Ardmore Shipping Corp 6-K, filed May 4, 2022
Ardmore Shipping Corp (ASC)
About this 6-K
Ardmore Shipping Corp filed this 6-K on May 4, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For three months ended
Commission file number 001-36028
(Exact name of Registrant as specified in its charter)
Belvedere Building,
Ground Floor,
69 Pitts Bay Road,
Pembroke,
HM08,
Bermuda
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ⌧ Form 40- F ◻
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1).
Yes ◻ No ⌧
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7).
Yes ◻ No ⌧
INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Attached to this Report on Form 6-K are (1) Management’s Discussion and Analysis of Financial Condition and Results of Operations and (2) the unaudited interim condensed consolidated financial statements and related notes of Ardmore Shipping Corporation (the “Company”), as at March 31, 2022 and for the three months ended March 31, 2022 and 2021.
This Report is hereby incorporated by reference into the following registration statements of the Company:
| ● | Registration Statement on Form F-3D (Registration No. 333-203205) filed with the U.S. Securities and Exchange Commission on April 2, 2015; |
| ● | Registration Statement on Form S-8 (Registration No. 333-213344) filed with the U.S. Securities and Exchange Commission on August 26, 2016; |
| ● | Registration Statement on Form F-3 (Registration No. 333-233540) filed with the U.S. Securities and Exchange Commission on August 30, 2019; and |
| ● | Registration Statement on Form F-3 (Registration No. 333-258974) filed with the U.S. Securities and Exchange Commission on August 20, 2021. |
FORWARD-LOOKING STATEMENTS
Matters discussed in this report may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words “believe”, “anticipate”, “intend”, “estimate”, “forecast”, “plan”, “potential”, “should”, “may”, “will”, “expect” and similar expressions are among those that identify forward-looking statements.
Forward-looking statements in this report include, among others, statements regarding: future operating results; the employment of the Company’s vessels; the outcome of the Company’s strategies and implementation of the Company’s Energy Transition Plan; the effect of the COVID-19 pandemic and Russia’s invasion of Ukraine on, among others, oil demand, the Company’s business, financial condition and results of operations including liquidity; the sale and purchase of certain vessels; future drydocking days; sufficiency of liquidity and capital resources; the Company’s joint venture and investment involving Element 1 Corp. and/or Maritime Partners, LLC. The forward-looking statements in this report are based upon various assumptions, including, among others, the Company’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. Although the Company believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond the Company’s control, the Company cannot assure you that it will achieve or accomplish these expectations, beliefs or projections.
In addition to these important factors, other important factors that, in the Company’s view, could cause actual results to differ materially from those discussed in the forward-looking statements include: general market conditions, including fluctuations in charter rates and vessel values; changes in demand for and the supply of tanker vessel capacity; changes in the Company’s operating expenses, including bunker prices, drydocking and insurance costs; changes in the projections of spot and time charter or pool trading of the Company’s vessels; fluctuations in oil prices; the market for the Company’s vessels; competition in the tanker industry; availability of financing and refinancing; charter counterparty performance; ability to obtain financing and comply with covenants in the Company’s financing arrangements; the strength of world economies and currencies; changes in governmental rules and regulations or actions taken by regulatory authorities; new or revised accounting pronouncements; general domestic and international political conditions; potential disruption of shipping routes due to accidents, piracy or political events; vessel breakdowns and instances of off-hires; the Company’s financial condition and liquidity; the duration and scope of the COVID-19 pandemic; the effect of the conflict between Russia and Ukraine on, among others, oil demand, the Company’s business, financial condition and results of operations including liquidity; actual performance of Element 1 Corp’s technology and systems, particularly in the marine environment; the level and timing of adoption of the technology by participants in the marine industry; and other factors. Please see the Company’s filings with the U.S. Securities and Exchange Commission, including the Company’s Form 20-F for the year ended December 31, 2021, for a more complete discussion of these and other risks and uncertainties. The Company cautions readers of this report not to place undue reliance on these forward-looking statements, which speak only as of their dates. The Company undertakes no obligation to update or revise any forward-looking statements. These forward-looking statements are not guarantees of the Company’s future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ARDMORE SHIPPING CORPORATION | |
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Date: May 4, 2022 | By: | /s/ Paul Tivnan |
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| Paul Tivnan |
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| Chief Financial Officer, Treasurer and Secretary |
ARDMORE SHIPPING CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited interim condensed consolidated financial statements and accompanying notes contained in this Report on Form 6-K and with our audited consolidated financial statements contained in “Item 18. Financial Statements” and “Item 5. Operating and Financial Review and Prospects” of our Annual Report on Form 20-F for the year ended December 31, 2021. The unaudited interim condensed consolidated financial statements included in this report have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements (“U.S. GAAP”) and are presented in U.S. dollars as at March 31, 2022 and for the three months ended March 31, 2022 and 2021. Unless the context otherwise requires, the terms “Ardmore,” the “Company”, “we,” “our” and “us” refer to Ardmore Shipping Corporation (NYSE: ASC) and its consolidated subsidiaries.
GENERAL
Ardmore owns and operates a fleet of Medium Range (“MR”) product and chemical tankers ranging from 25,000 to 50,000 deadweight tonnes (“Dwt”). We provide seaborne transportation of petroleum products and chemicals worldwide to oil majors, national oil companies, oil and chemical traders, and chemical companies, with our modern, fuel-efficient fleet of mid-size tankers. As at March 31, 2022, we had in operation 27 vessels (including two chartered-in vessels), including 21 MR tankers ranging from 45,000 Dwt to 49,999 Dwt (15 Eco-Design and six Eco-Mod) and six Eco-Design IMO 2 product / chemical tankers ranging from 25,000 Dwt to 37,800 Dwt. Since March 1, 2021, we are commercially managing three of Carl Büttner's 24,000 Dwt chemical tankers.
We are strategically focused on modern, fuel-efficient, mid-size product and chemical tankers. We actively pursue opportunities to exploit the overlap we believe exists between the clean petroleum product (“CPP”) and chemical sectors in order to enhance earnings, and also seek to engage in more complex CPP trades, such as multi-grade and multi-port loading and discharging operations, where our knowledge of chemical operations is beneficial to our CPP customers.
Our fuel-efficient operations are designed to enhance our operating performance and provide value-added service to our customers. We believe we are at the forefront of fuel efficiency and emissions reduction trends and are well positioned to capitalize on these developments with our fleet of Eco-design and Eco-mod vessels. Our acquisition strategy includes to continue to build our fleet with Eco-design newbuilds or Eco-design second-hand vessels and with modern second-hand vessels that can be upgraded to Eco-mod.
We believe that the global energy transition will have a profound impact on the shipping industry, including the product and chemical tanker segments. While this transition will unfold over years, the impact is already being felt through anticipated Energy Efficiency Existing Ship Index and Carbon Intensity Indicator regulations and constraints on newbuilding ordering activity. We view energy transition as less of a compliance challenge and more of an opportunity, which we have set out in our Energy Transition Plan (“ETP”), which is posted on our website. We have established Ardmore Ventures as our holding company for existing and future potential investments related to the ETP and we completed our first projects under the plan in June 2021.
We are an integrated shipping company. The majority of our fleet is technically managed by a combination of Ardmore Shipping Services (Ireland) Limited and Anglo Ardmore Ship Management Limited, a joint venture entity that is 50% owned by us, and we also retain a third-party technical manager for some of our vessels. We have a resolute focus on both high-quality service and efficient operations, and we believe that our corporate overhead and operating expenses are among the lowest of our peers.
