same period in 2010. Direct vessels expenses of the cabotage business increased by $8.4 million or
60.0% to $22.4 million for the nine months period ended September 30, 2011, as compared to $14.0
million for the same period in 2010. The increase resulted primarily from the additional operating
expenses generated by the new vessels, the Stavroula and the San San H, which commenced operations
in October 2010 and March 2011, respectively. Direct vessels expenses of the barge business
increased by $2.8 million or 12.3% to $25.6 million for the nine months period ended September 30,
2011, as compared to $22.8 million for the same period in 2010. The increase resulted primarily
from the increase in crew costs, repairs and maintenance. Direct vessels expenses include crew
costs, victualling costs, dockage expenses, lubricants, spares, insurance, maintenance and repairs.
Cost of Products Sold: For the nine month period ended September 30, 2011, Navios Logistics’
cost of products sold increased by $3.7 million or 9.6% to $42.3 million, as compared to $38.6
million for the same period during 2010. The increase was mainly attributable to an increase in the
price of products sold.
6
Depreciation and Amortization: Depreciation and amortization increased by $0.1 million to
$16.6 million for the nine month period ended September 30, 2011, as compared to $16.5 million for
the same period of 2010. The depreciation of tangible assets and the amortization of intangible
assets for the nine month period ended September 30, 2011 amounted to $13.3 million and $3.3
million, respectively. Depreciation of tangible assets and amortization of intangible assets for
the nine month period ended September 30, 2010 amounted to $13.2 million and $3.3 million,
respectively. Depreciation and amortization in the barge business decreased by $0.6 million to
$10.8 million for the nine month period ended September 30, 2011, as compared to $11.4 million for
the same period during 2010. Such decrease is due to the fact that certain barges have reached the
end of their estimated useful lives in 2010. Depreciation and amortization in the cabotage business
for the nine month period ended September 30, 2011 increased by $0.6 million to $3.2 million, as
compared with $2.6 million for the same period during 2010. The increase resulted primarily from
the additional depreciation generated by the new vessels, the Stavroula and the San San H, which
commenced operations in October 2010 and March 2011, respectively. Depreciation and amortization in
the port terminal business for the nine month period ended September 30, 2011 increased by $0.1
million to $2.6 million, as compared with $2.5 million for the same period during 2010. This
increase was mainly due to the depreciation of the new drying and conditioning facility in Navios
Logistics’ dry port facility in Uruguay.
General and Administrative Expenses: General and administrative expenses increased by $1.1
million or 11.8% to $10.4 million for the nine month period ended September 30, 2011, as compared
to $9.3 million for the same period during 2010. General and administrative expenses relating to
the port terminal business increased by $0.2 million or 12.5% to $1.8 million, as compared to $1.6
million in the same period during 2010. General and administrative expenses relating to the barge
business increased by $0.9 million or 12.0% to $8.4 million for the nine month period ended
September 30, 2011, as compared to $7.5 million for the same period during 2010. General and
administrative expenses relating to the cabotage business was $0.2 million in both the nine month
periods ended September 30, 2011 and 2010. The overall increase was mainly attributable to an
increase in salaries by $1.4 million mainly due to an increased
number of employees, wages increase and the impact of foreign exchange rates, mitigated by a decrease in other administrative
costs by $0.3 million.
Interest
Income/(Expense) and Finance Costs, Net: Interest
income/(expense) and finance costs, net
increased by $8.1 million to $11.3 million for the nine month period ended September 30, 2011, as
compared to $3.2 million for the same period of 2010. For the nine month period ended September 30,
2011, interest expense amounted to $10.6 million, other finance costs amounted to $1.4 million and
interest income amounted to $0.7 million. For the nine month period ended September 30, 2010,
interest expense amounted to $2.8 million, other finance costs amounted to $0.5 million and
interest income amounted to $0.1 million. The main reason for the increase was the interest expense
generated by the Senior Notes issued in April 2011.
Other Expense, Net: Other expense, net decreased by $1.5 million to $7.2 million for the nine
month period ended September 30, 2011, as compared to $8.7 million for the same period of 2010.
Other expense, net for the barge business decreased by $2.6 million to $3.0 million for the nine
month period ended September 30, 2011, as compared to $5.6 million for the same period in 2010.
This decrease was mainly due to a lower provision for bad debts as compared to
the same period of 2010. Other expense, net for the port terminal business increased by $0.3
million to $0.3 million for the nine month period ended September 30, 2011, as compared to $0
for the same period in 2010. This increase was mainly attributable to foreign currency
exchange losses. Other expense, net for the cabotage business increased by $0.8 million to $3.9
million for the nine month period ended September 30, 2011, as compared to $3.1 million for the
same period in 2010. This increase was due mainly to an increase in taxes other-than income taxes.
Income Tax Benefit/ (Expense): Income taxes increased by $0.3 million or 42.9% to $0.4 million
of benefit for the nine month period ended September 30, 2011, as compared to $0.7 million of
benefit for the same period in 2010. The variation was mainly due to (a) $0.2 million of higher
income tax expense in Argentina due to the decrease of deferred tax assets carried forward, and (b)
a $0.1 million increase in income tax charges with respect to retained earnings in Paraguay. Income
taxes in the port terminal business decreased by $0.4 million or 66.7% to an expense of $0.2
million for the nine month period ended September 30, 2011 as compared to an expense of $0.6
million for the same period in 2010. Income taxes of the barge business increased by $0.6 million
or 31.6% to a benefit of $1.3 million for the nine month period ended September 30, 2011 as
compared to a benefit of $1.9 million for the same period in 2010. Income taxes of the cabotage
business increased by $0.1 million or 16.7% to an expense of $0.7 million for the nine month period
ended September 30, 2011 as compared to an expense of $0.6 million for the same period in 2010.
Net Income Attributable to the Noncontrolling Interest: Net income attributable to the
noncontrolling interest decreased by $0.5 million or 38.5% to $0.8 million for the nine month
period ended September 30, 2011, as compared to $1.3 million for the same period during 2010.This
was mainly due to the acquisition of the noncontrolling interests in the cabotage business.
Non-Guarantor Subsidiaries
Hidronave South American Logistics S.A. , which is one of the two subsidiaries of Navios
Logistics that does not guarantee the Senior Notes, accounted for approximately $1.6 million, or
1.0%, of total revenue, and approximately $0.5 million, or 2.1%, of total EBITDA, in each case, for
the nine month period ended September 30, 2011,and approximately $3.2 million, or 0.5%, of total
assets, and approximately $1.8 million, or 0.6%, of total liabilities, in each case, as of
September 30, 2011.
7
Hidronave South American Logistics S.A., accounted for approximately $0.9 million, or 0.6%, of
total revenue, and
approximately $0.1 million, or 0.5%, of total EBITDA, in each case, for the nine month period ended
September 30, 2010, and
approximately $2.6 million, or 0.5%, of total assets, and approximately
$1.8 million, or 0.8%, of total liabilities, in each case, as of September 30, 2010.
Logistics Finance, the other subsidiary of Navios Logistics that does not guarantee the Senior
Notes, does not have any independent assets or operations.
Non-Guarantor EBITDA Reconciliation to Net Income Attributable to Navios Logistics’ Stockholders
| For the Nine | For the Nine | |||||||
| Month | Month | |||||||
| Period Ended | Period Ended | |||||||
| September 30, | September 30, | |||||||
| 2011 | 2010 | |||||||
| (Expressed in thousands of U.S. dollars) | (unaudited) | (unaudited) | ||||||
Hidronave’s net income attributable to Navios Logistics’ stockholders |
$ | 507 | $ | 48 | ||||
Depreciation and amortization |
51 | 56 | ||||||
Interest expense and finance cost, net |
42 | 16 | ||||||
Income tax expense |
(3 | ) | (3 | ) | ||||
EBITDA |
$ | 597 | $ | 117 | ||||
Liquidity and Capital Resources
Navios Logistics has historically financed its capital requirements with cash flows from
operations, equity contributions from stockholders, borrowings under its credit facilities and the
issuance of other debt. Main uses of funds have been capital expenditures for the acquisition of
new vessels, construction and upgrades at the port terminals, expenditures incurred in connection
with ensuring that the owned vessels comply with international and regulatory standards and
repayments of credit facilities. Navios Logistics anticipates that cash on hand, internally
generated cash flows and borrowings under existing and future credit facilities will be sufficient
to fund its operations, including working capital requirements. See “Working Capital Position”,
“Capital Expenditures” and “Long-term Debt Obligations and Credit Arrangements” for further
discussion of Navios Logistics’ working capital position.
The following table presents cash flow information derived from the unaudited consolidated
statements of cash flows of Navios Logistics for the nine month periods ended September 30, 2011
and 2010.
| Nine Month | Nine Month | |||||||
| Period Ended | Period Ended | |||||||
| September 30, | September 30, | |||||||
| 2011 | 2010 | |||||||
| (Expressed in thousands of U.S. dollars ) | (unaudited) | (unaudited) | ||||||
Net cash provided by operating activities |
$ | 28,688 | $ | 19,236 | ||||
Net cash used in investing activities |
(66,947 | ) | (7,741 | ) | ||||
Net cash provided by/(used in) financing activities |
56,897 | (5,680 | ) | |||||
Increase in cash and cash equivalents |
$ | 18,638 | $ | 5,815 | ||||
Cash and cash equivalents, beginning of the period |
39,204 | 26,927 | ||||||
Cash and cash equivalents, end of period |
57,842 | 32,742 | ||||||
Cash provided by operating activities for the nine month period ended September 30, 2011 as
compared to the nine month period ended September 30, 2010
Net cash provided by operating activities increased by $9.5 million to $28.7 million for the
nine month period ended September 30, 2011, as compared to $19.2 million for the same period in
2010. In determining net cash from operating activities, net income is adjusted for the effect of
certain non-cash items including depreciation and amortization and income taxes, which are analyzed
in detail as follows:
8
| Nine Month Period Ended | ||||||||
| September 30, | September 30, | |||||||
| 2011 | 2010 | |||||||
| (Expressed in thousands of U.S. dollars) | (unaudited) | (unaudited) | ||||||
Net income |
$ | 1,741 | $ | 4,663 | ||||
Depreciation of vessels, port terminals and other fixed assets |
13,284 | 13,177 | ||||||
Amortization of intangible assets and liabilities |
3,325 | 3,362 | ||||||
Amortization of deferred financing costs |
934 | 267 | ||||||
Amortization of deferred drydock costs |
443 | 283 | ||||||
Provision for losses on accounts receivable |
323 | 2,672 | ||||||
Gain on sale of assets |
(36 | ) | — | |||||
Income tax expense |
(356 | ) | (718 | ) | ||||
Net income adjusted for non-cash items |
$ | 19,658 | $ | 23,706 | ||||
Net income is also adjusted for changes in operating assets and liabilities in order to
determine net cash from operating activities.
The positive change in operating assets and liabilities of $9.0 million for the nine month
period ended September 30, 2011 resulted primarily from a $10.6 million increase in accrued
expenses, a $6.1 million increase in accounts payable, a $0.6 million decrease in restricted cash
and a $0.5 million increase in amounts due to affiliates. The positive change was partially offset
by a $5.1 million increase in accounts receivable, a $1.1 million increase in prepaid expenses and
other current assets and a $2.6 million increase in deferred drydock and special survey costs.
The negative change in operating assets and liabilities of $4.5 million for the nine month
period ended September 30, 2010 resulted from a $7.1 million increase in accounts receivable, $2.4
million in payments of interest, a $0.1 million decrease in accounts payables and a $0.8 million
increase in deferred drydock and special survey costs . This negative change was partially offset
by a $2.6 million increase in accrued expenses, a $1.7 million decrease in prepaid expenses and
other current assets, a $1.2 million decrease in restricted cash and a $0.4 million increase in
other liabilities.
Cash used in investing activities for the nine month period ended September 30, 2011
as compared to the nine month period ended September 30, 2010:
Net cash used in investing activities increased by $59.2 million to $66.9 million for the nine
month period ended September 30, 2011 from $7.7 million for the same period in 2010.
Cash used in investing activities for the nine month period ended September 30, 2011 was
mainly the result of (a) $0.9 million in payments for the construction of the new drying and
conditioning facility in Nueva Palmira, (b) $3.4 million in payments for the construction of a new
silo in Nueva Palmira, (c) $57.1 million in payments for the acquisition and transportation of 3
pushboats, 66 barges and a floating dry dock, (d) $1.7 million in payments for improvements and (e)
$3.8 million for the purchase of other fixed assets.
Cash used in investing activities for the nine month period ended September 30, 2010 was the
result of (a) $2.8 million in payments for the construction of the new drying and conditioning
facility in Nueva Palmira, Uruguay, (b) $0.7 million in payments for the acquisition of a barge,
and (c) $4.2 million in payments for the purchase of other fixed assets.
Cash provided by financing activities for the nine month period ended September 30, 2011 as
compared to cash used in financing activities for the nine month period ended September 30, 2010:
Net cash provided by financing activities increased by $62.6 million to $56.9 million for the
nine month period ended September 30, 2011, as compared to funds used in financing activities of
$5.7 million for the same period of 2010.
Cash provided by financing activities for the nine month period ended September 30, 2011 was
mainly due to the $200.0 million proceeds from the Senior Notes issued in April 2011. This was
partially offset by (a) $0.9 million in payments of obligations under capital leases in connection
with the product tanker vessels, the San San H and the Stavroula, (b) $126.7 million of repayments
of long-term debt, (c) a $6.8 million in payments of deferred financing costs following the
amendment of the Marfin loan facility and the issuance of the Senior Notes and (d) $8.6 million for
the acquisition of noncontrolling interests.
Cash used in financing activities for the nine month period ended September 30, 2010 was
mainly the result of (a) $3.5 million of repayments of long-term debt, (b) $0.5 million for a
distribution of dividends to noncontrolling shareholders, (c) $0.5 million in payments of deferred
financing costs and (d) $1.5 million in payments of obligations under capital leases in connection
with the product tanker vessels, the San San H and the Stavroula. This was partially mitigated by
$0.3 million of proceeds from long term loans.
Reconciliation of EBITDA to Net Income/(Loss) Attributable to Navios Logistics’ Stockholders
EBITDA represents net income/(loss) attributable to Navios Logistics’ stockholders before
interest and finance costs, depreciation and amortization, and income taxes, unless otherwise
stated. EBITDA is presented because it is used by certain investors to measure a company’s
operating performance.
EBITDA is a “non-GAAP financial measure” and should not be considered a substitute for net
income, cash flow from
9
operating activities and other operations or cash flow statement data
prepared in accordance with accounting principles generally accepted in the United States or as a
measure of profitability or liquidity. While EBITDA is frequently used as a measure of operating
performance, the definition of EBITDA used here may not be comparable to that used by other
companies due to differences in methods of calculation.
