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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2011
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 333-171331
AMERICAN PETROLEUM TANKERS PARENT LLC
(Exact name of registrant as specified in its charter)
Delaware | 90-0587372 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. employer identification no.) | |
600 W. Germantown Pike, Suite 400, Plymouth Meeting, PA |
19462 | |
(Address of principal executive offices) | (Zip code) |
(610) 940-1677
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x or No ¨.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x or No ¨.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ or No x.
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AMERICAN PETROLEUM TANKERS PARENT LLC. AND SUBSIDIARIES
INDEX
Table of Contents
Forward-Looking Statements
This Form 10-Q contains forward-looking statements. All statements other than statements of historical fact are forward-looking statements for purposes of federal and state securities laws. Forward-looking statements may include the words may, plans, estimates, anticipates, believes, expects, intends and similar expressions. Although we believe that these statements are based on reasonable assumptions, they are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected or assumed in our forward-looking statements. These factors, risks and uncertainties include, among others, the following:
| our substantial level of indebtedness; |
| general economic and business conditions in the United States; |
| our dependence on a limited number of customers; |
| our limited operating history; |
| capital expenditures required to maintain the operating capacity of our fleet; |
| competitive pressures and trends; |
| fluctuations in shipping volume; and |
| modifications to or repeal of the Jones Act or OPA 90. |
These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should, therefore, be considered in light of various factors, including those set forth in Amendment No. 5 to the registration statement filed on Form S-4 on April 8, 2011 (the Registration Statement), under Risk Factors. In light of such risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements. We do not undertake any obligation to publicly release any revisions to these forward looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.
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PART I FINANCIAL INFORMATION
American Petroleum Tankers Holding LLC
Unaudited Condensed Consolidated Balance Sheets
as of June 30, 2011 and December 31, 2010
(in thousands)
June 30, 2011 |
December 31, 2010 |
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Assets |
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Cash and cash equivalents |
$ | 13,240 | $ | 18,241 | ||||
Accounts receivables |
13,174 | 11,095 | ||||||
Prepaid expenses and other current assets |
298 | 453 | ||||||
Restricted cash |
| 7,923 | ||||||
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Total Current Assets |
26,712 | 37,712 | ||||||
Deferred financing costs, net |
10,602 | 12,255 | ||||||
Other assets |
3,648 | 3,573 | ||||||
Vessels and equipment, net |
681,112 | 692,178 | ||||||
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Total Assets |
$ | 722,074 | $ | 745,718 | ||||
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Liabilities and Members Equity |
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Accrued expenses and other liabilities |
$ | 4,798 | $ | 6,385 | ||||
Accrued interest |
4,408 | 4,869 | ||||||
Payable due USS Entities |
250 | 320 | ||||||
Unearned revenue |
4,582 | 4,508 | ||||||
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Total Current Liabilities |
14,038 | 16,082 | ||||||
Long-term debt (includes amounts to related parties of $382,941 and $361,959 at June 30, 2011 and December 31, 2010, respectively) |
635,356 | 639,985 | ||||||
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Total Liabilities |
649,394 | 656,067 | ||||||
Commitments and Contingencies (Notes 5 and 11) |
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Members Equity |
72,680 | 89,651 | ||||||
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Total Liabilities and Members Equity |
$ | 722,074 | $ | 745,718 | ||||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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American Petroleum Tankers Holding LLC
Unaudited Condensed Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2011 and 2010 (in thousands)
Three Months Ended June 30, |
Six Months Ended June 30, |
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2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues |
$ | 27,421 | $ | 13,360 | $ | 54,426 | $ | 25,929 | ||||||||
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Expenses: |
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Vessel operating expenses |
9,204 | 5,151 | 17,119 | 10,277 | ||||||||||||
General and administrative expenses |
130 | 536 | 899 | 873 | ||||||||||||
Depreciation and amortization |
5,941 | 3,752 | 11,856 | 7,556 | ||||||||||||
Management fees |
787 | 518 | 1,574 | 1,077 | ||||||||||||
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Total Expenses |
16,062 | 9,957 | 31,448 | 19,783 | ||||||||||||
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Operating income: |
11,359 | 3,403 | 22,978 | 6,146 | ||||||||||||
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Other income (expense): |
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Interest income |
1 | 7 | 6 | 7 | ||||||||||||
Interest expense (includes amounts to related parties, as discussed in Note 7) |
(18,806 | ) | (10,352 | ) | (37,297 | ) | (15,000 | ) | ||||||||
Debt extinguishment expense |
(2,220 | ) | (7,640 | ) | (2,220 | ) | (7,640 | ) | ||||||||
Derivative losses |
(383 | ) | (507 | ) | (438 | ) | (1,624 | ) | ||||||||
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Net loss |
$ | (10,049 | ) | $ | (15,089 | ) | $ | (16,971 | ) | $ | (18,111 | ) | ||||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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American Petroleum Tankers Holding LLC
Unaudited Condensed Consolidated Statement of Changes in Members Equity
For the Six Months Ended June 30, 2011
(in thousands)
Member Interests | Total Members Equity |
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Class A | Class B | |||||||||||
Beginning balance at January 1, 2011 |
$ | 89,651 | $ | | $ | 89,651 | ||||||
Net loss |
(16,971 | ) | | (16,971 | ) | |||||||
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Ending balance at June 30, 2011 |
$ | 72,680 | $ | | $ | 72,680 | ||||||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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American Petroleum Tankers Holding LLC
Unaudited Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2011 and 2010
(in thousands)
2011 | 2010 | |||||||
OPERATING ACTIVITIES: |
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Net loss |
$ | (16,971 | ) | $ | (18,111 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: |
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Straight-line charter revenues |
(275 | ) | (666 | ) | ||||
Depreciation and amortization |
11,856 | 7,556 | ||||||
Amortization of deferred financing costs |
1,277 | 1,701 | ||||||
Amortization of discount on notes issued |
766 | 192 | ||||||
Debt prepayment penalty fees |
810 | 2,814 | ||||||
Write-off of deferred financing costs |
787 | 4,826 | ||||||
Write-off of discount on notes issued |
623 | | ||||||
Derivative losses |
438 | 1,624 | ||||||
Interest paid-in-kind |
20,982 | 11,723 | ||||||
Changes in current assets and liabilities: |
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Accounts receivables |
(2,079 | ) | 724 | |||||
Prepaid expenses and other current assets |
155 | (127 | ) | |||||
Accrued expenses and other liabilities |
(1,360 | ) | 3,391 | |||||
Payable due USS Entities |
(70 | ) | (39 | ) | ||||
Unearned revenue |
74 | 1,134 | ||||||
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Net cash provided by operating activities |
17,013 | 16,742 | ||||||
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INVESTING ACTIVITIES: |
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Vessel and equipment additions |
(1,006 | ) | (5,042 | ) | ||||
Software additions |
(252 | ) | | |||||
Change in restricted cash |
7,923 | (167,107 | ) | |||||
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Net cash provided by (used in) investing activities |
6,665 | (172,149 | ) | |||||
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FINANCING ACTIVITIES: |
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Proceeds from the issuance of debt |
| 277,029 | ||||||
Payment on long-term debt |
(27,000 | ) | (96,904 | ) | ||||
Debt prepayment penalty fees |
(810 | ) | (2,814 | ) | ||||
Payment of debt issuance costs |
(869 | ) | (8,453 | ) | ||||
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Net cash (used in) provided by financing activities |
(28,679 | ) | 168,858 | |||||
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Net (decrease) increase in cash and cash equivalents |
(5,001 | ) | 13,451 | |||||
Cash and cash equivalents at beginning of period |
18,241 | 7,893 | ||||||
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Cash and cash equivalents at end of period |
$ | 13,240 | $ | 21,344 | ||||
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NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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Vessel and construction-in-progress accruals |
$ | | $ | 148,570 | ||||
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Interest paid-in-kind |
$ | 20,982 | $ | 11,723 | ||||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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American Petroleum Tankers Holding LLC
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2011 and 2010
(dollars in thousands)
Note 1 Organization
On May 14, 2010, American Petroleum Tankers LLC (APT) consummated a restructuring of its corporate organization, resulting in: (i) the formation of American Petroleum Tankers Holding LLC (APT Holding, the Company, we, our, or us) as the new parent holding company; (ii) the formation of American Petroleum Tankers Parent LLC (APT Parent), as a new wholly-owned subsidiary of APT Holding, and AP Tankers Co., as a new wholly-owned subsidiary of APT Parent; and (iii) the contribution down of the interests of: (a) the former parent holding company, APT, and (b) APT Intermediate Holdco LLC (Intermediate Holdco), such that APT and Intermediate Holdco became wholly-owned subsidiaries of APT Parent. As a result of this restructuring, APT, Intermediate Holdco and AP Tankers Co. are entities at the same corporate level, each a direct wholly-owned subsidiary of APT Parent. As the reorganization occurred among entities under common control, the unaudited condensed consolidated financial statements of the predecessor company, American Petroleum Tankers LLC, are presented as the historical financial statements of APT Holding.