1
We are commercially independent, as we have no blanket employment arrangements with third-party or related-party commercial managers. Through our in-house chartering and commercial team, we market our services directly to a broad range of customers, including oil majors, national oil companies, oil and chemical traders, chemical companies, and pooling service providers. We monitor the tanker markets to understand how to best utilize our vessels and may change our chartering strategy to take advantage of changing market conditions.
As of March 31, 2022, our fleet consisted of the following 25 owned vessels:
Vessel Name |
| Type |
| Dwt Tonnes |
| IMO |
| Built |
| Country |
| Flag |
| Specification |
Ardmore Seavaliant |
| Product/Chemical |
| 49,998 |
| 2/3 |
| Feb-13 |
| Korea |
| MI |
| Eco-design |
Ardmore Seaventure |
| Product/Chemical |
| 49,998 |
| 2/3 |
| Jun-13 |
| Korea |
| MI |
| Eco-design |
Ardmore Seavantage |
| Product/Chemical |
| 49,997 |
| 2/3 |
| Jan-14 |
| Korea |
| MI |
| Eco-design |
Ardmore Seavanguard |
| Product/Chemical |
| 49,998 |
| 2/3 |
| Feb-14 |
| Korea |
| MI |
| Eco-design |
Ardmore Sealion |
| Product/Chemical |
| 49,999 |
| 2/3 |
| May-15 |
| Korea |
| MI |
| Eco-design |
Ardmore Seafox |
| Product/Chemical |
| 49,999 |
| 2/3 |
| Jun-15 |
| Korea |
| MI |
| Eco-design |
Ardmore Seawolf |
| Product/Chemical |
| 49,999 |
| 2/3 |
| Aug-15 |
| Korea |
| MI |
| Eco-design |
Ardmore Seahawk |
| Product/Chemical |
| 49,999 |
| 2/3 |
| Nov-15 |
| Korea |
| MI |
| Eco-design |
Ardmore Endeavour |
| Product/Chemical |
| 49,997 |
| 2/3 |
| Jul-13 |
| Korea |
| MI |
| Eco-design |
Ardmore Enterprise |
| Product/Chemical |
| 49,453 |
| 2/3 |
| Sep-13 |
| Korea |
| MI |
| Eco-design |
Ardmore Endurance |
| Product/Chemical |
| 49,466 |
| 2/3 |
| Dec-13 |
| Korea |
| MI |
| Eco-design |
Ardmore Encounter |
| Product/Chemical |
| 49,478 |
| 2/3 |
| Jan-14 |
| Korea |
| MI |
| Eco-design |
Ardmore Explorer |
| Product/Chemical |
| 49,494 |
| 2/3 |
| Jan-14 |
| Korea |
| MI |
| Eco-design |
Ardmore Exporter |
| Product/Chemical |
| 49,466 |
| 2/3 |
| Feb-14 |
| Korea |
| MI |
| Eco-design |
Ardmore Engineer |
| Product/Chemical |
| 49,420 |
| 2/3 |
| Mar-14 |
| Korea |
| MI |
| Eco-design |
Ardmore Sealancer |
| Product |
| 47,451 |
| — |
| Jun-08 |
| Japan |
| MI |
| Eco-mod |
Ardmore Sealeader |
| Product |
| 47,463 |
| — |
| Aug-08 |
| Japan |
| MI |
| Eco-mod |
Ardmore Sealifter |
| Product |
| 47,472 |
| — |
| Jun-08 |
| Japan |
| MI |
| Eco-mod |
Ardmore Seafarer | | Product | | 49,999 | | — | | Jun-10 |
| Japan |
| SG |
| Eco-mod |
Ardmore Dauntless |
| Product/Chemical |
| 37,764 |
| 2 |
| Feb-15 |
| Japan |
| MI |
| Eco-design |
Ardmore Defender |
| Product/Chemical |
| 37,791 |
| 2 |
| Feb-15 |
| Japan |
| MI |
| Eco-design |
Ardmore Cherokee |
| Product/Chemical |
| 25,215 |
| 2 |
| Jan-15 |
| Japan |
| MI |
| Eco-design |
Ardmore Cheyenne |
| Product/Chemical |
| 25,217 |
| 2 |
| Mar-15 |
| Japan |
| MI |
| Eco-design |
Ardmore Chinook |
| Product/Chemical |
| 25,217 |
| 2 |
| Jul-15 |
| Japan |
| MI |
| Eco-design |
Ardmore Chippewa |
| Product/Chemical |
| 25,217 |
| 2 |
| Nov-15 |
| Japan |
| MI |
| Eco-design |
Total |
| 25 |
| 1,115,567 |
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SIGNIFICANT DEVELOPMENTS
Sale of Vessels
In March 2022, Ardmore agreed to the sale of the Ardmore Sealeader, Ardmore Sealifter and Ardmore Sealancer for an aggregate price of $40 million. Effective March 28, 2022, the three vessels were classified as held for sale.
Conflict in Ukraine
Russia’s invasion of Ukraine in February 2022 has disrupted supply chains and caused instability and significant volatility in the global economy. Much uncertainty remains regarding the global impact of the conflict in Ukraine, and it is possible that such instability, uncertainty and resulting volatility could significantly increase our costs and adversely affect our business, including our ability to secure charters and financing on attractive terms.
2
As a result of Russia’s invasion of Ukraine, the United States, several European Union nations, the United Kingdom and other countries have announced unprecedented sanctions and other measures against Russia, Belarus and certain Russian and Belarussian entities and nationals. The sanctions announced by the U.S. and other countries against Russia and, in some instances, Belarus include, among others, restrictions on selling or importing goods, services or technology in or from affected regions, travel bans and asset freezes impacting connected individuals and political, military, business and financial organizations in Russia, severing large Russian banks from U.S. and/or other financial systems, and barring some Russian enterprises from raising money in the U.S. market. On March 8, 2022, the U.S. announced a ban on the import of certain Russian energy products into the U.S., including crude oil, petroleum, petroleum fuels, oils, liquefied natural gas and coal. The U.S., EU nations and other countries could impose wider sanctions and take other actions should the conflict further escalate. While it is difficult to anticipate the impact the sanctions announced to date may have on our business and us, these and any further sanctions imposed or actions taken by the U.S., EU nations or other countries, and any retaliatory measures by Russia in response, could lead to increased volatility in global oil demand which, could have a material impact on our business, results of operations and financial condition. In addition, it is possible that third parties with which we do business may be impacted by events in Russia and Ukraine, which could adversely affect us.
COVID-19
In response to the COVID-19 pandemic, many countries, ports and organizations, including those where Ardmore conducts a large part of its operations, have implemented measures to combat the outbreak, such as quarantines and travel restrictions. Such measures have caused severe trade disruptions. In addition, the pandemic initially resulted and may again result in a significant decline in global demand for refined oil products.
As Ardmore’s business is the transportation of refined oil products on behalf of oil majors, oil traders and other customers, any significant decrease in demand for the cargo Ardmore transports has and could continue to adversely affect demand for its vessels and services. The extent to which the pandemic may impact Ardmore’s results of operations and financial condition, including possible impairments, will depend on future developments, which are highly uncertain and cannot be predicted, including, among others, new information which may emerge concerning the virus and its variants and the level of the effectiveness and administration of vaccines and other actions to contain or treat its impact. Accordingly, an estimate of the impact of the COVID-19 pandemic on Ardmore cannot be made at this time.