Three Month Period Ended September 30, 2011
| Port | ||||||||||||||||
| Terminal | Cabotage | Barge | ||||||||||||||
| Business | Business | Business | Total | |||||||||||||
| (Expressed in thousands of U.S. dollars) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
Net income/(loss) attributable to Navios
Logistics’ stockholders |
$ | 3,230 | $ | 1,261 | $ | (6,018 | ) | $ | (1,527 | ) | ||||||
Depreciation and amortization |
890 | 1,094 | 3,547 | 5,531 | ||||||||||||
Amortization of deferred drydock costs |
— | 91 | 91 | 182 | ||||||||||||
Interest (income)/expense and finance cost, net |
(138 | ) | 1,238 | 4,012 | 5,112 | |||||||||||
Income tax benefit/(expense) |
172 | 440 | (1,001 | ) | (389 | ) | ||||||||||
EBITDA |
$ | 4,154 | $ | 4,124 | $ | 631 | $ | 8,909 | ||||||||
Three Month Period Ended September 30, 2010
| Port | ||||||||||||||||
| Terminal | Cabotage | Barge | ||||||||||||||
| Business | Business | Business | Total | |||||||||||||
| (Expressed in thousands of U.S. dollars) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
Net income/(loss) attributable to Navios
Logistics’ stockholders |
$ | 3,978 | $ | (80 | ) | $ | (2,441 | ) | $ | 1,457 | ||||||
Depreciation and amortization |
852 | 962 | 3,383 | 5,197 | ||||||||||||
Amortization of deferred drydock costs |
— | 22 | 92 | 114 | ||||||||||||
Interest (income)/expense and finance cost, net |
(76 | ) | 653 | 536 | 1,113 | |||||||||||
Income tax benefit/(expense) |
527 | 217 | (418 | ) | 326 | |||||||||||
EBITDA |
$ | 5,281 | $ | 1,774 | $ | 1,152 | $ | 8,207 | ||||||||
EBITDA increased by $0.7 million to $8.9 million for the three month period ended September
30, 2011, as compared to $8.2 million for the same period of 2010. This increase was mainly due to
(a) a $5.1 million increase in time charter, voyage and port terminal revenues, of which $3.6
million was attributable to the cabotage business and $1.8 million was attributable to the barge
business, mitigated by a decrease of $0.3 million attributable to the port terminal business, (b) a
$8.5 million increase in sales of products attributable to the port terminal business, (c) a $1.1
million decrease in noncontrolling interest mainly relating to the cabotage business, and (d) a
$0.7 million decrease in other income/(expense), net. This increase was partially offset by (a) a
$2.5 million increase in time charter, voyage and port terminal expenses, resulting from a $2.8
million increase in the barge business mitigated by a $0.3 million decrease in the cabotage
business, (b) a $8.7 million increase in cost of products sold attributable to the port terminal
business, and (c) a $3.5 million increase in direct vessels expenses, resulting from a $2.6 million
increase in the cabotage business and a $0.9 million increase in the barge business.
Nine Month Period Ended September 30, 2011
| Port | ||||||||||||||||
| Terminal | Cabotage | Barge | ||||||||||||||
| Business | Business | Business | Total | |||||||||||||
| (Expressed in thousands of U.S. dollars) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
Net income/(loss) attributable to Navios
Logistics’ stockholders |
$ | 9,165 | $ | 6,084 | $ | (14,266 | ) | $ | 983 | |||||||
Depreciation and amortization |
2,564 | 3,210 | 10,835 | 16,609 | ||||||||||||
Amortization of deferred drydock costs |
— | 151 | 292 | 443 | ||||||||||||
Interest (income)/expense and finance cost, net |
(395 | ) | 2,290 | 9,376 | 11,271 | |||||||||||
Income tax benefit/(expense) |
172 | 696 | (1,224 | ) | (356 | ) | ||||||||||
EBITDA |
$ | 11,506 | $ | 12,431 | $ | 5,013 | $ | 28,950 | ||||||||
10
Nine Month Period Ended September 30, 2010
| Port | ||||||||||||||||
| Terminal | Cabotage | Barge | ||||||||||||||
| Business | Business | Business | Total | |||||||||||||
| (Expressed in thousands of U.S. dollars) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
Net income/(loss) attributable to Navios
Logistics’ stockholders |
$ | 11,255 | $ | 1,640 | $ | (9,570 | ) | $ | 3,325 | |||||||
Depreciation and amortization |
2,545 | 2,617 | 11,377 | 16,539 | ||||||||||||
Amortization of deferred drydock costs |
— | 22 | 261 | 283 | ||||||||||||
Interest (income)/expense and finance cost, net |
(135 | ) | 1,335 | 1,953 | 3,153 | |||||||||||
Income tax benefit/(expense) |
564 | 567 | (1,849 | ) | (718 | ) | ||||||||||
EBITDA |
$ | 14,229 | $ | 6,181 | $ | 2,172 | $ | 22,582 | ||||||||
EBITDA
increased by $6.4 million to $29.0 million for the nine month period ended
September 30, 2011, as compared to $22.6 million for the same period of 2010. This increase was
mainly due to (a) a $22.3 million increase in time charter, voyage and port terminal revenues, of
which $13.9 million was attributable to the cabotage business, $8.3 million was attributable to the
barge business and $0.1 million was attributable to the port terminal business, (b) a $2.5 million
increase in sales of products attributable to the port terminal business, (c) a $0.5 million
decrease in noncontrolling interest mainly relating to the cabotage business and (d) a $1.7 million
decrease in other expense, net. This increase was partially offset by (a) a $4.6 million increase
in time charter, voyage and port terminal expenses resulting from a $4.2 million increase in the
barge business, a $1.1 million increase attributable to the port terminal business, mitigated by a
$0.7 million decrease in the cabotage business, (b) a $3.8 million increase in cost of products
sold attributable to the port terminal business, (c) a $11.1 million increase in direct vessels
expenses, of which $8.3 million was related to the cabotage business and $2.8 million was related
to the barge business and (d) a $1.1 million increase in general and administrative expenses.
Long-term Debt Obligations and Credit Arrangements
Senior Notes: On April 12, 2011, Navios Logistics and its wholly-owned subsidiary Navios Logistics
Finance (US) Inc. (“Logistics Finance” and, together with
Navios Logistics, the “Co-Issuers”) issued
$200.0 million in Senior Notes due on April 15, 2019 (the
“Senior Notes”) at
a fixed rate of 9.25%. The Senior Notes are fully and unconditionally guaranteed, jointly and
severally, by all of Navios Logistics’ direct and indirect subsidiaries except for Hidronave South
American Logistics S.A. and Logistics Finance. The subsidiary guarantees are “full and
unconditional,” as those terms are used in Regulation S-X Rule 3-10, except that the indenture
provides for an individual subsidiary’s guarantee to be automatically
released in certain customary circumstances, such as when a subsidiary is sold or all of the assets of the subsidiary are sold, the capital stock is sold, when the subsidiary is designated as an
“unrestricted subsidiary” for purposes of the indenture, upon liquidation or dissolution of the
subsidiary or upon legal or covenant defeasance or satisfaction and discharge of the Senior Notes.
The Co-Issuers have the option to redeem the notes in whole or in part, at their option, at any
time (i) before April 15, 2014, at a redemption price equal to 100% of the principal amount plus
the applicable make-whole premium plus accrued and unpaid interest, if any, to the redemption date
and (ii) on or after April 15, 2014, at a fixed price of 106.938%, which price declines ratably
until it reaches par in 2017. At any time before April 15, 2014, the Co-Issuers may redeem up to
35% of the aggregate principal amount of the Senior Notes with the net proceeds of an equity
offering at 109.25% of the principal amount of the notes, plus accrued and unpaid interest, if any,
to the redemption date so long as at least 65% of the originally issued aggregate principal amount
of the notes remains outstanding after such redemption. In addition, upon the occurrence of certain
change of control events, the holders of the Senior Notes will have the right to require the
Co-Issuers to repurchase some or all of the notes at 101% of their face amount, plus accrued and
unpaid interest to the repurchase date.
Under a registration rights agreement, the Co-Issuers and the subsidiary guarantors are
obliged to file a registration statement prior to January 7, 2012 that enables the holders of the
Senior Notes to exchange the privately placed notes with publicly registered notes with identical
terms. The Senior Notes contain covenants which, among other things, limit the incurrence of
additional indebtedness, issuance of certain preferred stock, the payment of dividends in excess of
6% per annum of the net proceeds received by or contributed to us in or from any public offering,
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 Navios Logistics’ properties and assets and
creation or designation of restricted subsidiaries.
11
Loan Facilities:
Marfin Facility
On March 31, 2008, the Company entered into a $70.0 million loan facility with Marfin Popular
Bank for the purpose of providing Nauticler S.A. with investment capital to be used in connection
with one or more investment projects. The loan was initially repayable in one installment by March
2011 and bore interest at LIBOR plus a margin of 175 basis points. In
March 2009, the Company
transferred its loan
facility of $70.0 million to Marfin Popular Bank Public Co. Ltd. The loan
provided for an additional one year extension and an increase of the margin to 275 basis points. On
March 23, 2010, the loan was extended for one additional year, providing an increase of the margin
to 300 basis points. On March 29, 2011, Marfin Popular Bank committed to amend its current loan
agreement with Navios Logistics’ subsidiary, Nauticler S.A., to provide for a $40.0 million
revolving credit facility. Under this commitment, the existing margin of 300 basis points will
apply and the obligations will be secured by mortgages on four tanker vessels or alternative
security over other assets acceptable to the bank. The commitment requires that we maintain a
loan-to-value ratio of 120% based on charter-free valuations and compliance with the covenants
contained in the indenture governing the Senior Notes. The obligation of the bank under the
commitment was subject to prepayment of the existing facility and was subject to customary
conditions, such as the receipt of satisfactory appraisals, insurance, opinions and the
negotiation, execution and delivery of mutually satisfactory loan documentation. On April 12, 2011,
following the completion of the sale of $200.0 million of Senior Notes, Navios Logistics fully
repaid the $70.0 million loan facility with Marfin Bank using a portion of the proceeds from the
Senior Notes. As of September 30, 2011, the loan documentation for the $40.0 million revolving
credit facility had not been completed and the facility had not been drawn.
Other Indebtedness
On July 25, 2011, Navios Logistics acquired the noncontrolling interests of its joint
ventures, Thalassa Energy S.A., HS Tankers Inc., HS Navigation Inc., HS Shipping Ltd. Inc. and HS
South Inc., in accordance with the terms of certain stock purchase agreements with HS Energy Ltd.,
an affiliate of Vitol S.A. Navios Logistics paid a total consideration of $8.5 million for such
noncontrolling interests, and simultaneously paid $53.2 million (including $0.2 million of accrued
interest up to July 25, 2011) in full and final settlement of all amounts of indebtedness of such
joint ventures under certain loan agreements as further described below.
In connection with the acquisition of Horamar, Navios Logistics assumed a $9.5 million loan
facility that was entered into by HS Shipping Ltd. Inc., a majority owned subsidiary, in 2006, in
order to finance the construction of a 8,974 dwt double hull tanker the Malva H. Since the vessel’s
delivery, the interest rate had been LIBOR plus 150 basis points. The loan was repayable in
installments of at least 90% of the amount of the last hire payment due to be paid to HS Shipping
Ltd. Inc. The loan was repayable by December 31, 2011 and could have been prepaid before such date,
upon two days written notice. The loan also required compliance with certain covenants. This loan
was repaid in full on July 25, 2011 using a portion of the proceeds from the Senior Notes.
On September 4, 2009, Navios Logistics entered into a loan facility for an amount of up to
$18.7 million that bore interest at LIBOR plus 225 basis points in order to finance the acquisition
cost of the Estefania H. The loan was repayable in installments of at least the higher of (a) 90%
of the amount of the last hire payment due to HS Navigation Inc. prior to the repayment date, and
(b) $0.3 million, inclusive of any interest accrued in relation to the loan at that time. The loan
was repayable by May 15, 2016 and could have been prepaid before such date with two days written
notice. The loan also required compliance with certain covenants. This loan was repaid in full on
July 25, 2011 using a portion of the proceeds from the Senior Notes.
On December 15, 2009, Navios Logistics entered into a loan facility in order to finance the
acquisition cost of the Makenita H for an amount of $24.0 million, which bore interest at LIBOR
plus 225 basis points. The loan was repayable in installments of at least the higher of (a) 90% of
the amount of the last hire payment due to HS Tankers Inc. prior to the repayment date, and (b)
$0.3 million, inclusive of any interest accrued in relation to the loan at that time. The loan was
repayable by March 24, 2016 and could have been prepaid before such date with two days written
notice. The loan also required compliance with certain covenants. This loan was repaid in full on
July 25, 2011 using a portion of the proceeds from the Senior Notes.
On December 20, 2010, in order to finance the acquisition cost of the Sara H, Navios Logistics
entered into a loan facility for $14.4 million that bore interest at LIBOR plus 225 basis points.
The loan was repayable in installments of at least the higher of (a) 90% of the amount of the last
hire payment due to HS South Inc. prior to the repayment date, and (b) $0.3 million, inclusive of
any interest accrued in relation to the loan at that time. The loan was repayable by May 24, 2016
and could have been prepaid before such date with two days written notice. The loan also required
compliance with certain covenants. This loan was repaid in full on July 25, 2011 using a portion of
the proceeds from the Senior Notes.
Navios Logistics assumed a $2.3 million loan facility that was entered into, by its majority
owned subsidiary, Thalassa Energy S.A., in October 2007 in order to finance the purchase of two
self-propelled barges, the Formosa and the San Lorenzo. The loan bore interest at LIBOR plus 150
basis points. The loan was repayable in five equal installments of $0.5 million, which were made in
November 2008, June 2009, January 2010, August 2010, and March 2011. The loan was secured by a
first priority mortgage over the two self-propelled barges. As of September 30, 2011, the facility
was repaid in full.
In connection with the acquisition of Hidronave S.A. on October 29, 2009, Navios Logistics
assumed a $0.8 million loan facility that was entered into by Hidronave S.A. in 2001 in order to
finance the construction of the pushboat Nazira. As of
September 30, 2011, the outstanding loan balance was $0.7 million. The loan facility bears interest
at a fixed rate of 600 basis points. The loan is repayable in monthly installments of $5,740 each
and the final repayment date must occur prior to August 10, 2021. The loan also requires compliance
with certain covenants.
The maturity table below reflects the principal payments due by period of all credit
facilities outstanding as of September 30,
12
2011 for the next five years and thereafter, based on
the repayment schedule of the respective loan facilities (as described above) and the issuance of
$200.0 million of Senior Notes on April 12, 2011 (due on April 2019).
| As of | ||||
| September 30, | ||||
| 2011 | ||||
| (Amounts in | ||||
| millions of | ||||
| Payment due by period | U.S. dollars) | |||
September 30, 2012 |
0.1 | |||
September 30, 2013 |
0.1 | |||
September 30, 2014 |
0.1 | |||
September 30, 2015 |
0.1 | |||
September 30, 2016 |
0.1 | |||
September 30, 2017 and thereafter |
200.2 | |||
Total long-term borrowings |
$ | 200.7 | ||
Contractual Obligations:
The following table summarizes Navios Logistics’ contractual obligations as of September 30,
2011:
| Less | More | |||||||||||||||||||
| than | 1-3 | 3-5 | than | |||||||||||||||||
| Contractual Obligations | 1 year | years | years | 5 years | Total | |||||||||||||||
Payment
due by period (Amounts in millions of U.S. dollars) |
||||||||||||||||||||
Long-term debt obligations(1) |
$ | 0.1 | $ | 0.2 | $ | 0.2 | $ | 0.2 | $ | 0.7 | ||||||||||
Senior Notes(2) |
— | — | — | 200.0 | 200.0 | |||||||||||||||
Operating lease obligations |
4.9 | 3.7 | — | — | 8.6 | |||||||||||||||
Capital lease obligations |
31.3 | — | — | — | 31.3 | |||||||||||||||
Rent obligations(3) |
0.2 | 0.3 | 0.2 | 0.2 | 0.9 | |||||||||||||||
Total |
$ | 36.5 | $ | 4.2 | $ | 0.4 | $ | 200.4 | $ | 241.5 | ||||||||||
| (1) | The amount identified does not include interest costs associated with the outstanding credit facility. This loan facility bears a fixed interest rate of 600 basis points. | |
| (2) | The Senior Notes have a fixed rate of 9.25% per annum which is not included in the above table. | |
| (3) | Navios Logistics has several lease agreements with respect to its various operating offices. |
Working Capital Position
On September 30, 2011, Navios Logistics’ current assets totaled $94.5 million, while current
liabilities totaled $82.2 million, resulting in a positive working capital position of $12.3
million. Navios Logistics’ cash forecast indicates that Navios Logistics will generate sufficient
cash for at least the next 12 months to make the required principal and interest payments on Navios
Logistics’ indebtedness, provide for the normal working capital requirements of the business and
remain in a positive cash position.
