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AMSC ASA — Interim / Quarterly Report 2021
Nov 19, 2021
3533_rns_2021-11-19_d6020e77-6a34-47af-86a9-ab0b661be10d.pdf
Interim / Quarterly Report
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AMERICAN SHIPPING COMPANY ASA
Third Quarter 2021 Report
Third Quarter 2021 Report
Lysaker, 19 November 2021, American Shipping Company ASA ("AMSC" or the "Company") announces results for the third quarter ending 30 September 2021.
HIGHLIGHTS
- Stable Q3 financial performance with bareboat revenue of USD 22.3 million, normalized EBITDA of USD 22.3 million and adjusted net profit of USD 5.0 million
- Declared Q3 dividend of USD 0.12 per share, an increase of 20% compared to Q2 and supported by the Company's free cash flow
- Backlog of secured bareboat revenue of USD 170 million with average weighted tenor of 1.9 years
AMSC CEO, Pål Lothe Magnussen comments, "We are pleased to report a 20% increase in quarterly dividends supported by our stable financial performance. The Jones Act tanker market is continuing to improve and recently several vessels have been reactivated from warm layup while older vessels have been scrapped, resulting in an improving supply and demand balance. Short term market dynamics are encouraging and long term fundamentals remain attractive."
MAIN EVENTS DURING AND SUBSEQUENT TO THE THIRD QUARTER
- Operating income: Operating income was stable at USD 12.9 million in each of Q2 2021 and Q2 2020.
- Normalized EBITDA: Normalized EBITDA of USD 22.3 million for Q3 2021 consists of base bareboat revenue of USD 22.3 million, plus Deferred Principal Obligation ("DPO") of USD 0.8 million, less SG&A of USD 0.8 million. The comparative figure for Q3 2020 for normalized EBITDA was USD 22.4 million (consisting of base bareboat revenue of USD 22.2 million, plus DPO of USD 0.9 million, less SG&A of USD 0.7 million). See Note 14 for more detailed information.
- Adjusted net profit: Adjusted net profit of USD 5.0 million for Q3 2021 consists of net profit after tax, adjusted for non‐recurring items, currency fluctuations, mark‐to‐market of derivatives and changes to non‐cash deferred tax expenses. The comparative figure for Q3 2020 was USD 4.6 million. See Note 14 for further details.
- Dividends: On 19 August 2021, the Board authorized a quarterly dividend payment of USD 0.10 per share, the equivalent of NOK 0.8872 per share, to the shareholders on record as of 27 August, which was paid on 3 September 2021. The dividend was classified as a return of paid in capital.
On 18 November 2021, the Board authorized an increased dividend payment of USD 0.12 per share to the shareholders on record as of 26 November 2021. The shares in AMSC will be traded ex. dividend from and including 25 November 2021, and the dividend will be paid on or about 6 December 2021. The dividend is classified as a return of paid in capital.
Dividend guidance: The Company's policy with respect to dividends is driven by the Board's commitment to return value to its shareholders while also prudently managing its balance sheet and maintaining financial flexibility to pursue growth and diversification opportunities. Dividend payments depend on, among other things, performance of existing contracts including outlook for profit share, and will be considered in conjunction with the Company's financial position, debt covenants, capital requirements, and market conditions going forward.
THIRD QUARTER FINANCIAL REVIEW
Condensed Income Statement
| unaudited | ||||
|---|---|---|---|---|
| Q3 | Q3 | Year to Date | ||
| Amounts in USD million (except share and per share information) | 2021 | 2020 | 2021 | 2020 |
| Operating revenues | 22.3 | 22.2 | 65.9 | 66.0 |
| Operating profit before depreciation ‐ EBITDA | 21.5 | 21.5 | 62.5 | 63.8 |
| Normalized EBITDA | 22.3 | 22.4 | 65.0 | 66.4 |
| Operating profit ‐ EBIT | 12.9 | 12.9 | 37.1 | 38.3 |
| Net financial expense | (7.8) | (19.0) | (22.3) | (41.4) |
| Unrealized gain/(loss) on interest swaps | (0.2) | (0.5) | (0.3) | (0.8) |
| Net foreign exchange gain/(loss) | (0.4) | ‐ | (0.4) | ‐ |
| Profit/(loss) before income tax | 4.5 | (6.6) | 14.1 | (3.9) |
| Income tax expense | (0.1) | (0.2) | (0.1) | (0.3) |
| Non‐cash income tax (expense) / benefit | (0.9) | 2.3 | (3.0) | 2.4 |
| Net profit/(loss) for the period * | 3.5 | (4.5) | 11.0 | (1.8) |
| Adjusted net profit | 5.0 | 4.6 | 14.5 | 11.0 |
| Average number of common shares | 60,616,505 | 60,616,505 | 60,616,505 | 60,616,505 |
| Earnings/(loss) per share (USD) | 0.06 | (0.07) | 0.18 | (0.03) |
* Applicable to common stockholders of the parent company
Third quarter results
AMSC's operating revenues for Q3 2021 and Q3 2020 were USD 22.3 million and USD 22.2 million, respectively. EBITDA was USD 21.5 million each in Q3 2021 and Q3 2020. EBIT was USD 12.9 million in both Q2 2021 and Q2 2020.
