Navios Maritime Holdings Inc.

Navios Maritime Holdings Inc.

$5
0.41 (8.93%)
New York Stock Exchange
USD, KY
Marine Shipping

Navios Maritime Holdings Inc. (NM-PG) Q1 2010 Earnings Call Transcript

Published at 2010-05-27 18:15:16
Executives
Laura Kowalcyk [ph] – IR Angeliki Frangou – Chairman and CEO Ted Petrone – President, Navios Corporation George Achniotis – CFO
Analysts
Jon Chappell – JP Morgan Will Thomson [ph] – FBR Capital Markets Noah Parquette – Cantor Fitzgerald John Parker – Jefferies Justine Fisher – Goldman Sachs Daniel Burke – Clarkson Johnson Rice
Operator
Good morning. My name is Kelly and I will be your conference operator today. At this time I would like to welcome everyone to the Navios Maritime Holdings Q1 2010 conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator instructions) Thank you. I will now turn the call over to Laura Kowalcyk [ph].
Laura Kowalcyk
Thank you for joining us for this morning’s call. With us today from Navios Maritime Holdings are Ms. Angeliki Frangou, Chairman and CEO, Mr. Ted Petrone, President, and Mr. George Achniotis, Chief Financial Officer. As a reminder, this conference call is also being webcast. To access the webcast, please go the Investors section on Navios’ Website, www.navios.com. Before I review the structure of this morning's call, I would like to read the Safe Harbor statement. This conference could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios. Forward-looking statements are statements that are not historical fact. Such forward-looking statements are based upon the current beliefs and expectations of Navios' management and are subject to risks and uncertainties, which could cause actual results to differ from forward-looking statements. Such risks are more fully discussed in Navios' filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios does not assume any obligation to update the information contained in this conference call. Thank you. At this time, I would like to outline the agenda for today's call. First, Ms. Frangou will offer opening remarks. Next, Mr. Petrone will provide an operational update and an overview of market fundamentals. Following Mr. Petrone's remarks, Mr. Achniotis will review Navios' first quarter 2010 financial results. Finally, Ms. Frangou will offer concluding remarks. At the completion of Ms. Frangou's remarks, the Company will open the call to take your questions. At this time, I would like to turn the call over to Ms. Angeliki Frangou, Chairman and CEO of Navios. Angeliki?
Angeliki Frangou
Thank you, Laura and good morning to all of you joining us on today’s call. During the first quarter we benefited from our strategy of keeping us fluid for long term sales with high quality counterparties. As a result, we had $78 million of EBITDA and $31.3 million of net income in the first quarter of 2010. This included one-off items that our CFO George Achniotis will take you through in detail in a moment. We also declared a $0.06 per share dividend for the first quarter of 2010 payable on July 7 to shareholders of record on June 15. We have all experienced a great deal of uncertainty including the sovereign debt issues that have marshaled into a tragedy requiring the U.S. to intervene to get about one trillion dollars into the European financial system. The capital market in the absence of (inaudible) has been struggling as most (inaudible) after the European Union (inaudible) the emergency financing. We can now predict the likelihood of continued volatility in the market. However, we can say that we continue to see strong fundamentals in the industrial production, particularly in emerging markets. Thus, I believe that absent some contingents from the sovereign debt crisis we are optimistic about our industry. Let’s now start our presentation with slide five, which shows the Navios Group and then (inaudible) value creation for shareholders of the Navios Holdings. Navios Holdings has a developed and stable business model that is reasonably insulated from the market volatility. It has been doing this by entering into long term charters with credit worth counterparties and obtaining AA+ insurance. The net result is a dependable, long term cash flow. For example, in 2010 Navios contracted more than 96% of its fleet base generating about $300 million in gross revenues. Navios Partners. Navios Holdings own 33% interest in Navios Partners despite difficult amount of times in 2008, 2009, Navios Partners grew actually in the interest distribution. In fact, Navios Holdings anticipating receiving more $21 million in distribution in 2010. Also, our unit in Navios Partners is worth about $210 million as of yesterday’s close. Navios Logistics. Navios Logistics focuses on the emerging markets in South America, was formed in 2008. We have 65.5% ownership stake. Navios Logistics is a key provider in the integrated logistics in the Hidrovia region, which you will recall is a river network about the size of Mississippi. Navios Logistics Corporation today includes today includes storage and port terminal facilities, for grain and liquid products by the river transport and a cabotage business. Navios Logistics has had limitedly expanded its barge business and today is one of the few regional providers offering both wet and dry services. Navios Logistics will expand into other related areas such as storage and (inaudible) of mineral commodities. Navios Logistics will seek independent financing and is taking active steps to achieve this currently. Navios Acquisition. We have pleased to have announced that shareholders approved Navios Acquisition proposed divestment and will look forward to closing the transaction tomorrow. I will discuss impact on Navios Holdings in a moment, but I wanted to take this opportunity and to thank all people involved for their hard work getting this deal done in a very difficult market. Slide six provides certain highlight for Navios Holdings. I think most of our shareholders are very, very aware of our strategy. What I would like to point out is that focus on long term contracted revenue has allowed Navios Holdings to grow revenue despite asset sales to Navios Partners. Thus for example Navios Holdings anticipates having $300 million in contracted revenue in 2010 as compared less than $250 million in 2009. Please note that this is – this $300 million already reflects a reduction from our natural run rate to account for the vesting of three vestings in the Navios Partners. Slide eight addresses recent developments. As I mentioned a moment ago, the shareholders of Navios Acquisition approved the acquisition of fleet of 13 product and chemical tankers with an option for an additional two product tankers. We believe that in the long term we have (inaudible) provide significant value. We view the industry related market and development. Our conclusion are based on Navios