Capital Expenditures
In February 2010, HS South Inc., a majority owned subsidiary of Navios Logistics, took
delivery of the Sara H, a 9,000 dwt double hull product oil tanker vessel, which, as of the
beginning of March 2010, is chartered-out for three years. The purchase price of the vessel
(including direct costs) amounted to $18.0 million. On December 20, 2010, HS South Inc., entered
into a loan facility to finance the acquisition cost of the Sara H for an amount of $14.4 million,
which bears interest at a rate of LIBOR plus 225 basis points.
This loan was repaid in full on July 25, 2011. See “Long term Debt Obligations and Credit
Arrangements” above.
During the first quarter of 2010, Navios Logistics began the construction of a grain drying
and conditioning facility at Navios Logistics’ dry port facility in Nueva Palmira. The facility has
been operational since May 16, 2011 and is being financed entirely with funds provided by the port
operations. Navios Logistics paid an amount of $3.9 million as of September 30, 2011 for the
construction of the facility ($3.0 million as of December 31, 2010).
13
In June 2010, Navios Logistics entered into long-term bareboat agreements for two new product
tankers, the Stavroula and the San San H, each with a capacity of 16,871 dwt. The San San H and the
Stavroula were delivered in June and July 2010, respectively. Both tankers are chartered-in for a
two-year period, and Navios Logistics has the obligation to purchase the vessels immediately upon
the expiration of their respective charter periods. Navios Logistics has recognized a capital lease
obligation for the San San H and the Stavroula amounting to $17.0 million and $17.1 million,
respectively.
In 2010, Navios Logistics acquired two 29 acre parcels of land located south of the Nueva
Palmira Free Zone as part of a project to develop a new transshipment facility for mineral ores and
liquid bulks, paying a total of $1.0 million.
On various dates on or prior to October 24, 2011, Navios Logistics used a portion of the
proceeds from its offering of senior unsecured notes due 2019 to acquire three pushboats, 66 barges
and one floating drydock for a total cost of approximately $56.0 million, including transportation
and other related costs.
Following the acquisition of two pieces of land for $1.0 million in 2010, in September 2011,
Navios Logistics paid another $0.4 million for the acquisition of a third piece of land. All of
these pieces of land are located at the south of the Nueva Palmira Free Zone and were acquired as
part of a project to develop a new transshipment facility for mineral ores and liquid bulks.
During the third quarter of 2011, Navios Logistics commenced the construction of a new silo at
its dry port facility in Nueva Palmira, Uruguay. The silo is expected
to be completed in March 2012. Prior to September 30, 2011
Navios Logistics had paid $3.0 million for the silo
construction.
Dividend Policy
The payment of dividends is in the discretion of Navios Logistics’ board of directors. Navios
Logistics anticipates retaining most of its future earnings, if any, for use in its operations and
the expansion of its business. Any determination as to dividend policy will be made by Navios
Logistics’ board of directors and will depend on a number of factors, including the requirements of
Marshall Islands law, Navios Logistics’ future earnings, capital requirements, financial condition
and future prospects and such other factors as Navios Logistics’ board of directors may deem
relevant. Marshall Islands law generally prohibits the payment of dividends other than from
surplus, when a company is insolvent or if the payment of the dividend would render the company
insolvent.
Navios Logistics’ ability to pay dividends is also restricted by the terms of its credit
facilities and the indenture governing its Senior Notes.
Because Navios Logistics is a holding company with no material assets other than the stock of
its subsidiaries, its ability to pay dividends is dependent upon the earnings and cash flow of its
subsidiaries and their ability to pay dividends to Navios Logistics. If there is a substantial
decline in any of the markets in which Navios Logistics participates, its earnings will be
negatively affected, thereby limiting its ability to pay dividends.
Concentration of Credit Risk
Accounts receivable
Concentrations of credit risk with respect to accounts receivables are limited due to Navios
Logistics’ large number of customers, who are established international operators and have an
appropriate credit history. Due to these factors, management believes that no additional credit
risk beyond amounts provided for collection losses is inherent in Navios Logistics’ trade
receivables. For the nine month period ended September 30, 2011, two customers, Petrobras and
Petropar, accounted for 16.3% and 10.2% of Navios Logistics’ revenues, respectively. For the nine
month period ended September 30, 2010, one customer, Petrobras, accounted for 19.2% of Navios
Logistics’ revenues.
Cash deposits with financial institutions
Cash deposits in excess of amounts covered by government-provided insurance are exposed to
loss in the event of non-performance by financial institutions. Navios Logistics does maintain cash
deposits in excess of government-provided insurance limits. Navios Logistics also minimizes
exposure to credit risk by dealing with a diversified group of major financial
institutions.
Off-Balance Sheet Arrangements
Charter hire payments to third parties for chartered-in barges and pushboats are treated as
operating leases for accounting purposes. Navios Logistics is also committed to making rental
payments under various operating leases for office and other premises.
As of September 30, 2011, Navios Logistics’ subsidiaries in South America were contingently
liable for various claims and penalties towards the local tax authorities amounting to a total of
approximately $5.0 million. According to the acquisition agreement, if such cases are brought
against Navios Logistics, the amounts involved will be reimbursed by the previous shareholders,
and, as such,
14
Navios Logistics has recognized a receivable against such liability. The
contingencies are expected to be resolved in the next four years. In the opinion of management, the
ultimate disposition of these matters is immaterial and will not adversely affect Navios Logistics
financial position, results of operations or liquidity.
As of July 19, 2011 and in consideration of Gunvor S.A. entering into sales of oil or
petroleum products with Petrosan, the Company has undertaken to pay to Gunvor S.A. on first demand
any obligations arising directly from the non-fulfillment of said contracts. The guarantee shall
not exceed $1.5 million and shall remain in full force and effect until December 31, 2011.
Legal proceedings
The Company is subject to legal proceedings, claims and contingencies arising in the ordinary
course of business. When such amounts can be estimated and the contingency is probable, management
accrues the corresponding liability. While the ultimate outcome of lawsuits or other proceedings
against the Company cannot be predicted with certainty, management does not believe the costs of
such actions will have a material effect on the Company’s consolidated financial position, results
of operations or cash flows.
Related Party Transactions
The balance due to affiliates as of September 30, 2011 amounted to $0.7 million (December 31,
2010: $0.2 million) which includes the current amounts due to Navios Holdings. Such payables do not
accrue interest and do not have a specific due date for their settlement.
Navios Logistics rents barges and pushboats and pays expenses for lodging at companies
indirectly owned by certain of Navios Logistics’ directors and officers. In relation to these
transactions, amounts payable to other related parties amounted to $0.4 million as of September 30,
2011 ($0.3 million in December 31, 2010) and rent and services expense for the three and nine month
periods ended September 30, 2011 amounted to $0.5 million and $1.6 million, respectively
($0.5 million and $1.6 million in the same periods of 2010, respectively).
Leases: On October 2, 2006, Petrovia S.A. and Mercopar SACI, two wholly owned subsidiaries of
Navios Logistics, entered into lease agreements with Holdux Maritima Leasing Corp., a Panamanian
corporation owned by the estate of Horacio A. Lopez (the father of Claudio Pablo Lopez, Carlos
Augusto Lopez and Horacio Enrique Lopez). The lease agreements provide for the leasing of one
pushboat and three tank barges. The total annual lease payments are $0.6 million and the lease
agreements expire in October 2011.
On July 1, 2007, Compania Naviera Horamar S.A., a wholly owned subsidiary of Navios Logistics,
entered into two lease agreements with Mercotrans S.A. and Mercoparana S.A., two Argentinean
corporations owned by the estate of Horacio A. Lopez (the father of Claudio Pablo Lopez, Carlos
Augusto Lopez and Horacio Enrique Lopez). The lease agreements provide for the leasing of one
pushboat and three tank barges. The total annual lease payments are $1.5 million and the lease
agreements expire in 2012. The lease agreement with Mercotrans S.A. was terminated on July 20,
2011.
Lodging: Compania Naviera Horamar S.A., a wholly owned subsidiary of Navios Logistics, obtains
lodging services from Empresa Hotelera Argentina S.A./(NH Lancaster) an Argentinean corporation
owned by certain of Navios Logistics’ directors and officers, including Claudio Pablo Lopez, Navios
Logistics’ Chief Executive Officer, and Carlos Augusto Lopez, Navios Logistics’ Chief Commercial
Officer—Shipping Division, each of whom does not have a controlling interest in those companies.
The total expense payments were less than $0.1 million for the three and nine month periods ended
September 30, 2011 and 2010.
General & administrative expenses: On April 12, 2011, Navios Logistics entered into an
administrative services agreement for a term of five years, with Navios Holdings, pursuant to which
Navios Holdings provides certain administrative management services to Navios Logistics. Such
services 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. Navios Holdings is reimbursed for reasonable costs and expenses
incurred in connection with the provision of these services. Total general and administrative fees
charged for each of the three and nine month periods ended September 30, 2011 amounted to $0.1
million and $0.3 million, respectively ($0 for each of the three and nine month periods ended
September 30, 2010).
Navios Logistics believes that the transactions discussed above were made on terms no less
favorable to the Company than would have been obtained from unaffiliated third parties.
Employment Agreements
Navios Logistics has executed employment agreements with several of its key employees who are
its noncontrolling
shareholders. These agreements stipulate, among other things, severance and benefit arrangements in
the event of termination. In addition, the agreements include confidentiality provisions and
covenants not to compete. The employment agreements initially expired on December 31, 2009, but
renew automatically for successive one-year periods until either party gives 90 days’ written
notice of its intention to terminate the agreement. Generally, the agreements call for a base
salary ranging from $0.28 million to $0.34 million per year, annual bonuses and other incentives,
provided certain performance targets are achieved. Under the agreements, Navios Logistics’ accrued
compensation totaling $0.2 million and $0.7 million for the three and nine month periods ended
September 30, 2011 ($0.2 million and $0.7 million for the same periods of 2010).
15
Quantitative and Qualitative Disclosures about Market Risks
Navios Logistics is exposed to certain risks related to interest rate, foreign currency and
time charter hire rate fluctuation. Risk management is carried out under policies approved by
executive management.
Interest Rate Risk:
Debt Instruments — On September 30, 2011 and December 31, 2010, Navios Logistics had a total
of $200.7 million and $127.4 million, respectively, in long-term indebtedness.
On July 25, 2011, Navios Logistics used proceeds from the Senior Notes to fully repay $53.0
million of debt of the non-wholly owned subsidiaries in connection with Navios Logistics’ purchase
of the noncontrolling interests of such non-wholly owned subsidiaries. As a result, from that date
onward Navios Logistics’ debt bears interest at a fixed rate only.
The interest rates on the Navios Logistics loans (Hidronave loan and the Senior Notes) are
fixed and, therefore, changes in interest rates do not affect their values, which as of September
30, 2011 was $0.7 million and $200.0 million, respectively.
As of September 30, 2011, Navios Logistics did not have any financial variable rate debt.
During the nine month period ended September 30, 2011, and particularly from January 1, 2011 to
July 25, 2011, when all debt with variable rate interest was fully repaid, Navios Logistics paid
interest on variable rate debt based on LIBOR plus an average spread of 208 basis points.
For a detailed discussion of Navios Logistics’ debt instruments refer to section “Long-term
Debt Obligations and Credit Arrangements” included elsewhere in this document.
Foreign currency transactions:
Navios Logistics’ operating results, which are reported in U.S. dollars, may be affected by
fluctuations in the exchange rate between the U.S. dollar and other currencies. For accounting
purposes, we use U.S. dollars as our functional and reporting currency. Therefore, revenue and
expense accounts are translated into U.S. dollars at the exchange rate in effect at the date of
each transaction. The balance sheets of the foreign operations are translated using the exchange
rate at the balance sheet date except for property and equipment and equity, which are translated
at historical rates.
Navios Logistics’ subsidiaries in Uruguay, Argentina, Brazil and Paraguay transact part of
their operations in Uruguayan pesos, Argentinean pesos, Brazilian reales and Paraguayan guaraníes;
however, all of the subsidiaries’ primary cash flows are U.S. dollar denominated. For the nine
month period ended September 30, 2011 and 2010 approximately 51.5% and 50.4%, respectively, of
Navios Logistics’ expenses were incurred in currencies other than U.S dollars. Transactions in
currencies other than the functional currency 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 statement of income. A change in exchange rates between
the U.S. dollar and each of the foreign currencies listed above of 1.00% would change our net
income for both the nine month period ended September 30, 2011 and the year ended December 31, 2010
by $0.7 million.
Inflation and fuel price increases
The impact of inflation and the resulting pressure on prices in the South American countries
in which Navios Logistics operates may not be fully neutralized by equivalent adjustments in the
rate of exchange between the local currencies and the U.S. dollar. Specifically, for Navios
Logistics’ vessels, barges and pushboats business, Navios Logistics negotiated, and will continue
to negotiate, fuel price adjustment clauses; however, in some cases, prices that Navios Logistics
pays for fuel are temporarily not aligned with the adjustments that Navios Logistics obtains under
its freight contracts.
Critical Accounting Policies
Navios Logistics’ interim condensed consolidated financial statements have been prepared in accordance
with U.S. GAAP. The preparation of these financial statements requires Navios Logistics to make
estimates in the application of its accounting policies based on the best assumptions, judgments
and opinions of management. Following is a discussion of the accounting policies that involve a
higher degree of judgment and the methods of their application that affect the reported amount of
assets and liabilities, revenues and expenses and related disclosure of contingent assets and
liabilities at the date of Navios Logistics’ financial statements. Actual results may differ from
these estimates under different assumptions or conditions.
16
Critical accounting policies are those that reflect significant judgments or uncertainties,
and potentially result in materially different results under different assumptions and conditions.
Navios Logistics has described below what it believes are its most critical accounting policies
that involve a high degree of judgment and the methods of their application.
Impairment of Long-Lived Assets: Vessels, other fixed assets and other long-lived assets held
and used by Navios Logistics are reviewed periodically for potential impairment whenever events or
changes in circumstances indicate that the carrying amount of a particular asset may not be fully
recoverable. In accordance with accounting for long-lived assets, management determines projected
undiscounted cash flows for each asset and compares it to its carrying amount. In the event that
projected undiscounted cash flows for an asset is less than its carrying amount, then management
reviews fair values and compares them to the asset’s carrying amount. In the event that impairment
occurs, an impairment charge is recognized by comparing the asset’s carrying amount to its fair
value. For the purposes of assessing impairment, long-lived assets are grouped at the lowest levels
for which there are separately identifiable cash flows.