Note 2 Basis of Presentation
The accompanying unaudited condensed consolidated financial statements for the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q. These financial statements should be read in conjunction with the Companys audited consolidated financial statements for the year ended December 31, 2010.
These financial statements include, in the opinion of management, all adjustments necessary for the fair presentation of the financial information included herein, which are of a normal recurring nature.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affects the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Note 3 New Accounting Pronouncements
There are no recently issued accounting standards that we believe will have a material impact on our financial position, results of operations or cash flows.
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American Petroleum Tankers Holding LLC
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2011 and 2010
(dollars in thousands)
Note 4 Restricted Cash
In connection with the issuance of $285,000 of 10 1/4% First Priority Senior Secured Notes (the Notes) on May 17, 2010, as discussed in Note 7, $169,900 of the net proceeds were placed in an escrow account to fund the remaining construction costs of the Companys vessels. In addition, the Company received net proceeds of $2,800 from the release of restricted cash with the repayment of a senior note facility as discussed in Note 7, and earned $7 in interest on the Notes proceeds for a total increase of restricted cash of $167,107 for the period ended June 30, 2010. The balance in the escrow account at December 31, 2010 was $7,923. During the six months ended June 30, 2011, the remaining restricted cash was released from escrow. As discussed in Note 5, the Company was scheduled to make its final vessel construction payments (excluding warranty escrow payments) during the first quarter of 2011; however, the final payment under the Companys vessel construction contract is being deferred until the expiration of the last vessel warranty period in December 2011. The final payment (excluding warranty escrow payments) is estimated to be no more than $900. The remaining balance in the escrow account was released from escrow after the first anniversary of the Notes issuance date, as specified in the Notes Agreement.
Note 5 Construction Contract
The Company entered into a contract with National Steel and Shipbuilding Company (NASSCO) for the construction of five 49,000 dwt double-hulled tankers. The vessels were delivered in January 2009, June 2009, December 2009, July 2010 and December 2010, respectively.
At June 30, 2011 and December 31, 2010, the Company has accrued $1,900 and $1,835, respectively, payable to NASSCO for completion of the final vessel delivered in December 2010 and $1,000 for warranty escrow payments, with $500 payable in July and December 2011, for the last two vessels delivered. The Company has capitalized these costs within Vessels and Equipment, Net and accrued the liability within Accrued Expenses and Other Liabilities in the accompanying Unaudited Condensed Consolidated Balance Sheets. Under the terms of the amended construction agreement with NASSCO, the Company was required to make a final payment (excluding the warranty escrow payments) in February 2011. NASSCO and the Company agreed to defer the final payment until the expiration of the last vessel warranty period in December 2011. Future commitments under this contract are further discussed in Note 11.
Note 6 Vessels and Equipment, Net
Vessel and Equipment, Net consists of the following:
June 30, 2011 |
December 31, 2010 |
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Vessels and equipment |
$ | 718,654 | $ | 717,878 | ||||
Less accumulated depreciation |
(37,542 | ) | (25,700 | ) | ||||
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$ | 681,112 | $ | 692,178 | |||||
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American Petroleum Tankers Holding LLC
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2011 and 2010
(dollars in thousands)
Capitalized interest is recorded as part of the asset to which it relates and is amortized over the estimated useful life of the asset. Interest costs of $2,343 and $3,791 were capitalized during the three and six months ended June 30, 2010, respectively.
Note 7 Long-Term Debt
Long-term debt consists of the following:
June 30, 2011 |
December 31, 2010 |
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Notes, net of $5,585 and $6,974 unamortized original discount at June 30, 2011 and December 31, 2010, respectively |
$ | 252,415 | $ | 278,026 | ||||
Sponsor Facility |
382,941 | 361,959 | ||||||
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$ | 635,356 | $ | 639,985 | |||||
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As discussed in Note 13, the Notes are secured by a first priority lien on substantially all of the assets of APT Parent and its subsidiaries. The Sponsor Facility, as defined below, is secured by a second lien on the same assets, subject to certain exceptions and permitted liens.
First Priority Senior Secured Notes
On May 17, 2010, APT Parent and AP Tankers Co. issued the Notes due 2015 at a price of 97.203%. Interest on the Notes is payable on May 1 and November 1 of each year. The net proceeds were used to place $169,900 cash in escrow for the construction of vessels, prepay $97,574 related to a senior secured loan facility, the DVB Facility, (including principal, interest, and prepayment penalty), and the remainder was used to pay related transaction fees and expenses, of which $10,080 of costs were capitalized as debt issuance costs within Deferred Financing Costs, Net in the accompanying Unaudited Condensed Consolidated Balance Sheets.
Under the terms of the indenture governing the Notes, the Company may redeem up to 10% of the original issue amount in a twelve month period prior to May 1, 2012 at 103%. On March 28, 2011, the Company provided notice to the trustee that pursuant to the indenture the Company would redeem $27,000 of the principal amount of the Notes unconditionally. The redemption was completed on April 28, 2011 with the principal payment of $27,000 plus debt prepayment fees of $810 and accrued interest of $1,361. As a result, the Company recognized a loss on redemption of the Notes of $2,220 in the second quarter of 2011, representing the debt prepayment fees of $810, write-off of deferred financing costs of $787, and write-off of discounts on notes issued of $623.
In connection with the issuance of the Notes, APT Parent and AP Tankers Co. entered into a registration rights agreement (Registration Rights Agreement) which requires the use of reasonable efforts to register notes having substantially identical terms as the Notes with the Securities and Exchange Commission (SEC) under the Securities Act of 1933, as amended, prior to May 12, 2011. The Company completed the registration of the Notes and an exchange offer, exchanging unregistered Notes for Notes registered with the SEC, on May 12, 2011.
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American Petroleum Tankers Holding LLC
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2011 and 2010
(dollars in thousands)
Sponsor Facility
The Company maintains a Notes Facility (the Sponsor Facility) pursuant to which the Class A Members or their affiliates had made available $325,000 of revolving credit loans. Beginning July 2009, the monthly interest payments are treated as paid-in-kind in lieu of monthly cash payments. As a result, the Company is allowed to exceed its total commitment under the Sponsor Facility for the capitalized paid-in-kind payments. Under the terms of the Sponsor Facility, the ability to borrow additional amounts against this facility ceased in June 2011.
During the six months ended June 30, 2011 and 2010, the Company recorded $20,982 and $11,723, respectively, for interest-in-kind payments that were capitalized in the Sponsor Facility balance. An interest-in-kind accrual of $7,017 and $26,812 was recorded as long-term debt at June 30, 2011 and December 31, 2010, respectively.
The maturities of long-term debt subsequent to June 30, 2011, excluding accreted interest on the Sponsor Facility subsequent to June 30, 2011, are as follows:
2015 |
$ | 252,415 | ||
2016 |
382,941 | |||
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$ | 635,356 | |||
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A reconciliation of Interest Expense for the three and six month periods ended June 30, 2011 and 2010 is as follows:
Three Months Ended June 30, |
Six Months Ended June 30, |
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2011 | 2010 | 2011 | 2010 | |||||||||||||
Cash paid for interest other (1) |
$ | 14,583 | $ | 952 | $ | 14,583 | $ | 2,044 | (2) | |||||||
Paid-in-kind interest to members |
10,927 | 7,759 | 20,982 | 11,723 | ||||||||||||
Amortization of deferred financing costs |
621 | 740 | 1,277 | 1,701 | (2) | |||||||||||
Amortization of discounts on notes issued |
364 | 192 | 766 | 192 | ||||||||||||
Administrative fee to members |
75 | 76 | 150 | 152 | ||||||||||||
Change in interest accrual |
(7,764 | ) | 2,976 | (461 | ) | 2,979 | (2) | |||||||||
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Gross interest expense |
18,806 | 12,695 | 37,297 | 18,791 | ||||||||||||
Less capitalized interest |
| (2,343 | ) | | (3,791) | |||||||||||
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Net Interest Expense |
$ | 18,806 | $ | 10,352 | $ | 37,297 | $ | 15,000 | ||||||||
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Cash for prepayment fee |
$ | 810 | $ | 2,814 | $ | 810 | $ | 2,814 | ||||||||
Write-off of deferred financing costs |
787 | 4,826 | 787 | 4,826 | ||||||||||||
Write-off of discount on notes issued |
623 | | 623 | | ||||||||||||
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Debt Extinguishment Expense |
$ | 2,220 | $ | 7,640 | $ | 2,220 | $ | 7,640 | ||||||||
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(1) | Represents additional cash flow disclosures. |
(2) | Includes amounts for loan under DVB Facility that was prepaid on May 17, 2010. |
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American Petroleum Tankers Holding LLC
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2011 and 2010
(dollars in thousands)
Note 8 Related Party Transactions
USS Entities
Until July 28, 2009, USS Product Manager LLC (Product Manager), a wholly-owned subsidiary of U.S. Shipping Partners L.P. (the Partnership) and an affiliate of USS Product Carriers LLC, a former Class B Member of APT, managed the construction of, and until September 28, 2009 the operation of, the tankers for APT. The obligations under the management agreement were being performed by employees of U.S. Shipping General Partner LLC, the Partnerships general partner.