Acquisition is possessing these vessels over the low end of the cycle in an industry that likely will grow for the foreseeable future. We anticipate that Navios Acquisition will emerge from the closing as an independent public company. Navios Holdings in return will be relieved from all financing commitments that support the transaction and enable the acquisition. Navios Holdings will be reimbursed for the $38.8 million equity payments made in respect to the 11 vessel fleet a couple of weeks ago plus all associated payments previously made. When Navios Acquisition emerges as an independent operating company, the partial equity Navios Holdings received will have an estimate value of approximately $50 million. This will create approximately $0.50 per share in value for Navios Holdings shareholders. In total, including the shares of Navios Holdings acquired from Navios Acquisition, Navios Holdings will own 12.4 million shares. Navios Holdings’ average cost will be approximately $5. Navios Holdings will also own a $10.6 million warrant exercisable generating a value of (inaudible). In total, the securities in Navios Acquisition shares and warrants will be worth approximately $100 million representing a 57.3% ownership stake. We also have created liquidity from the sale of three vessels to Navios Partners. This transaction will (inaudible) to Navios Holdings in Navios Partners. Navios Partners began to enter into long term cash flow which strengthen Navios Partners upgraded to make and increase distribution of which Navios Holdings is a (inaudible) beneficiary. Navios Holdings monetizes vessels and the related long term contracts and use the proceeds to create liquidity and deleverage. As you can see below, Navios Holdings sold the vessels for a total of $283 million. This is $253 million in cash and $20 million in the form of Navios Partners units. We used $120 million of these proceeds to repay debt and have the remaining $143 million available on our balance sheet. Slide nine shows our fully funded newbuilding program. As you can see, we are awaiting delivery of eight Capesize newbuilding vessels with an average charter-out period of more than 10 years. Our newbuilding commitments reflect a benefit our mandatory convertible stock program, which will fund more $160 million of our CapEx. Today, we also announced the acquisition of a new Capesize vessel. Ted will provide specifics in a moment, but we acquired the vessel at a very attractive price of $54 million. This vessel is chartered for a single charter of approximately $24,700 per day net of commissions. We estimate that the revenue it will contribute and aggregate EBITDA during the 10-year term of $69.7 million. Slide 11 shows that our (inaudible) liquidity is very favorable with total liquidity available of $376.4 million of which $345 million was cash in hand as of March 31, 2010. Also, our net debt to total capitalization was 48.5%. Here in slide 12 set forth our substantial cash flow cushion from our low operating breakeven. As you can see, our estimated breakeven rate of $19,806 per day for 2010 compares well with our contracted rate of $27,224 and $ 31,232 per day for 2010 and 2011, respectively. With that, I would like to turn the call over to Mr. Ted Petrone Navios’ President, who will take you through the Company operation and industry perspective. Ted?
Ted Petrone
Thank you, Angeliki and good morning all. Please turn to slide 14. In the first quarter we continued to acquire vessels at attractive prices. (inaudible) the newbuilding Capesize vessel of 180,000 deadweight upon its delivery filling out in January 2011 for $54 million. The vessel will be chartered out for 10 years at the rate of $24,674. The annualized estimated EBITDA contribution is $7.1 million and the aggregate estimated EBITDA over the life of the contract is $69.7 million. Also in the first quarter, Navios continued to (inaudible) locking in to secure long term cash flow by chartering out three vessels, two Handymaxes, and one Panamax for a total of approximately 40 years forward charter to first-class counterparties. Please turn to slide 15. Navios Maritime Holdings Inc. consists of 59 vessels of 6.4 million deadweight. Navios has 42 vessels in the water with an average age of 4.9 years, which is considerably younger than the industry average of 15.3 years. Of the 27 long term charter-in vessels Navios holds purchase options on 12 of these vessels. The Navios Group consists – Group which includes Navios Partners and Navios Acquisition controls 73 dry bulk vessels equating to 7.8 million deadweight as well as 13 tankers equating to 700,000 deadweight. Please turn to slide 16. Navios charter-out rate that is roughly $27,222 for 2010. The rate continues to increase. It is $31,230 for 2011, $32,876 for 2012, and $33,551 for 2013. The services of Navios long term fleet that is chartered out include 96% for 2010, 69.7 for 2011. We will earn contracted revenue over $1.1 billion till the end of 2013. We have also insured our revenue with an EU-backed AA+ entity. Please turn to slide 17. Through our in-house technical management, we continue to enjoy vessel operating expenses significantly below the industry average. Currently Navios’ daily OpEx is $4,509, 26% below the industry average. Navios’ established reputation allows us to charter out vessels to high quality counter parties for long periods of time at favorable spreads. The positive average daily spread of $17,127 for 2010 will increase to $19,693 in 2011. Please turn to slide 19. As you all know, we currently own 31.3% of Navios Partners, including our 2% GP interest. Navios has an operating fleet of 14 vessels with an average age of 5.5 years. The combined fleet has a carrying capacity of 1.3 million deadweight. (inaudible) partners with current earnings without capital outlay. Partners hold purchase options on these two vessels. Please turn to slide 20. The 31.3% interest in Navios Partners as of May 26, had a market value in excess of $210 million. The value is under represented on our balance sheet as a book value of $58.4 million. Navios Partners provide significant cash flows to Navios Holdings. Till 2009, we received $30 million in distribution from Navios Partners. We anticipate based on the current run rate receiving about $21.1 million in distribution in 2010. And note that this will form more than 87% of Navios dividend to or shareholders. Please turn to slide 21. (inaudible) quarterly pattern of EBITDA, operating surplus, and net income are shown for the nine quarters from Q1 2008 to Q1 2010. The consecutive high results from (inaudible) significant profitable growth by the Company from increase in the number of operating vessels and favorable change in the daily charter operating. Please turn to slide 23. This provides an overview of Navios South American Logistics, which is one of the