For the three and nine month period ended September 30, 2011, after considering various indicators, including but
not limited to the market price of Navios Logistics’ long-lived assets, Navios Logistics’
contracted revenues and cash flows and the economic outlook, Navios Logistics concluded that no
impairment loss should be recognized on the long-lived assets.
Although Navios Logistics believes the underlying indicators supporting this assessment are
reasonable, if charter rate trends became unfavorable and the length of the current market downturn
extends beyond expectations, Navios Logistics may be required to perform impairment analysis in the
future that could expose Navios Logistics to material charges in the future.
No impairment loss was recognized for any of the periods presented.
Vessels, Barges, Pushboats and Other Fixed Assets, Net: Vessels, barges, pushboats and other
fixed assets acquired as parts of a business combination or asset acquisition are recorded at fair
value on the date of acquisition. All other vessels, barges and pushboats acquired are stated at
historical cost, which consists of the contract price, and any material expenses incurred upon
acquisition (improvements and delivery expenses). Subsequent expenditures for major improvements
and upgrading are capitalized, provided they appreciably extend the life, increase the earning
capacity or improve the efficiency or safety of the vessels. The cost and related accumulated
depreciation of assets retired or sold are removed from the accounts at the time of sale or
retirement and any gain or loss is included in the accompanying condensed consolidated statement of
income.
Expenditures for routine maintenance and repairs are expensed as incurred.
Depreciation is computed using the straight-line method over the useful life of the assets,
after considering the estimated residual value. Management estimates the useful life of the
majority of Navios Logistics’ vessels to be between 15 and 40 years from the asset’s original
construction or acquisition with the exception of certain product tankers for which their useful
life was estimated to be 44 to 45 years. However, when regulations place limitations over the
ability of a vessel to trade on a worldwide basis, its useful life is reestimated to end at the
date such regulations become effective. An increase in the useful life of a vessel or in its
residual value would have the effect of decreasing the annual depreciation charge and extending it
into later periods. A decrease in the useful life of a vessel or in its residual value would have
the effect of increasing the annual depreciation charge.
Navios Logistics capitalizes interest on long-term construction projects.
Port Terminals and Other Fixed Assets, Net: Port terminals and other fixed assets acquired as
part of a business combination or asset acquisition are recorded at fair value on the date of
acquisition. All other port terminals and other fixed assets are recorded at cost, which consists
of the construction contracts prices, and material equipment expenses. Port terminals and other
fixed assets are depreciated utilizing the straight-line method at rates equivalent to their
average estimated economic useful lives. The cost and related accumulated depreciation of assets
retired or sold are removed from the accounts at the time of sale or retirement and any gain or
loss is included in the accompanying condensed consolidated statements of income.
Useful life of the assets, are: |
||
Dry port terminal
|
5 to 40 years | |
Oil storage, plant and port facilities for liquid cargoes
|
5 to 20 years | |
Other fixed assets
|
5 to 10 years |
Deferred Drydock and Special Survey Costs: Navios Logistics’ vessels are subject to regularly
scheduled drydocking and special surveys that are carried out every five years for oceangoing
vessels and every seven years for pushboats and barges, to coincide with the renewal of the related
certificates issued by the classification societies as applicable, unless a further extension is
obtained under certain conditions. The costs of drydocking and special surveys are deferred and
amortized over the above mentioned periods or to the next drydocking or
special survey date if such
has been determined. Unamortized drydocking or special survey costs of vessels sold are charged
against income in the year the vessel is sold. Costs capitalized as part of the drydocking or
special survey consist principally of the actual costs incurred at the yard, spare parts, paints,
lubricants and services incurred solely during the drydocking or special survey period.
17
Goodwill and Other Intangibles:
(i) Goodwill: Goodwill is tested for impairment at the reporting unit level at least annually
and written down with a charge to operations if its carrying amount exceeds the estimated implied
fair value. Navios Logistics evaluates impairment of goodwill using a two-step process. First, the
aggregate fair value of the reporting unit is compared to its carrying amount, including goodwill.
Navios Logistics determines the fair value of the reporting unit based on a combination of
discounted cash flow analysis and an industry market multiple.
If the fair value of a reporting unit exceeds the carrying amount, no impairment exists. If
the carrying amount of the reporting unit exceeds the fair value, then Navios Logistics must
perform the second step to determine the implied fair value of the reporting unit’s goodwill and
compare it with its carrying amount. The implied fair value of goodwill is determined by allocating
the fair value of the reporting unit to all the assets and liabilities of that reporting unit, as
if the reporting unit had been acquired in a business combination and the fair value of the
reporting unit was the purchase price. If the carrying amount of the goodwill exceeds the implied
fair value, then goodwill impairment is recognized by writing the goodwill down to its implied fair
value.
No impairment loss was recognized for any of the periods presented.
(ii) Intangibles Other than Goodwill: Navios Logistics’ intangible assets and liabilities
consist of favorable lease terms, customer relationships, trade name, port terminal operating
rights, and favorable construction options. Intangible assets resulting from acquisitions accounted
for using the purchase method of accounting are recorded at fair value as estimated by an external
expert valuation.
The fair value of the trade name was determined based on the “relief from royalty” method
which values the trade name based on the estimated amount that a company would have to pay in an
arms-length transaction in order to use that trade name. Other intangibles that are being
amortized, such as the amortizable portion of favorable leases, port terminal operating rights,
customers relationships and backlog assets, would be considered impaired if their fair market value
could not be recovered from the future undiscounted cash flows associated with the asset. Vessel
purchase options, which are included in favorable lease terms, are not amortized and would be
considered impaired if the carrying value of an option, when added to the option price of the
vessel, exceeded the fair value of the vessel.
The fair value of customer relationships was determined based on the “excess earnings” method,
which relies upon the future cash flow generating ability of the asset. The asset is amortized
under the straight line method over 20 years.
When intangible assets or liabilities associated with the acquisition of a vessel are
identified, they are recorded at fair value. Fair value is determined by reference to market data
and the discounted amount of expected future cash flows. Where charter rates are higher than market
charter rates, an asset is recorded, being the difference between the acquired charter rate and the
market charter rate for an equivalent vessel. Where charter rates are less than market charter
rates, a liability is recorded, being the difference between the assumed charter rate and the
market charter rate for an equivalent vessel. The determination of the fair value of acquired
assets and assumed liabilities requires Navios Logistics to make significant assumptions and
estimates of many variables, including market charter rates, expected future charter rates, the
level of utilization of Navios Logistics’ vessels and its weighted average cost of capital. The use
of different assumptions could result in a material change in the fair value of these items, which
could have a material impact on Navios Logistics’ financial position and results of operations.
The amortizable value of favorable leases is amortized over the remaining life of the lease
term and the amortization expense is included in the statement of operations in the “Depreciation
and amortization” line item.
The amortizable value of favorable leases would be considered impaired if its fair market
value could not be recovered from the future undiscounted cash flows associated with the asset. As
of September 30, 2011, there is no impairment of intangible assets.
Amortizable intangible assets are amortized under the straight line method according to the
following weighted average amortization periods:
| Intangible assets/liabilities | Years | |||
Trade name |
10 | |||
Favorable lease terms |
2 to 5 | |||
Port terminal operating rights |
20 to 25 | |||
Customers relationships |
20 | |||
Backlog asset—port terminal |
3.6 | |||
18
Recent Accounting Pronouncements
Goodwill
Impairment Guidance
In September 2011, the FASB issued an Update to simplify how public entities test goodwill for
impairment. The amendments in the Update permit an entity to first assess qualitative factors to
determine whether it is more likely than not that the fair value of a reporting unit is less than
its carrying amount on a basis for determining whether it is necessary to perform the two-step
goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as
having a likelihood of more than 50 percent. The amendments are effective for annual and interim
goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early
adoption is permitted including for annual and interim impairment tests performed as of a date
before September 15, 2011, if an entity’s financial statements for the most recent annual or
interim period have not yet been issued. The amendment will be adopted by Navios Logistics
effective beginning in the first quarter of 2012. The adoption of the new amendments is not
expected to have a significant impact on Navios Logistics’ consolidated financial statements.
Presentation of Comprehensive Income
In June 2011, the FASB issued an update in the presentation of comprehensive income. According
to the update an entity has the option to present the total of comprehensive income, the components
of net income, and the components of other comprehensive income either in a single continuous
statement of comprehensive income or in two separate but consecutive statements. The statement of
other comprehensive income should immediately follow the statement of net income and include the
components of other comprehensive income and a total for other comprehensive income, along with a
total for comprehensive income. Regardless of whether an entity chooses to present comprehensive
income in a single continuous statement or in two separate but consecutive statements, the entity
is required to present on the face of the financial statements reclassification adjustments for
items that are reclassified from other comprehensive income to net income in the statement(s) where
the components of net income and the components of other comprehensive income are presented. The
amendments in this update do not change the items that must be reported in other comprehensive
income or when an item of other comprehensive income must be reclassified to net income. For public
entities, the amendments are effective for fiscal years, and interim periods within those years,
beginning after December 15, 2011. Early adoption is permitted, because compliance with the
amendments is already permitted. The amendments do not require any transition disclosures. The
adoption of the new amendments is not expected to have a significant impact on Navios Logistics’
consolidated financial statements.
Fair Value Measurement
In May 2011, the Financial Accounting Standards Board (“FASB”) issued amendments to achieve
common fair value measurement and disclosure requirements. The new guidance (i) prohibits the
grouping of financial instruments for purposes of determining their fair values when the unit of
accounting is specified in another guidance, unless the exception provided for portfolios applies
and is used; (ii) prohibits the application of a blockage factor in valuing financial instruments
with quoted prices in active markets and (iii) extends that prohibition to all fair value
measurements. Premiums or discounts related to size as a characteristic of the entity’s holding
(that is, a blockage factor) instead of as a characteristic of the asset or liability (for example,
a control premium), are not permitted. A fair value measurement that is not a Level 1 measurement
may include premiums or discounts other than blockage factors when market participants would
incorporate the premium or discount into the measurement at the level of the unit of accounting
specified in another guidance. The new guidance aligns the fair value measurement of instruments
classified within an entity’s shareholders’ equity with the guidance for liabilities. As a result,
an entity should measure the fair value of its own equity instruments from the perspective of a
market participant that holds the instruments as assets. The disclosure requirements have been
enhanced. The most significant change will require entities, for their recurring Level 3 fair value
measurements, to disclose quantitative information about unobservable inputs used, to include a
description of the valuation processes used by the entity, and to include a qualitative discussion
about the sensitivity of the measurements. In addition, entities must report the level in the fair
value hierarchy of assets and liabilities not recorded at fair value but where fair value is
disclosed. The new guidance is effective for interim and annual periods beginning on or after
December 15, 2011, with early adoption prohibited. The new guidance will require prospective
application. The adoption of the new standard is not expected to have a significant impact on
Navios Logistics’ consolidated financial statements.
Fair Value Disclosures
In January 2010, the Financial Accounting Standards Board (“FASB”) issued amended standards
requiring additional fair value disclosures. The amended standards require disclosures of transfers
in and out of Levels 1 and 2 of the fair value hierarchy, as well as requiring gross basis
disclosures for purchases, sales, issuances and settlements within the Level 3 reconciliation.
Additionally, the update clarifies the requirement to determine the level of disaggregation for
fair value measurement disclosures and to disclose valuation techniques and inputs used for both
recurring and nonrecurring fair value measurements in either Level 2 or Level 3. Navios Logistics
adopted the new guidance in the first quarter of fiscal year 2010, except for the disclosures
related to purchases, sales, issuance and settlements within Level 3, which will be effective for
Navios Logistics beginning in the first quarter of fiscal year 2011. The adoption of the new
standards did not have and is not expected to have a significant impact on Navios Logistics’
consolidated financial statements.
