SEC Company Response from NORDIC AMERICAN TANKERS Ltd (NAT) (CIK 0001000177) (NAT) — Jul 20, 2011
NORDIC AMERICAN TANKERS Ltd (NAT) (CIK 0001000177)
Date: July 20, 2011 · CIK: 0001000177 · Accession: 0000919574-11-004202
AI Filing Summary & Sentiment
File numbers found in text: 001-13944
Referenced dates: June 9, 2011
Letter
Securities and Exchange Commission Division of Corporation Finance Attention: Linda Cvrkel, Esq. as Nordic American Tanker Shipping Limited) Form 20-F for the year ended December 31, 2010 Filed April 21, 2011 File No. 001-13944
Dear Ms. Cvrkel,
By letter dated June 9, 2011 addressed to the undersigned, the Staff of the Securities and Exchange Commission (the "Staff") provided comments to the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2010.
The Company was formed for the purpose of acquiring and chartering Suezmax tankers only, designated for transportation of crude oil. The Company has grown from three to 19 Suezmax tankers in less than seven years and the original three vessels are still in our fleet. The Company has a unique business model which differs from other tanker companies. The Company's strategy is focused on dividend accretive growth through vessel acquisitions, operating one type of vessel, cash breakeven rate, which currently is about $11,000 per day per vessel, spot market exposure, strong balance sheet and available financial resources. All of the Company's vessels acquisitions are financed with proceeds from issuance of common stock or by a limited amount of debt as the case may be. Our vessels are held for use and we have not sold any vessels as we focus on maximizing the cash flow of the Company which is distributed quarterly to our shareholders. We therefore believe that the estimated future cash flow together with the Company's stock price on the NYSE are key elements in the valuation of our company.
The Company's responses, together with the Staff's comments, are set forth below:
Risk Factors, page 5
If our vessels call on ports located in countries that are subject to restrictions imposed by the U.S. or other governments, that could adversely affect our reputation and the market for our common stock, page 12.
1.
In light of your statement that from time to time, vessels in your fleet call on ports in countries identified by the U.S. government as state sponsors of terrorism, please represent to us that in future filings you will delete "If" from your risk factor heading, so that it is clear from the heading that your vessels do, in fact, call on ports in countries that have been designated as state sponsors of terrorism.
The Company hereby undertakes that in future filings it will not use the term "if" in the risk factor heading relating to its vessels calling on ports located in countries that are subject to restrictions imposed by the U.S. or other governments.
2.
You state that your vessels call on ports located in countries identified by the U.S. government as state sponsors of terrorism. Please represent to us that in future filings you will revise your risk factor disclosure to name the countries identified by the U.S. government as state sponsors of terrorism to which you refer.
In this regard, we note that Cuba, Iran, Sudan, and Syria are identified by the U.S. Department of State as state sponsors of terrorism, and are subject to U.S. economic sanctions and export controls. Your annual report does not include disclosure regarding contacts with those countries. Describe to us the nature and extent of any past, current, and anticipated contacts with Cuba, Iran, Sudan, and Syria, whether through subsidiaries, or other direct or indirect arrangements, since your letters to us dated February 6, 2009 and March 30, 2009. Further, you should describe to us any goods, fees, or services you have provided or anticipate providing, directly or indirectly, to the referenced countries, and any agreements, commercial arrangements, or other contracts you have had, or intend to have, directly or indirectly, with the governments or entities controlled by the governments of those countries.
The Company hereby undertakes that in future filings it will identify the specific countries, if any, to which its risk factor concerning vessels calling on ports located in countries that are subject to restrictions imposed by the U.S. or other governments relates.
In March 2010, the Company announced that it decided to place all its vessels in one spot market cooperation, which was effective from July 1, 2010. We currently operate all of our existing vessels in a spot market cooperation with other vessels that are not owned by us. The cooperation has the responsibility for the commercial management of the participating vessels including chartering, operating, marketing and purchasing bunker (fuel oil) for the vessels. The earnings of all of the vessels are aggregated and divided by the actual earning days each vessel was available during the period, which means that the Company does not receive revenues that are identified as having accrued from any specific voyage.