Net financial expense for Q3 2021 was USD 7.8 million (USD 19.0 million in Q3 2020). The reduced expense is due to the refinancing of AMSC's debt during 2020, which included one‐off expenses of USD 10.9 million during Q3 2020.
In Q3 2021, AMSC had an unrealized loss of USD 0.2 million on the mark‐to‐market valuation of its interest rate swap contracts related to its vessel financing (USD 0.5 million in Q3 2020).
AMSC had a net profit before tax for Q3 2021 of USD 4.5 million (USD 6.6 million loss in Q3 2020). Income tax expense for Q3 2021 was USD 0.1 million (USD 0.2 million in Q3 2020). Non‐cash deferred income tax expense was USD 0.9 million in Q3 2021 (USD 2.3 million benefit in Q3 2020). Net profit for Q3 2021 was USD 3.5 million compared to USD 5.4 million loss in Q3 2020.
Year to date results
AMSC's operating revenues for the first nine months of 2021 and 2020 were USD 65.9 million and USD 66.0 million, respectively. EBITDA was USD 62.5 million year to date in 2021 and USD 63.8 million in the same period of 2020. EBIT was USD 37.1 million in the nine months ending 30 September 2021 (USD 38.3 million in the same period of 2020).
Net financial expense for the first nine months of 2021 was USD 22.3 million (USD 41.4 million in the first nine months of 2020). The reduced expense is due to the refinancing of AMSC's debt during 2020, as well
as a USD 0.2 million gain on the bond tap issued at 101 of par recognized during Q2 2021. During Q1 2020, AMSC made a one‐time payment of USD 1.9 million to terminate the interest rate swaps in connection with the refinancing.
In 2021, AMSC had an unrealized loss of USD 0.3 million on the mark‐to‐market valuation of its interest rate swap contracts related to its vessel financing (USD 0.8 million loss in 2020).
AMSC had a net profit before tax for the nine months ending 30 September 2021 of USD 14.1 million (USD 3.9 million loss for the nine months ending 30 September 2020). Income tax expense for year to date 2021 was USD 0.1 million (USD 0.3 million in 2020). Non‐cash deferred income tax expense was USD 3.0 million in 2021 (USD 2.4 million benefit in 2020). Net profit for the first nine months of 2021 was USD 11.0 million compared to USD 1.8 million loss in the first nine months of 2020.
As of 31 December 2020, AMSC has approximately USD 517.6 million of federal net operating losses in carryforward in its U.S. subsidiaries and approximately USD 75.8 million of net operating losses in Norway. See Note 6 for more detailed information.
The non‐cash deferred income tax benefit in the U.S. was the result of accelerated tax depreciation, which has created differences between accumulated depreciation for book and tax purposes and corresponding tax losses, the net of which is recognized as a deferred tax liability on the balance sheet.
| unaudited | |||
|---|---|---|---|
| 30‐Sep | 30‐Sep | 31‐Dec | |
| Amounts in USD million | 2021 | 2020 | 2020 * |
| Vessels | 624.1 | 658.1 | 649.5 |
| Deferred tax assets | 12.8 | ‐ | 14.8 |
| Interest‐bearing long term receivables (DPO) | 21.9 | 23.8 | 23.3 |
| Trade and other receivables | 0.9 | 0.1 | 0.3 |
| Cash held for specified uses | 1.7 | 0.5 | 0.9 |
| Cash and cash equivalents | 54.7 | 29.9 | 34.9 |
| Total assets | 716.1 | 712.4 | 723.7 |
| Total equity | 154.0 | 147.5 | 161.3 |
| Deferred tax liabilities | 10.7 | 8.9 | 9.2 |
| Interest‐bearing long term debt | 518.0 | 523.1 | 516.8 |
| Derivative financial liabilities | 1.5 | 1.6 | 1.2 |
| Interest‐bearing short term debt | 26.8 | 26.8 | 26.8 |
| Deferred revenues and other payables | 5.1 | 4.6 | 8.3 |
| Total equity and liabilities | 716.1 | 712.4 | 723.7 |
Condensed Statement of Financial Position
* Derived from audited financial statements
The decrease in Vessels from 31 December 2020 reflects depreciation of the Company's 10 vessels for the first nine months of 2021.