3
RESULTS OF OPERATIONS
Factors You Should Consider When Evaluating Our Results
There are a number of factors that should be considered when evaluating our historical financial performance and assessing our future prospects and we use a variety of financial and operational terms and concepts when analyzing our results of operations. Please read “Item 5. Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2021 for additional information.
In accordance with U.S. GAAP, we report gross revenues in our condensed statements of operations and report voyage expenses separately. Ship-owners base economic decisions regarding the deployment of their vessels upon actual and anticipated time charter equivalent, or TCE rates (which represent net revenues divided by revenue days) and industry analysts typically measure rates in terms of TCE rates. This is because under time charters the customer typically pays the voyage expenses, while under voyage charters, also known as spot market charters, the shipowner usually pays the voyage expenses. Accordingly, the discussion of revenue below focuses on TCE rates where applicable. Net revenues, a non-U.S. GAAP financial measure, represents revenues less voyage expenses. Voyage expenses are all expenses related to a particular voyage, which include, among other things, bunkers and port/canal costs. Net revenue utilized to calculate TCE is determined on a discharge to discharge basis, which is different from how we record revenue under U.S. GAAP. Under discharge to discharge, revenue is recognized beginning from the discharge of cargo from the prior voyage to the anticipated discharge of cargo in the current voyage, and voyage expenses are recognized as incurred.
Statement of Operations for the three months ended March 31, 2022 and March 31, 2021
The following table presents our operating results for the three months ended March 31, 2022 and March 31, 2021.
| | Three months ended | |
| | | | ||||
In thousands of U.S. Dollars |
| March 31, 2022 |
| March 31, 2021 |
| Variance |
| Variance (%) | |||
Revenue, net | | $ | 63,368 | | | 45,551 | | | 17,817 | | 39% |
| | | | | | | | | | | |
Voyage expenses | |
| (27,076) | | | (20,392) | | | (6,684) | | (33%) |
Vessel operating expenses | |
| (16,587) | | | (14,503) | | | (2,084) | | (14%) |
Charter hire costs | | | (2,122) | | | (1,204) | | | (918) | | (76%) |
Depreciation | |
| (7,790) | | | (7,809) | | | 19 | | 0% |
Amortization of deferred drydock expenditures | |
| (1,197) | | | (1,483) | | | 286 | | 19% |
General and administrative expenses | |
| | | | | | | | | |
Corporate | |
| (4,468) | | | (4,177) | | | (291) | | (7%) |
Commercial and chartering | |
| (891) | | | (760) | | | (131) | | (17%) |
Unrealized gains on derivatives | | | 604 | | | 102 | | | 502 | | 492% |
Loss on vessels held for sale | |
| (6,917) | | | — | | | (6,917) | | 100% |
Interest expense and finance costs | |
| (4,138) | | | (3,776) | | | (362) | | (10%) |
Interest income | |
| 10 | | | 13 | | | (3) | | (23%) |
Loss before taxes | |
| (7,204) | | | (8,438) | | | 1,234 | | 15% |
Income tax | |
| (34) | | | (58) | | | 24 | | 41% |
Profit from equity method investments | | | 236 | | | — | | | 236 | | (100%) |
Net loss | | $ | (7,002) | | | (8,496) | | | 1,494 | | 18% |
Preferred dividend | | | (848) | | | — | | | (848) | | (100%) |
Net loss attributable to common stockholders | | $ | (7,850) | | | (8,496) | | | 646 | | 8% |
Revenue. Revenue for the three months ended March 31, 2022, was $63.4 million, an increase of $17.8 million from $45.6 million for the three months ended March 31, 2021.
Our average number of operating vessels increased to 27 for the three months ended March 31, 2022, from 26 for the three months ended March 31, 2021.
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We had one product tanker employed under time charter as at March 31, 2022 as compared with four as at March 31, 2021. Revenue days derived from time charters were 262 for the three months ended March 31, 2022, as compared to 169 for the three months ended March 31, 2021. The increase in revenue days for time-chartered vessels resulted in an increase in revenue of $1.7 million.
We had 2,126 spot revenue days for the three months ended March 31, 2022, as compared to 2,096 for the three months ended March 31, 2021. We had 26 and 22 vessels employed directly in the spot market as at March 31, 2022 and 2021, respectively. The increase in spot revenue days resulted in an increase in revenue of $0.6 million, while changes in spot rates resulted in an increase in revenue of $15.5 million for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021. The Company managed three third party chemical tankers employed under spot as at March 31, 2022, compared with four as at March 31, 2021. This resulted in an increase in revenue of $0.1 million.
Voyage Expenses. Voyage expenses were $27.1 million for the three months ended March 31, 2022, an increase of $6.7 million from $20.4 million for the three months ended March 31, 2021. Voyage expenses increased primarily due to the increase in bunker prices resulting in an increase of $6.5 million and an increase in spot revenue days of $0.2 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.
TCE Rate. The average TCE rate for our fleet was $15,155 per day for the three months ended March 31, 2022, an increase of $3,806 per day from $11,349 per day for the three months ended March 31, 2021. The increase in average TCE rate was the result of higher spot rates for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021. TCE rates represent net revenues (or revenue less voyage expenses) divided by revenue days, as further defined above.
Vessel Operating Expenses. Vessel operating expenses were $16.6 million for the three months ended March 31, 2022, an increase of $2.1 million from $14.5 million for the three months ended March 31, 2021. This increase is due to the timing of vessel operating expenses between quarters. Vessel operating expenses, by their nature, are prone to fluctuations between periods. Average fleet operating expenses per day, including technical management fees, were $6,921 per vessel for the three months ended March 31, 2022, as compared to $6,340 per vessel for the three months ended March 31, 2021. The timing of crew changes as a result of COVID-19 related delays in 2021 was a contributing factor in the difference for the three months ended March 31, 2022 when compared with March 31, 2021.
Charter Hire Costs. Charter hire costs were $2.1 million for the three months ended March 31, 2022, an increase of $0.9 million from $1.2 million from the three months ended March 31, 2021. We currently have two vessels chartered-in for the three months ended March 31, 2022 as compared to one vessel for the three months ended March 31, 2021.
Depreciation. Depreciation expense for the three months ended March 31, 2022, was $7.8 million, consistent with $7.8 million for the three months ended March 31, 2021.
Amortization of Deferred Drydock Expenditures. Amortization of deferred drydock expenditures for the three months ended March 31, 2022 was $1.2 million, a decrease of $0.3 million from $1.5 million for the three months ended March 31, 2021. The deferred costs of drydockings for a given vessel are amortized on a straight-line basis to the next scheduled drydocking of the vessel.
General and Administrative Expenses: Corporate. Corporate-related general and administrative expenses for the three months ended March 31, 2022 were $4.5 million, an increase of $0.3 million from $4.2 million for the three months ended March 31, 2021.
General and Administrative Expenses: Commercial and Chartering. Commercial and chartering expenses are the expenses attributable to our chartering and commercial operations departments in connection with our spot trading activities. Commercial and chartering expenses for the three months ended March 31, 2022 were $0.9 million, an increase of $0.1 million from $0.8 million for the three months ended March 31, 2021.
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Interest Expense and Finance Costs. Interest expense and finance costs include loan interest, finance lease interest, and amortization of deferred finance fees. Interest expense and finance costs for the three months ended March 31, 2022 were $4.1 million, an increase of $0.3 million from $3.8 million for the three months ended March 31, 2021. Cash interest expense increased by $0.4 million to $3.7 million for the three months ended March 31, 2022, from $3.3 million for the three months ended March 31, 2021, primarily due to increased average LIBOR during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. Amortization of deferred finance fees for the three months ended March 31, 2022 was $0.4 million, consistent with $0.4 million for the three months ended March 31, 2021.