During the period since our letters to the Commission dated February 6, 2009 and March 30, 2009 through June 30, 2010, we have operated all of our spot trading vessels in cooperative arrangements with Frontline Limited and the Swedish group, Stena Bulk AB.
None of the Company's vessels has ever called at ports in Cuba or Syria.
Six of the Company`s vessels called on Marsa Bashayer, Sudan, during the years ended December 31, 2009 and December 31, 2010, in order to load oil cargoes. These six vessels called 17 times in total during the year ended December 31, 2010, and called 11 times in total during the year ended December 31, 2009. As stated above, the earnings of all of the vessels are aggregated and divided by the actual earning days each vessel was available during the period, which means that the Company does not receive revenues that are identified as having accrued from any specific voyage. As a result, the Company does not receive revenues identified to the calls on Marsa Bashayer other than its share of the revenues calculated across the group of vessels managed by the administrator as a whole during the period. These vessels do not employ U.S. citizens and did not carry U.S.-origin cargoes. Finally, the Company does not pay expenses related to the calls on Marsa Bashayer, including payments to Sudanese port authorities for docking and other services, other than its share of the expenses calculated across the group of vessels managed by the administrator as a whole during the period.
One of the Company's vessels called one time on Kharg Island, Iran, on March, 14, 2010. One of the Company's vessels called on Kharg Island, Iran, once, and called on Sirri Island, Iran, once during the year ended December 31, 2009. As stated above, the earnings of all of the vessels are aggregated and divided by the actual earning days each vessel was available during the period, which means that the Company does not receive revenues that are identified as having accrued from any specific voyage. As a result, the Company did not receive revenues identified to the calls on Kharg Island or Sirri Island, Iran.
During period since our letters to the Commission dated February 6, 2009 and March 30, 2009 through December 31, 2010, the cooperation arrangement subchartered the Company's vessels to third parties. These spot charterers determine the ports on which the Company's vessels call.
The Company has not provided, nor does it anticipate providing, any goods, fees, or services, directly or indirectly, to the referenced countries. The Company does not have, nor does it intend to have, any agreements, commercial arrangements, or other contacts, directly or indirectly, with the governments or entities controlled by the governments of those countries.
3.
Please discuss for us the materiality of any contacts with Cuba, Iran, Sudan, and Syria you describe in response to the foregoing comment, and whether those contacts constitute a material investment risk for your security holders. You should address materiality in quantitative terms, including the approximate dollar amounts of any revenues, assets, and liabilities associated with each of the referenced countries since your prior letters. Also, address materiality in terms of qualitative factors that a reasonable investor would deem important in making an investment decision, including the potential impact of corporate activities upon a company's reputation and share value. As you know, various state and municipal governments, universities, and other investors have proposed or adopted divestment or similar initiatives regarding investment in companies that do business with U.S.-designated state sponsors of terrorism. Your materiality analysis should address the potential impact of the investor sentiment evidenced by such actions directed toward companies that have contacts with Cuba, Iran, Sudan, or Syria.
The Company has not been involved in business to and from Cuba or Syria.
The Company has been informed by one of the cooperative arrangements that port calls by our vessels to Sudan contributed to the cooperative arrangements total net voyage revenue of 3.3% during the year ended December, 2009, and 5.5% during the year ended December, 2010, respectively. The Company has been informed by the cooperative arrangements that port calls by our vessels to Iran contributed to the cooperative arrangements total net voyage revenue of 0.9% during the year ended December 2009, and 0.2% during the year ended December 2010, respectively. Port costs paid on these calls have been paid by the cooperation arrangement.
Accordingly, the Company believes that its business to and from Sudan and Iran during the periods described above was not material from a quantitative viewpoint or otherwise and should not be considered as posing a material investment risk for its security holders.
The Company has also concluded that the payments made to Sudanese and Iranian port authorities by the cooperation arrangement are qualitatively or otherwise immaterial to the Company's reputation and share price.
The Company was listed on the American Stock Exchange from 1995 to 2004 when it moved its listing to the New York Stock Exchange. The Company believes that since that time, U.S. investors in general and the Company's shareholders in particular, have become familiar with the international energy markets in which the supply of oil by ship plays a key role. The Company believes that U.S. investors in the energy industry understand that sources of oil include Sudan.