At year‐end 2020, AMSC recognized its Norwegian net deferred tax assets which had not previously been recognized.
During 2021, Overseas Shipholding Group, Inc. ("OSG") made repayments on the DPO of USD 2.5 million, of which USD 1.4 million is principal repayment. See note 12 to the condensed consolidated financial statements for additional information on the DPO.
Interest bearing debt as of 30 September 2021 was USD 544.8 million, net of USD 7.4 million in capitalized fees versus USD 543.6 million as of 31 December 2020. This debt relates to the bank financing for the Company's 10 vessels of USD 332.2 million and the unsecured bond of USD 220.0 million. AMSC was in compliance with all of its debt covenants as of 30 September 2021.
Outlook
The second half of 2021 has seen several time charter fixtures at firming rates and of durations ranging from 3 months to 5 years. Fixtures are concluded on the back of U.S. domestic demand for clean petroleum products returning to historical levels, increased seasonality for the upcoming winter season and the opening of societies in the USA and beyond. Four MR tankers have recently been reactivated from warm layup, leaving only four tankers in warm layup. The expectation is that the number of vessels in layup will be further reduced into next year on the back of a global economic recovery and tightening energy markets.
As previously predicted, the supply side of the market is now retracting with two older tankers being confirmed to go for scrap. Due to limited US yard capacity and rising newbuilding costs, such vessels are unlikely to be replaced in the market for many years to come.
During the third quarter, demand for clean products in the USA has almost fully recovered to pre‐COVID levels. U.S. refinery utilization is still lagging somewhat, partly due to higher than normal imports driven by low international product tanker rates and continued COVID‐19 impact on global energy and fuel markets making excess fuel available at low cost. US refinery utilization is expected to improve as the maintenance season is coming to an end and global economic recovery continues.
Crude oil cargoes from the U.S. Gulf to the U.S. North East remain subdued as the price spread between WTI and Brent/Bonny has not been sufficiently wide to support cargo volumes experienced prior to the pandemic. We remain optimistic that this trade will return to historical levels as U.S. shale production increases on the back of higher energy prices.
The long‐term fundamentals in the Jones Act tanker market remain positive. MR tankers are a reliable means of transportation and a key part of the infrastructure transporting fuel and crude oil across the USA. AMSC's 10 tankers are a key part of the Jones Act fleet and represent about 30% of the modern tankers. AMSC continues to enjoy downside protection with "come hell or high water" bareboat contracts, with five product tankers secured until December 2022, four product tankers secured until December 2023 and one shuttle tanker secured until June 2025.
Risks
The risks facing AMSC principally relate to the operational and financial performance of OSG, re‐chartering risk as well as overall market risk.
AMSC's activities also expose the Company to a variety of other financial risks, including but not limited to, currency, interest rate, refinancing, and liquidity risk.
For further details of AMSC's risks, refer to the 2020 Annual Report.
Definitions
Jones Act ‐ The U.S. cabotage law, referred to as Jones Act, requires all commercial vessels operating between U.S. ports to be built, owned, operated and manned by U.S. citizens and to be registered under the U.S. flag. In 1996 certain amendments were enacted to the U.S. vessel documentations laws, allowing increased non‐U.S. participation in the ownership of vessels operating in the Jones Act trade under certain conditions, known as the finance lease exemption.