On July 10, 2009, Product Carriers, Product Manager, the Partnership and USS PC Holdings LLC (collectively USS Entities), the Class A Members of APT, the Sponsor Facility lenders to APT (together with the Class A Members, the Blackstone/Cerberus Entities) and APT entered into a settlement agreement to settle litigation between the USS Entities and the Blackstone/Cerberus Entities relating to control of APT. Under the terms of the settlement, which was approved by the U.S. Bankruptcy Court Southern District of New York on July 17, 2009 and effective on July 28, 2009, the management agreement (except for certain provisions) was terminated and Product Manager ceased to manage APTs tankers and provide construction supervision services.
Pursuant to the terms of the settlement agreement, Product Manager earned $250 and $500 during 2010 and 2009, respectively, for cost savings realized on the construction of one vessel completed in each of the respective years. The cost savings were accrued within Due to USS Entities at December 31, 2010 and 2009, respectively, and capitalized as a cost to the respective vessels. The $500 cost savings was paid by the Company in the first quarter of 2010. During the six months ended June 30, 2011 and 2010, the Company reimbursed the Partnership $70 and $39, respectively, for expenses paid on behalf of the Company.
Blackstone/Cerberus Entities
The Company pays an annual administration fee of $300 for the Sponsor Facility to an affiliate of certain of the Class A Members. This fee is recognized as a component of Interest Expense, in the accompanying Unaudited Condensed Consolidated Statements of Operations.
During the three and six months ended June 30, 2011, the Company recorded $10,927 and $20,982, respectively, for interest-in-kind payments that were capitalized in the Sponsor Facility balance. During the three and six months ended June 30, 2010, the Company recorded $7,759 and $11,723, respectively, for interest-in-kind payments that were capitalized in the Sponsor Facility balance. An interest-in-kind accrual of $7,017 and $26,812 was recorded as long-term debt at June 30, 2011 and December 31, 2010, respectively.
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American Petroleum Tankers Holding LLC
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2011 and 2010
(dollars in thousands)
Note 9 Derivative Instruments
Effective April 1, 2007, the Company entered into a nine-year interest rate cap, with a notional amount of $100,000, for $1,924, including transaction fees. This interest rate cap of the three-month U.S. Dollar LIBOR of 6.0% is intended to reduce the potential negative impacts to the Companys cash flows that could result in movements in interest rates between the date a chartering contract is entered into and the anticipated sale.
The Company recognizes all derivatives as either assets or liabilities in the balance sheet and measures those instruments at fair value. Changes in the fair value of those instruments are reported in earnings, as the Company did not designate the interest rate cap as a hedge. The fair market value of the interest rate cap at June 30, 2011 and December 31, 2010 was $527 and $965, respectively, and is recorded as a long-term asset in Other Assets in the accompanying Unaudited Condensed Consolidated Balance Sheets. The change in the fair value of the derivative financial instrument was recorded to Derivative Losses as losses of $383 and $438 during the three and six months ended June 30, 2011, respectively, and losses of $507 and $1,624 during the three and six months ended June 30, 2010, respectively.
Note 10 Fair Value of Financial Instruments
The methods and assumptions used to estimate the fair value of each class of financial instruments are set forth below:
| Cash and cash equivalents and restricted cash the carrying amounts approximate fair value because of the relatively short time between the origination of the instrument and its expected realization. |
| Derivative financial instruments the fair value of the interest rate cap is developed from market-based inputs under the income approach, as obtained from a brokerage agency, using cash flows discounted at relevant market interest rates. |
| Long-term debt For registered debt the fair value is based on quoted prices in active markets. For all other debt the fair value is estimated based on each obligations characteristics, using the borrowing rates currently available for the same or similar issues for debt of the same remaining maturities, and discounted back to the present value. The Company regularly monitors its credit risk in evaluating its fair value of long-term debt. Significant factors evaluated include changes in margin on its various loans and its ability to make future debt payments. At June 30, 2011, the carrying value and estimated fair value of the Companys debt was $635,356 and $659,778, respectively. At December 31, 2010, the carrying value and estimated fair value of the Companys debt was $639,985 and $655,971, respectively. |
The following valuation hierarchy prioritizes the inputs for valuation used to measure fair value into three broad levels as follows:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
10
Table of Contents
American Petroleum Tankers Holding LLC
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2011 and 2010
(dollars in thousands)
The Company utilizes the best available information in measuring fair value. The Company has determined that its interest rate cap is valued using Level 2 inputs.
Note 11 Commitments and Contingencies
As discussed in Note 5, the Company has a contract with NASSCO for the construction of five product tankers which were delivered in January 2009, June 2009, December 2009, July 2010 and December 2010, respectively. The Company currently expects the cost to construct these five tankers under the NASSCO contract to aggregate approximately $670,772. Payments of $668,872 have been made under these construction contracts as of June 30, 2011. The Company estimates that it will make payments under this construction contract of approximately $1,900 in 2011.
Note 12 Financial Information by Segments and Geographic Area
The Companys business is to charter its tankers primarily in the U.S. domestic Jones Act trades to customers in the petroleum industry to and from destination points in the coastwise United States. Currently, one of the vessels operates worldwide and another may operate worldwide in the future, depending on the requirements of the customer. Each of the Companys vessels represents an operating segment. These segments are aggregated into one reportable segment because they possess similar economic characteristics and all vessels are the same design and carry petroleum products for U.S. based customers.
Note 13 Guarantor Subsidiaries
APT Parent, a wholly-owned subsidiary of APT Holding (the Parent), and AP Tankers Co., a wholly-owned subsidiary of APT Parent, (collectively, the Subsidiary Issuers), issued the Notes in May 2010. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis by APT Holding and all of APT Parents wholly-owned subsidiaries: APT, Intermediate Holdco, and Intermediate Holdcos wholly-owned subsidiaries, JV Tanker Charterer LLC, PI 2 Pelican State LLC, and APT Sunshine State LLC (collectively the Guarantor Subsidiaries).
The guarantees by Parent and Guarantor Subsidiaries are senior secured obligations: equal in right of payment with any of their existing and future senior indebtedness but senior with any of their existing and future unsecured indebtedness to the extent of the value of the collateral securing the Notes; senior to any of their existing and future subordinated indebtedness; junior with any of their existing and future indebtedness with respect to any credit agreement, certain maritime liens or that are secured by assets other than the collateral securing the Notes; and junior to any existing and future obligations of any non-guarantor subsidiaries. The Notes are secured by a first priority lien on substantially all of the assets of APT Parent and its subsidiaries subject to certain exceptions and permitted liens.
Parent is a holding company whose only asset is its ownership interests in its subsidiaries. The Company conducts virtually all of its business operations through APT Parent and its subsidiaries. The activities for the Subsidiary Issuers relate only to the issuance and servicing of the Notes and payroll for administrative personnel. Accordingly, the Companys only material sources of cash are dividends and distributions with respect to its ownership interests in APT and the subsidiaries of Intermediate Holdco that are derived from the earnings and cash flow generated by APT and the subsidiaries of Intermediate Holdco. Through June 30, 2011, no dividends have been paid.
11
Table of Contents
American Petroleum Tankers Holding LLC
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2011 and 2010
(dollars in thousands)
The following tables set forth, on an unaudited condensed consolidating basis, the balance sheets, statements of operations and statements of cash flows for Parent, Subsidiary Issuers and Guarantor Subsidiaries for all financial statement periods presented in the Companys unaudited condensed consolidated financial statements. The Subsidiary Issuers allocate interest expense to the Guarantor Subsidiaries for capitalization towards the cost of the vessels under construction. Intercompany cash advances and loans made primarily for the purpose of short-term operating needs are included in cash flows from operating activities.