The Company notes the Staff's comments that a number of states, universities and other investors have taken a variety of positions with respect to investments in companies that do business with countries identified as state sponsors of terrorism. The Staff states that the
Company's qualitative materiality analysis should address the potential impact of investor sentiment evidenced by such actions concerning companies with operations associated with Sudan. As the Company's business contacts with Sudan and Iran have been infrequent and relatively minor in scope, the Company does not believe that such contacts are qualitatively or otherwise material to a reasonable investor's investment decision.
Item 5. Operating and Financial Review and Prospects, page 34
A.
Operating Results, page 34
4.
We note that voyage expenses are $0 for the year ended December 31, 2010, which is a significant decrease from the amount recognized during 2009 and 2008. Please explain to us, and revise your disclosure in future filings to explain why there were no voyage expenses during 2010. For example, you disclose that voyage expenses decreased by 100% to $0 in 2010 from $9 million in 2009 but you do not explain the reason(s) for the decrease. Your response and revised disclosure should explain the nature of any changes in the way your business operated in 2010 as compared to 2009 and 2008 and explain any changes in the types of pooling arrangements and how those arrangements are accounted for in your financial statements.
The Company notes that the 100% decrease in voyage expenses during 2010 was attributable to the fact that all of our vessels during 2010 were operated pursuant to arrangements that were accounted for on a net basis in accordance with ASC 605-45. Accordingly, all voyage revenues were presented net of voyage expenses.
During each of 2009 and 2008, four vessels were temporarily operated on spot charters and accounted for on a gross basis in accordance with ASC 605-45. As such, the voyage revenues and expenses attributable to such arrangements were presented gross on the Company's statements of income.
A detailed description of the Company's arrangements and the circumstances in which such arrangements are accounted for on a gross basis versus a net basis is provided as follows.
Cooperative Arrangements:
In a cooperative arrangement the commercial management of all participating vessels is the responsibility of the administrator of the arrangement. The participating vessels are owned by several tanker owners. Commercial management of the participating vessels includes marketing, chartering, operating and purchasing bunkers (fuel oil) for the vessels. The earnings of all of the vessels are aggregated and divided by the actual earning days each vessel was available during the period. The owners of the participating vessels remain responsible for all other costs including the financing, insurance, crewing and technical management of their vessels.
All cooperative arrangements in which we have participated since 2008 have been accounted for on a net basis. When deciding whether to account for a specific arrangement on a net or gross basis we have considered the indicators as laid out in ASC 605-45 to decide if we are the primary obligor in the arrangement or not. For cooperative arrangements, our analysis includes the following:
The revenues are aggregated within the cooperative arrangement and divided among the participants. The revenue is not fixed as it is dependent upon the outcome of all participating vessels' activities and not only the outcome of our own vessels activities. In accordance with ASC 605-45 the fact that revenues appear to be variable is an indicator of gross presentation however the lack of direct influence on the level of revenue created is an indicator of a net presentation. The administrator of the arrangement is responsible for all aspects of commercial operations, including the collection of freight revenues and the payment of voyage expenses. Our Company is not directly providing any part of the services requested by the customer, is not in a position to choose suppliers for the voyage expenses, and has no practical influence on the specifics of the service. These factors point towards net presentation.
Finally, the Company's exposure to credit risk is limited to its share of revenues from the arrangement, meaning that the credit risk is solely for the net amount due from the Commercial manager operating the arrangement. The cooperative arrangement maintains the credit risk related to the charterers, as it has the responsibility for collecting the charter hire from a customer and must pay the amount owed to a supplier after the supplier performs, regardless of whether the charter hire is fully collected. This is also an indicator of net reporting.
Although conditions can be found supporting both a net and a gross presentation, the Company considers it appropriate to present this type of arrangement on a net basis in the Statement of Operations based on the combined analysis of relevant factors as described above.