premier logistics provider in the Hidrovia region. Navios Logistics has two divisions composed of barge and cabotage business and port terminal operations, all operating throughout the Hidrovia system. Please turn to slide 24. We formed Navios South American Logistics in January of 2008 with the combination of our existing port operations in Uruguay with a (inaudible) barge and liquid port terminal. Since then we have significantly expanded our operations and it currently consists of 223 vessels, barges, and pushboats. We are also operating in the cabotage business and have recently expanded our double-hull product tanker fleet to 46 vessels. Please turn to slide 25. This slide shows some summary and financial information for logistics business. Revenue for the three months ending March 31, 2009 [ph] increased by 23.4% to $36.2 million compared to the same period of 2009. EBITDA decreased 29.2% to $4.1 million from $5.8 million. As I will discuss, operating results of Q1 were directly impacted by the 2009 drop and resulting post drop congestion on the river as well as higher G&A expenses. Please turn to slide 26. Navios Logistics has a strong balance sheet. This slides provides key balance sheet data for March 31st, 2010 compared to December, 31st, 2009. Cash and cash equivalents (inaudible) $19.9 million as compared to $26.9 million at December 31st, 2009. Total assets grew by 3% to $519.5 million by the end of Q1 2010. Net debt to book capitalization was a conservative 23.5%. Please turn to slide 27. The Paraguay River is the part of the Hidrovia waterway, which connects five (inaudible) to the river plate in Argentina and connects Hidrovia region’s agricultural, and minerals commodities (inaudible) to transship them to ocean-going ships. As previously mentioned, drought conditions in the Hidrovia waterway region in 2009 impacted the river operations and consequently barge and vessels operations. At noticed from this chart on the slide although river conditions have improved over the last year they are still well below the 15-year average and more normalized river seasonality is expected for the rest of 2010. Please turn to slide 28. (inaudible) terminal has a total silo capacity of 360,000 tons. In 2009, (inaudible) assisted by record year grain wheat and planting crops established record throughput at 3,550,400 tons, a 23.8% increase over 2008. The grain and wheat and planting crop for 2009-10 is again projected at record levels with harvested crop already passing through the (inaudible). The projections for Uruguayan crops are double grain exports over the next five years. We are constructing (inaudible) capacity of 348,000 tons per year. Please turn to slide 29. The liquid terminal in Paraguay generates revenue from storage services and (inaudible) fuel sales. Spot fuel sales were 52,000 cubic feet for 2009 and are expected to increase by 20% to 62,500 cubic meters for 2010. With the construction of additional tank space, storage capacity will increase by the end of 2010 to over 450,000 cubic meters. Top contract partners include Petrobras, Esso, and Petrosur. Please turn to slide 31. This slide reviews our ownership in Navios Acquisition Corporation. On Tuesday, May 25th, Navios Acquisition shareholders approved the acquisition of 31 vessels for an aggregate purchase price of $457.7 million of which $123.4 million will be from existing cash and $334.3 million balance from debt financing. As a result, Navios Acquisition will reimburse Navios Holdings for the initial equity payment of $38.8 million that Navios Holdings made on May 19th for the acquisition of 11 product and chemical tanker vessels as also equity payments previously made by Navios Holdings. Please turn to slide 32. Navios Maritime Acquisition fleet comprise of 13 vessels totaling 700,000 deadweight comprised of four LR1s, seven MR2s, and two IMO II class 25,000 deadweight chemical tankers. Four vessels will deliver in 2010, and the remaining nine newbuildings will deliver in 2011 and 2012. Navios Acquisition also has an option to acquire two LR1 newbuildings. Navios Acquisition strategy is to become a world-leading operator and charter of modern high quality products and chemical tankers. Navios Acquisition principal focus going forward is (inaudible) refined petroleum products both clean and dirty and bulk liquid chemicals. (inaudible) condition Navios Acquisition tended to deploy its vessels through the in-charters on a mix of short, medium, and long term time charters, including spot charters. This chartering strategy will afford us opportunity to capture increased profits during strong charter market, while benefiting for the relatively stable cash flows and high utilization rates for (inaudible) longer term time charters. Navios Acquisition will seek profit-sharing agreements in the long term time charters so as to be provided with potential incremental revenue above the contracted minimum charter rates in terms of a strong spot market. Navios Acquisition initially intends to limit the duration of the charter to the product and chemical tankers. This will provide us flexibility to take advantage of rising charter rates if the charter market improves as the global economy strengthens. Please turn to slide 33. The key competitive advantage is Navios Acquisition’s relationship with Navios Holdings. This has enabled Navios Acquisition to access favorable debt financing as evidenced by the credit agreements, which contain favorable features, including an advance rate of 73% financing of the aggregate purchase price of the vessels; interest margin ranging from 2.5% to 2.75% over the applicable base rate; a favorable amortization profile of 17 years on over 80% of the loan with a six-year term for $277 million of debt; favorable covenants including initial loan-to-value ratio of 125% and the ability to distribute up to 50% in net profit; additionally there are no negative covenants restricting incurrence of additional debt or preventing acquisition of additional vessels. Please turn to slide 34. Understanding why the industry is within a circle shipping cycle is essential a successful entry. Navios Acquisition chartered and acquired modern, high quality, double hull vessels and acquired some chemical (inaudible) at cyclical low prices as can be noted on the chart. Please turn to slide 35. The recent financial crisis and developments in the marine transportation industry particularly in the product and chemical tanker sectors created a significant opportunity to acquire vessels near historically low, inflation adjusted prices and employ them in a manner that will provide attractive returns on invested capital. This chart at slide 35 shows that Navios Acquisition average acquisition price is $33.3 million for the MR newbuilding. It is at or near historical low value dating back to 1980. The recent financial crisis