Unaudited Condensed Consolidating Balance Sheet as of June 30, 2011 |
||||||||||||||||||||
Parent (Guarantor) |
Subsidiary Issuers |
Guarantor Subsidiaries |
Consolidating Adjustments |
Consolidated | ||||||||||||||||
Assets |
||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 130 | $ | 13,110 | $ | | $ | 13,240 | ||||||||||
Accounts receivables |
| | 13,174 | | 13,174 | |||||||||||||||
Prepaid expenses and other current assets |
| 76 | 222 | | 298 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Current Assets |
| 206 | 26,506 | | 26,712 | |||||||||||||||
Receivables due from affiliates, net |
| 210,527 | | (210,527 | ) | | ||||||||||||||
Deferred financing costs, net |
| 7,754 | 2,848 | | 10,602 | |||||||||||||||
Investment in affiliates |
72,680 | 110,861 | | (183,541 | ) | | ||||||||||||||
Other assets |
| 238 | 3,410 | | 3,648 | |||||||||||||||
Vessels and equipment, net |
| | 681,112 | | 681,112 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Assets |
$ | 72,680 | $ | 329,586 | $ | 713,876 | $ | (394,068 | ) | $ | 722,074 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and Members Equity |
||||||||||||||||||||
Accrued expenses and other liabilities |
$ | | $ | 83 | $ | 4,715 | $ | | $ | 4,798 | ||||||||||
Accrued interest |
| 4,408 | | | 4,408 | |||||||||||||||
Payable due USS Entities |
| | 250 | | 250 | |||||||||||||||
Unearned revenue |
| | 4,582 | | 4,582 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Current Liabilities |
| 4,491 | 9,547 | | 14,038 | |||||||||||||||
Payables due to affiliates, net |
| | 210,527 | (210,527 | ) | | ||||||||||||||
Long-term debt |
| 252,415 | 382,941 | | 635,356 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Liabilities |
| 256,906 | 603,015 | (210,527 | ) | 649,394 | ||||||||||||||
Members Equity |
72,680 | 72,680 | 110,861 | (183,541 | ) | 72,680 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Liabilities and Members Equity |
$ | 72,680 | $ | 329,586 | $ | 713,876 | $ | (394,068 | ) | $ | 722,074 | |||||||||
|
|
|
|
|
|
|
|
|
|
12
Table of Contents
American Petroleum Tankers Holding LLC
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2011 and 2010
(dollars in thousands)
Unaudited Condensed Consolidating Balance Sheet as of December 31, 2010 |
||||||||||||||||||||
Parent (Guarantor) |
Subsidiary Issuers |
Guarantor Subsidiaries |
Consolidating Adjustments |
Consolidated | ||||||||||||||||
Assets |
||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | | $ | 18,241 | $ | | $ | 18,241 | ||||||||||
Accounts receivables |
| | 11,095 | | 11,095 | |||||||||||||||
Prepaid expenses and other current assets |
| | 453 | | 453 | |||||||||||||||
Restricted cash |
| 7,923 | | | 7,923 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Current Assets |
| 7,923 | 29,789 | | 37,712 | |||||||||||||||
Receivables due from affiliates, net |
| 247,683 | | (247,683 | ) | | ||||||||||||||
Deferred financing costs, net |
| 9,113 | 3,142 | | 12,255 | |||||||||||||||
Investment in affiliates |
89,651 | 108,991 | | (198,642 | ) | | ||||||||||||||
Other assets |
| | 3,573 | | 3,573 | |||||||||||||||
Vessels and equipment, net |
| | 692,178 | | 692,178 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Assets |
$ | 89,651 | $ | 373,710 | $ | 728,682 | $ | (446,325 | ) | $ | 745,718 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and Members Equity |
||||||||||||||||||||
Accrued expenses and other liabilities |
$ | | $ | 1,164 | $ | 5,221 | $ | | $ | 6,385 | ||||||||||
Accrued interest |
| 4,869 | | | 4,869 | |||||||||||||||
Payable due USS Entities |
| | 320 | | 320 | |||||||||||||||
Unearned revenue |
| | 4,508 | | 4,508 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Current Liabilities |
| 6,033 | 10,049 | | 16,082 | |||||||||||||||
Payables due to affiliates, net |
| | 247,683 | (247,683 | ) | | ||||||||||||||
Long-term debt |
| 278,026 | 361,959 | | 639,985 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Liabilities |
| 284,059 | 619,691 | (247,683 | ) | 656,067 | ||||||||||||||
Members Equity |
89,651 | 89,651 | 108,991 | (198,642 | ) | 89,651 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Liabilities and Members Equity |
$ | 89,651 | $ | 373,710 | $ | 728,682 | $ | (446,325 | ) | $ | 745,718 | |||||||||
|
|
|
|
|
|
|
|
|
|
13
Table of Contents
American Petroleum Tankers Holding LLC
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2011 and 2010
(dollars in thousands)
Unaudited Condensed Consolidating Statement of Operations For the Three Months Ended June 30, 2011 |
||||||||||||||||||||
Parent (Guarantor) |
Subsidiary Issuers |
Guarantor Subsidiaries |
Consolidating Adjustments |
Consolidated | ||||||||||||||||
Revenues |
$ | | $ | | $ | 27,421 | $ | | $ | 27,421 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Expenses: |
||||||||||||||||||||
Vessel operating expenses |
| | 9,204 | | 9,204 | |||||||||||||||
General and administrative expenses |
| 134 | (4 | ) | | 130 | ||||||||||||||
Depreciation and amortization |
| 14 | 5,927 | | 5,941 | |||||||||||||||
Management fees |
| | 787 | | 787 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Expenses |
| 148 | 15,914 | | 16,062 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating (loss) income |
| (148 | ) | 11,507 | | 11,359 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other income (expense): |
||||||||||||||||||||
Interest income |
| | 1 | | 1 | |||||||||||||||
Interest expense |
| (7,657 | ) | (11,149 | ) | | (18,806 | ) | ||||||||||||
Debt extinguishment expense |
| (2,220 | ) | | | (2,220 | ) | |||||||||||||
Equity in losses of subsidiaries |
(10,049 | ) | (24 | ) | | 10,073 | | |||||||||||||
Derivative losses |
| | (383 | ) | | (383 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net loss |
$ | (10,049 | ) | $ | (10,049 | ) | $ | (24 | ) | $ | 10,073 | $ | (10,049 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
Unaudited Condensed Consolidating Statement of Operations For the Three Months Ended June 30, 2010 |
||||||||||||||||||||
Parent (Guarantor) |
Subsidiary Issuers |
Guarantor Subsidiaries |
Consolidating Adjustments |
Consolidated | ||||||||||||||||
Revenues |
$ | | $ | | $ | 13,360 | $ | | $ | 13,360 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Expenses: |
||||||||||||||||||||
Vessel operating expenses |
| | 5,151 | | 5,151 | |||||||||||||||
General and administrative expenses |
| 73 | 463 | | 536 | |||||||||||||||
Depreciation and amortization |
| | 3,752 | | 3,752 | |||||||||||||||
Management fees |
| | 518 | | 518 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Expenses |
| 73 | 9,884 | | 9,957 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating (loss) income |
| (73 | ) | 3,476 | | 3,403 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other expense: |
||||||||||||||||||||
Interest income |
| 7 | | | 7 | |||||||||||||||
Interest expense |
| (3,227 | ) | (7,125 | ) | | (10,352 | ) | ||||||||||||
Debt extinguishment expense |
| | (7,640 | ) | | (7,640 | ) | |||||||||||||
Equity in losses of subsidiaries |
(15,089 | ) | (11,796 | ) | | 26,885 | | |||||||||||||
Derivative losses |
| | (507 | ) | | (507 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net loss |
$ | (15,089 | ) | $ | (15,089 | ) | $ | (11,796 | ) | $ | 26,885 | $ | (15,089 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
14
Table of Contents
American Petroleum Tankers Holding LLC
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2011 and 2010
(dollars in thousands)
Unaudited Condensed Consolidating Statement of Operations For the Six Months Ended June 30, 2011 |
||||||||||||||||||||
Parent (Guarantor) |
Subsidiary Issuers |
Guarantor Subsidiaries |
Consolidating Adjustments |
Consolidated | ||||||||||||||||
Revenues |
$ | | $ | | $ | 54,426 | $ | | $ | 54,426 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Expenses: |
||||||||||||||||||||
Vessel operating expenses |
| | 17,119 | | 17,119 | |||||||||||||||
General and administrative expenses |
| 740 | 159 | | 899 | |||||||||||||||
Depreciation and amortization |
| 14 | 11,842 | | 11,856 | |||||||||||||||
Management fees |
| | 1,574 | | 1,574 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Expenses |
| 754 | 30,694 | | 31,448 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating (loss) income |
| (754 | ) | 23,732 | | 22,978 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other income (expense): |
||||||||||||||||||||
Interest income |
| 4 | 2 | | 6 | |||||||||||||||
Interest expense |
| (15,871 | ) | (21,426 | ) | | (37,297 | ) | ||||||||||||
Debt extinguishment expense |
| (2,220 | ) | | | (2,220 | ) | |||||||||||||
Equity in (losses) income of subsidiaries |
(16,971 | ) | 1,870 | | 15,101 | | ||||||||||||||