Lysaker, 18 November 2021 The Board of Directors and President / CEO American Shipping Company ASA
Annette Malm Justad Peter D. Knudsen Chairperson Director
Kristian Røkke Pål Magnussen Director President / CEO
AMERICAN SHIPPING COMPANY ASA GROUP CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRD QUARTER AND FIRST NINE MONTHS OF 2021
CONDENSED INCOME STATEMENT
| unaudited | ||||
|---|---|---|---|---|
| Q3 | Q3 | Year to Date | ||
| Amounts in USD million (except share and per share information) | 2021 | 2020 | 2021 | 2020 |
| Operating revenues | 22.3 | 22.2 | 65.9 | 66.0 |
| Operating expenses | (0.8) | (0.7) | (3.4) | (2.1) |
| Operating profit before depreciation ‐ EBITDA | 21.5 | 21.5 | 62.5 | 63.8 |
| Depreciation | (8.6) (8.6) |
(25.4) | (25.5) | |
| Operating profit ‐ EBIT | 12.9 | 12.9 | 37.1 | 38.3 |
| Net financial expense | (7.8) | (19.0) | (22.3) | (41.4) |
| Unrealized gain/(loss) on interest swaps | (0.2) | (0.5) | (0.3) | (0.8) |
| Net foreign exchange gain/(loss) | (0.4) | ‐ | (0.4) | ‐ |
| Profit/(loss) before income tax | 4.5 | (6.6) | 14.1 | (3.9) |
| Income tax (expense) / benefit | (0.1) | (0.2) | (0.1) | (0.3) |
| Non‐cash income tax (expense) / benefit | (0.9) | 2.3 | (3.0) | 2.4 |
| Net profit/(loss) for the period * | 3.5 | (4.5) | 11.0 | (1.8) |
| Average number of common shares | 60,616,505 | 60, 616,505 |
60,616,505 | 60,616,505 |
| Earnings/(loss) per share (USD) | 0.06 | (0.07) | 0.18 | (0.03) |
CONDENSED STATEMENT OF CHANGES IN COMPREHENSIVE INCOME
| unaudited | ||||
|---|---|---|---|---|
| Q3 | Q3 | Year to Date | ||
| Amounts in USD million | 2021 | 2020 | 2021 | 2020 |
| Net income/(loss) for the period | 3.5 | (4.5) | 11.0 | (1.8) |
| Other comprehensive income for the period, net of tax | ‐ | ‐ | ‐ | ‐ |
| Total comprehensive income/(loss) for the period * | 3.5 | (4.5) | 11.0 | (1.8) |
* Applicable to common stockholders of the parent company.
CONDENSED STATEMENT OF FINANCIAL POSITION
| unaudited | |||
|---|---|---|---|
| 30‐Sep | 30‐Sep | 31‐Dec | |
| Amounts in USD million | 2021 | 2020 | 2020 * |
| Assets | |||
| Non‐current assets | |||
| Vessels | 624.1 | 658.1 | 649.5 |
| Deferred tax assets | 12.8 | ‐ | 14.8 |
| Interest‐bearing long term receivables (DPO) | 21.9 | 23.8 | 23.3 |
| Total non‐current assets | 658.8 | 681.9 | 687.6 |
| Current assets | |||
| Trade and other receivables | 0.9 | 0.1 | 0.3 |
| Cash held for specified uses | 1.7 | 0.5 | 0.9 |
| Cash and cash equivalents | 54.7 | 29.9 | 34.9 |
| Total current assets | 57.3 | 30.5 | 36.1 |
| Total assets | 716.1 | 712.4 | 723.7 |
| Equity and liabilities | |||
| Total equity | 154.0 | 147.5 | 161.3 |
| Non‐current liabilities | |||
| Bond payable | 220.0 | 200.0 | 200.0 |
| Other interest‐bearing loans | 305.4 | 332.3 | 325.6 |
| Derivative financial liabilities | 1.5 | 1.6 | 1.2 |
| Capitalized fees | (7.4) (9.2) |
(8.7) | |
| Deferred tax liability | 10.7 | 8.9 | 9.2 |
| Total non‐current liabilities | 530.2 | 533.5 | 527.3 |
| Current liabilities | |||
| Interest‐bearing short‐term debt | 26.8 | 26.8 | 26.8 |
| Deferred revenues and other payables | 5.1 | 4.6 | 8.3 |
| Total current liabilities | 31.9 | 31.4 | 35.1 |
| Total liabilities | 562.1 | 564.9 | 562.4 |
| Total equity and liabilities | 716.1 | 712.4 | 723.7 |
* Derived from audited financial statements
CONDENSED STATEMENT OF CHANGES IN TOTAL EQUITY
| unaudited | ||
|---|---|---|
| Year to Date | ||
| Amounts in USD million | 2021 | 2020 |
| Equity as of beginning of period | 161.3 | 165.0 |
| Total comprehensive income for the period | 11.0 | (1.8) |
| Repurchase of treasury shares | (0.2) | (0.1) |
| Proceeds from sale of treasury shares | 0.1 | 0.1 |
| Dividends/return of capital | (18.2) | (15.8) |
| Total equity as of end of period | 154.0 | 147.5 |
CONDENSED CASH FLOW STATEMENT
| unaudited | ||
|---|---|---|
| Year to Date | ||
| Amounts in USD million | 2021 | 2020 |
| Net cash flow from operating activities | 38.9 | 25.4 |
| Net cash flow from investing activities | ‐ | (4.7) |
| Net cash flow used in financing activities | (18.2) | (38.1) |
| Net change in cash and cash equivalents | 20.7 | (17.5) |