continues to affect adversely the availability of credit in shipping industry participants creating opportunities for well-capitalized companies with committed available financing such as Navios Acquisition to enter the product and chemical tanker sectors at such an advantageous time. Please turn to slide 37. The drybulk market continues to perform well on ongoing strong demand for iron ore and coal from China and India as well as dramatic increase in investor activity in the OECD countries. With the onset of the Indian monsoon season combined with the South American grain season, and the recent drop in spot Chinese iron ore prices the BDI have experienced a rapid rise. It was at 4209 yesterday. It continues to remains a major characteristic of the industry and the changing trading patterns consistently increase ton mile demand. However, the new Chinese increase during the quarter for (inaudible) remain significant. (inaudible) 210 million tons of iron ore were 12% greater in April year-to-date than the same period in 2009 and net coal imports continue at the highest level according to the last recorded for 2009. China continued that trend in April recording 55.3 million tons, which was 6% more than the record average of 52.2 million tons recorded last year. In addition, India’s increasing access to coal has added to demand for the Panamax and Ultra-Handymax vessels during the quarter. Further, Japan increased iron ore imports by 42% year-on-year to 32 million tons during the quarter, adding demand to Capesize vessels. Panamax and Ultra-Handymax vessels earn more than Capes at the end of the first quarter due to continued strong demand for Chinese and Indian coal imports in combination with the seasonal grain movements. At the end of Q1, the (inaudible) time charter daily average have increased by 87% to over $58,000 exceeding Panamax rates by 59%. Currently, there are 159 Capes or about 15% of the Cape fleet waiting to berth at (inaudible) worldwide compared to 151 at the end of 2009. All dry bulk vessels waiting increased slightly over the quarter from 264 to 292. Moving to slide 38, seaborne dry bulk trade has grown at a compounded annual growth rate of 4.1% in the last decade since China joined the WTO. Over this period the major driver of growth has been the demand for iron ore and coal. In 2000, these two commodities accounted for approximately 45% of seaborne drybulk trade. By the end of this year, the pair will represent approximately 57% and industry forecasting total seaborne iron ore trade rising to over one billion tons this year for the first time. This growing demand is primarily driven by the continued industrialization and urbanization of developing nations led by China and India. We expect this trend to continue for the foreseeable future. China’s GDP grew by 11.9% in the first quarter. That is quarterly growth rate for three years. The IMF forecast China to currently grow by 10% in 2010 and overtake Japan as the world’s second largest economy. The IMF forecast Indian growth of 8.8% this year. Turning to slide 39, dry bulk vessels demand is not only driven by demand for natural resources but also by the reasons [ph] that these cargos are transported. Changing trends (inaudible) all size of vessels. As an example, Australia and India have been the main suppliers of Chinese iron ore import until the last few years. Since then Indian steel production increased and the proportion of Chinese iron ore imports declined, forcing China to import ore from outside the Pacific Rim. This has not only increased the seaborne demand, but has also increased the ton miles traveled to transport the ore and the key driver of Capesize demand. As an example, Vale of Brazil sold a record 140 million tons of ore to China in 2009 compared to 91 million metric ton in 2008. Indian coal import shown on the right hand chart have increased dramatically at a 21% compounded annual growth rate since 2006. According to the Central Electricity Authority of India, this demand will continue to substantially grow if the majority of the planned new power generation will be coal-fired. Coming monsoon season in India will increase ton miles as Far Eastern still accounts for (inaudible) moving to Australia and Brazil. With the drop in Chinese (inaudible) over 180 tons in April to a current 145 level iron ore prices seem to be picking up, which is reflected in the demand increase in Cape rate this week. Turning to slide 40, steel production in China for Q1 was 158 million pounds, up 24% year on year and up 35.4 million tons in April, an increase of 1% over the 54.97 million tons recorded in March. While the steel production rose by 29% during the quarter to same period last year, with particularly strong production increases in Japan, up 51%, South Korea with 29%, EU very circumstance, and Brazil 59%. China imported 155 million tons of iron ore in Q1 to keep pace with a higher steel production and demand driven by major and new infrastructure projects and domestic consumption. First quarter iron ore imports were up 18% year-on-year and April’s import of 55.3 million tons exceeded 2009 record average monthly iron ore imports at 52.4 million tons per month. Iron ore inventory peaked at 71 million tons during Q1 and stood at 68.6 million as of May 24 representing an average of about 25 days of production. Given the rates has risen, a modest 2.5% in the recent low recorded May 7 to the 15.9 million stock over recorded at the end of April. Turning now to slide 41, the collapse of the fleet [ph] market in the first quarter of 2008 resulted in the dramatic jump in scrapping levels last year when a record 10 million deadweight was recorded. With the subsequent and consistent market increase, scrapping has reached 1.9 million deadweights this year. this is equivalent to about 5 million deadweight tons on an annualized basis. Still 16% of the fleet is more than 25 years of age and 26% of the fleet is over 20 years old, providing 120 million deadweight of scrapping potential. Moving to slide 42, during 2008 the order book of 2009 and 2010 grew until the global credit crisis began in the second half of 2008. Actual deliveries for 2009 were 42.5 million deadweight from a projected orderbook of 71.3 million, resulting in a 40% non-delivery. Through April 2010, we’ve done delivery for 22.9 million deadweight, with an expected 44.6 million deadweight resulting to 48%. For 2010, deliveries are projected to be 65 million deadweight illustrating that non-deliveries continue to be substantial in that regard in order book (inaudible). Even though some yards may have increased capacity, it should be noted that a 2010 delivery our advantage that we (inaudible) contracted at price significantly above the current market, making them uneconomical today. In addition, the market’s bank financing will continue to adversely impact