19
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
F-1
NAVIOS SOUTH AMERICAN LOGISTICS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of U.S. dollars — except share data)
| September 30, | ||||||||||||
| 2011 | December 31, | |||||||||||
| Notes | (unaudited) | 2010 | ||||||||||
ASSETS |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
3 | $ | 57,842 | $ | 39,204 | |||||||
Restricted cash |
— | 564 | ||||||||||
Accounts receivable, net |
21,977 | 17,102 | ||||||||||
Prepaid expenses and other current assets |
14,672 | 13,554 | ||||||||||
Total current assets |
$ | 94,491 | $ | 70,424 | ||||||||
Noncurrent assets |
||||||||||||
Vessels, port terminals and other fixed assets, net |
4 | 349,818 | 296,133 | |||||||||
Intangible assets other than goodwill |
5 | 64,974 | 68,299 | |||||||||
Goodwill |
104,096 | 104,096 | ||||||||||
Other long-term assets |
17,115 | 8,509 | ||||||||||
Total noncurrent assets |
536,003 | 477,037 | ||||||||||
Total assets |
$ | 630,494 | $ | 547,461 | ||||||||
LIABILITIES AND EQUITY |
||||||||||||
Current liabilities |
||||||||||||
Accounts payable |
$ | 28,694 | $ | 22,591 | ||||||||
Due to affiliate companies |
9 | 692 | 155 | |||||||||
Accrued expenses |
6 | 21,413 | 9,611 | |||||||||
Current portion of capital lease obligations |
4 | 31,330 | 1,252 | |||||||||
Current portion of long-term debt |
7 | 69 | 10,171 | |||||||||
Total current liabilities |
$ | 82,198 | $ | 43,780 | ||||||||
Noncurrent liabilities |
||||||||||||
Senior notes |
7 | 200,000 | — | |||||||||
Long-term debt, net of current portion |
7 | 616 | 117,251 | |||||||||
Capital lease obligations, net of current portion |
4 | — | 31,009 | |||||||||
Deferred tax liability |
19,921 | 21,105 | ||||||||||
Long-term liabilities |
5,377 | 5,037 | ||||||||||
Total noncurrent liabilities |
225,914 | 174,402 | ||||||||||
Total liabilities |
$ | 308,112 | $ | 218,182 | ||||||||
Commitments and contingencies |
8 | — | — | |||||||||
Stockholders’ equity |
||||||||||||
| Common stock — $1.00 par value: 50,000,000 authorized shares; 20,000 shares issued and outstanding as of September 30, 2011 and December 31, 2010 | 20 | 20 | ||||||||||
Additional paid-in capital |
303,518 | 292,668 | ||||||||||
Retained earnings |
18,325 | 17,342 | ||||||||||
Total Navios Logistics’ stockholders’ equity |
321,863 | 310,030 | ||||||||||
Noncontrolling interest |
519 | 19,249 | ||||||||||
Total stockholders’ equity |
322,382 | 329,279 | ||||||||||
Total liabilities and stockholders’ equity |
$ | 630,494 | $ | 547,461 | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
NAVIOS SOUTH AMERICAN LOGISTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in thousands of U.S. dollars — except share data)
| Three Month | Three Month | Nine Month | Nine Month | |||||||||||||||||
| Period Ended | Period Ended | Period Ended | Period Ended | |||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||||||
| Notes | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||
Time charter, voyage and port
terminal revenues |
$ | 44,058 | 38,979 | $ | 123,861 | $ | 101,581 | |||||||||||||
Sales of products |
24,789 | 16,323 | 44,047 | 41,562 | ||||||||||||||||
Time charter, voyage and port
terminal expenses |
(11,103 | ) | (8,600 | ) | (30,817 | ) | (26,213 | ) | ||||||||||||
Direct vessels expenses |
(18,068 | ) | (14,552 | ) | (48,006 | ) | (36,762 | ) | ||||||||||||
Cost of products sold |
(23,873 | ) | (15,236 | ) | (42,320 | ) | (38,554 | ) | ||||||||||||
Depreciation and amortization |
4,5 | (5,531 | ) | (5,197 | ) | (16,609 | ) | (16,539 | ) | |||||||||||
General and administrative expenses |
(3,572 | ) | (3,500 | ) | (10,368 | ) | (9,308 | ) | ||||||||||||
Interest income/(expense) and
finance cost, net |
(5,112 | ) | (1,113 | ) | (11,271 | ) | (3,153 | ) | ||||||||||||
Gain on sale of assets |
36 | — | 36 | — | ||||||||||||||||
Other expense, net |
(3,327 | ) | (4,017 | ) | (7,168 | ) | (8,669 | ) | ||||||||||||
| (Loss)/income before income taxes and noncontrolling interest | $ | (1,703 | ) | $ | 3,087 | $ | 1,385 | $ | 3,945 | |||||||||||
Income tax benefit/(expense) |
389 | (326 | ) | 356 | 718 | |||||||||||||||
Net (loss)/income |
(1,314 | ) | 2,761 | 1,741 | 4,663 | |||||||||||||||
| Less: Net income attributable to the noncontrolling interest | (213 | ) | (1,304 | ) | (758 | ) | (1,338 | ) | ||||||||||||
| Net (loss)/income attributable to Navios Logistics’ stockholders | $ | (1,527 | ) | $ | 1,457 | $ | 983 | $ | 3,325 | |||||||||||
| Basic and diluted net (loss)/earnings per share attributable to Navios Logistics’ stockholders | $ | (0.0764 | ) | $ | 0.0729 | $ | 0.0492 | $ | 0.1663 | |||||||||||
| Weighted average number of shares, basic and diluted | 10 | 20,000 | 20,000 | 20,000 | 20,000 | |||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
NAVIOS SOUTH AMERICAN LOGISTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of U.S. dollars)
| Nine Month Period | Nine Month Period | |||||||||||
| Ended | Ended | |||||||||||
| September 30, | September 30, | |||||||||||
| 2011 | 2010 | |||||||||||
| Notes | (unaudited) | (unaudited) | ||||||||||
OPERATING ACTIVITIES: |
||||||||||||
Net income |
$ | 1,741 | $ | 4,663 | ||||||||
Adjustments to reconcile net income to net cash provided by
operating activities: |
||||||||||||
Non cash adjustments |
17,917 | 19,043 | ||||||||||
Increase in operating assets |
(5,656 | ) | (4,011 | ) | ||||||||
Increase in operating liabilities |
17,221 | 304 | ||||||||||
Payments for drydock and special survey costs |
(2,535 | ) | (763 | ) | ||||||||
Net cash provided by operating activities |
28,688 | 19,236 | ||||||||||
INVESTING ACTIVITIES: |
||||||||||||
Acquisition of vessels, port terminals and other fixed assets |
(66,947 | ) | (7,741 | ) | ||||||||
Net cash used in investing activities |
(66,947 | ) | (7,741 | ) | ||||||||
FINANCING ACTIVITIES: |
||||||||||||
Proceeds from issuance of Senior Notes |
7 | 200,000 | — | |||||||||
Repayment of long-term debt |
7 | (126,738 | ) | (3,522 | ) | |||||||
Acquisition of noncontrolling interest |
10 | (8,638 | ) | — | ||||||||
Dividends to noncontrolling shareholders |
— | (467 | ) | |||||||||
Payments of obligations under capital leases |
4 | (930 | ) | (1,460 | ) | |||||||
Proceeds from long-term loan |
7 | — | 294 | |||||||||
Deferred financing costs |
(6,797 | ) | (525 | ) | ||||||||
Net cash provided by/(used in) financing activities |
56,897 | (5,680 | ) | |||||||||
Increase in cash and cash equivalents |
18,638 | 5,815 | ||||||||||
Cash and cash equivalents, beginning of period |
39,204 | 26,927 | ||||||||||
Cash and cash equivalents, end of period |
$ | 57,842 | $ | 32,742 | ||||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
||||||||||||
Cash paid for interest |
$ | 2,243 | $ | 3,118 | ||||||||
Cash paid for income taxes |
$ | 834 | $ | 478 | ||||||||
Non-cash investing and financing activities: |
||||||||||||
Acquisition of vessels |
$ | — | $ | (50,830 | ) | |||||||
Capital lease obligations |
$ | — | $ | 34,032 | ||||||||
Exercise option from acquisition of vessels |
$ | — | $ | 4,400 | ||||||||
Other long-term liabilities |
$ | — | $ | 16,798 | ||||||||
Contribution receivable from noncontrolling shareholders |
$ | — | $ | (2,237 | ) | |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
NAVIOS SOUTH AMERICAN LOGISTICS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Expressed in thousands of U.S. dollars — except share data)
| Total Navios | ||||||||||||||||||||||||||||
| Logistics’ | ||||||||||||||||||||||||||||
| Shares | Common | Additional Paid-in | Stockholders’ | Noncontrolling | ||||||||||||||||||||||||
| Amount | Stock | Capital | Retained Earnings | Equity | Interest | Total Equity | ||||||||||||||||||||||
Balance
December 31, 2009 |
20,000 | $ | 20 | $ | 281,798 | $ | 11,742 | $ | 293,560 | $ | 16,472 | $ | 310,032 | |||||||||||||||
Dividends to
noncontrolling
shareholders |
— | — | — | — | — | (467 | ) | (467 | ) | |||||||||||||||||||
Release of shares
in escrow |
— | — | 10,870 | — | 10,870 | — | 10,870 | |||||||||||||||||||||
Net income |
— | — | — | 3,325 | 3,325 | 1,338 | 4,663 | |||||||||||||||||||||
Balance
September 30, 2010
(unaudited) |
20,000 | $ | 20 | $ | 292,668 | $ | 15,067 | $ | 307,755 | $ | 17,343 | $ | 325,098 | |||||||||||||||
| Total Navios | ||||||||||||||||||||||||||||
| Logistics’ | ||||||||||||||||||||||||||||
| Shares | Common | Additional Paid-in | Stockholders’ | Noncontrolling | ||||||||||||||||||||||||
| Amount | Stock | Capital | Retained Earnings | Equity | Interest | Total Equity | ||||||||||||||||||||||
Balance
December 31, 2010 |
20,000 | $ | 20 | $ | 292,668 | $ | 17,342 | $ | 310,030 | $ | 19,249 | $ | 329,279 | |||||||||||||||
Acquisition of
noncontrolling
interest (including
transaction
expenses) |
— | — | 10,850 | — | 10,850 | (19,488 | ) | (8,638 | ) | |||||||||||||||||||
Net income |
— | — | — | 983 | 983 | 758 | 1,741 | |||||||||||||||||||||
Balance
September 30, 2011
(unaudited) |
20,000 | $ | 20 | $ | 303,518 | $ | 18,325 | $ | 321,863 | $ | 519 | $ | 322,382 | |||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
NAVIOS SOUTH AMERICAN LOGISTICS INC.
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
(Expressed in thousands of U.S. dollars — except share data)
NOTE 1: DESCRIPTION OF BUSINESS
Nature of operations
Navios South American Logistics Inc. (“Navios Logistics” or the “Company”), together
with its subsidiaries, is one of the largest logistics companies in the Hidrovia region of South
America, serving the storage and marine transportation needs of its customers through two port
storage and transfer facilities, one for grain commodities and the other for refined petroleum
products, and a diverse fleet, consisting of vessels, barges and pushboats. Navios Logistics has
combined its ports in Uruguay and Paraguay with its versatile fleet to create an end-to-end
logistics solution for customers seeking to transport mineral and grain commodities and liquid
cargoes through the Hidrovia region. The Company provides transportation for liquid cargo
(hydrocarbons such as crude oil, gas oil, naphtha, fuel oil and vegetable oils), liquefied cargo
(liquefied petroleum gas (LPG)) and dry cargo (cereals, cotton pellets, soybeans, wheat, limestone
(clinker), mineral iron, and rolling stones).
Formation of Navios Logistics
Navios Logistics was incorporated under the laws of the Republic of the Marshall Islands
on December 17, 2007. On January 1, 2008, pursuant to a Share Purchase Agreement, Navios Maritime
Holdings Inc. (“Navios Holdings”) (NYSE: NM) contributed: (a) $112,200 in cash and (b) all of the
authorized capital stock of its wholly-owned subsidiary, Corporacion Navios Sociedad Anonima
(“CNSA”), to Navios Logistics in exchange for 12,765 shares of Navios Logistics representing 63.8%
(67.2% excluding contingent consideration) of Navios Logistics’ outstanding stock. As part of the
same transaction, Navios Logistics acquired 100% ownership of Horamar Group (“Horamar”) in exchange
for: (i) $112,200 in cash, of which $5,000 was escrowed and payable upon the attainment of certain
EBITDA targets during specified periods through December 2008; and (ii) the issuance of 7,235
shares of Navios Logistics representing 36.2% (32.8% excluding contingent consideration) of Navios
Logistics’ outstanding stock, of which 1,007 shares were escrowed upon the attainment of certain
EBITDA targets. During the year ended December 31, 2008, $2,500 in cash and 503 shares were
released from escrow when Horamar achieved the interim EBITDA target. On March 20, August 19, and
December 30, 2009, the Share Purchase Agreement was amended to postpone until June 17, 2010 the
date for determining whether the EBITDA target was achieved. On June 17, 2010, following the
release of $2,500 in cash and the 504 shares remaining in escrow upon the achievement of the EBITDA
target thresholds, goodwill increased by $13,370, to reflect the changes in non-controlling
interests. Navios Holdings currently holds 63.8% of Navios Logistics’ outstanding stock. The shares
released from escrow on June 17, 2010 related to the Horamar acquisition were valued in the
Company’s financial statements at $10,870 on the basis of their estimated fair value on the date of
the release. The fair value of the escrowed shares was estimated based on a discounted cash flow
analysis prepared by the Company, which projected the expected future cash flows for its logistics
business and discounted those cash flows at a rate that reflects the business’ weighted-average
cost of capital. This release was accounted for by increasing goodwill and increasing paid-in
capital.
The Company used the following key methods and assumptions in the discounted cash flow
analysis: (a) its free cash flows (EBITDA less capital expenditures and income taxes) for each of
the years from 2010 through 2014 was projected on the basis of a compound annual growth rate for
revenue of approximately 8.8%; (b) its cash flow projections were prepared on the basis of revenue
producing assets that were owned by the logistics business as of the date of the analysis; (c) a
terminal value for the business was calculated by applying a growth factor of 4.9% in perpetuity to
projected free cash flow for the last specifically-forecasted year (2014); (d) its projected future
cash flows, including the terminal value, were discounted using a weighted-average cost of capital
of 12.9%; and (e) net debt of the business was deducted from the discounted cash flows in arriving
at estimated fair value of the logistics business.
The 7,235 shares of Navios Logistics issued were valued at fair value as this was a
transaction involving unrelated, independent parties, while the 12,765 shares issued to Navios
Holdings in exchange for its 100% equity interest in CNSA were accounted for at carryover basis.
On July 25, 2011, the Company acquired the noncontrolling interests of its joint ventures
Thalassa Energy S.A., HS Tankers Inc., HS Navigation Inc., HS Shipping Ltd .Inc. and HS South Inc.,
in accordance with the terms of certain stock purchase agreements with HS Energy Ltd., an affiliate
of Vitol S.A. (“Vitol”). The Company paid a total consideration of $8,500 for such noncotrolling
interests ($8,638 including transactions expenses; see also Note 10), and simultaneously paid
$53,155 in full and final settlement of all amounts of indebtedness of such joint ventures under
certain loan agreements. The transaction was considered a step acquisition (with control maintained
by Navios Logistics) and was accounted for as an equity transaction.
F-6
NAVIOS SOUTH AMERICAN LOGISTICS INC.
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
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 Logistics’
consolidated financial positions, statements of changes in equity, statements of operations and
cash flows for the periods presented. Adjustments consist of normal, recurring entries. Where
necessary, comparative figures have been reclassified to conform to changes in presentation in the
current year. 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
United States generally accepted accounting principles (“GAAP”) for complete financial statements.
The December 31, 2010 balance sheet data was derived from audited financial statements, but do not
include all disclosures required by GAAP.
For the three and nine month period ended September 30, 2010, the Company reclassified
$14,552 and $36,762, respectively, from time charter, voyage and port terminal expenses to direct
vessel expenses since the Company considers this to be a better presentation to reflect the results
of operations.
(b) Principles of Consolidation
The accompanying interim consolidated financial statements include the accounts of
Navios Logistics and its majority owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in the consolidated statements.
(c) Subsidiaries Included in the Consolidation:
Subsidiaries are those entities in which the Company has an interest of more than one
half of the voting rights or otherwise has power to govern the financial and operating policies.
Barges, pushboats and other vessels acquired as part of a business combination are recorded at fair
market value on 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. Barges, pushboats and
other vessels acquired as asset acquisitions are stated at historical cost, which consists of the
contract price and any material expenses incurred upon acquisition (improvements and delivery
expenses).
Subsidiaries included in the consolidation:
| Percentage | ||||||||||||||||
| Country of | Of | Statement of Operations | ||||||||||||||
| Company Name | Incorporation | Nature/Vessel Name | Ownership | 2011 | 2010 | |||||||||||
Corporacion Navios S.A. |
Uruguay | Operating Company | 100 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
Nauticler S.A. |
Uruguay | Sub-Holding Company | 100 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
Compania Naviera Horamar S.A. |
Argentina | Vessel-Operating Management Company | 100 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
Compania de Transporte
Fluvial Int S.A. |
Uruguay | Sub-Holding Company | 100 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
Ponte Rio S.A. |
Uruguay | Operating Company | 100 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
Thalassa Energy S.A.(1) |
Argentina | Barge-Owning Company | 100 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
HS Tankers Inc.(1) |
Panama | Tanker-Owning Company | 100 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
HS Navigation Inc.(1) |
Panama | Tanker-Owning Company | 100 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
HS Shipping Ltd. Inc.(1) |
Panama | Tanker-Owning Company | 100 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
HS South Inc. (1) |
Panama | Tanker-Owning Company | 100 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
Petrovia Internacional S.A. |
Uruguay | Land-Owning Company | 100 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
Mercopar S.A. |
Paraguay | Operating/Barge-Owning Company | 100 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
Navegacion Guarani S.A. |
Paraguay | Operating/Barge and | 100 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
| Pushboat-Owning Company | ||||||||||||||||
Hidrovia OSR S.A. |
Paraguay | Tanker-Owning Company/Oil | 100 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
| Spill Response & Salvage | ||||||||||||||||
| Services | ||||||||||||||||
Mercofluvial S.A. |
Paraguay | Operating/Barge and | 100 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
| Pushboat-Owning Company | ||||||||||||||||
F-7
NAVIOS SOUTH AMERICAN LOGISTICS INC.