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LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are cash and cash equivalents, cash flows provided by our operations, our undrawn credit facilities and capital raised through debt and equity financing transactions. As at March 31, 2022, we had $53.2 million in liquidity available with cash and cash equivalents of $53.2 million (December 31, 2021: $55.4 million) and amounts available and undrawn under our revolving credit facilities of $Nil (December 31, 2021: $11.6 million). We believe that our working capital, together with expected cash flows from operations, will be sufficient for our present requirements.
Our short-term liquidity requirements include the payment of operating expenses (including voyage expenses and bunkers from spot chartering our vessels), drydocking expenditures, debt servicing costs, lease payments, quarterly preferred stock dividends, interest rate swap settlements, any dividends on our shares of common stock, scheduled repayments of long-term debt, as well as funding our other working capital requirements. Our short-term and spot charters contribute to the volatility of our net operating cash flow, and thus our ability to generate sufficient cash flows to meet our short-term liquidity needs. Historically, the tanker industry has been cyclical, experiencing volatility in profitability and asset values resulting from changes in the supply of, and demand for, vessel capacity. In addition, tanker spot markets historically have exhibited seasonal variations in charter rates. Tanker spot markets are typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere and unpredictable weather patterns that tend to disrupt vessel scheduling. Time charters provide contracted revenue that may reduce the volatility (as rates can fluctuate within months) and seasonality from revenue generated by vessels that operate in the spot market. Spot charters preserve flexibility to take advantage of increasing rate environments, but also expose the ship-owner to decreasing rate environments. Variability in our net operating cash flow also reflects changes in interest rates, fluctuations in working capital balances, the timing and the amount of drydocking expenditures, repairs and maintenance activities and the average number of vessels in service. The number of vessel dry dockings tends to vary each period depending on the vessel's maintenance schedule and required maintenance.
Our long-term capital needs are primarily for capital expenditures and debt repayment and finance lease payments. Generally, we expect that our long-term sources of funds will be cash balances, long-term bank borrowings, finance leases and other debt or equity financings. We expect that we will rely upon internal and external financing sources, including, cash balances, bank borrowings, lease financings and the issuance of debt and equity securities, to fund vessel acquisitions or newbuildings and expansion capital expenditures.
Our credit facilities and finance leases are described in Notes 3 (“Debt”) and 4 (“Leases”), respectively, to our interim condensed consolidated financial statements included in this Report on Form 6-K. Our financing facilities contain covenants and other restrictions we believe are typical of debt financing collateralized by vessels, including those that restrict the relevant subsidiaries from incurring or guaranteeing additional indebtedness, granting certain liens, and selling, transferring, assigning or conveying assets. The majority of our financing facilities do not impose a restriction on dividends, distributions, or returns of capital unless an event of default has occurred, is continuing or will result from such payment. Our financing facilities require us to maintain various financial covenants. Should we not meet these financial covenants or other covenants, the lenders may declare our obligations under the applicable agreements immediately due and payable, and terminate any further loan commitments, which would significantly affect our short-term liquidity requirements. As at March 31, 2022, we were in compliance with all covenants relating to our financing facilities.
CASH FLOW DATA
Cash Flow Data for the three months ended March 31, 2022 and March 31, 2021
|
| Three months ended | ||||
CASH FLOW DATA | | March 31, 2022 |
| March 31, 2021 | ||
Net cash (used in) operating activities | | $ | (5,341) | | | (1,112) |
Net cash (used in) / provided by investing activities | | $ | (611) | | | 9,298 |
Net cash provided by / (used in) financing activities | | $ | 3,750 | | | (16,355) |
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Cash (used in) / provided by operating activities
For the three months ended March 31, 2022, net cash used in operating activities was $5.3 million. Net loss adjusted for non-cash items resulted in an inflow of $9.3 million. Changes in operating assets and liabilities resulted in an outflow of $14.1 million and drydock payments were $0.5 million. For the three months ended March 31, 2021, net cash used in operating activities was $1.1 million. Net loss adjusted for non-cash items resulted in an inflow of $1.6 million. Changes in operating assets and liabilities resulted in an outflow of $Nil and drydock payments were $2.7 million.
Cash (used in) / provided by investing activities
For the three months ended March 31, 2022, net cash used in investing activities was $0.6 million, which included advances for ballast water treatment systems (“BWTS”) of $0.2 million. Payments in relation to other non-current assets, the acquisition of vessels and vessel equipment, and equity investments were $0.4 million. For the three months ended March 31, 2021, net cash provided by investing activities was $9.3 million, with proceeds from the sale of the Ardmore Seamariner in January 2021 of $9.9 million offset by payments made for the acquisition of other vessel equipment were $0.6 million. For the three months ended March 31, 2021, there were no payments in relation to BWTS, leasehold improvements and other non-current assets.
Cash provided by / (used in) financing activities
For the three months ended March 31, 2022, the net cash provided by financing activities was $3.7 million. Proceeds of debt amounted to $9.8 million and total principal repayments of finance lease arrangements were $5.3 million. Dividend payments on our Series A Redeemable Preferred Stock amounted to $0.7 million. For the three months ended March 31, 2021, the net cash used in financing activities was $16.4 million. Proceeds from debt were $Nil million. Repayments of debt amounted to $11.7 million and total principal repayments of finance lease arrangements were $4.7 million. Payments of cash dividends were $Nil.
CAPITAL EXPENDITURES
Drydock
The drydocking schedule for our vessels that were in operation as of March 31, 2022 is as follows:
|
| For the Years Ending December 31, | ||||||
|
| 2022 |
| 2023 |
| 2024 |
| 2025 |
Number of vessels in drydock (excluding in-water surveys) | | 2 | | 6 | | 3 | | 13 |
We endeavor to manage the timing of future dockings across the fleet in order to minimize the number of vessels that are drydocked at any one time. As our fleet matures, our drydock expenses are likely to increase.
Ballast Water Treatment Systems Installation
The BWTS installation schedule for our vessels that were in operation as of March 31, 2022 is as follows:
|
| For the Years Ending December 31, | ||||||
|
| 2022 |
| 2023 |
| 2024 |
| 2025 |
Number of ballast water treatment system installations | | 2 | | 6 | | 2 | | — |
We endeavor to manage the timing of future ballast water treatment system installations across the fleet in order to minimize the number of vessels that are completing ballast water treatment system installations at any one time.
8
CRITICAL ACCOUNTING ESTIMATES
We prepare our financial statements in accordance with U.S. GAAP, which require us to make estimates in the application of our accounting policies based on our best assumptions, judgments and opinions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ materially from our assumptions and estimates. Accounting estimates and assumptions that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties are discussed in “Item 5. Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2021. There have been no significant changes to these estimates and assumptions in the three months ended March 31, 2022.
DISCLOSURES ABOUT MARKET RISK
In addition to the risks set forth below, you should carefully consider the risk factors discussed in “Item 3. Key Information – D. Risk Factors” in our Annual Report on Form 20-F for the year ended December 31, 2021, regarding risks which could materially affect our business, financial condition and results of operations.