the market. Despite high price in 2010, the expected deliveries will likely increase and establish a record year in deliveries. The recent healthy dry bulk rates reflect a number of changes in training patterns resulting in longer voyages, increased flood congestion, selling new building brokerage [ph], and return to strong investor production general. The dry bulk markets reflect the current ability of the company to obtain credit – trade credit as evidenced by the increasing export container rates and raw material movement, the net result of the dry bulk market that is enjoying maturity. Despite a 64 cape delivery through April and finding financial markets, capes are averaging over $58,000 per day and the year-to-date average of $35,000. Key factors to launch would be the fees of new building deliveries, commodity fact negotiations, and expansion of cargo demand, including the resulting increase in ton miles. The effect of the switch to quarterly fact negotiations, Chinese reaction to these negotiations, a potential Australian profit tax and a potential Indian INR export tax increase are additional factors that may affect the market through the rest of the year. The current density, new freight rates in vessel may be sustained. This concludes our presentation. I would now like to turn the call over to George Achniotis for the Q1 financial results. George?
George Achniotis
Thank you, Ted. I will now briefly review Navios’ financial results for the first quarter of 2010. Please turn to slide 44. Total revenue for the three months of operations ended March 31, 2010 was $154.4 million as compared to $147.2 million for the comparable period of 2009. Revenue from vessel operations for the three months ended March 31, 2010 was $118.2 million as compared to $117.9 million for the same period during 2009. The increase in revenue is mainly attributable to the decrease in the average days of the fleet by 8.1% from 3,880 days in the first quarter of ’09 to 4,194 days in the same quarter of 2010. The increase was partially offset by a decrease by 13.3% in the time charter equivalent earnings per day in the first quarter of 2010 as compared to 2009. The achieved TCE rate per day was $24,484 versus $28.227 in the respective first quarter of 2009. Revenue from the Logistics business was $36.2 million in the first quarter of 2010 compared to $29.3 million in the same period of ’09. The increase is mainly due to the addition of a product tanker in the fleet in the second half of 2009 and the additional storage capacity at the port in Uruguay. EBITDA for the three months ended March 31, 2010 increased by 84.2% or $35.7 million from $42.4 million in the first quarter of ’09 to $78.1 million in the same period of ’10. EBITDA for the first quarter of 2010 was positively affected by an increase in gain on sale of assets of $24.4 million due to the drop down of Navios Hyperion and Navios Aurora II to Navios Partners. EBITDA was negatively affected by a $4 million write-off. This reflects the termination of our unfavorable short-term chartering contract. Over the course of this year, we anticipate that due to the termination of this contract, we will save approximately $8 million. EBITDA was further affected by an FFA loss of approximately $1.8 million. The loss resulted from the bankruptcy of a counterparty over hedge trade in 2008 from which Navios Holdings had no financial loss but which resulted in an open position. This open position was closed in the second quarter of 2010. We do not anticipate (inaudible) future as all of our capes are now conducted through exchanges. After adjusting for the above items, EBITDA for the quarter was $59.5 million compared to $42.4 million in the same period of 2009. The increase in EBITDA is mainly attributable to an increase in revenue by $7.2 million; a decrease in time charter, voyage and logistics business expenses by $4.6 million; an increase in equity and net earnings from affiliated companies by $6.4 million; an increase in non-controlling interest by $1.3 million; and a decrease in net other expenses by $1.4 million. The above increase in EBITDA was mitigated mainly by an increase in direct vessel expenses by $2.1 million and an increase in general and admin expenses excluding the share-based compensation by $1.7 million. The increase in G&A expenses was mainly attributable to an increase in professional fees, salaries and other administrative costs of Navios South American Logistics. Net income for the first quarter of 2010 was $31.3 million as compared to $12.0 million for the comparable period in ’09. After adjusting net income for the three one-off items discussed above, net income was $12.7 million. The increase of normalized net income by $0.7 million was primarily due to the $17.1 million increase in EBITDA and a $0.1 million increase in income tax gain. The increase was offset by $9.4 million increase in depreciation and amortization and a $7.1 million increase in interest and finance costs. Turning to the next slide, number 45, I will highlight key balance sheet changes between March 31, 2010 and December 31, 2009. Navios’ cash and cash equivalents, including restricted cash, on March 31, 2010 improved by $64.4 million to $345.5 million versus $281.1 million at the end of December 2009. This improvement reflects the cash proceeds of (inaudible) Navios Partners. Vessels for terminals and other fixed assets, net of depreciation, remained approximately constant at $1.6 billion, reflecting primarily the delivery of Navios Antares in January of 2010 and the drop down of Navios Hyperion and Navios Aurora II to Navios Partners. The investments and available for sale securities, which represent part of the share strength in Navios Partners, have increased by $29.3 million. The increase reflects the additional units obtained during the dropdown of Navios Aurora II to Navios Partners in March of 2010. It also reflects the increase in the unit price of Navios Partners between December 31, 2009 and March 31, 2010. The increase due to the unit price is also reflected in the increase of accumulated other congestion [ph] fleet income since using of capitals, lease gains as through the income statement. Long-term debt, including the current portion, decreased by $36.7 million in the quarter, reflecting the leverage in fully material divestments to Navios Partners. Turning now to slide 46, the company continued its consistent dividend policy and has declared a dividend for the first quarter of 2010 of $0.06 per share to common shareholders as of June 15 to be payable in July 7. This is the company’s 18th contributed quarterly dividend payment, reflecting a fleet deployment policy that provides stable and short and long-term cash flows. This concludes my review of the first quarter financials. At this time, I would turn the call back over to Angeliki. Angeliki?