| Cash and cash equivalents, including cash held for specified uses at the beginning of period | 35.7 | 47.9 |
| Cash and cash equivalents, including cash held for specified uses at end of period | 56.4 | 30.4 |
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2021
1. Introduction ‐ American Shipping Company
American Shipping Company ASA ("AMSC") is a company domiciled in Norway. The condensed interim financial statements for the three and nine months ended 30 September 2021 comprise AMSC and its wholly owned subsidiaries. These financial statements have not been audited or reviewed by the Company's auditors. American Shipping Company has one operating segment.
The consolidated 2020 annual financial statements of AMSC are available at www.americanshippingco.com.
2. Basis of Preparation
These consolidated interim financial statements reflect all adjustments, in the opinion of AMSC's management, that are necessary for a fair presentation of the results of operations for the periods presented. Operating results for the three and nine month periods are not necessarily indicative of the results that may be expected for any subsequent interim period or year.
3. Statement of compliance
These consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU (IFRS) applicable for interim reporting, IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as of and for the year ended 31 December 2020.
4. Significant accounting principles
The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as of and for the year ended 31 December 2020.
There have not been any new IFRS standards or interpretations issued or effective after the completion of the annual consolidated financial statements for the year 2020 that have a significant impact on AMSC's financial reporting for the three and nine months ended 30 September 2021.
5. Use of estimates
The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts in the financial statements. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from these estimates.
The most significant judgments made by management in preparing these condensed consolidated interim financial statements in applying the Group's accounting policies, and the key sources of estimation uncertainty, are the same as those that applied to the consolidated financial statements as of and for the year ended 31 December 2020.
Certain prior period reclassifications were made to conform to current year presentation.
6. Tax
Income tax expense is recognized in each interim period based on the best estimate of the expected annual income tax rates.
Without the benefit of accelerated depreciation on vessels for U.S. income tax purposes, the Company would have U.S. taxable income. Accordingly, substantially all of the deferred tax expense results from accelerated tax depreciation, which has created differences between accumulated depreciation for book and tax purposes and corresponding tax losses, the net of which is recognized as a deferred tax liability. The Company expects that the deferred tax liability will continue to grow until the U.S. subsidiaries are in a tax payable position for U.S. Federal income tax purposes, which is not expected until the vessels are fully depreciated for tax purposes and currently available tax operating losses are fully utilized. Deferred tax expense is a non‐cash item.
Deferred tax assets include the Company's net operating losses in carryforward, the losses on derivative financial liabilities, unused interest expense deductions and capitalized loan fees. Deferred tax liabilities include the value of the vessels. AMSC's effective tax rate is significantly impacted by losses in Norway for which the tax benefit was recorded during 2020.
The Company has approximately USD 517.6 million of federal net operating losses in carryforward in the U.S. subsidiaries as of 31 December 2020, of which approximately USD 164.3 million are subject to certain limitations under Internal Revenue Service Code Section 382 (see note 5 of the 2020 consolidated financial statements for more details). The Company also has approximately USD 75.8 million of net operating losses in carryforward in Norway as of 31 December 2020.