Operational Risk
We are exposed to operating costs arising from various vessel operations. Key areas of operating risk include drydock, repair costs, insurance, piracy and fuel prices. Our risk management includes various strategies for technical management of drydock and repairs coordinated with a focus on measuring cost and quality. Our relatively young fleet helps to minimize the risk. Given the potential for accidents and other incidents that may occur in vessel operations, the fleet is insured against various types of risk. We have established a set of countermeasures in order to minimize the risk of piracy attacks during voyages, particularly through regions which the Joint War Committee or our insurers consider high risk, or which they recommend monitoring, to make the navigation safer for sea staff and to protect our assets. The price and supply of fuel is unpredictable and can fluctuate from time to time. We periodically consider and monitor the need for fuel hedging to manage this risk. We are also subject to operational risks relating to COVID-19 as described in the “Significant Developments” section of this report.
Foreign Exchange Risk
The majority of our transactions, assets and liabilities are denominated in U.S. Dollars, our functional currency. We incur certain general and operating expenses in other currencies (primarily the Euro, Singapore Dollar, and Pounds Sterling) and, as a result, there is a risk that currency fluctuations may have a negative effect on the value of our cash flows. Such risk may also have an adverse effect on our financial condition and results of operations. We believe these adverse effects to be immaterial and we have not entered into any derivative contracts to manage foreign exchange risk during the three months ended March 31, 2022.
Interest Rate Risk
We are exposed to the impact of interest rate changes, primarily through borrowings that require us to make interest payments based on LIBOR. Significant increases in interest rates could adversely affect our results of operations and our ability to repay debt. We regularly monitor interest rate exposure and enter into swap arrangements to hedge exposure where it is considered economically advantageous to do so.
We are exposed to the risk of credit loss in the event of non-performance by the counterparties to the interest rate swap agreements. In order to minimize counterparty risk, we have only entered into derivative transactions with investment grade counterparties at the time of the transactions. In addition, to the extent possible and practical, interest rate swaps are entered into with different counterparties to reduce concentration risk.
9
During the three months ended June 30, 2020, we entered into floating-to-fixed interest rate swap agreements over a three-year term with multiple counterparties. In accordance with these transactions, we will pay an average fixed-rate interest amount of 0.32% and will receive floating rate interest amounts based on LIBOR. These interest rate swaps have a total notional amount of $252.1 million of which $210.2 million are designated as cash flow hedges.
LIBOR is scheduled to be phased out and alternative reference rates for interest rates may be adopted, which could affect our interest rate risk. For additional information, please see the risk factor entitled “There is uncertainty as to the continued use of LIBOR in the future, and the interest rates on our LIBOR-based obligations may increase in the future” Item 3.D (Key Information--Risk Factors) in our Annual Report on Form 20-F for the year ended December 31, 2021.
Liquidity Risk
Our principal objective in relation to liquidity is to ensure that we have access at minimum cost to sufficient liquidity to enable us to meet our obligations as they come due and to provide adequately for contingencies. Our policy is to manage our liquidity by forecasting of cash flows arising from or expense relating to spot voyage revenue, time charter revenue, pool revenue, vessel operating expenses, general and administrative overhead and servicing of debt.
Credit Risk
There is a concentration of credit risk with respect to our cash and cash equivalents to the extent that substantially all of the amounts are held in ABN Bank and Nordea Bank, and in short-term funds (with a credit risk rating of at least AA) managed by Blackrock State Street Global Advisors and JPMorgan Asset Management. While we believe this risk of loss is low, we intend to review and revise our policy for managing cash and cash equivalents if considered prudent to do so.
We limit our credit risk with trade accounts receivable by performing ongoing credit evaluations of our customers’ financial condition. We generally do not require collateral for our trade accounts receivable.
We may be exposed to a credit risk in relation to vessel employment and at times may have multiple vessels employed by one charterer. We consider and evaluate concentration of credit risk regularly and perform on-going evaluations of these charterers for credit risk, including credit concentration risk. As at March 31, 2022, our 27 vessels in operation (including two chartered-in vessels) were employed with 25 different charterers.
Inflation
We do not expect inflation to be a significant risk to direct expenses in the current and foreseeable economic environment. However, in the event inflation becomes a significant factor in the global economy, inflationary pressures would result in increased operating, voyage and financing costs.
10
Ardmore Shipping Corporation
INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
| Page |
Unaudited Interim Condensed Consolidated Balance Sheets as at March 31, 2022 and December 31, 2021 | F-2 | |
F-3 | ||
F-4 | ||
F-5 | ||
F-6 | ||
Notes to the Unaudited Interim Condensed Consolidated Financial Statements | F-7 |
F-1
Ardmore Shipping Corporation
Unaudited Interim Condensed Consolidated Balance Sheets
As at March 31, 2022 and December 31, 2021
|
| As at | ||
In thousands of U.S. Dollars, except as indicated |
| March 31, 2022 |
| December 31, 2021 |
ASSETS |
|
|
|
|
Current assets | |
|
|
|
Cash and cash equivalents | | |
| |
Receivables, net of allowance for bad debts of $ | | |
| |
Prepaid expenses and other assets | | |
| |
Advances and deposits | | |
| |
Inventories | | |
| |
Current portion of derivative assets | | | | |
Vessel held for sale | | |
| |
Total current assets | | |
| |
| | |
| |
Non-current assets | | |
| |
Investments and other assets, net | | | | |
Vessels and vessel equipment, net | | |
| |
Deferred drydock expenditures, net | | |
| |
Advances for ballast water treatment systems | | |
| |
Amount receivable in respect of finance leases | | |
| |
Non-current portion of derivative assets | | | | |
Operating lease, right-of-use asset | | |
| |
Total non-current assets | | |
| |
| | |
| |
TOTAL ASSETS | | |
| |
| | |
| |
LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY | | |
| |
Current liabilities | | |
| |
Accounts payable | | |
| |
Accrued expenses and other liabilities | | |
| |
Deferred revenue | | |
| |
Accrued interest on debt and finance leases | | |
| |
Current portion of long-term debt | | |
| |
Current portion of finance lease obligations | | |
| |
Current portion of operating lease obligations | | |
| |
Total current liabilities | | |
| |
| | |
| |
Non-current liabilities | | |
| |
Non-current portion of long-term debt | | |
| |
Non-current portion of finance lease obligations | | |
| |
Non-current portion of operating lease obligations | | |
| |
Other non-current liabilities | | | | |
Total non-current liabilities | | |
| |
| | | | |
TOTAL LIABILITIES | | | | |
| | | | |
Redeemable Preferred Stock | | | | |
Cumulative Series A 8.5% redeemable preferred stock | | |
| |
Total redeemable preferred stock | | | | |
| | | | |
Stockholders' equity | | |
| |
Common stock | | |
| |
Additional paid in capital | | |
| |
Accumulated other comprehensive income | | |
| |
Treasury stock | | ( |
| ( |
Accumulated deficit | | ( |
| ( |
Total stockholders' equity | | |
| |
| | | | |