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Percentage | ||||||||||||||||
| Country of | Of | Statement of Operations | ||||||||||||||
| Company Name | Incorporation | Nature/Vessel Name | Ownership | 2011 | 2010 | |||||||||||
Petrolera San Antonio S.A. |
Paraguay | POA Facility-Owning Company | 100 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
Stability Oceanways S.A. |
Panama | Barge and Pushboat-Owning | 100 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
| Operating Company | ||||||||||||||||
Hidronave South American
Logistics S.A. |
Brazil | Pushboat-Owning Company | 51 | % | 1/1—09/30 | 1/1—09/30 | ||||||||||
Navarra Shipping
Corporation |
Marshall Is. | Tanker-Owning Company | 100 | % | 1/1—09/30 | 4/1—09/30 | ||||||||||
Pelayo Shipping Corporation |
Marshall Is. | Tanker-Owning Company | 100 | % | 1/1—09/30 | 4/1—09/30 | ||||||||||
Navios Logistics Finance
(US) Inc. |
Delaware | Operating Company | 100 | % | 1/16—09/30 | — | ||||||||||
Varena
Maritime Services S.A. |
Panama | Barge and Pushboat-Owning Operating Company | 100 | % | 4/14—09/30 | — | ||||||||||
| (1) | On July 25, 2011, Navios Logistics acquired the noncontrolling interests of these joint ventures. As a result, after the consummation of the transaction, the percentage of ownership of the Company in these subsidiaries changed in accordance with the table included in Note 10. |
NOTE 3: CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
| September 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
Cash on hand and at banks |
$ | 25,252 | $ | 26,080 | ||||
Short-term deposits |
32,590 | 13,124 | ||||||
Total cash and cash equivalents |
$ | 57,842 | $ | 39,204 | ||||
Short-term deposits are comprised of deposits with banks with original maturities of less
than 90 days.
NOTE 4: VESSELS, PORT TERMINALS AND OTHER FIXED ASSETS, NET
Vessels, port terminals and other fixed assets, net consist of the following:
| Accumulated | Net Book | |||||||||||
| Tanker Vessels, Barges and Push Boats | Cost | Depreciation | Value | |||||||||
Balance December 31, 2010 |
$ | 278,837 | $ | (42,637 | ) | $ | 236,200 | |||||
Additions |
59,680 | (11,182 | ) | 48,498 | ||||||||
Balance September 30, 2011 |
$ | 338,517 | $ | (53,819 | ) | $ | 284,698 | |||||
| Accumulated | Net Book | |||||||||||
| Dry Port Terminal | Cost | Depreciation | Value | |||||||||
Balance December 31, 2010 |
$ | 39,501 | $ | (5,094 | ) | $ | 34,407 | |||||
Additions |
5,260 | (883 | ) | 4,377 | ||||||||
Disposals |
(152 | ) | 103 | (49 | ) | |||||||
Balance September 30, 2011 |
$ | 44,609 | $ | (5,874 | ) | $ | 38,735 | |||||
F-8
NAVIOS SOUTH AMERICAN LOGISTICS INC.
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Accumulated | Net Book | |||||||||||
| Oil Storage Plant and Port Facilities for Liquid Cargoes | Cost | Depreciation | Value | |||||||||
Balance December 31, 2010 |
$ | 25,757 | $ | (3,937 | ) | $ | 21,820 | |||||
Additions |
436 | (987 | ) | (551 | ) | |||||||
Balance September 30, 2011 |
$ | 26,193 | $ | (4,924 | ) | $ | 21,269 | |||||
| Accumulated | Net Book | |||||||||||
| Other Fixed Assets | Cost | Depreciation | Value | |||||||||
Balance December 31, 2010 |
$ | 4,139 | $ | (433 | ) | $ | 3,706 | |||||
Additions |
1,642 | (232 | ) | 1,410 | ||||||||
Balance September 30, 2011 |
$ | 5,781 | $ | (665 | ) | $ | 5,116 | |||||
| Accumulated | Net Book | |||||||||||
| Total | Cost | Depreciation | Value | |||||||||
Balance December 31, 2010 |
$ | 348,234 | $ | (52,101 | ) | $ | 296,133 | |||||
Additions |
67,018 | (13,284 | ) | 53,734 | ||||||||
Disposals |
(152 | ) | 103 | (49 | ) | |||||||
Balance September 30, 2011 |
$ | 415,100 | $ | (65,282 | ) | $ | 349,818 | |||||
Certain assets of the Company have been pledged as collateral for loan facilities. As of
September 30, 2011 and December 31, 2010, the net book value of such assets was $4,193 and $45,568,
respectively (See Note 7).
During the first quarter of 2010, Navios Logistics began the construction of a grain
drying and conditioning facility at its dry port facility in Nueva Palmira, Uruguay. The facility,
which has been operational since May 16, 2011, has been financed entirely with funds provided by
Navios Logistics’ dry port operations. For the construction of the facility, Navios Logistics paid
$848 during the nine month period ended September 30, 2011 and $3,043 during the year ended
December 31, 2010.
During the nine month period ended September 30, 2011, Navios Logistics used a portion
of the proceeds from the Senior Notes to pay $10,819 for the acquisition of two pushboats named
William Hank and Lonny Fugate and another $6,360 for the acquisition of a pushboat named WW Dyer.
Additionally, Navios Logistics used a portion of such proceeds to pay $19,836 for the acquisition
of 66 dry barges, $14,728 relating to transportation and other related costs associated with the
acquired pushboats and barges, and $4,300 for the acquisition of a floating drydock facility.
Additionally, during the nine month period ended September 30, 2011, Navios Logistics
performed some improvements relating to its vessels, the Malva H, the Estefania H and the San San H
(formerly known as the Jiujiang), amounting to $44, $611 and $1,070, respectively.
Following the acquisition of two pieces of land for $987 in 2010, in September 2011,
Navios Logistics paid a total of $389 for the acquisition of a third piece of land. All of these
pieces of land are located at the south of the Nueva Palmira Free Zone and were acquired as part of
a project to develop a new transshipment facility for mineral ores and liquid bulks.
During the third quarter of 2011, Navios Logistics commenced the construction of a new silo at
its dry port facility in Nueva Palmira, Uruguay. The silo is expected
to be completed in March 2012. As of September 30, 2011 Navios Logistics had paid $2,994 for the silo
construction.
In June 2010, Navios Logistics entered into long-term bareboat agreements for two new product
tankers, the Stavroula and the San San H, each with a capacity of 16,871 dwt. The San San H and the
Stavroula were delivered in June and July 2010, respectively. Both tankers are chartered-in for a
two-year period, and Navios Logistics has the obligation to purchase the vessels immediately upon
the expiration of their respective charter periods. The purchase price of the vessels (including
direct costs) amounted to approximately $19,643 and $17,904, respectively. As of September 30,
2011, the obligations for these vessels were accounted for as capital
leases and the lease payments
during the nine month period ended September 30, 2011 for both vessels were $931.
F-9
NAVIOS SOUTH AMERICAN LOGISTICS INC.
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
The following is an analysis of the leased property under capital leases:
| September 30, | ||||
| Vessel | 2011 | |||
San San H and Stavroula |
$ | 37,547 | ||
Less: Accumulated amortization |
(705 | ) | ||
Net book value |
$ | 36,842 | ||
Future minimum lease payments under capital lease together with the present value of the
future minimum lease payments as of September 30, 2011 are as follows:
| September 30, | ||||
| Payment due by period | 2011 | |||
September 30, 2012 |
$ | 32,091 | ||
Total future minimum lease payments (1) |
$ | 32,091 | ||
Less: amount representing interest (2) |
(761 | ) | ||
Present value of future minimum lease payments (3) |
$ | 31,330 | ||
| (1) | There are no minimum sublease rentals to reduce minimum payments. | |
| (2) | Amount necessary to reduce net minimum lease payments to present value calculated at the Company’s incremental borrowing rate at the inception of the lease. | |
| (3) | Reflected in the balance sheet as current obligations under capital leases of $31,330. |
NOTE 5: INTANGIBLE ASSETS OTHER THAN GOODWILL
Intangible assets as of September 30, 2011 and December 31, 2010 consisted of the following:
| Acquisition | Accumulated | Disposal/Transfer | Net Book Value | |||||||||||||
| September 30, 2011 | Cost | Amortization | to Vessel Cost | September 30, 2011 | ||||||||||||
Trade name |
$ | 10,420 | $ | (3,908 | ) | $ | — | $ | 6,512 | |||||||
Port terminal operating rights |
34,060 | (5,299 | ) | — | 28,761 | |||||||||||
Customer relationships |
36,120 | (7,284 | ) | — | 28,836 | |||||||||||
Favorable lease terms |
3,780 | (2,915 | ) | — | 865 | |||||||||||
Total |
$ | 84,380 | $ | (19,406 | ) | $ | — | $ | 64,974 | |||||||
F-10
NAVIOS SOUTH AMERICAN LOGISTICS INC.
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Acquisition | Accumulated | Disposal/Transfer | Net Book Value | |||||||||||||
| December 31, 2010 | Cost | Amortization | to Vessel Cost | December 31, 2010 | ||||||||||||
Trade name |
$ | 10,420 | $ | (3,126 | ) | $ | — | $ | 7,294 | |||||||
Port terminal operating rights |
34,060 | (4,605 | ) | — | 29,455 | |||||||||||
Customer relationships |
36,120 | (5,954 | ) | — | 30,166 | |||||||||||
Favorable construction contracts (*) |
4,400 | — | (4,400 | ) | — | |||||||||||
Favorable lease terms |
3,780 | (2,396 | ) | — | 1,384 | |||||||||||
Total |
$ | 88,780 | $ | (16,081 | ) | $ | (4,400 | ) | $ | 68,299 | ||||||
| (*) | This amount is not amortized until the vessel is delivered. When a vessel is delivered, the amount is capitalized as part of the cost of the vessel and then depreciated over the remaining useful life of the vessel. Following the delivery of the tanker vessel Sara H in 2010, $4,400 was transferred to the cost of the vessel. |
Amortization expense, net for the three and nine month periods ended September 30, 2011
amounted to $1,110 and $3,325, respectively ($1,123 and $3,363 for the three and nine month periods
ended September 30, 2010, respectively).
The remaining aggregate amortization of acquired intangibles as of September 30, 2011
will be as follows:
| Within | Year | Year | Year | Year | ||||||||||||||||||||||||
| Description | one year | two | three | four | five | Thereafter | Total | |||||||||||||||||||||
Trade name |
$ | 1,042 | $ | 1,042 | $ | 1,042 | $ | 1,042 | $ | 1,042 | $ | 1,302 | $ | 6,512 | ||||||||||||||
Port terminal
operating rights |
917 | 917 | 917 | 917 | 917 | 24,176 | 28,761 | |||||||||||||||||||||
Customer relationships |
1,775 | 1,775 | 1,775 | 1,775 | 1,775 | 19,961 | 28,836 | |||||||||||||||||||||
Favorable lease terms |
692 | 173 | — | — | — | — | 865 | |||||||||||||||||||||
Total |
$ | 4,426 | $ | 3,907 | $ | 3,734 | $ | 3,734 | $ | 3,734 | $ | 45,439 | $ | 64,974 | ||||||||||||||
NOTE 6: ACCRUED EXPENSES
Accrued expenses consist on the following:
| September 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
Accrued salaries |
$ | 8,076 | $ | 5,228 | ||||
Taxes payable |
3,748 | 2,709 | ||||||
Accrued fees |
347 | 731 | ||||||
Accrued Senior Notes interest |
8,633 | — | ||||||
Accrued interest |
— | 81 | ||||||
Other |
609 | 862 | ||||||
Total accrued expenses |
$ | 21,413 | $ | 9,611 | ||||
NOTE 7: BORROWINGS
On April 12, 2011, Navios Logistics and its wholly-owned subsidiary Navios Logistics
Finance (US) Inc. (“Logistics Finance” and, together with the Company, the “Co-Issuers”) issued
$200,000 in Senior Notes (the “Senior Notes”) due on April 15, 2019 at a fixed rate of 9.25%. The
Senior Notes are fully and unconditionally guaranteed, jointly and severally, by all of Navios
Logistics’ direct and indirect subsidiaries except for Hidronave South American Logistics S.A. and
Logistics Finance. The subsidiary guarantees are “full and
unconditional,” as those terms are used in Regulation S-X Rule 3-10, except that the indenture
provides for an individual subsidiary’s guarantee to be
automatically released in certain customary circumstances, such as when a subsidiary is sold or all
of the assets of the subsidiary are sold, the capital stock is sold,
when the subsidiary is designated as an “unrestricted subsidiary” for purposes of
the indenture, upon liquidation or dissolution of the subsidiary or upon legal or covenant
defeasance or satisfaction and discharge of the Senior Notes. The Co-Issuers have the option to
redeem the notes in whole or in part, at their option, at any time (i) before April 15, 2014, at a
redemption price equal to 100% of the principal amount plus the applicable make-whole premium plus
accrued and unpaid interest, if any, to the redemption date and (ii) on or after April 15, 2014, at
a fixed price of 106.938%, which price declines ratably until it reaches par in 2017. At any time
before April 15, 2014, the Co-Issuers may redeem up to 35% of the aggregate principal amount of the
Senior Notes with the net proceeds of an equity offering at 109.25% of the principal amount of the
notes, plus accrued and unpaid interest, if any, to the redemption date so long as at least 65% of
the originally issued aggregate principal amount of the notes remains outstanding after such
redemption. In addition, upon the occurrence of certain change of control events, the holders of
the Senior Notes will have the right to require the Co-Issuers to repurchase some or all of the
notes at 101% of their face amount, plus accrued and unpaid interest to the repurchase date.
F-11
NAVIOS SOUTH AMERICAN LOGISTICS INC.
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
Under a registration rights agreement, the Co-Issuers and the subsidiary guarantors are
obliged to file a registration statement prior to January 7, 2012 that enables the holders of the
Senior Notes to exchange the privately placed notes with publicly registered notes with identical
terms.
The Senior Notes contain covenants which, among other things, limit the incurrence of
additional indebtedness, issuance of certain preferred stock, the payment of dividends in excess of
6% per annum of the net proceeds received by or contributed to the Company in or from any public
offering, 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 Navios Logistics’ properties and
assets and creation or designation of restricted subsidiaries.
The net proceeds from the Senior Notes were $193,207 after deducting fees and estimated
expenses relating to the offering. The net proceeds from the Senior Notes have been used to
(i) repay existing indebtedness, including any indebtedness of Navios Logistics’ non-wholly owned
subsidiaries excluding Hidronave South American Logistics S.A. (“non-wholly owned subsidiaries”),
(ii) purchase barges and pushboats and (iii) to the extent there are remaining proceeds after the
uses in (i) and (ii), for general corporate purposes.
Borrowings, other than the Senior Notes mentioned above, consist of the following:
| September 30, | ||||
| 2011 | ||||
Loan for Nazira |
685 | |||
Less: current portion |
(69 | ) | ||
Total long-term borrowings |
$ | 616 | ||
Marfin Facility
On March 31, 2008, the Company entered into a $70,000 loan facility
for the purpose of providing Nauticler S.A. with investment capital to be used in connection with
one or more investment projects. In March 2009, the Company
transferred its loan facility of $70,000 to Marfin Popular Bank Public Co. Ltd. The loan provided
for an additional one year extension and increase of the margin to 275 basis points. On March 23,
2010, the loan was extended for one additional year, providing an increase of the margin to 300
basis points. On March 29, 2011, Marfin Popular Bank committed to amend its current loan agreement
with Nauticler S.A., to provide for a $40,000 revolving credit facility.