7. Share capital and equity
As of 30 September 2021, AMSC had 60,616,505 ordinary shares at a par value of NOK 10 per share.
| Dividends paid (classified as repayment of | 2021 | 2020 | ||||
|---|---|---|---|---|---|---|
| previously paid in share premium) | 1‐Mar‐21 | 4‐Jun‐21 | 3‐Sep‐21 | 16‐Mar‐20 | 4‐Jun‐20 | 7‐Sep‐20 |
| NOK per share | 0.8470 | 0.8321 | 0.8872 | 0.7478 | 0.8019 | 0.8958 |
| USD per share | 0.100 | 0.100 | 0.100 | 0.080 | 0.080 | 0.100 |
| Aggregate NOK (millions) | 51.3 | 50.4 | 53.8 | 45.3 | 48.6 | 54.3 |
| Aggregate USD (millions) | 6.1 | 6.1 | 6.1 | 4.8 | 4.8 | 6.1 |
8. Interest‐bearing debt
The following table shows material changes in interest‐bearing debt:
| 9 months to | ||||
|---|---|---|---|---|
| Amounts in USD million | 30‐Sep‐21 | 30‐Sep‐20 | ||
| Balance at beginning of period | 543.6 | 567.0 | ||
| Repayment of debt / loan fees Issuance of debt Amortization of loan fees |
(20.0) 20.0 1.2 |
(527.3) 505.0 5.2 |
||
| Balance at end of period | 544.8 | 549.8 |
The Company was in compliance with all of its debt covenants as of 30 September 2021.
On 15 April 2021, the Company executed a tap issue of USD 20 million in the senior unsecured bond due 2 July 2025. The tap issue was made at an issue price of 101% of nominal amount. Following settlement on 19 April 2021, the outstanding amount of the senior unsecured bond is USD 220 million. The USD 0.2 million gain on the issue was recognized during Q2 2021 as a reduction of interest expense.
9. Related party transactions
AMSC believes that related party transactions are made on terms equivalent to those that prevail in arm's length transactions.
10. Net financial expenses
| 3 months to | 9 months to | |||
|---|---|---|---|---|
| Amounts in USD million | 30‐Sep‐21 | 30‐Sep‐20 | 30‐Sep‐21 | 30‐Sep‐20 |
| Interest expense | (8.2) | (8.4) | (23.8) | (30.2) |
| Refinancing costs | ‐ | (9.2) | ‐ | (9.2) |
| Write‐off unamortized loan fees | ‐ | (1.7) | ‐ | (3.3) |
| Interest income | 0.4 | 0.3 | 1.5 | 1.4 |
| Net financial expense | (7.8) | (19.0) | (22.3) | (41.4) |
11. Profit sharing agreement with OSG
AMSC and OSG have an agreement to share profits from OSG's operations of AMSC's 10 vessels. The calculation of profit to share is complex and made on an aggregated fleet level. The calculation thus starts with total time charter vessel revenue, subtracted by defined cost elements including provisions for drydock costs. The profit share is reported quarterly, but is calculated on an aggregated fleet level over a full calendar year. Accordingly, one may have individual quarters with positive profit share offset by quarters with negative profit share. Nonetheless, AMSC's portion of the profit can never be negative on an annual basis.
In years of weak markets there may be shortfalls in net time charter revenues applied to cover provisions for future drydocks. Such shortfalls need to be recovered by net time charter revenues in subsequent years with stronger markets. Similarly, if drydock provisions deducted in the profit share calculation are too high, these are adjusted through a true‐up mechanism once special surveys for individual vessels are completed. The concept of true‐ups ensure that any shortfall or excess in drydock provisions are adjusted to reflect the actual cost of drydocks over the five‐year special survey cycles.
AMSC's 50% share of the full year profit is used to reduce the OSG credit. In the agreement negotiated with OSG, the "OSG credit" is the amount of AMSC's profit sharing that OSG retains prior to having an obligation to remit profit sharing payments to AMSC. After the OSG credit has been fully reduced to zero, AMSC will receive its 50% share of the subsequent profit share in cash. The OSG credit balance was as of 31 December 2020 USD 7.1 million.
12. Deferred Principal Obligation (DPO)
Pursuant to the current charter agreements, OSG had the right to defer payment of a portion of the bareboat charter hire for the first five vessels during the initial seven year fixed bareboat charter periods. OSG paid a reduced bareboat charter rate and assumed the DPO. The DPO accrued on a daily basis to a maximum liability from OSG of USD 7.0 million per vessel. The DPO is repaid to AMSC over 18 years including interest unless the bareboat charter is terminated earlier at which time the DPO becomes due immediately. OSG has made repayments on all five vessels delivered under the arrangement, and those vessels' cash bareboat charter hire resumed to its full contractual amount.
| 9 months to | ||||
|---|---|---|---|---|
| Amounts in USD million | 30‐Sep‐21 | 30‐Sep‐20 | ||
| Balance at beginning of period | 23.3 | 25.3 | ||
| Repayments of principal | (1.4) | (1.5) | ||
| Balance at end of period | 21.9 | 23.8 |
13. Financial Instruments
The only financial instruments that the Company accounts for at fair value on an ongoing basis are the interest rate swaps, which are classified in the Level 2 category as is described in the 2020 consolidated financial statements. The Company's policy is to recognize transfers into and transfers out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer. During the quarter ended 30 September 2021, there were no transfers between categories.