Derivative losses |
| | (438 | ) | | (438 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net (loss) income |
$ | (16,971 | ) | $ | (16,971 | ) | $ | 1,870 | $ | 15,101 | $ | (16,971 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Unaudited Condensed Consolidating Statement of Operations For the Six Months Ended June 30, 2010 |
||||||||||||||||||||
Parent (Guarantor) |
Subsidiary Issuers |
Guarantor Subsidiaries |
Consolidating Adjustments |
Consolidated | ||||||||||||||||
Revenues |
$ | | $ | | $ | 25,929 | $ | | $ | 25,929 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Expenses: |
||||||||||||||||||||
Vessel operating expenses |
| | 10,277 | | 10,277 | |||||||||||||||
General and administrative expenses |
| 73 | 800 | | 873 | |||||||||||||||
Depreciation and amortization |
| | 7,556 | | 7,556 | |||||||||||||||
Management fees |
| | 1,077 | | 1,077 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Expenses |
| 73 | 19,710 | | 19,783 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating (loss) income |
| (73 | ) | 6,219 | | 6,146 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other expense: |
||||||||||||||||||||
Interest income |
| 7 | | | 7 | |||||||||||||||
Interest expense |
| (3,227 | ) | (11,773 | ) | | (15,000 | ) | ||||||||||||
Debt extinguishment expense |
| | (7,640 | ) | | (7,640 | ) | |||||||||||||
Equity in losses of subsidiaries |
(18,111 | ) | (14,818 | ) | | 32,929 | | |||||||||||||
Derivative losses |
| | (1,624 | ) | | (1,624 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net (loss) |
$ | (18,111 | ) | $ | (18,111 | ) | $ | (14,818 | ) | $ | 32,929 | $ | (18,111 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
15
Table of Contents
American Petroleum Tankers Holding LLC
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2011 and 2010
(dollars in thousands)
Unaudited Condensed Consolidating Statement of Cash Flows For the Six Months Ended June 30, 2011 |
||||||||||||||||||||
Parent (Guarantor) |
Subsidiary Issuers |
Guarantor Subsidiaries |
Consolidating Adjustments |
Consolidated | ||||||||||||||||
OPERATING ACTIVITIES: |
||||||||||||||||||||
Net (loss) income |
$ | (16,971 | ) | $ | (16,971 | ) | $ | 1,870 | $ | 15,101 | $ | (16,971 | ) | |||||||
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |
||||||||||||||||||||
Straight-line charter revenues |
| | (275 | ) | | (275 | ) | |||||||||||||
Depreciation and amortization |
| 14 | 11,842 | | 11,856 | |||||||||||||||
Amortization of deferred financing costs |
| 983 | 294 | | 1,277 | |||||||||||||||
Amortization of discount on notes issued |
| 766 | | | 766 | |||||||||||||||
Equity in losses (income) of subsidiaries |
16,971 | (1,870 | ) | | (15,101 | ) | | |||||||||||||
Debt prepayment penalty fees |
| 810 | | | 810 | |||||||||||||||
Write-off of deferred financing costs |
| 787 | | | 787 | |||||||||||||||
Write-off of discount on notes issued |
| 623 | | | 623 | |||||||||||||||
Derivative losses |
| | 438 | | 438 | |||||||||||||||
Interest paid-in-kind |
| | 20,982 | | 20,982 | |||||||||||||||
Changes in current assets and liabilities: |
||||||||||||||||||||
Accounts receivables |
| | (2,079 | ) | | (2,079 | ) | |||||||||||||
Prepaid expenses and other current assets |
| (76 | ) | 231 | | 155 | ||||||||||||||
Accrued expenses and other liabilities |
| (1,084 | ) | (276 | ) | | (1,360 | ) | ||||||||||||
Payable due USS Entities |
| | (70 | ) | | (70 | ) | |||||||||||||
Unearned revenue |
| | 74 | | 74 | |||||||||||||||
Change in receivables due from/payables due to affiliates, net |
| 9,346 | (9,346 | ) | | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash (used in) provided by operating activities |
| (6,672 | ) | 23,685 | | 17,013 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
INVESTING ACTIVITIES: |
||||||||||||||||||||
Vessel and equipment additions |
| | (1,006 | ) | | (1,006 | ) | |||||||||||||
Software additions |
| (252 | ) | | | (252 | ) | |||||||||||||
Change in restricted cash |
| 7,923 | | | 7,923 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash provided by (used in) investing activities |
| 7,671 | (1,006 | ) | | 6,665 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
FINANCING ACTIVITIES: |
||||||||||||||||||||
Receipts from (payments to) affiliates |
| 27,810 | (27,810 | ) | | | ||||||||||||||
Payment on long-term debt |
| (27,000 | ) | | | (27,000 | ) | |||||||||||||
Debt prepayment penalty fees |
| (810 | ) | | | (810 | ) | |||||||||||||
Payment of debt issuance costs |
| (869 | ) | | | (869 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash used in financing activities |
| (869 | ) | (27,810 | ) | | (28,679 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net increase (decrease) in cash and cash equivalents |
| 130 | (5,131 | ) | | (5,001 | ) | |||||||||||||
Cash and cash equivalents at beginning of period |
| | 18,241 | | 18,241 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash and cash equivalents at end of period |
$ | | $ | 130 | $ | 13,110 | $ | | $ | 13,240 | ||||||||||
|
|
|
|
|
|
|
|
|
|
16
Table of Contents
American Petroleum Tankers Holding LLC
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2011 and 2010
(dollars in thousands)
Unaudited Condensed Consolidating Statement of Cash Flows For the Six Months Ended June 30, 2010 |
||||||||||||||||||||
Parent (Guarantor) |
Subsidiary Issuers |
Guarantor Subsidiaries |
Consolidating Adjustments |
Consolidated | ||||||||||||||||
OPERATING ACTIVITIES: |
||||||||||||||||||||
Net (loss) income |
$ | (18,111 | ) | $ | (18,111 | ) | $ | (14,818 | ) | $ | 32,929 | $ | (18,111 | ) | ||||||
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |
||||||||||||||||||||
Straight-line charter revenues |
| | (666 | ) | | (666 | ) | |||||||||||||
Depreciation and amortization |
| | 7,556 | | 7,556 | |||||||||||||||
Amortization of deferred financing costs |
| 243 | 1,458 | | 1,701 | |||||||||||||||
Amortization of discount on notes issued |
| 192 | | | 192 | |||||||||||||||
Equity in losses (income) of subsidiaries |
18,111 | 14,818 | | (32,929 | ) | | ||||||||||||||
Debt prepayment penalty fees |
| | 2,814 | | 2,814 | |||||||||||||||
Write-off of deferred financing costs |
| | 4,826 | | 4,826 | |||||||||||||||
Write-off of discount on notes issued |
| | | | | |||||||||||||||
Derivative losses |
| | 1,624 | | 1,624 | |||||||||||||||
Interest paid-in-kind |
| | 11,723 | | 11,723 | |||||||||||||||
Changes in current assets and liabilities: |
||||||||||||||||||||
Accounts receivables |
| | 724 | | 724 | |||||||||||||||
Prepaid expenses and other current assets |
| | (127 | ) | | (127 | ) | |||||||||||||
Accrued expenses and other liabilities |
| 3,497 | (106 | ) | | 3,391 | ||||||||||||||
Payable due USS Entities |
| | (39 | ) | | (39 | ) | |||||||||||||
Unearned revenue |
| | 1,134 | | 1,134 | |||||||||||||||
Change in receivables due from/payables due to affiliates, net |
| (1,827 | ) | 1,827 | | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash (used in) provided by operating activities |
| (1,188 | ) | 17,930 | | 16,742 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
INVESTING ACTIVITIES: |
||||||||||||||||||||
Vessel and equipment additions |
| | (5,042 | ) | | (5,042 | ) | |||||||||||||
Software additions |
| | | | | |||||||||||||||
Change in restricted cash |
| (169,907 | ) | 2,800 | | (167,107 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash (used in) investing activities |
| (169,907 | ) | (2,242 | ) | | (172,149 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
FINANCING ACTIVITIES: |
||||||||||||||||||||
Proceeds from the issuance of debt |
| 277,029 | | | 277,029 | |||||||||||||||
(Payments to) receipts from affiliates |
| (97,481 | ) | 97,481 | | | ||||||||||||||
Payment on long-term debt |
| | (96,904 | ) | | (96,904 | ) | |||||||||||||
Debt prepayment penalty fees |
| | (2,814 | ) | | (2,814 | ) | |||||||||||||
Payment of debt issuance costs |
| (8,453 | ) | | | (8,453 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash provided by (used in) financing activities |
| 171,095 | (2,237 | ) | | 168,858 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net increase in cash and cash equivalents |
| | 13,451 | | 13,451 | |||||||||||||||
Cash and cash equivalents at beginning of period |
| | 7,893 | | 7,893 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash and cash equivalents at end of period |
$ | | $ | | $ | 21,344 | $ | | $ | 21,344 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Note 14 Subsequent Events
The Company evaluated events and transactions that occurred after the balance sheet date but before the financial statements were issued and determined there were no items to report.