Under this commitment, the existing margin of 300 basis points will apply and the obligations will
be secured by mortgages on four tanker vessels or alternative security over other assets acceptable
to the bank. The commitment requires that we maintain a loan-to-value ratio of 120% based on
charter-free valuations and compliance with the covenants contained in the indenture governing the
Senior Notes. The obligation of the bank under the commitment was subject to prepayment of the $70,000 facility and is subject to customary conditions, such as the receipt of satisfactory
appraisals, insurance, opinions and the negotiation, execution and delivery of mutually
satisfactory loan documentation. On April 12, 2011, following the completion of the sale of the
Senior Notes by the Co-Issuers, Navios Logistics fully repaid the $70,000 loan facility with Marfin
Popular Bank using a portion of the proceeds of the Senior Notes. As of September 30, 2011, the
loan documentation for the $40,000 revolving credit facility had not been completed and the
facility had not been drawn.
F-12
NAVIOS SOUTH AMERICAN LOGISTICS INC.
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
Other Indebtedness
In connection with the acquisition of Horamar, Navios Logistics had assumed a $9,500
loan facility that was entered into by its majority owned subsidiary, HS Shipping Ltd. Inc. in
2006, in order to finance the construction of a 8,974 dwt double-hull tanker, the Malva H. After
the vessel’s delivery, the interest rate has been LIBOR plus 150 basis points. The loan was
repayable in installments of at least 90% of the amount of the last hire payment due by Horamar to
be paid to HS Shipping Ltd. Inc. The loan was repayable by December 31, 2011 and could have been
prepaid before such date, upon two days written notice. The loan also required compliance with
certain covenants. This loan was repaid in full on July 25, 2011 using a portion of the proceeds
from the Senior Notes.
Navios Logistics assumed a $2,286 loan facility that was entered into, by its majority
owned subsidiary, Thalassa Energy S.A., in October 2007 to finance the purchase of two
self-propelled barges, the Formosa and the San Lorenzo. The loan bears interest at LIBOR plus 150
basis points. The loan was repayable in five equal installments of $457, which were made in
November 2008, June 2009, January 2010, August 2010, and March 2011. The loan was secured by a
first priority mortgage over the two self-propelled barges. As of September 30, 2011, the loan was
repaid in full.
On September 4, 2009, Navios Logistics entered into a loan facility in order to finance
the acquisition cost of the Estefania H for an amount of up to $18,710 that bears interest at LIBOR
plus 225 basis points. The loan was repayable in installments of at least the higher of (a) 90% of
the amount of the last hire payment due to HS Navigation Inc. prior to the repayment date; and (b)
$250, inclusive of any interest accrued in relation to the loan at that time. The loan was
repayable by May 15, 2016 and could have been prepaid before such date with two days written
notice. The loan also required compliance with certain covenants. This loan was repaid in full on
July 25, 2011 using a portion of the proceeds from the Senior Notes.
On December 15, 2009, in order to finance the acquisition cost of the Makenita H,
Navios Logistics entered into a loan facility for $24,000, which bore interest at LIBOR plus 225
basis points. The loan was repayable in installments of at least the higher of (a) 90% of the
amount of the last hire payment due to HS Tankers Inc. prior to the repayment date; and (b) $250,
inclusive of any interest accrued in relation to the loan at that time. The loan was repayable by
March 24, 2016 and could have been prepaid before such date with two days written notice. The loan
also required compliance with certain covenants. This loan was repaid in full on July 25, 2011
using a portion of the proceeds from the Senior Notes.
On December 20, 2010, in order to finance the acquisition cost of the Sara H, Navios
Logistics entered into a loan facility for $14,385, which bore interest at LIBOR plus 225 basis
points. The loan was repayable in installments of at least the higher of (a) 90% of the amount of
the last hire payment due to HS South Inc. prior to the repayment date; and (b) $250, inclusive of
any interest accrued in relation to the loan at that time. The loan was repayable by May 24, 2016
and could have been prepaid before such date with two days written notice. The loan also required
compliance with certain covenants. This loan was repaid in full on July 25, 2011 using a portion of
the proceeds from the Senior Notes.
In connection with the acquisition of Hidronave S.A. on October 29, 2009, the Company
assumed an $817 loan facility that was entered into by Hidronave S.A. in 2001 in order to finance
the construction of the pushboat Nazira. As of September 30, 2011, the outstanding loan balance was
$684 ($735 as of December 31, 2010). The loan facility bears interest at a fixed rate of 600 basis
points. The loan is repayable in monthly installments of $6 each and the final repayment must occur
prior to August 10, 2021. The loan also requires compliance with certain covenants.
In connection with the loans, the Company is subject to certain covenants and
commitments and certain of its assets are restricted as collateral. The Company was in compliance
with all the covenants as of the period ended September 30, 2011.
The maturity table below reflects future principal payments of the long-term debt
outstanding as of September 30, 2011, for the next five years and thereafter.
| Amounts in | ||||
| thousands of | ||||
| Payment due by period | U.S. dollars | |||
September 30, 2012 |
$ | 69 | ||
September 30, 2013 |
69 | |||
September 30, 2014 |
69 | |||
September 30, 2015 |
69 | |||
September 30, 2016 |
69 | |||
September 30, 2017 and thereafter |
200,340 | |||
Total long-term borrowings |
$ | 200,685 | ||
F-13
NAVIOS SOUTH AMERICAN LOGISTICS INC.
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTE 8: COMMITMENTS AND CONTINGENCIES
In connection with the acquisition of Horamar, the Company recorded liabilities for certain
pre-acquisition contingencies amounting to $6,632 ($2,907 relating to VAT-related matters, $1,703
for withholding tax-related matters, $1,511 relating to provisions for claims and others and $511
for income tax-related matters) that were included in the allocation of the purchase price based on
their respective fair values. As it relates to these contingencies, the prior owners of Horamar
agreed to indemnify the Company in the event that any of the above contingencies materialize before
the agreed-upon dates, extending to various dates through January 2020. As of September 30, 2011,
the remaining liability related to these pre-acquisition contingencies amounted to $5,037 ($4,674
as of December 31, 2010) and was entirely offset by an indemnification asset for the same amount,
which is reflected in other non-current assets.
On July 19, 2011 and in consideration of Gunvor S.A. entering into sales of oil or
petroleum products with Petrosan, the Company has undertaken to pay to Gunvor S.A. on first demand
any obligations arising directly from the non-fulfillment of said contracts. The guarantee shall
not exceed $1,500 and shall remain in full force and effect until December 31, 2011.
The Company is subject to legal proceedings, claims and contingencies arising in the
ordinary course of business. When such amounts can be estimated and the contingency is probable,
management accrues the corresponding liability. While the ultimate outcome of lawsuits or other
proceedings against the Company cannot be predicted with certainty, management does not believe the
costs of such actions will have a material effect on the Company’s consolidated financial position,
results of operations, or cash flows.
As of September 30, 2011, the Company’s future minimum commitments, net of commissions under
chartered-in vessels, barges and pushboats were as follows:
| Amounts in | ||||
| thousands of | ||||
| U.S. dollars | ||||
September 30, 2012 |
4,942 | |||
September 30, 2013 |
3,593 | |||
September 30, 2014 |
51 | |||
| $ | 8,586 | |||
NOTE 9: TRANSACTIONS WITH RELATED PARTIES
The balance due to affiliates as of September 30, 2011 amounted to $692 (December 31, 2010:
$155) which includes the current amounts due to Navios Holdings. Such payables do not accrue
interest and do not have a specific due date for their settlement.
Navios Logistics rents barges and pushboats and pays expenses for lodging at companies
indirectly owned by certain of Navios Logistics’ directors and officers. In relation to these
transactions, amounts payable to related parties other than Navios Holdings amounted to $358 as of
September 30, 2011 ($322 as of December 31, 2010) and rent and services expense for the three and
nine month periods ended September 30, 2011, amounted to $491 and $1,555, respectively ($540 and
$1,624 for the three and nine month periods ended September 30, 2010, respectively).
Leases: On October 2, 2006, Petrovia S.A. and Mercopar SACI, two wholly owned
subsidiaries of Navios Logistics, entered into lease agreements with Holdux Maritima Leasing Corp.,
a Panamanian corporation owned by the estate of Horacio A. Lopez (the father of Claudio Pablo
Lopez, Carlos Augusto Lopez and Horacio Enrique Lopez). The lease agreements provide for the
leasing of one pushboat and three tank barges. The total annual lease payments are $620 and lease
agreements expired in October 2011.
F-14
NAVIOS SOUTH AMERICAN LOGISTICS INC.
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
On July 1, 2007, Compania Naviera Horamar S.A., a wholly owned subsidiary of Navios
Logistics, entered into two lease agreements with Mercotrans S.A. and Mercoparana S.A., two
Argentinean corporations owned by the estate of Horacio A. Lopez (the father of Claudio Pablo
Lopez, Carlos Augusto Lopez and Horacio Enrique Lopez). The lease agreements provide for the
leasing of one pushboat and three tank barges. The total annual lease payments are $1,500 and the
lease agreements expire in 2012. The lease agreement with Mercotrans S.A. was terminated on
July 20, 2011.
Lodging: Compania Naviera Horamar S.A., a wholly owned subsidiary of Navios Logistics,
obtains lodging services from Empresa Hotelera Argentina S.A. /(NH Lancaster) an Argentinean
corporation owned by certain of Navios Logistics’ directors and officers, including Claudio Pablo
Lopez, Navios Logistics’ Chief Executive Officer and Carlos Augusto Lopez, Navios Logistics’ Chief
Commercial Officer—Shipping Division, each of whom does not have a controlling interest in those
companies. The total expense payments for the three and nine month periods ended September 30, 2011
were $8 and $35, respectively ($10 and $34 for the three and nine month periods ended September 30,
2010, respectively).
General & administrative expenses: On April 12, 2011, Navios Logistics entered into an
administrative services agreement for a term of five years, with Navios Holdings, pursuant to which
Navios Holdings provides certain administrative management services to Navios Logistics. Such
services 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. Navios Holdings is reimbursed for reasonable costs and expenses
incurred in connection with the provision of these services. Total general and administrative fees
charged for each of the three and nine month periods ended September 30, 2011 amounted to $125 and
$250, respectively ($0 for each of the three and nine month periods ended September 30, 2010).
The Company believes that the transactions discussed above were made on terms no less
favorable to the Company than would have been obtained from unaffiliated third parties.
Employment Agreements
The Company has executed employment agreements with several of its key employees who are
noncontrolling shareholders of the Company. These agreements stipulate, among other things,
severance and benefit arrangements in the event of termination. In addition, the agreements include
confidentiality provisions and covenants not to compete.
The employment agreements initially expired on December 31, 2009, but renew
automatically for successive one-year periods until either party gives 90 days written notice of
its intention to terminate the agreement. Generally, the agreements call for a base salary ranging
from $280 to $340 per year, annual bonuses and other incentives, provided certain performance
targets are achieved. Under the agreements, the Company accrued compensation totaling $245 and $733
for the three and nine month periods ended September 30, 2011, respectively ($243 and $731 for the
three and nine month periods ended September 30, 2010, respectively).
NOTE 10: SHARE CAPITAL
Common shares and shareholders
On August 4, 2010, the Company amended its articles of incorporation and increased its
authorized share capital to 50,000,000 shares of common stock with a par value of $0.01 per share.
As of September 30, 2011 and December 31, 2010, the Company has issued 20,000 shares of
common stock at $1.00 per share par value.
Holders of each share of common stock have one vote for each share held of record on all
matters submitted to a vote of shareholders. Dividends on shares of common stock may be declared
and paid from funds available to the Company.
The 1,007 shares issued as part of the Horamar Group acquisition were released from
escrow to the former shareholders of Horamar upon achievement of the EBITDA target threshold. The
1,007 shares have been reflected as part of the Company’s outstanding shares from the date of
issuance since these shares were irrevocably issued on January 1, 2008 with the identity of the
ultimate recipient to be determined at a future date. Following the achievement of the EBITDA
targets mentioned in Note 1, the shares were delivered to the Horamar Group shareholders.
F-15
NAVIOS SOUTH AMERICAN LOGISTICS INC.
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
On July 25, 2011, the Company acquired the noncontrolling interests of its joint ventures
Thalassa Energy S.A., HS Tankers Inc., HS Navigation Inc., HS Shipping Ltd .Inc. and HS South Inc.,
in accordance with the terms of certain stock purchase agreements with HS Energy Ltd., an affiliate
of Vitol. The Company paid a total consideration of $8,500 for such noncontrolling interests
($8,638 including transactions expenses), and simultaneously paid $53,155 in full and final
settlement of all amounts of indebtedness of such joint ventures under certain loan agreements.
Since the Company already consolidated these joint ventures, the transaction was considered a step
acquisition (with control maintained by Navios Logistics) and was accounted for as an equity
transaction. An amount of $10,850, which is equal to the difference between the carrying value of
the noncontrolling interests as of July 25, 2011 ($19,488) and the fair value of the total
consideration paid including transaction expenses ($8,638) was recorded in Additional Paid in
Capital.
As a result, after the consummation of the transaction, the percentage of ownership of the
Company in its subsidiaries is the following:
| Percentage of ownership | ||||||||
| September 30, | December 31, | |||||||
| Company Name | 2011 | 2010 | ||||||
Thalassa Energy S.A. |
100 | % | 62.50 | % | ||||
HS Tankers Inc |
100 | % | 51 | % | ||||
HS Navigation Inc. |
100 | % | 51 | % | ||||
HS Shipping Ltd. Inc. |
100 | % | 62.50 | % | ||||
HS South Inc. |
100 | % | 62.50 | % | ||||
NOTE 11: SEGMENT INFORMATION
Current accounting guidance establishes standards for reporting information about
operating segments in annual financial statements and requires reporting of selected information
about operating segments in interim financial reports issued to shareholders. Operating segments
are components of a company about which separate financial information is available that is
regularly evaluated by the chief operating decision makers in deciding how to allocate resources
and assess performance. The statement also establishes standards for related disclosures about a
company’s products and services, geographical areas and major customers. The Company has determined
that its reportable segments are those that are based on the Company’s method of internal
reporting. Historically, Navios Logistics had two reportable segments, Logistics Business and Dry
Port Terminal Business.
Since Navios Logistics was formed by the business combination between CNSA and Horamar,
Navios Logistics has grown its vessel fleet from approximately 123 vessels, including barges,
pushboats and tankers, to 303 vessels through acquisitions of vessels and the acquisition of a 51%
interest in Hidronave S.A., a Brazilian pushboat operator. Additionally, Navios Logistics expanded
its Uruguayan port terminal with the addition of a new silo with 80,000 metric tons of storage
capacity in 2009 reaching a total storage capacity of 360,000 metric tons, and in 2010 Navios
Logistics acquired additional land and began the installation of a grain drying and conditioning
facility, which has been operational since May 16, 2011.
Following these recent business developments, beginning in 2011, Navios Logistics
reports its operations based on three reportable segments: Port Terminal Business, Barge Business
and Cabotage Business. The Port Terminal Business aggregates the dry port terminal operations
(previously identified as the Dry Port Terminal Business) and the liquid port terminal operations
previously included in the Logistics Business segment. The previously identified Logistics Business
segment is further split to form the Barge Business segment and the Cabotage Business segment. The
information for the nine month period ended September 30, 2010 has been reclassified in accordance
with the new reportable segments. The information reported to the chief operating decision maker
has been modified in accordance with the change in reportable segments. A general description of
each segment follows:
The Port Terminal Business segment:
This reportable segment includes the aggregated operating results of two of the Navios
Logistics’ operating businesses: dry port terminal and liquid port terminal operations.