Bareboat charters:
Revenues from bareboat charters are recorded at a fixed charter hire rate per day over the term of the charter. The charter hire is payable monthly in advance. Dur
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CORRESP
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d1213870_corresp.htm
NORDIC AMERICAN TANKERS LIMITED
LOM Building, 27 Reid Street
Hamilton, HM 11, Bermuda
July 20, 2011
Securities and Exchange Commission
Division of Corporation Finance
100F Street, N.E
Washington, D.C. 20549
USA
Attention: Linda Cvrkel, Esq.
Branch Chief
Re:
Nordic American Tankers Limited (formerly known
as Nordic American Tanker Shipping Limited)
Form 20-F for the year ended December 31, 2010
Filed April 21, 2011
File No. 001-13944
Dear Ms. Cvrkel,
By letter dated June 9, 2011 addressed to the undersigned, the Staff of the Securities and Exchange Commission (the "Staff") provided comments to the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2010.
The Company was formed for the purpose of acquiring and chartering Suezmax tankers only, designated for transportation of crude oil. The Company has grown from three to 19 Suezmax tankers in less than seven years and the original three vessels are still in our fleet. The Company has a unique business model which differs from other tanker companies. The Company's strategy is focused on dividend accretive growth through vessel acquisitions, operating one type of vessel, cash breakeven rate, which currently is about $11,000 per day per vessel, spot market exposure, strong balance sheet and available financial resources. All of the Company's vessels acquisitions are financed with proceeds from issuance of common stock or by a limited amount of debt as the case may be. Our vessels are held for use and we have not sold any vessels as we focus on maximizing the cash flow of the Company which is distributed quarterly to our shareholders. We therefore believe that the estimated future cash flow together with the Company's stock price on the NYSE are key elements in the valuation of our company.
The Company's responses, together with the Staff's comments, are set forth below:
Risk Factors, page 5
If our vessels call on ports located in countries that are subject to restrictions imposed by the U.S. or other governments, that could adversely affect our reputation and the market for our common stock, page 12.
1.
In light of your statement that from time to time, vessels in your fleet call on ports in countries identified by the U.S. government as state sponsors of terrorism, please represent to us that in future filings you will delete "If" from your risk factor heading, so that it is clear from the heading that your vessels do, in fact, call on ports in countries that have been designated as state sponsors of terrorism.
The Company hereby undertakes that in future filings it will not use the term "if" in the risk factor heading relating to its vessels calling on ports located in countries that are subject to restrictions imposed by the U.S. or other governments.
2.
You state that your vessels call on ports located in countries identified by the U.S. government as state sponsors of terrorism. Please represent to us that in future filings you will revise your risk factor disclosure to name the countries identified by the U.S. government as state sponsors of terrorism to which you refer.
In this regard, we note that Cuba, Iran, Sudan, and Syria are identified by the U.S. Department of State as state sponsors of terrorism, and are subject to U.S. economic sanctions and export controls. Your annual report does not include disclosure regarding contacts with those countries. Describe to us the nature and extent of any past, current, and anticipated contacts with Cuba, Iran, Sudan, and Syria, whether through subsidiaries, or other direct or indirect arrangements, since your letters to us dated February 6, 2009 and March 30, 2009. Further, you should describe to us any goods, fees, or services you have provided or anticipate providing, directly or indirectly, to the referenced countries, and any agreements, commercial arrangements, or other contracts you have had, or intend to have, directly or indirectly, with the governments or entities controlled by the governments of those countries.
The Company hereby undertakes that in future filings it will identify the specific countries, if any, to which its risk factor concerning vessels calling on ports located in countries that are subject to restrictions imposed by the U.S. or other governments relates.
2
In March 2010, the Company announced that it decided to place all its vessels in one spot market cooperation, which was effective from July 1, 2010. We currently operate all of our existing vessels in a spot market cooperation with other vessels that are not owned by us. The cooperation has the responsibility for the commercial management of the participating vessels including chartering, operating, marketing and purchasing bunker (fuel oil) for the vessels. The earnings of all of the vessels are aggregated and divided by the actual earning days each vessel was available during the period, which means that the Company does not receive revenues that are identified as having accrued from any specific voyage.