The fair values of financial instruments, the related fair value hierarchy, together with the carrying amounts shown in the balance sheet are as follows:
| Carrying | Fair | Fair | |
|---|---|---|---|
| amount | value | value | |
| Amounts in USD millions | 30‐Jun‐21 | 30‐Jun‐21 | hierarchy * |
| Interest‐bearing receivables (DPO) | 21.9 | 18.5 | 3 |
| Interest swap used for economic hedging | (1.5) | (1.5) | 2 |
| Unsecured bond issue (gross) | (220.0) | (226.3) | 2 |
| Secured loans (gross) | (332.2) | (333.1) | 2 |
The fair value of cash, accounts receivable and accounts payable approximate the carrying values due to their short‐term nature.
* Described in the 2020 consolidated financial statements
14. Alternative Performance Measures
Alternative performance measures are financial measures other than the financial measures defined under IFRS. In accordance with guidelines, AMSC publishes the explanation of the use of alternative performance measures used by the Company, definitions of the performance measures used and reconciliation with the IFRS financial statement.
AMSC discloses Normalized EBITDA and Adjusted Net Profit in order to provide meaningful supplemental information to management and investors as the Company believes these measures enhance an understanding of the Company's operating earnings. The Company also discloses its revenue backlog which includes its bareboat charter revenue from fixed bareboat contracts, not including options.
Normalized EBITDA is calculated as operating revenues (base bareboat revenue) less operating expenses plus profit sharing plus DPO. Adjusted Net Profit includes net profit/(loss) after tax, adjusting for non‐recurring items, currency fluctuations, mark‐to‐market of derivatives and changes to deferred tax. The tables below illustrate the comparative information for normalized EBITDA and reconciliation to the reported EBITDA and Adjusted net profit and a reconciliation to net profit/(loss) after tax.
| unaudited | ||||
|---|---|---|---|---|
| Q3 Q3 Year to Date |
||||
| Normalized EBITDA (amounts in USD millions) | 2021 | 2020 | 2021 | 2020 |
| Base bareboat revenue | 22.3 | 22.2 | 65.9 | 66.0 |
| Less operating expenses | (0.8) | (0.7) | (3.4) | (2.1) |
| Reported EBITDA | 21.5 | 21.5 | 62.5 | 63.8 |
| Plus profit share | ‐ | ‐ | ‐ | ‐ |
| Plus DPO | 0.8 | 0.9 | 2.5 | 2.6 |
| Normalized EBITDA | 22.3 | 22.4 | 65.0 | 66.4 |
| unaudited | ||||
|---|---|---|---|---|
| Q3 | Q3 | Year to Date | ||
| Adjusted net profit (amounts in USD millions) | 2021 | 2020 | 2021 | 2020 |
| Net profit/loss after tax | 3.5 | (4.5) | 11.0 | (1.8) |
| Add back: | ||||
| Unrealized (gain)/loss on interest swaps | 0.2 | 0.5 | 0.3 | 0.8 |
| Net foreign exchange (gain)/loss | 0.4 | ‐ | 0.4 | ‐ |
| Non‐cash income tax expense | 0.9 | (2.3) | 3.0 | (2.4) |
| Loan refinancing: | ||||
| Interest swap termination payments | ‐ | ‐ | ‐ | 1.9 |
| Bond (premium) / call price | ‐ | 9.2 | (0.2) | 9.2 |
| Write‐off unamortized lending fees | ‐ | 1.7 | ‐ | 3.3 |
| Adjusted net profit | 5.0 | 4.6 | 14.5 | 11.0 |
15. American Tanker, Inc. consolidated financial statements
In accordance with the bond loan agreement, below are the consolidated unaudited financial statements for American Tanker, Inc. and its subsidiaries for the first nine months of 2021.