Total redeemable preferred stock and stockholders’ equity | | | | |
| | |
| |
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY | | |
| |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
F-2
Ardmore Shipping Corporation
Unaudited Interim Condensed Consolidated Statements of Operations
For the three months ended March 31, 2022 and March 31, 2021
|
| Three months ended | ||
In thousands of U.S. Dollars except share data |
| March 31, 2022 |
| March 31, 2021 |
Revenue, net |
| |
| |
|
| |
| |
Voyage expenses |
| ( |
| ( |
Vessel operating expenses |
| ( |
| ( |
Charter hire costs |
| ( |
| ( |
Depreciation |
| ( |
| ( |
Amortization of deferred drydock expenditures |
| ( |
| ( |
General and administrative expenses | | | | |
Corporate |
| ( |
| ( |
Commercial and chartering |
| ( |
| ( |
Loss on vessels held for sale | | ( |
| |
Unrealized gains on derivatives | | |
| |
Interest expense and finance costs |
| ( |
| ( |
Interest income |
| |
| |
|
| |
| |
(Loss) before taxes |
| ( |
| ( |
|
| |
| |
Income tax |
| ( |
| ( |
Profit from equity method investments |
| |
| |
| | | | |
Net (loss) |
| ( |
| ( |
| | | | |
Preferred dividend | | ( |
| |
| | | | |
Net (loss) attributable to common stockholders |
| ( |
| ( |
|
| |
| |
Loss per share, basic | | ( |
| ( |
Weighted average number of shares outstanding, | | |
| |
Loss per share, diluted | | ( |
| ( |
Weighted average number of shares outstanding, | | |
| |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
F-3
Ardmore Shipping Corporation
Unaudited Interim Condensed Consolidated Statements of Comprehensive (Loss)
For the three months ended March 31, 2022 and March 31, 2021
|
| Three months ended | ||
In thousands of U.S. Dollars |
| March 31, 2022 |
| March 31, 2021 |
Net (loss) | | ( | | ( |
Other comprehensive income, net of tax | | | | |
Net change in unrealized gains on cash flow hedges | | | | |
Other comprehensive income, net of tax | | |
| |
| | | | |
Comprehensive (loss) | | ( |
| ( |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
F-4
Ardmore Shipping Corporation
Unaudited Interim Condensed Consolidated Statements of Changes in Redeemable Preferred Stock and Stockholders’ Equity
For the three months ended March 31, 2022 and March 31, 2021
|
| | | | | | | | |
| |
| Accumulated |
| | | |
| |
| | Redeemable Preferred | | | | | | | Additional | | other | | | | | | | ||
| | Stock | | | Common Stock | | paid in | | comprehensive | | Treasury |
| Accumulated | | | ||||
In thousands of U.S. Dollars | | Shares | | Amount | | | Shares | | Amount | | capital |
| loss | | stock | | deficit | | TOTAL |
Balance as at January 1, 2021 |
| — | | — | | | | | | | | | ( | | ( | | ( |
| |
Issue of common stock |
| — | | — | | | |
| |
| ( |
| — |
| — |
| — |
| — |
Share-based compensation |
| — | | — | | | — |
| — |
| |
| — |
| — |
| — |
| |
Changes in unrealized gain on cash flow hedges | | — | | — | | | — | | — | | — | | | | — | | — | | |
Net loss |
| — | | — | | | — |
| — |
| — |
| — |
| — |
| ( |
| ( |
Balance as at March 31, 2021 |
| — |
| — | | | |
| |
| |
| ( |
| ( |
| ( |
| |
| | | | | | | | | | | | | | | | | | | |
Balance as at January 1, 2022 |
| | | | | | |
| |
| | | |
| ( |
| ( |
| |
Issue of common stock | | — | | — | | | | | | | ( | | — | | — | | — | | — |
Share-based compensation |
| — | | — | | | — | | — | | | | — | | — | | — | | |
Changes in unrealized gain on cash flow hedges |
| — | | — | | | — | | — | | — | | | | — | | — | | |
Preference dividend | | — | | — | | | — | | — | | — | | — | | — | | ( | | ( |
Net loss |
| — | | — | | | — | | — | | — | | — | | — | | ( | | ( |
Balance as at March 31, 2022 |
| |
| | | | |
| |
| |
| |
| ( |
| ( |
| |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
F-5
Ardmore Shipping Corporation
Unaudited Interim Condensed Consolidated Statements of Cash Flows
For three months ended March 31, 2022 and March 31, 2021
| | Three months ended | ||
In thousands of U.S. Dollars |
| March 31, 2022 |
| March 31, 2021 |
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
| |
| |
Net Loss |
| ( |
| ( |
Adjustments to reconcile net (loss) to net cash (used in) operating activities: |
| |
| |
Depreciation |
| |
| |
Amortization of deferred drydock expenditures |
| |
| |
Share-based compensation |
| |
| |
Loss on vessel held for sale |
| |
| |
Amortization of deferred finance fees |
| |
| |
Unrealized (gains) on derivatives | | ( |
| ( |
Foreign exchange |
| |
| ( |
Profit from equity method investments | | ( | | |
Deferred drydock payments |
| ( |
| ( |
Changes in operating assets and liabilities: |
| | | |
Receivables |
| ( |
| ( |
Prepaid expenses and other assets |
| ( |
| ( |
Advances and deposits |
| |
| ( |
Inventories |
| ( |
| |
Accounts payable |
| ( |
| |
Accrued expenses and other liabilities |
| ( |
| |
Deferred revenue |
| ( |
| |
Accrued interest on debt and finance leases |
| |
| ( |
Net cash (used in) operating activities |
| ( |
| ( |
|
| |
| |
CASH FLOWS FROM INVESTING ACTIVITIES |
| |
| |
Proceeds from sale of vessels |
| |
| |
Payments for acquisition of vessels and vessel equipment |
| |
| ( |
Advances for ballast water treatment systems |
| ( |
| ( |
Payments for other non-current assets |
| ( |
| ( |
Payments for equity investments | | ( |
| |
Net cash (used in) / provided by investing activities |
| ( |
| |
|
| |
| |
CASH FLOWS FROM FINANCING ACTIVITIES |
| |
| |
Proceeds from long-term debt |
| |
| |
Repayments of long-term debt |
| ( |
| ( |
Repayments of finance leases |
| ( |
| ( |
Payment of preferred dividend | | ( |
| |
Net cash provided by / (used in) financing activities | | | | ( |
|
| |
| |
Net (decrease) in cash and cash equivalents |
| ( |
| ( |
|
| |
| |
Cash and cash equivalents at the beginning of the year |
| |
| |
|
| |
| |
Cash and cash equivalents at the end of the period |
| |
| |
|
| |
| |
Cash paid during the period for interest in respect of debt | | | | |
Cash paid during the period for interest in respect of finance leases | | | | |
Cash paid during the period for operating lease liabilities | | | | |
Cash paid during the period for income taxes | | | | |
Non-cash financing activity: Accrued preferred dividends | | | | |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
F-6
Ardmore Shipping Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2022 and March 31, 2021
(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)
1. General information and significant accounting policies
1.1. Background
Ardmore Shipping Corporation (NYSE: ASC) (“ASC”), together with its subsidiaries (collectively, the “Company”), provides seaborne transportation of petroleum products and chemicals worldwide to oil majors, national oil companies, oil and chemical traders, and chemical companies, with its modern, fuel-efficient fleet of mid-size product and chemical tankers and the Company operates its business in
In response to the COVID-19 pandemic, many countries, ports and organizations, including those where ASC conducts a large part of its operations, have implemented measures to combat the outbreak, such as quarantines and travel restrictions. Such measures have caused severe trade disruptions. In addition, the pandemic initially resulted and may again result in a significant decline in global demand for refined oil products. As the Company’s business is the transportation of refined oil products on behalf of oil majors, oil traders and other customers, any significant decrease in demand for the cargo the Company transports has and could continue to adversely affect demand for its vessels and services. The extent to which the pandemic may impact the Company’s results of operations and financial condition, including possible impairments, will depend on future developments, which are highly uncertain and cannot be predicted, including, among others, new information which may emerge concerning the virus and its variants and the level of the effectiveness and administration of vaccines and other actions to contain or treat its impact. Accordingly, an estimate of the impact of the COVID-19 pandemic on the Company cannot be made at this time.