During the period since our letters to the Commission dated February 6, 2009 and March 30, 2009 through June 30, 2010, we have operated all of our spot trading vessels in cooperative arrangements with Frontline Limited and the Swedish group, Stena Bulk AB.
None of the Company's vessels has ever called at ports in Cuba or Syria.
Six of the Company`s vessels called on Marsa Bashayer, Sudan, during the years ended December 31, 2009 and December 31, 2010, in order to load oil cargoes. These six vessels called 17 times in total during the year ended December 31, 2010, and called 11 times in total during the year ended December 31, 2009. As stated above, the earnings of all of the vessels are aggregated and divided by the actual earning days each vessel was available during the period, which means that the Company does not receive revenues that are identified as having accrued from any specific voyage. As a result, the Company does not receive revenues identified to the calls on Marsa Bashayer other than its share of the revenues calculated across the group of vessels managed by the administrator as a whole during the period. These vessels do not employ U.S. citizens and did not carry U.S.-origin cargoes. Finally, the Company does not pay expenses related to the calls on Marsa Bashayer, including payments to Sudanese port authorities for docking and other services, other than its share of the expenses calculated across the group of vessels managed by the administrator as a whole during the period.
One of the Company's vessels called one time on Kharg Island, Iran, on March, 14, 2010. One of the Company's vessels called on Kharg Island, Iran, once, and called on Sirri Island, Iran, once during the year ended December 31, 2009. As stated above, the earnings of all of the vessels are aggregated and divided by the actual earning days each vessel was available during the period, which means that the Company does not receive revenues that are identified as having accrued from any specific voyage. As a result, the Company did not receive revenues identified to the calls on Kharg Island or Sirri Island, Iran.
During period since our letters to the Commission dated February 6, 2009 and March 30, 2009 through December 31, 2010, the cooperation arrangement subchartered the Company's vessels to third parties. These spot charterers determine the ports on which the Company's vessels call.
The Company has not provided, nor does it anticipate providing, any goods, fees, or services, directly or indirectly, to the referenced countries. The Company does not have, nor does it intend to have, any agreements, commercial arrangements, or other contacts, directly or indirectly, with the governments or entities controlled by the governments of those countries.
3
3.
Please discuss for us the materiality of any contacts with Cuba, Iran, Sudan, and Syria you describe in response to the foregoing comment, and whether those contacts constitute a material investment risk for your security holders. You should address materiality in quantitative terms, including the approximate dollar amounts of any revenues, assets, and liabilities associated with each of the referenced countries since your prior letters. Also, address materiality in terms of qualitative factors that a reasonable investor would deem important in making an investment decision, including the potential impact of corporate activities upon a company's reputation and share value. As you know, various state and municipal governments, universities, and other investors have proposed or adopted divestment or similar initiatives regarding investment in companies that do business with U.S.-designated state sponsors of terrorism. Your materiality analysis should address the potential impact of the investor sentiment evidenced by such actions directed toward companies that have contacts with Cuba, Iran, Sudan, or Syria.
The Company has not been involved in business to and from Cuba or Syria.
The Company has been informed by one of the cooperative arrangements that port calls by our vessels to Sudan contributed to the cooperative arrangements total net voyage revenue of 3.3% during the year ended December, 2009, and 5.5% during the year ended December, 2010, respectively. The Company has been informed by the cooperative arrangements that port calls by our vessels to Iran contributed to the cooperative arrangements total net voyage revenue of 0.9% during the year ended December 2009, and 0.2% during the year ended December 2010, respectively. Port costs paid on these calls have been paid by the cooperation arrangement.
Accordingly, the Company believes that its business to and from Sudan and Iran during the periods described above was not material from a quantitative viewpoint or otherwise and should not be considered as posing a material investment risk for its security holders.
The Company has also concluded that the payments made to Sudanese and Iranian port authorities by the cooperation arrangement are qualitatively or otherwise immaterial to the Company's reputation and share price.
The Company was listed on the American Stock Exchange from 1995 to 2004 when it moved its listing to the New York Stock Exchange. The Company believes that since that time, U.S. investors in general and the Company's shareholders in particular, have become familiar with the international energy markets in which the supply of oil by ship plays a key role. The Company believes that U.S. investors in the energy industry understand that sources of oil include Sudan.