*****
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our consolidated financial condition, results of operations and cash flows should be read in conjunction with the unaudited condensed consolidated financial statements, and the notes thereto, and other data contained elsewhere in this Quarterly Report. The following discussion and analysis should also be read in conjunction with our audited consolidated financial statements, and notes thereto, and Managements Discussion and Analysis of Financial Condition and Results of Operations included in the Registration Statement. References in Item 2. herein to APT Holding, we, our and us refer to the Company and its subsidiaries unless otherwise stated or indicated by context. The following discussion and analysis includes forward-looking statements that involve certain risks and uncertainties. See Forward-Looking Statements.
We are a U.S. based, provider of Jones Act marine transportation services for refined petroleum products in the U.S. domestic coastwise trade. Our fleet consists of five modern, double-hulled product tankers. Our fleet of five vessels has a total capacity of approximately 245,000 dwt and an average age of less than two years.
Our customers are BP West Coast Products LLC (BP), an affiliate of Chevron Corporation (Chevron), an affiliate of Marathon Oil Corporation (Marathon) and the Military Sealift Command department of the U.S. Navy (MSC). Three of our vessels are on time charters that range up to three years under an evergreen type arrangement (which may be terminated at any time upon 90 days notice) to seven years. Our other two vessels are contracted to MSC for one year with four approximately one-year renewal options. While MSC awarded us the contract based on a five-year analysis, MSC is only permitted to commit to annual contracts due to budgetary restrictions. However, as a result of our customization of these vessels to meet MSCs requirements, as well as economic benefits for continued renewals, we believe it is likely that MSC will exercise its renewal options, although there can be no assurance that they will do so. The four T-5 tankers that our vessels have in part replaced have been in continuous MSC service since their delivery as new buildings in the mid-1980s, despite MSCs requirement for periodic renewals of time charters and / or operating agreements, as applicable. Further supporting this view, the day rates in the first-year of our charters with MSC are on average 25% higher than the day rates for our first-option years. We utilized this declining rate structure with a material premium in the first year to incentivize MSC to exercise each of their one-year renewal options.
Operationally, we retain all strategic and commercial management of our vessels, while the technical management of the vessels is outsourced to certain affiliates of Crowley Maritime Corporation (collectively, Crowley or our Manager). Crowleys technical management services include crewing, maintenance and repair, purchasing, insurance and claims administration, and security as well as accounting and reporting services. Founded in 1892, Crowley is one of the oldest maritime transportation companies in the U.S., employing approximately 4,800 employees across 80 office locations. We benefit from Crowleys operational expertise, purchasing power and relationships with vendors, suppliers and major labor organizations which are key to providing skilled and experienced crews. As of June 2011, the non-vessel accounting and GAAP reporting responsibilities were transitioned from Crowley to our staff.
Definitions
It is important to understand the meaning of the following terms in order to understand our discussion of our results of operations:
| Deadweight tons or dwt. dwt is the abbreviation for deadweight tons, representing principally the cargo carrying capacity of a vessel. |
| Revenue. Revenue includes revenue from time charters. Revenue is impacted by changes in charter and utilization rates. For charters which have a duration in excess of one year and include escalation |
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provisions we recognize revenue on a straight line basis over the life of the contract. |
| Vessel operating expenses. The most significant direct vessel operating expenses are manning costs, vessel maintenance and repairs, and insurance. We pay the vessel operating expenses. |
| Depreciation and amortization. We incur fixed charges related to the depreciation of the historical cost of our fleet. The aggregate number of drydockings undertaken in a given period and the nature of the work performed determine the level of drydocking expenditures. Depreciation and amortization is determined as follows: |
| Vessels and equipment are recorded at cost, including capitalized interest and transaction fees where appropriate, and depreciated to scrap value using the straight-line method; and |
| Both domestic and international regulatory bodies require that petroleum carrying vessels be drydocked for major repair and maintenance at least every five years (this requirement increases to twice in a five year period after the first fifteen years of operation). In addition, vessels may have to be drydocked in the event of accidents or other unforeseen damage. Drydocking costs are deferred and amortized over the estimated period between dry-dockings, although we have not sustained any drydocking costs to date. |
| General and administrative expenses. General and administrative expenses consist of employment costs for shore side staff and cost of facilities as well as legal, audit and other administrative costs. |
| Drydocking days. Drydocking days are days designated for the cleaning, inspection and survey of vessels, and resulting maintenance work, as required by the U.S. Coast Guard and the American Bureau of Shipping. Drydocking days may also include unscheduled work in the event of an accident or other unforeseen damage. |
| Time charter equivalent. Time charter equivalent is equal to the voyage revenue earned by a vessel during a defined period, divided by the total number of actual days worked by that vessel during the period involved, net of fuel and port expenses. |
Critical Accounting Policies
We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. The preparation of the condensed consolidated financial statements, upon which this discussion and analysis is based, requires management to make estimates and judgments which impact those condensed consolidated financial statements. The most critical of these estimates and accounting policies relate to long-lived asset depreciation, revenue recognition, and valuation of derivative instruments. Different assumptions in the application of these policies could result in material changes in our consolidated financial condition, results of operations, or cash flows. For a more complete discussion of these and other accounting policies, see the Notes to the Condensed Consolidated Financial Statements for the year ended December 31, 2010 included in Amendment 5 of the Form S-4.
Vessels and Equipment
Vessels and equipment are stated at cost. Normal repair and maintenance expenditures are expensed as incurred. Depreciation is computed using the straight-line method over the vessels estimated useful lives of 30 years based on the vessels cost less their estimated salvage value. Interest is capitalized in conjunction with our construction of vessels.
We assess recoverability of the carrying value of a long-lived asset when indicators of impairment are present by estimating the future undiscounted net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the assets carrying value and its fair value.
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Revenue Recognition
Revenues from long-term time charters of vessels with annual escalation clauses are recognized on a straight-line basis over the term of the contract. We also assess renewal options on time charters for bargain renewal options, and account for any bargain renewal options as a constructive extension of the lease term.
Derivative Instruments
Our use of derivative instruments, principally an interest rate cap, is limited to non-trading purposes and is designed to manage exposure to interest rate risks. The fair value of our interest rate cap represents the amount that would be paid to us by the counterparty to terminate the cap at the reporting date and is estimated based on a discounted cash flow model using a quoted interest rate. Changes in the fair market value of the interest rate cap could result in significant fluctuations in earnings.
Results of Operations
The following table presents our operating results for the three and six months ended June 30, 2011 and 2010.
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(dollars in thousands) | (dollars in thousands) | |||||||||||||||
Unaudited Condensed Consolidated Statements of Operations Data: |
||||||||||||||||
Revenues |
$ | 27,421 | $ | 13,360 | $ | 54,426 | $ | 25,929 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Expenses: |
||||||||||||||||
Vessel operating expenses |
9,204 | 5,151 | 17,119 | 10,277 | ||||||||||||
General and administrative expenses |
130 | 536 | 899 | 873 | ||||||||||||
Depreciation and amortization |
5,941 | 3,752 | 11,856 | 7,556 | ||||||||||||
Management fees |
787 | 518 | 1,574 | 1,077 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Expenses |
16,062 | 9,957 | 31,448 | 19,783 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income: |
11,359 | 3,403 | 22,978 | 6,146 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other income (expense): |
||||||||||||||||
Interest income |
1 | 7 | 6 | 7 | ||||||||||||
Interest expense |
(18,806 | ) | (10,352 | ) | (37,297 | ) | (15,000 | ) | ||||||||
Debt extinguishment expense |
(2,220 | ) | (7,640 | ) | (2,220 | ) | (7,640 | ) | ||||||||
Derivative losses |
(383 | ) | (507 | ) | (438 | ) | (1,624 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss |
$ | (10,049 | ) | $ | (15,089 | ) | $ | (16,971 | ) | $ | (18,111 | ) | ||||
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2011 versus Three Months Ended June 30, 2010
Revenues
During 2009, the Company received delivery of three new vessels, the Golden State, Pelican State and Sunshine State, in January 2009, June 2009 and December 2009, respectively. In the second quarter of 2010, the Golden State, Pelican State, and Sunshine State generated revenues in the aggregate of $13.4 million through charters with BP, Marathon, and Chevron, respectively. In the second quarter of 2010, we had an average utilization rate of 100% based on 273 operating days and 273 ownership days. During July 2010 and December 2010, we received delivery of the Empire State and Evergreen State, respectively. In the second quarter of 2011, the Golden State, Pelican State, Sunshine State, Empire State, and Evergreen State generated revenues in the aggregate of $27.4 million through charters with BP, Marathon, Chevron, and MSC, respectively. Overall utilization was 100% based on 455 operating days and 455 ownership days.