1.2. Management and organizational structure
ASC was incorporated in the Republic of the Marshall Islands on May 14, 2013. ASC commenced business operations through its predecessor company, Ardmore Shipping LLC, on April 15, 2010.
As at March 31, 2022, ASC had (a)
Ardmore Maritime Services (Asia) Pte, a wholly owned subsidiary incorporated in Singapore, carries out the Company’s management services and associated functions. Ardmore Shipping Services (Ireland) Limited, a wholly owned subsidiary incorporated in Ireland, provides the Company’s corporate, accounting, fleet administration and operations services. Each of Ardmore Shipping (Asia) Pte. Limited and Ardmore Shipping (Americas) LLC, wholly owned subsidiaries incorporated in Singapore and Delaware, respectively, performs commercial management and chartering services for the Company.
1.3. Basis of preparation
The accompanying interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”), and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) that apply to interim condensed financial statements.
F-7
Ardmore Shipping Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2022 and March 31, 2021
(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)
1.3. Basis of preparation (continued)
Accordingly, they do not include all of the information and footnotes normally included in consolidated financial statements prepared in conformity with U.S. GAAP. They should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2021 Annual Report on Form 20-F, filed with the SEC on March 11, 2022. The condensed consolidated balance sheet as of December 31, 2021 has been derived from the audited financial statements at that date but does not include all of the footnotes required by U.S. GAAP for complete financial statements.
The accompanying interim condensed consolidated financial statements are unaudited and include all adjustments (consisting of normal recurring adjustments) that management considers necessary for a fair presentation of its condensed consolidated financial position and results of operations for the interim periods presented.
The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the entire year.
All subsidiaries are
1.4. Significant accounting policies
There have been no changes in the Company’s significant accounting policies for the three months ended March 31, 2022 as compared to the significant accounting policies described in the Company’s audited consolidated financial statements for the year ended December 31, 2021. The accounting policies used in the preparation of the unaudited interim condensed consolidated financial statements are consistent with those applied in the audited financial statements for the year ended December 31, 2021.
2. Equity Investment
Element 1 Corp. - On June 17, 2021, the Company purchased a
e1 Marine LLC - On June 17, 2021, the Company established a joint venture, e1 Marine LLC, with E1 and an affiliate of Maritime Partners LLC (“MP”), which seeks to deliver a hydrogen delivery systems to the marine sector with each joint venture partner owning
The Company records its share of earnings and losses in these investment on a quarterly basis. The Company recorded an investment of $
F-8
Ardmore Shipping Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2022 and March 31, 2021
(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)
3. Debt
As at March 31, 2022, the Company had
|
| As at | ||
In thousands of U.S. Dollars |
| March 31, 2022 |
| December 31, 2021 |
NIBC Bank Facility | | |
| — |
Nordea/SEB Joint Bank Facility | | |
| |
Nordea/SEB Revolving Facility | | | | |
ABN/CACIB Joint Bank Facility | | | | |
ABN AMRO Revolving Facility | | |
| |
IYO Bank Facility | | | | |
Total debt | | |
| |
Deferred finance fees | | ( |
| ( |
Net total debt | | |
| |
Current portion of long-term debt | | |
| |
Current portion of deferred finance fees | | ( |
| ( |
Total current portion of long-term debt | | |
| |
Non-current portion of long-term debt | | |
| |
Future minimum scheduled repayments under the Company’s loan facilities for each year are as follows:
|
| As at |
In thousands of U.S. Dollars | | March 31, 2022 |
2022 |
| |
2023 |
| |
2024 | | |
2025 |
| |
|
| |
NIBC Bank Facility
On September 12, 2014,
F-9
Ardmore Shipping Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2022 and March 31, 2021
(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)
3. Debt (continued)
Nordea / SEB Joint Bank Facility and Nordea / SEB Revolving Facility
On December 11, 2019,
ABN/CACIB Joint Bank Facility
On December 11, 2019,
ABN AMRO Revolving Facility
On October 24, 2017, the Company entered into a $
IYO Bank Facility
On December 17, 2020,
F-10
Ardmore Shipping Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2022 and March 31, 2021
(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)
3. Debt (continued)
Long-term debt financial covenants
The Company’s existing long-term debt facilities described above include certain covenants. The financial covenants require that the Company:
| ● | maintain minimum solvency of not less than |
| ● | maintain minimum cash and cash equivalents (of which at least 60% of such minimum amount is held in cash and which includes the undrawn portion of the Nordea/SEB Revolving Facility), based on the number of vessels |
owned and chartered-in and
| ● | ensure that the aggregate fair market value of the applicable vessels plus any additional collateral is, depending on the facility, no less than |
| ● | maintain a corporate net worth of not less than $ |
| ● | maintain positive working capital, excluding balloon repayments and amounts outstanding under the ABN AMRO Revolving Facility, provided that the facility has a remaining maturity of more than three months. |
The Company was in full compliance with all of its long-term debt financial covenants as at March 31, 2022 and December 31, 2021.
F-11
Ardmore Shipping Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2022 and March 31, 2021
(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)
4. Leases
As at March 31, 2022, the Company was a party, as the lessee, to
|
| As at | ||
In thousands of U.S. Dollars |
| March 31, 2022 |
| December 31, 2021 |
Japanese Leases No.1 and 2 | | |
| |
Japanese Lease No.3 | | |
| |
CMBFL Leases No.1 to 4 | | |
| |
Ocean Yield ASA | | | | |
Japanese Lease No.4 | | |
| |
China Huarong Leases | | |
| |
CMBFL / Shandong | | | | |
Finance lease obligations | | |
| |
Amounts representing interest and deferred finance fees | | ( |
| ( |
Finance lease obligations, net of interest and deferred finance fees | | |
| |
Current portion of finance lease obligations | | |
| |
Current portion of deferred finance fees | | ( |
| ( |
Non-current portion of finance lease obligations | | |
| |
Non-current portion of deferred finance fees | | ( |
| ( |
Total finance lease obligations, net of deferred finance fees | | |
| |
Maturity analysis of the Company’s finance lease facilities for each year are as follows:
| | As at |
In thousands of U.S. Dollars | | March 31, 2022 |
2022 |
| |
2023 |
| |
2024 |
| |
2025 |
| |
2026 |
| |
2027 - 2030 |
| |
Finance lease obligations |
| |
Amounts representing interest and deferred finance fees |
| ( |
Finance lease obligations, net of interest and deferred finance fees |
| |
F-12
Ardmore Shipping Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2022 and March 31, 2021
(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)
Japanese Leases No. 1 and 2
On May 30, 2017,
Japanese Lease No. 3
On January 30, 2018,
CMBFL Leases No. 1 to 4
On June 26, 2018,
On October 25, 2018,
Ocean Yield ASA
On October 25, 2018,
F-13
Ardmore Shipping Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2022 and March 31, 2021
(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)
4. Leases (continued)
Japanese Lease No. 4
On November 30, 2018,
China Huarong Leases
On November 30, 2018,
CMBFL / Shandong
On June 25, 2021,
Finance leases financial covenants
Some of the Company’s existing finance lease facilities (as described above) include financial covenants which are the same, or no more onerous than, the Company’s long-term debt financial covenants described in Note 3. The Company was in full compliance with all of its finance lease related financial covenants as at March 31, 2022 and December 31, 2021.