Angeliki Frangou
Thank you, George. And we open the call to questions.
Operator
(Operator instructions) Your first question comes from Jon Chappell of JP Morgan. Jon Chappell – JP Morgan: Thank you. Good morning.
George Achniotis
Good morning. Jon Chappell – JP Morgan: My first question is about this new Capesize acquisition that you just announced this morning. First of all, the $54 million price tag was a lot lower than what we are seeing in brokerage reports. I’m sure that has something to do with the contract on it. But was this an asset that you got directly from the yard or from a bank in some of your previous acquisitions? And then, was the contract already associated with this asset or did you negotiate that contract post the purchase?
Angeliki Frangou
Actually, the last two capes we bought is approximately in the same price. If you have seen, this is directly from the shipyard that was stocked with assets from the previous owner. And this, in essence, that’s why is associated with this charter party that was an accounted party that we feel very comfortable. The aggregate EBITDA makes sense. So that’s why we did the deal. And you can still have, I mean, the aggregate EBITDA of about $70 million and you end up with an asset free of value. Jon Chappell – JP Morgan: Was it the same yard as the previous acquisitions?
Angeliki Frangou
Yes. We – Jon Chappell – JP Morgan: Are you aware of any –?
Angeliki Frangou
Sorry? Jon Chappell – JP Morgan: Are you aware of any other assets that may come available from that same yard then?
Angeliki Frangou
No, no. I think this was an opportunistic situation. And whenever we see something that makes sense, we do it. Jon Chappell – JP Morgan: Okay. Just broader industry question, maybe for Ted, I’ve been asked this question a lot and had my own answers, but I hope to get your opinion on it. How can you reconcile the turn strength in the BDI and the rate that you are seeing in the capes and the Panamaxes, which is really kind of moving the economy into China versus kind of the fears of what’s going on in that nation, Europe, of potential slowing and the impact that’s having on the broader markets?
Ted Petrone
I think the fears are overblown. I mean, we are sitting here a few miles from (inaudible). I think there is a little too much fear here. Remember, dry bulk is linked to the GDP of the emerging economies like China and India. And also the OECD has stepped up now. So you are seeing not only ton mile growth, but you are seeing trade growth of over 10% just in the tons itself. You have – with the port facility of bottleneck congestion, you had almost 120 capes delivered last year. The capes averaged 42,000. When the capes were averaging 38,000, you’ve already had 65 deliveries. Something is going on. Chinese tells the trade is growing. I just think if you put the facts together, it makes sense that we are where we are. Jon Chappell – JP Morgan: Okay. And then one last question, I asked this on the last call I think. So just an update. It seems that every quarter there is some issue with the Logistics side because of this – the drought, the ongoing impact of the drought. Are we close to normalization of water levels in South America where this will stop being detriment to the quarterly earnings?
Angeliki Frangou
Yes. The drought has normalized. And I think, as you know, Q2 and Q3 are seasonally strong quarters for South America. And this is something that we will see translating a natural result. Jon Chappell – JP Morgan: Okay. Thanks, Angeliki. Thanks, Ted.
Ted Petrone
Thank you.
Angeliki Frangou
Thank you.
Operator
Your next question comes from Chris Wetherbee of FBR Capital Markets. Will Thomson – FBR Capital Markets: Hi, guys. Will Thomson [ph] stepping in for Chris. Just a quick question about – can you give some color or expectations on run rates for the Logistics business?
Angeliki Frangou
We cannot give a run rate. You can see that last year was down, and we will see – I think you have to be able to get much more representative quarters (inaudible). Will Thomson – FBR Capital Markets: Okay. And then I guess can you – can you give some color on congestion in the ports? And what –?
Ted Petrone
Sorry, we can’t give a lot of color. You’ve got 16% of the capes sitting at world port, the loading and the discharging ports. We don’t see that going away in the near future. We’ve had 20 to 30 years of non-investment infrastructure in the port, and that’s a long-term issue. So I – we don’t see this really getting better. And we think that this isn’t going to continue. I think it’s – we think it’s a bottleneck. You may have another 100 capes you got to push into that bottleneck of all the ports. Chinese seemed to be doing some port developments of the Brazilians. But the Chinese seems to – port development seems to be more linked to the Chinese coastal trade. So this should continue for a while. Will Thomson – FBR Capital Markets: :
Ted Petrone
You are talking about shipyard deliveries? Will Thomson – FBR Capital Markets: Yes.