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Vessel Operating Expenses
In the second quarter of 2011, vessel operating expenses were $9.2 million compared to $5.2 million in the second quarter of 2010. Vessel operating expenses increased in 2011 primarily due to the deliveries of the Empire State in July 2010 and the Evergreen State in December 2010.
General and Administrative Expenses
General and administrative expenses decreased to $0.1 million in the second quarter of 2011 from $0.5 million in 2010. The company incurred significant legal fees in the second quarter of 2010 in advance of the bond offering in May 2010. The reduction in legal fees was partially offset by higher wage and benefits costs with the increase in corporate staff.
Depreciation and amortization
Depreciation and amortization expense increased to $5.9 million in the second quarter of 2011 from $3.8 million in 2010. The changes were primarily due to the deliveries of the Empire State in July 2010 and the Evergreen State in December 2010. Once a vessel is delivered and commences operation, the depreciation associated with that particular vessel is recorded as an expense.
Management Fees
Management fees increased to $0.8 million in the second quarter of 2011 from $0.5 million in 2010, primarily due to the deliveries of the Empire State in July 2010 and the Evergreen State in December 2010.
Interest Expense
Interest expense increased to $18.8 million during the second quarter of 2011 compared to $10.4 million in 2010. The increase was primarily the result of: (a) a higher weighted-average outstanding balance of our Sponsor Facility due to the capitalization of paid-in-kind interest; (b) a higher interest rate following the conversion of the Sponsor Facilitys interest rate in May 2010 from a variable rate to a fixed rate; (c) interest expense incurred in 2010 under the Notes, which were issued in May 2010; and (d) a decrease in interest capitalized as part of the construction cost of the vessels due to the delivery of two vessels in July and December 2010.
Debt Extinguishment Expense
Debt extinguishment expense was $2.2 million due to the prepayment of $27.0 million of the Notes in the second quarter, versus $7.6 million due to the prepayment of the DVB facility in the second quarter of 2010.
Derivative Losses
Derivative losses were $0.4 million during the second quarter of 2011 compared with $0.5 million during 2010 due to a decrease in the fair value of our interest rate cap.
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Net Loss
As a result of the foregoing factors, net loss was $10.0 million in the second quarter of 2011, compared to a net loss of $15.1 million for 2010.
Six Months Ended June 30, 2011 versus Six Months Ended June 30, 2010
Revenues
During 2009, the Company received delivery of three new vessels, the Golden State, Pelican State and Sunshine State, in January 2009, June 2009 and December 2009, respectively. In the six months ended June 30, 2010, the Golden State, Pelican State, and Sunshine State generated revenues in the aggregate of $25.9 million through charters with BP, Marathon, and Chevron, respectively. We had an average utilization rate of 98% based on 532 operating days and 543 ownership days. During July 2010 and December 2010, we received delivery of the Empire State and Evergreen State, respectively. In 2011, the Golden State, Pelican State, Sunshine State, Empire State, and Evergreen State generated revenues in the aggregate of $54.4 million through charters with BP, Marathon, Chevron, and MSC, respectively. Overall utilization was 100% based on 905 operating days and 905 ownership days.
Vessel Operating Expenses
Vessel operating expenses were $17.1 million in 2011, compared to $10.3 million in 2010. Vessel operating expenses increased in 2011 primarily due to the deliveries of the Empire State in July 2010 and the Evergreen State in December 2010.
General and Administrative Expenses
General and administrative expenses were $0.9 million in 2011, compared with $0.9 million in 2010. Increases in payroll and professional fees were offset by lower legal fees in the period.
Depreciation and amortization
Depreciation and amortization expense increased to $11.9 million in 2011 from $7.6 million in 2010. The changes were primarily due to the deliveries of the Empire State in July 2010 and the Evergreen State in December 2010. Once a vessel is delivered and commences operation, the depreciation associated with that particular vessel is recorded as an expense.
Management Fees
Management fees increased to $1.6 million in 2011 from $1.1 million in 2010, primarily due to the deliveries of the Empire State in July 2010 and the Evergreen State in December 2010.
Interest Expense
Interest expense increased to $37.3 million in 2011 compared to $15.0 million in 2010. The increase was primarily the result of: (a) a higher weighted-average outstanding balance of our Sponsor Facility due to the capitalization of paid-in-kind interest; (b) a higher interest rate following the conversion of the Sponsor Facilitys interest rate in May 2010 from a variable rate to a fixed rate; (c) interest expense incurred in 2010 under the Notes, which were issued in May 2010; and (d) a decrease in interest capitalized as part of the construction cost of the vessels due to the delivery of two vessels in July and December 2010.
Debt Extinguishment Expense
Debt extinguishment expense was $2.2 million due to the prepayment of $27.0 million of the Notes in 2011, versus $7.6 million due to the prepayment of the DVB facility in 2010.
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Table of Contents
Derivative Losses
Derivative losses were $0.4 million in 2011 compared with $1.6 million in 2010 due to a decrease in the fair value of our interest rate cap.
Net Loss
As a result of the foregoing factors, net loss was $17.0 million in 2011, compared to a net loss of $18.1 million for 2010.
Liquidity and Capital Resources
We operate in a capital intensive industry. Our primary liquidity requirements relate to operating expenses, semi-annual payments for interest under the Notes, capital expenditures for the maintenance of vessels, and payments under our management service agreements. Our long-term liquidity needs primarily relate to interest and principal debt payments under the Notes and Sponsor Facility, which mature in 2015 and 2016, respectively. Long-term liquidity needs will depend upon the timing and amount of drydocking expenditures, repairs and maintenance activity, vessel additions and dispositions and fluctuations in working capital balances and scheduled maintenance.
In connection with the issuance of $285,000, 10 1/4% First Priority Senior Secured Notes (the Notes), APT Parent and AP Tankers Co. entered into a registration rights agreement (Registration Rights Agreement) which required us to consummate an exchange offer, exchanging unregistered Notes for Notes registered with the Securities and Exchange Commission (the Commission), under the Securities Act of 1933, as amended (the Securities Act), by May 12, 2011. We completed this exchange offer on May 12, 2011. The registered Notes are substantially identical to the unregistered Notes and are governed by the same indenture governing the unregistered Notes. The material provisions of the exchange offer are described in the prospectus, dated and filed with the Commission on April 13, 2011 pursuant to Rule 424(b)(3) under the Securities Act.
Our time charter contracts are structured such that we are paid in advance of providing the service, typically at the start of each month with the exception of MSC who pays charter hire every 15 days in arrears. As a result, we receive cash prior to recognizing revenue or expense, thus minimizing working capital requirements.
We believe that cash flows from operations will be sufficient to meet our existing liquidity needs for the next 12 months. We were in compliance with all of the covenants contained in our debt agreements as of June 30, 2011.
Working Capital
Working capital at June 30, 2011 was $12.7 million compared with $21.6 million at December 31, 2010. This decrease was primarily due to the reduction of cash used for the redemption of $27.0 million of the Notes in April 2011, and partially offset by the reduction in accrued vessel construction costs.
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Table of Contents
Cash Flows
For the Six Months Ended June 30, |
||||||||
2011 | 2010 | |||||||
(dollars in thousands) | ||||||||
Net cash flow provided by operating activities |
$ | 17,013 | $ | 16,742 | ||||
Net cash flow provided by (used in) investing activities |
6,665 | (172,149 | ) | |||||
Net cash flow (used in) provided by financing activities |
(28,679 | ) | 168,858 |
Operating cash flows Net cash flow provided by operating activities was $17.0 million for the six months ended June 30, 2011 and $16.7 million for the six months ended June 30, 2010. The increase in operating cash flows is primarily from the operation of five vessels during 2011 versus three vessels during the same period in 2010, partially offset by higher interest payments.