| CONDENSED INCOME STATEMENT | |
|---|---|
| unaudited | |
| YTD | |
| Amounts in USD million (except share and per share information) | 2021 |
| Operating revenues | 66.0 |
| Operating expenses | (3.0) |
| Operating profit before depreciation ‐ EBITDA | 63.0 |
| Depreciation | (25.4) |
| Operating profit ‐ EBIT | 37.6 |
| Net interest expense | (29.0) |
| Unrealized gain/(loss) on interest swaps | (0.3) |
| Other financial expenses | (1.5) |
| Profit/(loss) before income tax | 6.8 |
| Income tax expense | (0.1) |
| Non‐cash income tax benefit/(expense) | (1.4) |
| Net profit/(loss) for the period * | 5.3 |
| Average number of common shares | 1,000 |
| Earnings/(loss) per share (USD thousands) | 5.28 |
* Applicable to common stockholders of the parent company.
CONDENSED STATEMENT OF FINANCIAL POSITION
| unaudited | |
|---|---|
| 30‐Sep | |
| Amounts in USD million | 2021 |
| Assets | |
| Non‐current assets | |
| Vessels | 623.1 |
| Interest‐bearing long term receivables (DPO) | 21.9 |
| Total non‐current assets | 645.0 |
| Current assets | |
| Other current assets | 0.6 |
| Cash held for specified uses | 1.7 |
| Cash and cash equivalents | 52.2 |
| Total current assets | 54.5 |
| Total assets | 699.5 |
| Equity and liabilities | |
| Total equity | 49.9 |
| Non‐current liabilities | |
| Bond payable | 220.0 |
| Other interest‐bearing loans | 395.7 |
| Derivative financial liabilities | 1.5 |
| Capitalized fees | (7.4) |
| Deferred tax liability | 11.4 |
| Total non‐current liabilities | 621.2 |
| Current liabilities | |
| Interest‐bearing short‐term debt | 26.8 |
| Deferred revenues and other payables | 1.7 |
| Total current liabilities | 28.5 |
| Total liabilities | 649.6 |
| Total equity and liabilities | 699.5 |
CONDENSED CASH FLOW STATEMENT
| unaudited | |
|---|---|
| YTD | |
| Amounts in USD million | 2021 |
| Net cash flow from operating activities | 31.9 |
| Net cash flow used in financing activities | 0.0 |
| Net change in cash and cash equivalents | 31.8 |
| Cash and cash equivalents, including cash held for specified uses at the beginning of period | 22.0 |
| Cash and cash equivalents, including cash held for specified uses at end of period | 53.9 |
16. Subsequent events
On 18 November 2021, the Board authorized a dividend payment of USD 0.12 per share to the shareholders on record as of 26 November 2021. The shares in AMSC will be traded ex. dividend from and including 25 November 2021, and the dividend will be paid on or about 6 December 2021. The dividend is classified as a return of paid in capital.
American Shipping Company ASA Oksenøyveien 10 PO Box 230 1326 Lysaker NORWAY
| Pål Magnussen | Morten Bakke | Leigh Jaros |
|---|---|---|
| President / CEO | CFO | Controller |
| Tel: +47 24 13 00 04 | Tel: +47 24 13 00 87 | Cell: +1 484 880 3741 |
| Cell: +47 90 54 59 59 | Cell: +47 90 09 55 94 | |
| [email protected] | [email protected] | [email protected] |
Disclaimer
This release includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. Such forward-looking information and statements are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for American Shipping Company ASA and its subsidiaries and affiliates (the "American Shipping Company Group") lines of business. These expectations, estimates, and projections are generally identifiable by statements containing words such as "expects," "believes," "estimates" or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for the American Shipping Company Group's businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time. Although American Shipping Company ASA believes that its expectations and the information in this release were based upon reasonable assumptions at the time when they were made, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in this release. Neither American Shipping Company ASA nor any other company within the American Shipping Company Group is making any representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the information in the release, and neither American Shipping Company ASA, any other company within the American Shipping Company Group nor any of their directors, officers or employees will have any liability to you or any other persons resulting from your use of the information in the release.
American Shipping Company ASA undertakes no obligation to publicly update or revise any forward-looking information or statements in the release, other than what is required by law.
The American Shipping Company Group consists of many legally independent entities, constituting their own separate identities. American Shipping Company is used as the common brand or trade mark for most of these entities. In this release we may sometimes use "American Shipping Company"," "Group, "we," or "us," when we refer to American Shipping Company Group companies in general or where no useful purpose is served by identifying any particular company of American Shipping Company.