Angeliki Frangou
The shipyard is delayed. There is cancelation on deliveries because of the financial crisis and no availability of credit in essence. So this will continue. I mean, there is nothing – this is a bottom that we will see in 2010 and it will actually be higher than 2009.
Ted Petrone
Which was higher than 2008. We think this will continue going forward. Will Thomson – FBR Capital Markets: Yes. Okay, thank you. That’s helpful.
Angeliki Frangou
Thank you.
Operator
Your next question comes from Noah Parquette of Cantor Fitzgerald. Noah Parquette – Cantor Fitzgerald: Hi, thank you. Good morning. I want to ask – what are the plans regarding the spinoff of the Logistics business? I mean, what time can we expect that?
Angeliki Frangou
I mean, we know that the business needs independent financing. We have articulated that, and we are going to be in the process. We’ve just seen it in other – we just concluded a deal. Noah Parquette – Cantor Fitzgerald: Great. So this is sort of – it's on the backburner for now?
Angeliki Frangou
I don’t know. I wouldn’t say that. Noah Parquette – Cantor Fitzgerald: Okay. I want to get your thoughts on the Australian mining tax and what implications that will have for the dry bulk markets?
Ted Petrone
I don’t think it has a lot – I think there is a lot of talk by the government. And maybe the tax is on the profit, not on the revenues. So I don’t really – I just think it’s a lot of bluff. It’s political speak. It’s a different – every contender has their own political speak and this is it. This is high revenue for them. They are not going to kill the goose that laid the golden eggs. So lot of jobs involve in that industry. Noah Parquette – Cantor Fitzgerald: Okay. And then on just the modeling side, G&A was kind of high this quarter at $12 million. Were there any one-time items in there? What would be good run rate for the rest of the year?
George Achniotis
G&As were slightly up this quarter because of, like I said, (inaudible) indicating higher professional fees and higher salaries. So these would probably come down in the next quarter, but the run rate should be around $11 million, $11.5 million. Noah Parquette – Cantor Fitzgerald: Okay. That’s all I have. Thank you.
Operator
(Operator instructions) Your next question comes from John Parker of Jefferies. John Parker – Jefferies: Hi. Can you give us a guidance on the OpEx per day for the product tankers in the Navios Acquisition fleet?
Angeliki Frangou
We will be coming with a full – as you know, we are closing tomorrow and we will come shortly after the super six [ph] day. And then you will see the presentation. We will give clarity and transparency that what Navios likes to give. So you will be able to more (inaudible). John Parker – Jefferies: Okay. And this should be the – the dividend is restricted to 50% of consolidated net income. Is that correct?
Angeliki Frangou
No, no, this is not the – what Ted was saying is that this is not a high distribution model. This is a company that when we will start doing dividends, it will be modestly like the Navios Holdings structure. We just gave the financing that is not restricted and you have the ability to do up to 50%. It’s not an intention. It’s a model of really giving some return to the shareholders. John Parker – Jefferies: Okay. And then the Capesize dropdown to Partners, $110 million in cash, I think there is about $56 million of debt that you have to repay with that. Is that the right of seeing – of looking at the cash flows in that transaction?
Angeliki Frangou
I guess – and I think I touched upon that from the $280 million that we’ve got from the three vessels that got sold, we paid about $120 million in debt on the two vessels and the remaining is cash in our balance sheet. John Parker – Jefferies: Okay. And then finally, you recently amended your facilities to release some of your restricted cash. Can you give us a number – how much of your restricted cash that was there during the quarter is now related to half of the amendment to your credit facility?
Angeliki Frangou
This actually is used – we have it as a financing and we just did the Vector of about $20 million – $18 million, the financing of the Vector. John Parker – Jefferies: Okay. Thank you very much.
Angeliki Frangou
Thank you.
Ted Petrone
You’re welcome.
Operator
Your next question comes from Justine Fisher of Goldman Sachs. Justine Fisher – Goldman Sachs: Good morning.
Angeliki Frangou
Good morning.
Ted Petrone
Good morning. Justine Fisher – Goldman Sachs: The first question that I have is just on the Capesize that you guys acquired. Obviously you acquired it from a shipyard for $54 million and the previous buyer of that vessel, I guess, seems like they weren’t able to pay for it. So when you guys were talking about order books, one of the comments you made was that it will be difficult to finance vessels that were booked at previous higher prices. But it does seem that shipyards are willing to bring that prices down pretty significantly if they can find a buyer at all. So I mean, are you guys seeing the shipyards say, “Well, we know we can’t sell this cape for $90 million, so we will just have to bite the bullet and sell it for something rather than not sell it at all”?
Angeliki Frangou
Let me explain to you. There is no half – really half beat vessel. The reason this is too cheaper than it is almost going to 50% this year. If it goes, in essence, an order maybe placed in 2008, but the construction is done within – let’s say, the vessel was ordered in 2008, then it’s going to be built in 2010. That is – during 2010 they build the vessel. So there is no half beat in [ph] vessel. Of course, you have to realize that Navios has one of the best accesses to shipyards and banks, which is our best strongest point in the industry. So, in this aspect, we have the ability of reason to build as we like and picking the best. Otherwise, these vessels must probably never have been built. You have to realize. Justine Fisher – Goldman Sachs: But I mean, even if that shipyard thought that it was going to receive – I don’t know – I mean, I don’t know what the previous price was. But even if they thought that they were going to receive that amount, now that they are going to start building it in 2010, they seem to prefer to sell – to reduce the price on the ships also just so that they can be utilizing their birth space for construction rather than just folding and say, “No, we’re not going to build anything unless it is the price that it was previously contracted”?