Investing cash flows Net cash provided by (used in) investing activities was $6.7 million for the six months ended June 30, 2011 and $(172.1) million in 2010. The increase in investing cash flows was primarily from the release of $7.9 million of restricted cash for general corporate purposes, versus the net deposit of $167.1 of restricted cash in the same period in 2010. The restricted cash was provided by the May 2010 bond offering and was used to fund the construction of the Empire State and Evergreen State. Vessel and equipment additions were $1.0 million in 2011 compared with $5.0 million in 2010.
Financing cash flows Net cash (used in) provided by financing activities was $(28.7) million for the six months ended June 30, 2011 and $168.9 million for 2010. The Company repaid $27.0 million of the Notes in April 2011. In the six months ended June 30, 2010, the Company received net proceeds of $277.0 million from the Notes offering, prepaid the DVB facility for $96.9 million in May 2010, and paid $8.5 million in debt issuance costs with the proceeds from the issuance of the Notes.
Long-Term Debt
Long-term debt consists of the following:
June 30, 2011 |
December 31, 2010 |
|||||||
Notes, net of $5,585 and $6,974 unamortized original discount at June 30, 2011 and December 31, 2010, respectively |
$ | 252,415 | $ | 278,026 | ||||
Sponsor Facility |
382,941 | 361,959 | ||||||
|
|
|
|
|||||
$ | 635,356 | $ | 639,985 | |||||
|
|
|
|
In 2006, we entered into the Sponsor Facility, pursuant to which the Class A members of APT or their affiliates agreed to make available $325.0 million of revolving credit loans. Beginning July 2009, the monthly interest payments are treated as paid-in-kind in lieu of monthly cash payments. As a result, the Company is allowed to exceed its total commitment under the Sponsor Facility for the capitalized paid-in-kind payments. Under the terms of the Sponsor Facility, the ability to borrow additional amounts against this facility ceased in June 2011. In addition, the security agent is due a fee of 0.005% of borrowings outstanding and the administrative agent is due a fee of $0.3 million per year. Concurrent with the issuance of the Notes, we further amended the Sponsor Facility to effect an interest rate conversion from a variable rate of LIBOR + 4.5% to a fixed rate of 12% payable in kind, the extension of the maturity of the Sponsor Facility to 2016 and a subordination of our first lien security interest on Sunshine State, Evergreen State, and Empire State to a second lien, resulting in a second lien security interest on all five of our vessels. The Sponsor Facility is subject to an intercreditor agreement with the holders of the Notes. During the three months ended June 30, 2011 and 2010, the Company recorded $10.9 million and $7.8 million, respectively, for interest-in-kind payments that were capitalized in the Sponsor Facility balance. During the six months ended June 30, 2011 and 2010, the Company recorded $21.0 million and $11.7 million, respectively, for interest-in-kind payments. An interest-in-kind accrual of $7.0 million and $26.8 million was recorded as long-term debt at June 30, 2011 and December 31, 2010, respectively.
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Table of Contents
In August 2009, we entered into the DVB Facility with DVB Bank America N.V., with interest based on LIBOR plus 3.75%, for the partial financing of our five vessels. On May 17, 2010, we issued the $285.0 million Notes to fund the remaining vessel construction costs and to prepay $97.6 million related to the DVB Facility (including principal, interest and prepayment penalty). On May 17, 2010, the DVB Facility was fully repaid and no longer outstanding.
Under the terms of the indenture governing the Notes, the Company may redeem up to 10% of the original issue amount in a twelve month period prior to May 1, 2012 at 103%. On March 28, 2011, the Company provided notice to the trustee that pursuant to the indenture the Company would redeem $27.0 million of the principal amount of the Notes unconditionally. The redemption was completed on April 28, 2011, at a cost of $29.2 million, including premium and accrued interest.
The maturities of long-term debt as of June 30, 2011, excluding interest accreted on the Sponsor Facility subsequent to June 30, 2011, are as follows:
2015 |
$ | 252,415 | ||
2016 |
382,941 | |||
|
|
|||
$ | 635,356 | |||
|
|
Capital Expenditures.
During the six months ended June 30, 2011, we spent approximately $1.0 million for construction of our vessels, consisting mostly of owner furnished equipment and other outfitting costs. An additional $0.3 million was spent on software for corporate accounting and financial reporting. We estimate that our liability to NASSCO is $1.9 million as of June 30, 2011, of which $0.9 million is payable in 2011 for completion of our last vessel, delivered in December 2010, and $1.0 million for warranty escrow payments, with $0.5 million payable in July and December 2011, for the last two vessels delivered.
Off-balance sheet arrangements
We do not have any off-balance sheet arrangements.
Contractual Commitments
The following table reflects our contractual commitments associated with our debt and other obligations as of June 30, 2011.
Payments Due by Period | ||||||||||||||||
< 1 year | 1 3 years | 3 5 years | Total | |||||||||||||
Long-term debt (1) |
$ | 26,445 | $ | 52,890 | $ | 952,292 | $ | 1,031,627 | ||||||||
Contractual commitments (2) |
1,900 | | | 1,900 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 28,345 | $ | 52,890 | $ | 952,292 | $ | 1,033,527 | |||||||||
|
|
|
|
|
|
|
|
(1) | The long-term debt consists of principal values of $258,000 Notes and $382,941 Sponsor Facility, which bear interest at 10.25% per annum and 12% calculated over a 360-day year, respectively. Amounts include contractual interest payments and paid-in-kind interest. |
(2) | Contractual commitments are related to remaining spending under the NASSCO vessel construction contract. Contractual commitments do not include amounts to our Manager as we may cancel the contract at any time and without cause upon 90 days notice. |
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
All of our debt has fixed interest rates, and is comprised of outstanding borrowings at June 30, 2011 of $252.4 million under the Notes, maturing in 2015, and $382.9 million under the Sponsor Facility maturing in 2016. Except in limited circumstances, we do not have an obligation to prepay our fixed-rate debt prior to maturity and, as a result, interest rate risk and changes in fair value should not have a significant impact on fixed rate borrowings unless we would be required to refinance such debt.
On May 12, 2011, we completed an exchange offer to exchange the unregistered Notes for Notes registered with the Securities and Exchange Commission, under the Securities Act of 1933. The registered Notes are substantially identical to the unregistered Notes and are governed by the same indenture governing the unregistered Notes.
As of June 30, 2011, we had one outstanding interest rate cap with a notional amount of $100.0 million. This interest rate cap of the three-month U.S. Dollar LIBOR of 6.0% is intended to reduce the potential negative impacts to our cash flows that could result in movements in interest rates between the date a chartering contract is entered into and sale date, if any, of such combined vessel and chartering contract. We recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. Changes in the fair value of those instruments are reported in earnings, as we did not designate the interest rate cap as a hedge. We are exposed to credit related losses in the event of non-performance by counterparties to these instruments; however, the counterparties are major financial institutions and we consider such risk of loss to be minimal. We do not hold or issue derivative financial instruments for trading purposes.
Item 4. Controls and Procedures
As of the end of the period covered by this report, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined under the Securities and Exchange Commission rules) was carried out under the supervision and with the participation of the Companys management, including our Chief Executive Officer and Chief Financial Officer. The Companys disclosure controls and procedures are designed to ensure that information that the Company must disclose in its reports filed under the Securities Act of 1934 is communicated and processed in a timely manner. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. During our fiscal quarter ended June 30, 2011, no changes were made in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.
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Currently there are no pending legal proceedings. From time to time, we are subject to routine legal proceedings incidental to the operations of our business.
There have been no material changes to any of the risk factors disclosed in the Registration Statement (under the heading Risk Factors).
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
None.
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Item 6. | Exhibits |
Exhibit No. | Description | |
31.1* | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2* | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1* | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2* | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101* | The following materials from American Petroleum Tankers Parent LLCs Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 are furnished herewith, formatted in XBRL (eXtensible Business Reporting Language): (i) the Unaudited Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010, (ii) the Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010, (iii) the Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010, and (iv) the Notes to Unaudited Consolidated Financial Statements for the three and six Months ended June 30, 2011 and 2010, tagged as blocks of text. |
* | Filed herewith. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AMERICAN PETROLEUM TANKERS PARENT LLC (Registrant) | ||||||||
Date: | 8/12/11 | By: | /s/ Robert K. Kurz | |||||
Robert K. Kurz | ||||||||
Chief Executive Officer, | ||||||||
(Principal Executive Officer) | ||||||||
Date: |
8/12/11 | By: | /s/ Philip J. Doherty | |||||
Philip J. Doherty | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial and Accounting Officer) |
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