F-16
NAVIOS SOUTH AMERICAN LOGISTICS INC.
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
(i) Dry port terminal operations
Navios Logistics owns and operates the largest independent bulk transfer and storage
port terminal in Uruguay. Its dry port terminal is located in an international tax-free trade zone
in the port of Nueva Palmira, Uruguay, at the convergence of the Parana and Uruguay rivers. The
terminal operates 24 hours per day, seven days per week, and is ideally located to provide its
customers, primarily leading international grain and commodity houses, with a convenient and
efficient outlet for the transfer and storage of a wide range of commodities originating in the
Hidrovia region.
(ii) Liquid port terminal operations
Navios Logistics owns and operates an up-river port terminal with tank storage for
refined petroleum products, oil and gas in San Antonio, Paraguay, approximately 17 miles by river
from the capital of Asuncion. Its port terminal is one of the largest independent storage
facilities for crude and petroleum products in Paraguay. The port facility serves international
operators from Paraguay and Bolivia supplying products that support the growing demand for energy.
Because Paraguay is not oil producing country, its needs for both crude and refined petroleum
products are served entirely by imports. The main sources of supply are from Argentina and, to a
much lesser extent, Bolivia. The strategic location of the terminal at the center of the
Paraguay-Parana waterway has comparative advantages for the provision of services to both southern
and northern regions.
The Barge Business segment
Navios Logistics services the Argentine, Bolivian, Brazilian, Paraguayan and Uruguayan
river transportation markets through its fleet. Navios Logistics operates different types of
pushboats and wet and dry barges for delivering a wide range of dry and liquid products between
ports in the Parana, Paraguay and Uruguay River systems in South America (the Hidrovia or the
“waterway”). Navios Logistics contracts its vessels either on a time charter basis or on a Contract
of Affreightment (“CoA”) basis.
The Cabotage Business segment
Navios Logistics owns and operates oceangoing vessels to support the transportation
needs of its customers in the South American coastal trade business. The Company believes it
operates the largest in terms of capacity and one of the youngest
Argentine cabotage fleets. Its
fleet consists of six oceangoing product tanker vessels and two self propelled barges. Navios
Logistics contracts its vessels either on a time charter basis or on a CoA basis.
Inter-segment transactions, if any, are accounted for at current market prices. The
Company evaluates performance of its segments and allocates resources to them based on net income.
The following table describes the results of operations of the three segments, the Port
Terminal Business segment, the Barge Business segment and the Cabotage Business segment for the
three and nine month periods ended September 30, 2011 and 2010:
F-17
NAVIOS SOUTH AMERICAN LOGISTICS INC.
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Port Terminal | Cabotage | Barge | ||||||||||||||
| Business Segment | Business Segment | Business Segment | ||||||||||||||
| for the Three Month | for the Three Month | for the Three Month | ||||||||||||||
| Period Ended | Period Ended | Period Ended | ||||||||||||||
| September 30, 2011 | September 30, 2011 | September 30, 2011 | Total | |||||||||||||
Time charter, voyage and port
terminal revenues |
$ | 6,511 | $ | 14,377 | $ | 23,170 | $ | 44,058 | ||||||||
Sales of products |
24,789 | — | — | 24,789 | ||||||||||||
Time charter, voyage and port
terminal expenses |
(2,004 | ) | (331 | ) | (8,768 | ) | (11,103 | ) | ||||||||
Direct vessels expenses |
— | (8,383 | ) | (9,685 | ) | (18,068 | ) | |||||||||
Cost of products sold |
(23,873 | ) | — | — | (23,873 | ) | ||||||||||
Depreciation and amortization |
(890 | ) | (1,094 | ) | (3,547 | ) | (5,531 | ) | ||||||||
General and administrative expenses |
(611 | ) | (76 | ) | (2,885 | ) | (3,572 | ) | ||||||||
Interest income/(expense) and
finance cost, net |
138 | (1,238 | ) | (4,012 | ) | (5,112 | ) | |||||||||
Gain on sale of assets |
36 | — | — | 36 | ||||||||||||
Other expense, net |
(694 | ) | (1,424 | ) | (1,209 | ) | (3,327 | ) | ||||||||
Income/(loss) before taxes |
3,402 | 1,831 | (6,936 | ) | (1,703 | ) | ||||||||||
Income tax benefit/(expense) |
(172 | ) | (440 | ) | 1,001 | 389 | ||||||||||
Net income/(loss) |
3,230 | 1,391 | (5,935 | ) | (1,314 | ) | ||||||||||
Less: Net income attributable to
the noncontrolling interest |
— | (130 | ) | (83 | ) | (213 | ) | |||||||||
Net income/(loss) attributable to
Navios Logistics’ stockholders |
$ | 3,230 | $ | 1,261 | $ | (6,018 | ) | $ | (1,527 | ) | ||||||
| Port Terminal | Cabotage | Barge | ||||||||||||||
| Business Segment | Business Segment | Business Segment | ||||||||||||||
| for the Three Month | for the Three Month | for the Three Month | ||||||||||||||
| Period Ended | Period Ended | Period Ended | ||||||||||||||
| September 30, 2010 | September 30, 2010 | September 30, 2010 | Total | |||||||||||||
Time charter, voyage and port
terminal revenues |
$ | 6,783 | $ | 10,765 | $ | 21,431 | $ | 38,979 | ||||||||
Sales of products |
16,323 | — | — | 16,323 | ||||||||||||
Time charter, voyage and port
terminal expenses |
(1,973 | ) | (613 | ) | (6,014 | ) | (8,600 | ) | ||||||||
Direct vessels expenses |
— | (5,777 | ) | (8,775 | ) | (14,552 | ) | |||||||||
Cost of products sold |
(15,236 | ) | — | — | (15,236 | ) | ||||||||||
Depreciation and amortization |
(852 | ) | (962 | ) | (3,383 | ) | (5,197 | ) | ||||||||
General and administrative expenses |
(599 | ) | (74 | ) | (2,827 | ) | (3,500 | ) | ||||||||
Interest income/(expense) and
finance cost, net |
76 | (653 | ) | (536 | ) | (1,113 | ) | |||||||||
Gain on sale of assets |
— | — | — | — | ||||||||||||
Other expense, net |
(17 | ) | (1,284 | ) | (2,716 | ) | (4,017 | ) | ||||||||
Income/(loss) before taxes |
4,505 | 1,402 | (2,820 | ) | 3,087 | |||||||||||
Income tax (expense)/benefit |
(527 | ) | (217 | ) | 418 | (326 | ) | |||||||||
Net income/(loss) |
3,978 | 1,185 | (2,402 | ) | 2,761 | |||||||||||
Less: Net income attributable to
the noncontrolling interest |
— | (1,265 | ) | (39 | ) | (1,304 | ) | |||||||||
Net income/(loss) attributable to
Navios Logistics’ stockholders |
$ | 3,978 | $ | (80 | ) | $ | (2,441 | ) | $ | 1,457 | ||||||
F-18
NAVIOS SOUTH AMERICAN LOGISTICS INC.
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
| Port Terminal | Cabotage | Barge | ||||||||||||||
| Business Segment | Business Segment | Business Segment | ||||||||||||||
| for the Nine Month | for the Nine Month | for the Nine Month | ||||||||||||||
| Period Ended | Period Ended | Period Ended | ||||||||||||||
| September 30, 2011 | September 30, 2011 | September 30, 2011 | Total | |||||||||||||
Time charter, voyage and port terminal revenues |
$ | 18,436 | $ | 40,463 | $ | 64,962 | $ | 123,861 | ||||||||
Sales of products |
44,047 | — | — | 44,047 | ||||||||||||
Time charter, voyage and port terminal expenses |
(6,608 | ) | (1,029 | ) | (23,180 | ) | (30,817 | ) | ||||||||
Direct vessels expenses |
— | (22,392 | ) | (25,614 | ) | (48,006 | ) | |||||||||
Cost of products sold |
(42,320 | ) | — | — | (42,320 | ) | ||||||||||
Depreciation and amortization |
(2,564 | ) | (3,210 | ) | (10,835 | ) | (16,609 | ) | ||||||||
General and administrative expenses |
(1,773 | ) | (221 | ) | (8,374 | ) | (10,368 | ) | ||||||||
Interest income/(expense) and finance costs, net |
395 | (2,290 | ) | (9,376 | ) | (11,271 | ) | |||||||||
Gain on sale of assets |
36 | — | — | 36 | ||||||||||||
Other expense, net |
(312 | ) | (3,900 | ) | (2,956 | ) | (7,168 | ) | ||||||||
Income/(loss) before taxes |
9,337 | 7,421 | (15,373 | ) | 1,385 | |||||||||||
Income tax (expense)/benefit |
(172 | ) | (696 | ) | 1,224 | 356 | ||||||||||
Net income/(loss) |
9,165 | 6,725 | (14,149 | ) | 1,741 | |||||||||||
Less: Net income attributable to the noncontrolling interest |
— | (641 | ) | (117 | ) | (758 | ) | |||||||||
Net income/(loss) attributable to Navios Logistics’ stockholders |
$ | 9,165 | $ | 6,084 | $ | (14,266 | ) | $ | 983 | |||||||
| Port Terminal | ||||||||||||||||
| Business Segment | Cabotage | Barge | ||||||||||||||
| for the Nine | Business Segment | Business Segment | ||||||||||||||
| Month | for the Nine Month | for the Nine Month | ||||||||||||||
| Period Ended | Period Ended | Period Ended | ||||||||||||||
| September 30, 2010 | September 30, 2010 | September 30, 2010 | Total | |||||||||||||
Time charter, voyage and port terminal
revenues |
$ | 18,346 | $ | 26,560 | $ | 56,675 | $ | 101,581 | ||||||||
Sales of products |
41,562 | — | — | 41,562 | ||||||||||||
Time charter, voyage and port terminal expenses |
(5,493 | ) | (1,707 | ) | (19,013 | ) | (26,213 | ) | ||||||||
Direct vessels expenses |
— | (13,998 | ) | (22,764 | ) | (36,762 | ) | |||||||||
Cost of products sold |
(38,554 | ) | — | — | (38,554 | ) | ||||||||||
Depreciation and amortization |
(2,545 | ) | (2,617 | ) | (11,377 | ) | (16,539 | ) | ||||||||
General and administrative expenses |
(1,592 | ) | (198 | ) | (7,518 | ) | (9,308 | ) | ||||||||
Interest income/(expense) and finance cost, net |
135 | (1,335 | ) | (1,953 | ) | (3,153 | ) | |||||||||
Gain on sale of assets |
— | — | — | — | ||||||||||||
Other expense, net |
(40 | ) | (3,124 | ) | (5,505 | ) | (8,669 | ) | ||||||||
Income/(loss) before taxes |
11,819 | 3,581 | (11,455 | ) | 3,945 | |||||||||||
Income tax (expense)/benefit |
(564 | ) | (567 | ) | 1,849 | 718 | ||||||||||
Net income/(loss) |
11,255 | 3,014 | (9,606 | ) | 4,663 | |||||||||||
Less: Net (income)/loss attributable to the
noncontrolling interest |
— | (1,374 | ) | 36 | (1,338 | ) | ||||||||||
Net income/(loss) attributable to Navios
Logistics’ stockholders |
$ | 11,255 | $ | 1,640 | $ | (9,570 | ) | $ | 3,325 | |||||||
For the Barge Business segment and for the Cabotage Business segment, the Company’s
vessels operate on a regional basis and are not restricted to specific locations. Accordingly, it
is not possible to allocate the assets of these operations to specific locations. The total net
book value of long-lived assets for vessels amounted to $284,698 and $236,200 as of September 30,
2011 and December 31, 2010, respectively.
All of the assets related to the Port Terminal Business segment are located in Uruguay
and in Paraguay. The total net book value of long-lived assets for the Port Terminal Business
segment, including constructions in progress, amounted to $60,004 and $56,227 as of September 30,
2011 and December 31, 2010, respectively.
In addition, the net book value of intangible assets other than goodwill allocated to
the Barge Business segment and to the Cabotage Business segment, collectively, amounted to $36,213
and $38,844 as of September 30, 2011 and December 31, 2010, respectively, while the net book value
of intangible assets allocated to the Port Terminal segment amounted to $28,761 and $29,455 as of
September 30, 2011 and December 31, 2010, respectively.
F-19
NAVIOS SOUTH AMERICAN LOGISTICS INC.
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars — except share data)
In accordance with ASC 350-20-35-45, goodwill resulting from the acquisitions of Horamar and
Hidronave S.A., which had been allocated to the Logistics Business through December 31, 2010, was
re-allocated to the three segments by allocating $22,142 to the Port Terminal Business, $40,868 to
the Barge Business and $41,086 to the Cabotage Business. All three segments previously comprised a
part of the Logistics Business reporting unit on a relative fair value basis.
NOTE 12: FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of
financial instrument:
Cash and cash equivalents: The carrying amounts reported in the consolidated balance
sheets for interest bearing deposits approximate their fair value because of the short maturity of
these investments.
Restricted Cash: The carrying amounts reported in the consolidated balance sheets for
interest bearing deposits approximate their fair value because of the short maturity of these
investments.
Borrowings: The carrying amounts of the floating rate loans approximate their fair
value. The Senior Notes are fixed rate borrowings and their fair value, which was determined based
on quoted market prices, is indicated in the table below.
Capital leases: The capital leases are fixed rate obligations and their carrying amounts
approximate their fair value as indicated in the table below.
Accounts receivable: Carrying amounts are considered to approximate fair value due to the
short-term nature of these accounts receivables and because there were no significant changes in
interest rates.
All amounts that are assumed to be uncollectible are written off and/or reserved.
Accounts payable: The carrying amounts of accounts payable reported in the balance sheet
approximate their fair value due to the short-term nature of these accounts payable and because
there were no significant changes in interest rates.
The estimated fair values of the Company’s financial instruments are as follows:
| September 30, 2011 | December 31, 2010 | |||||||||||||||
| Book Value | Fair Value | Book Value | Fair Value | |||||||||||||
Cash and cash equivalent |
$ | 57,842 | $ | 57,842 | $ | 39,204 | $ | 39,204 | ||||||||
Restricted cash |
$ | — | $ | — | $ | 564 | $ | 564 | ||||||||
Accounts receivable, net |
$ | 21,977 | $ | 21,977 | $ | 17,102 | $ | 17,102 | ||||||||
Accounts payable |
$ | (28,700 | ) | $ | (28,700 | ) | $ | (22,591 | ) | $ | (22,591 | ) | ||||
Senior notes |
$ | (200,000 | ) | $ | (192,250 | ) | $ | — | $ | — | ||||||
Capital Leases |
(31,330 | ) | (31,330 | ) | (32,261 | ) | (32,261 | ) | ||||||||
Long-term debt, including current portion |
$ | (685 | ) | $ | (685 | ) | $ | (127,422 | ) | $ | (118,610 | ) | ||||
F-20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NAVIOS SOUTH AMERICAN LOGISTICS INC. |
||||
| By: | /s/ Claudio Pablo Lopez | |||
| Claudio Pablo Lopez | ||||
| Chief Executive Officer Date: November 28, 2011 |
||||
Furnished
pursuant to Section 4.17 of the Indenture governing the
9¼% Senior Notes due 2019