Angeliki Frangou
The price was around $90 million. Yesterday’s price doesn’t exist anymore. So – and nobody has money to put the differential between $90 million and the $54 million. So these are the analyses repricing today’s value. There is no way existing.
Ted Petrone
We really do think that some of them will reprice, you’re right, but at just slightly lower level. But who else has done this just like Navios and have the financing? The real issue of this shipyard is, what’s happened to the Greenfield yards and Brownfield yards that were on paper to construction. When Q4 ’08 happened, a lot of it just went off the table. So you need to take off 25% to 30% of these numbers on paper. They weren’t even there, to begin with. Justine Fisher – Goldman Sachs: Okay. And you guys are paying all of that with cash or are you leveraging that vessel?
Angeliki Frangou
We have at least 100 CapEx to be honest, because as you know, we have the mandatory convertible, to be fair, that finances some of our new buildings. We have two vessels with no mortgage right now, and we have a fully funded capacity and we receive money back. So we will make that decision later depending on our leverage ratios. Justine Fisher – Goldman Sachs: Okay. And then the last question I have is actually about leverage ratios because I’m just looking from the bond-holders perspective to your dropping down vessels to the MLP, and you are getting a reasonable price versus what you bought for those capes, that further $280 million for the three. But then – and the vessel that you are buying, again, when you talk about the projected EBITDA on that vessel, the numbers may go out a sense, but the company losing a ship that was on the $40,000 a day time charter and gaining on that on at almost $25,000 a day time charter. And you are paying down some debt, but it does seem as though a lot of – some of the proceeds are going on the balance sheet as cash for more vessels that there could have been a lot of companies to acquire more leveraged vessels. So how does the management think about the higher leverage numbers that result from the sort of transaction? I mean, is there a debt-to-EBITDA number that you guys don’t want to go above? Because I guess – I think these transactions make sense from a valuation perspective on a ship-by-ship basis, but they do tend to decrease EBITDA and increase debt at the parent company.
Angeliki Frangou
No, you’re wrong. We delivered on the bank because let’s say, you drop down a cape at $110 million. You would save that $60 million. And you can still have enough money to buy another cape mortgage-free. So you de-lever that and you increase. Justine Fisher – Goldman Sachs: So I guess it depends on you guys buying your additional ships mortgage-free?
Angeliki Frangou
Of course, that’s what we said. I mean, today we have a full 100 CapEx right now and we receive money back, which we – because we think that because of the mandatory convertible that’s there, which is equity. And the two mortgage-free vessels will only put mortgage, each would make sense on our leverage ratios. What we see is that our ratios are – the level of the ratios today is how we entered in 2009. We believe we have big leverage ratios and we’d like to deleverage as we take delivery of our vessels. Don’t forget that 2009 – Q4 of 2009 was affected by vessels that delivered in the end of the year. We had the debt on our balance sheet, and we didn’t yet have the effect of the EBITDA that was in those. So, from that number, we de-levered and we are looking that to continue in 2010 and ’11. Justine Fisher – Goldman Sachs: Okay. Thanks very much.
Angeliki Frangou
Thank you.
Operator
Your next question comes from Daniel Burke of Clarkson Johnson Rice. Daniel Burke – Clarkson Johnson Rice: Good morning. Thanks for taking my call.
Angeliki Frangou
Thank you. Daniel Burke – Clarkson Johnson Rice: Most of the questions have been answered, but I had a question on the short-term charter business. Certainly, the termination of the unfavorable short-term charter makes economic sense. But more broadly, I was curious you all de-emphasize the FSA business. You continue to expand the broader Navios businesses. As you look forward, the short-term charter business and the COA business, is that a portion that gets de-emphasized or does it remain a core?
Angeliki Frangou
Well, we have some. I mean – but you know that – if you need the market information, that is something we will continuously actively seek. But it’s not a big part of our business. Daniel Burke – Clarkson Johnson Rice: Okay. Fair enough. And then the two – on the Logistics side, the two charter ends that you look to have added, any detail on the duration of those charter and commitments and whether you expect to operate those vessels on spotter or time charter?
Angeliki Frangou
This is really going into the capital [ph] business and it was a good question. It is, as you know, a totally different market and the international shipping market there, which we can achieve a rate much more attractive. One will go most probably in a contract business and the second will be operated in shorter voyages within the area. Daniel Burke – Clarkson Johnson Rice: Okay, great. And then the last one for me, real simple practical one. We look forward to seeing the 6-K on the acquisition side, but presumably, George, you all will consolidate Navios Acquisition at the NM level?
George Achniotis
Yes, the intention of that is to consolidate acquisitions. Daniel Burke – Clarkson Johnson Rice: Okay, great. That’s all I had. That’s it for me. Thanks. Thanks to you all.
Angeliki Frangou
Thank you.
George Achniotis
Thank you.
Operator
We have reached our allotted time for the question-and-answer session. I will now turn the call over to Ms. Frangou for final remarks.
Angeliki Frangou
I would like to thank all of you for attending our Q1 results for 2010. Thank you.
Operator
Thank you. This concludes today’s conference call. You may now disconnect.