TOP Ships (TOPS) - 2018 Q4 - Annual Report

Operational Metrics - The company defines key operational metrics including calendar days, available days, and operating days to assess fleet performance and revenue generation capabilities [318]. - Time charter revenues are influenced by the number of vessels, operating days, and daily charter hire rates, which are affected by market conditions and vessel positioning [321]. - Voyage expenses primarily consist of port charges, bunkers, and commissions, which are driven by routes, ports, and fuel prices [327]. - Charter hire expenses represent lease payments for vessels under bareboat charters, with agreements lasting seven years for specific vessels [328]. - Vessel operating expenses are analyzed on a U.S. dollar per day basis and can fluctuate due to unplanned repairs and regulatory compliance [329]. - Dry-docking costs vary based on vessel age, location, and compliance with international standards [330]. - The company has outsourced operational functions to CSM, which manages technical and commercial aspects of vessel operations [332]. Revenue and Income - Time charter revenues increased by $10.9 million, or 38.4%, from 2016 to 2017, and by $1.7 million, or 4.3%, from 2017 to 2018, totaling $41.0 million in 2018 [342]. - Time charter revenues from related parties rose by $1.6 million, or 100%, in 2018 compared to 2017, attributed to the delivery of M/T Eco Palm Desert [347]. - Net income (loss) for 2018 was $(11.4) million, a decrease of $14.4 million compared to 2017, reflecting a significant decline in operating income [342]. - Operating income (loss) for 2018 was $(3.9) million, a decline of $5.5 million compared to 2017, indicating a challenging operational environment [342]. Expenses - Vessel operating expenses increased by $1.4 million, or 10%, in 2018 compared to 2017, primarily due to the operation of M/T Eco Palm Desert for three and a half months [348]. - Vessel depreciation rose by $0.6 million, or 11%, in 2018 compared to 2017, driven by an increase in calendar ownership days from 2,496 in 2017 to 2,670 in 2018 [350]. - Management fees to related parties increased by $3.0 million, or 64%, in 2018 compared to 2017, due to higher sale and purchase commissions [352]. - General and administrative expenses increased by $1.2 million, or 21%, in 2018 compared to 2017, mainly due to higher bonuses and legal fees [359]. - Total expenses increased by $7.2 million, or 19%, in 2018 compared to 2017, totaling $44.9 million [342]. Financing and Debt - Interest and finance costs arise from outstanding loans and credit facilities, impacting overall financial performance [334]. - Interest and finance costs decreased by $6.1 million, or 39%, in 2018 compared to 2017, primarily due to the absence of debt discount amortization related to convertible preferred shares [361]. - Total indebtedness as of December 31, 2018, was $140.7 million, amounting to $152.3 million after excluding unamortized financing fees and debt discounts [381]. - Working capital deficit as of December 31, 2018, was $31.5 million, expected to be financed through operational cash flow, debt or equity issuances [382]. - The outstanding balance of the ABN Facility was $52.3 million as of December 31, 2018, secured by first priority mortgages over three vessels [403]. - The NORD/LB Facility had an outstanding balance of $18.1 million as of December 31, 2018, secured by a first priority mortgage over the vessel M/T Stenaweco Excellence [407]. - The Alpha Bank Facility had an outstanding balance of $20.6 million as of December 31, 2018, with various covenants including a minimum free liquidity requirement of $0.75 million per collateralized vessel [413]. - The AT Bank Senior Facility was established for $23.5 million to fund the delivery of M/T Eco Palm Desert, with a balloon payment of $17.0 million due at the end of the term [414]. - The ABN Facility includes covenants such as an asset cover ratio of 130% and a maximum total net debt to market value ratio of 75% [402]. Cash Flow and Investments - Net cash used in investing activities for the year ended December 31, 2018 was $68.4 million, primarily for vessels under construction ($63.5 million) and investments in unconsolidated joint ventures ($3.7 million) [390]. - Net cash provided from financing activities for the year ended December 31, 2018 was $44.8 million, including $32.8 million from short-term debt and $28.5 million from long-term debt [393]. - Cash and cash equivalents and restricted cash were $30.6 million and $7.7 million as of December 31, 2017 and 2018 respectively [385]. - The company expects operating cash flow for the year ended December 31, 2019, to increase compared to 2018 due to employing more vessels [384]. Market Risks - The company continuously monitors exposure to market risks, including freight rates, interest rates, and currency rates [621]. - The company has not hedged currency exchange risks associated with expenses, which could adversely affect operating results [627]. - A hypothetical 1% increase in the three-month U.S. dollar LIBOR would raise interest rate expenses by approximately $0.4 million for 2019 [626]. - Approximately 96.5% of expenses were incurred in U.S. dollars, with 3.1% in Euros during 2018 [627]. - A 5% decrease in the exchange rate from $1.1784 to $1.1195 would result in an expense saving of approximately $0.08 million [628]. - The company has entered into interest rate swap agreements with fixed rates ranging from 1.4425% to 2.9700% [623].