The Company notes the Staff's comments that a number of states, universities and other investors have taken a variety of positions with respect to investments in companies that do business with countries identified as state sponsors of terrorism. The Staff states that the
Company's qualitative materiality analysis should address the potential impact of investor sentiment evidenced by such actions concerning companies with operations associated with Sudan. As the Company's business contacts with Sudan and Iran have been infrequent and relatively minor in scope, the Company does not believe that such contacts are qualitatively or otherwise material to a reasonable investor's investment decision.
4
Item 5. Operating and Financial Review and Prospects, page 34
A.
Operating Results, page 34
4.
We note that voyage expenses are $0 for the year ended December 31, 2010, which is a significant decrease from the amount recognized during 2009 and 2008. Please explain to us, and revise your disclosure in future filings to explain why there were no voyage expenses during 2010. For example, you disclose that voyage expenses decreased by 100% to $0 in 2010 from $9 million in 2009 but you do not explain the reason(s) for the decrease. Your response and revised disclosure should explain the nature of any changes in the way your business operated in 2010 as compared to 2009 and 2008 and explain any changes in the types of pooling arrangements and how those arrangements are accounted for in your financial statements.
The Company notes that the 100% decrease in voyage expenses during 2010 was attributable to the fact that all of our vessels during 2010 were operated pursuant to arrangements that were accounted for on a net basis in accordance with ASC 605-45. Accordingly, all voyage revenues were presented net of voyage expenses.
During each of 2009 and 2008, four vessels were temporarily operated on spot charters and accounted for on a gross basis in accordance with ASC 605-45. As such, the voyage revenues and expenses attributable to such arrangements were presented gross on the Company's statements of income.
A detailed description of the Company's arrangements and the circumstances in which such arrangements are accounted for on a gross basis versus a net basis is provided as follows.
Cooperative Arrangements:
In a cooperative arrangement the commercial management of all participating vessels is the responsibility of the administrator of the arrangement. The participating vessels are owned by several tanker owners. Commercial management of the participating vessels includes marketing, chartering, operating and purchasing bunkers (fuel oil) for the vessels. The earnings of all of the vessels are aggregated and divided by the actual earning days each vessel was available during the period. The owners of the participating vessels remain responsible for all other costs including the financing, insurance, crewing and technical management of their vessels.
5
All cooperative arrangements in which we have participated since 2008 have been accounted for on a net basis. When deciding whether to account for a specific arrangement on a net or gross basis we have considered the indicators as laid out in ASC 605-45 to decide if we are the primary obligor in the arrangement or not. For cooperative arrangements, our analysis includes the following:
The revenues are aggregated within the cooperative arrangement and divided among the participants. The revenue is not fixed as it is dependent upon the outcome of all participating vessels' activities and not only the outcome of our own vessels activities. In accordance with ASC 605-45 the fact that revenues appear to be variable is an indicator of gross presentation however the lack of direct influence on the level of revenue created is an indicator of a net presentation. The administrator of the arrangement is responsible for all aspects of commercial operations, including the collection of freight revenues and the payment of voyage expenses. Our Company is not directly providing any part of the services requested by the customer, is not in a position to choose suppliers for the voyage expenses, and has no practical influence on the specifics of the service. These factors point towards net presentation.
Finally, the Company's exposure to credit risk is limited to its share of revenues from the arrangement, meaning that the credit risk is solely for the net amount due from the Commercial manager operating the arrangement. The cooperative arrangement maintains the credit risk related to the charterers, as it has the responsibility for collecting the charter hire from a customer and must pay the amount owed to a supplier after the supplier performs, regardless of whether the charter hire is fully collected. This is also an indicator of net reporting.
Although conditions can be found supporting both a net and a gross presentation, the Company considers it appropriate to present this type of arrangement on a net basis in the Statement of Operations based on the combined analysis of relevant factors as described above.
Bareboat charters:
Revenues from bareboat charters are recorded at a fixed charter hire rate per day over the term of the charter. The charter hire is payable monthly in advance. Dur