Short Term Leases
The Company has entered into
F-14
Ardmore Shipping Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2022 and March 31, 2021
(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)
5. Interest Rate Swaps
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
During the second quarter of 2020, the Company entered into floating-to-fixed interest rate swap agreements, associated with existing variable-rate debt and financing facilities, over a
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings.
Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements and/or the Company has not elected to apply hedge accounting. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings.
The Company records the fair value of the interest rate swap as an asset or liability on its balance sheet. The following table shows the interest rate swap assets and liabilities as of March 31, 2022 and December 31, 2021:
Derivatives designated as hedging instruments (in thousands of U.S. Dollars) |
| Balance Sheet location |
| March 31, 2022 |
| December 31, 2021 | |
Interest rate swap |
| Current portion of derivative assets | | $ | |
| |
Interest rate swap |
| Non - current portion of derivative assets | | $ | |
| |
The following table shows the interest rate swap liabilities not designated as hedging instruments as of March 31, 2022 and December 31, 2021:
Derivatives not designated as hedging instruments (in thousands of U.S. Dollars) |
| Balance Sheet location |
| March 31, 2022 |
| December 31, 2021 | |
Interest rate swap |
| Current portion of derivative assets | | $ | |
| |
Interest rate swap |
| Non - current portion of derivative assets | | $ | |
| |
F-15
Ardmore Shipping Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2022 and March 31, 2021
(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)
6. Share-based compensation
Stock appreciation rights
As at March 31, 2022, the Company had granted
A summary of awards, simulation inputs, outputs and valuation methodology is as follows:
Model Inputs | | | |||||||||||||||||||||
|
| |
| | |
| |
| | |
| |
| |
| |
| Weighted |
| |
| | |
| | | | | | | | | | | | | | Risk-free | | | | Average Fair | | | | | |
| | SARs | | Exercise | | Vesting | | Grant | | Dividend | | rate of | | Expected | | Value @ | | Average Expected | | Valuation | |||
Grant Date | | Awarded | | Price | | Period | | Price | | Yield | | Return | | Volatility | | grant date | | Exercise Life | | Method | |||
12‑Mar‑14 |
| | | $ | |
| | $ | |
| | % | | % | | % | $ | |
|
| |||
01‑Sept‑14 |
| | | $ | |
| | $ | |
| | % | | % | | % | $ | |
|
| |||
06‑Mar‑15 |
| | | $ | |
| | $ | |
| | % | | % | | % | $ | |
|
| |||
15‑Jan‑16 |
| | | $ | |
| | $ | |
| | % | | % | | % | $ | |
|
| |||
04‑Apr‑18 |
| | | $ | |
| | $ | |
| | % | | % | | % | $ | |
|
| |||
07‑Mar‑19 | | | | $ | | | | $ | | | | % | | % | | % | $ | | | | |||
04‑Mar‑20 | | | | $ | | | | $ | | | | % | | % | | % | $ | | | | |||
04‑Mar‑21 | | | | $ | | | | $ | | | | % | | % | | % | $ | | | | |||
Changes in the SARs for three months ended March 31, 2022are set forth below in full numbers:
|
| |
|
| |
| |
| | Weighted average | |
|
| No. of SARs |
| exercise price | |
Balance as at January 1, 2022 |
| | $ | ||
SARs granted during the three months ended March 31, 2022 | | | | $ | |
SARs forfeited during the three months ended March 31, 2022 | | — | | | — |
Balance as at March 31, 2022 (none of which are exercisable or convertible) |
| | $ | ||
The total cost related to non-vested SAR awards expected to be recognized through 2024 is set forth below in thousands of U.S. Dollars:
Period | | | TOTAL |
2022 | | | |
2023 | | | |
2024 | | | |
| | | |
(1) Nine-month period ending December 31, 2022
F-16
Ardmore Shipping Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2022 and March 31, 2021
(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)
6. Share-based compensation (continued)
Restricted stock units
As at March 31, 2022, the Company had granted 1,543,855 restricted stock units (“RSUs”) to certain of its officers and directors under its 2013 Equity Incentive Plan, of which 218,036 had vested.
A summary of awards is as follows:
Grant Date |
| RSUs Awarded |
| Service Period |
| Grant Price | |
02-Jan-19 | | | | | $ | | |
07-Mar-19 | | | | | $ | | |
28-May-19 | | | | | $ | | |
04-Mar-20 | | | | | $ | | |
29-May-20 |
| | | | $ | | |
04-Mar-21 | | 56,957 | | 1 year | | $ | 4.28 |
04-Mar-21 | | 302,923 | | 3 years | | $ | 4.28 |
07-Jun-21 | | | | | $ | | |
30-Mar-22 | | 593,671 | | 3 years | | $ | 4.54 |
Changes in the RSUs for three months ended March 31, 2022 are set forth below in thousands of U.S. Dollars:
|
| |
| Weighted average | |
| | | | fair value at grant | |
| | No. of RSUs | | date | |
Balance as at January 1, 2022 |
| |
| $ | |
RSUs granted during the three months ended March 31, 2022 | | | | $ | |
RSUs vested during the three months ended March 31, 2022 | | ( | | $ | ( |
RSUs forfeited during the three months ended March 31, 2022 | | — | | | — |
Balance as at March 31, 2022 (none of which are vested) |
| | | $ | |
The total cost related to non-vested RSU awards expected to be recognized through 2024 is set forth below:
Period |
| | TOTAL |
2022 | | | |
2023 | | | |
2024 | | | |
2025 | | | |
| | $ | 3,743 |
(1) Nine-month period ending December 31, 2022
F-17
Ardmore Shipping Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2022 and March 31, 2021
(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)
6. Share-based compensation (continued)
Dividend equivalent rights
As at March 31, 2022, the Company had granted
A summary of awards, simulation inputs, outputs and valuation methodology is as follows:
Model Inputs | ||||||||||||||
|
| DERs |
| Service |
| Fair |
| Dividend |
| Risk-free rate |
| Expected |
| Valuation |
Grant Date | | Awarded | | Period | | Value | | Yield | | of Return | | Volatility | | Method |
04-Nov-19 | | | | $ | | % | % | % | ||||||
Changes in the DERs for three months ended March 31, 2022 are set forth below:
|
| |
| Weighted average fair | |
| | No. of DERs | | value at grant date | |
Balance as at January 1, 2022 |
| |
| $ | |
DERs granted during the three months ended March 31, 2022 | | | | | |
DERs forfeited during the three months ended March 31, 2022 | | | | | |
Balance as at March 31, 2022 (none of which are vested) |
| | | $ | |
F-18
Ardmore Shipping Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2022 and March 31, 2021
(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)
7. Preferred Stock
On June 17, 2021 and on December 3, 2021, ASC issued
The Series A Preferred Stock is redeemable, in whole or in part, upon the election of the Company or the Holder of shares of Series A Preferred Stock, upon the occurrence of certain change of control events, including if a person or group becomes the beneficial owner of a majority of ASC’s total voting power. As it is possible, regardless of the probability of such occurrence, that a person or group could acquire beneficial ownership of a majority of the voting power of ASC’s outstanding common stock without Company approval and thereby trigger a “change of control,” the Series A Preferred Stock is classified as temporary equity for accounting purposes. The Company’s obligations to the Holder of shares of Series A Preferred Stock are secured by a pledge of the Company’s stake in E1. The Series A Preferred Stock is presented in the Company’s financial statements net of the related stock issuance costs.
As part of the issuance of the Preferred Stock to MP, the Company agreed that MP shall have the right to a profits interest of
F-19