SEC Company Response from NORDIC AMERICAN TANKERS Ltd (NAT) (CIK 0001000177) (NAT) — Jan 19, 2018
NORDIC AMERICAN TANKERS Ltd (NAT) (CIK 0001000177)
Date: Jan. 19, 2018 · CIK: 0001000177 · Accession: 0000919574-18-000510
AI Filing Summary & Sentiment
File numbers found in text: 001-13944
Referenced dates: December 15, 2017
Letter
VIA EDGAR United States Securities and Exchange Commission Nordic American Tankers Limited Form 20-F for the Fiscal Year Ended December 31, 2016 Filed May 1, 2017 File No. 001-13944
Dear Ms. Raminpour:
We refer to the annual report on Form 20-F, filed by Nordic American Tankers Limited (the "Company") with the Securities and Exchange Commission (the "Commission") on May 1, 2017 (the "Annual Report"). By letter dated December 15, 2017 (the "Comment Letter"), the staff of the Commission (the "Staff") provided the Company with its comments to the Annual Report.
The following numbered paragraphs of this letter correspond to the numbered paragraphs of the Comment Letter. For your convenience, each response is prefaced by the exact text of the Staff's corresponding comment in bold text.
General
1.
We note that on June 22, 2017 and December 12, 2017 you filed on Forms 6-K your 2017 first and third quarter earnings releases, respectively. We also note that your website provides an earnings release to your investors for the second quarter of 2017. Please file your second quarter 2017 earnings release on Form 6-K. Refer to General Instruction B of Form 6-K.
On December 18, 2017, the Company filed its second quarter 2017 earnings release on Form 6-K.
Melissa Raminpour
Securities and Exchange Commission
January 19, 2018
Page 2
Form 20-F for Fiscal Year Ended December 31, 2016
Item 3 — Key Information
D. — Risk Factors, page 4
From time to time, our vessels call on ports located in countries that are subject to restrictions imposed by the U.S. or other governments, which could adversely affect our reputation and the market for our common stock, page 11
2.
In your letter to us dated August 15, 2015, you described your vessels' calls on ports in Sudan. You disclose in the Form 20-F that your vessels may, on charterers' instructions, call on ports in Sudan. Sudan is identified by the U.S. Department of State as a state sponsor of terrorism, and is subject to U.S. export controls. You do not discuss in the Form 20-F contacts with Sudan. Please describe to us the nature and extent of any past, current and anticipated contacts with Sudan since the referenced letter, whether through subsidiaries, charterers, or other direct or indirect arrangements. You should describe any goods, services or fees you have provided into Sudan, directly or indirectly, and any agreements, arrangements or other contacts you have had with the government of Sudan or entities it controls.
We emphasize that neither the vessels nor the Company employs U.S. citizens and does not carry U.S.-origin cargoes in connection with the business in the port of Bashayer in North Sudan. The Company's vessels have only made calls at this port in North Sudan.
13 vessels owned by the Company made 21 calls to North Sudan during 2015. These calls involved loading of oil cargoes in the North Sudanese port of Bashayer to be carried to international locations outside of the United States pursuant to voyage charters with non-U.S. charterers. During these calls in 2015, the Company incurred approximately $532,000 in port charges which were paid to local port authorities. To our knowledge there is only one oil port in North Sudan.
16 vessels owned by the Company made 25 calls to North Sudan during 2016. All of these calls involved loading of oil cargoes in the North Sudanese port of Bashayer to be carried to international locations outside of the United States pursuant to voyage charters with non-U.S. charterers. During these calls in 2016, the Company incurred approximately $620,000 in port charges which were paid to local port authorities.
During 2017 the oil lifted in our suezmax tankers was reduced compared with 2015 and 2016. 4 vessels owned by the Company made 6 calls to North Sudan for the nine months ended September 30, 2017. All of these calls involved loading of oil cargoes in the North Sudanese port of Bashayer to be carried to international locations outside of the United States pursuant to voyage charters with non-U.S. charterers. During these calls in 2017, the Company incurred approximately $151,000 in port charges which were paid to local port authorities.
Other than as set forth above, the Company has not provided any goods, services or fees into North Sudan, directly or indirectly, and the Company has no agreements, arrangements or other contacts with the government of North Sudan.
All of the Company's vessels are operating in the spot- and time-charter market, and the loading and discharging ports are determined by our customers. The Company can therefore not estimate if any future charterers will choose to conduct voyages to North Sudan.
Please see the map of North Sudan and South Sudan attached hereto under Exhibit A.
Melissa Raminpour
Securities and Exchange Commission
January 19, 2018
Page 3
3.
Please tell us the approximate dollar amounts of any revenues, assets and liabilities associated with Sudan for the last three fiscal years and the subsequent interim period.
The Company advises that it has no assets or liabilities associated with North Sudan for the last three fiscal years and neither the Company nor its subsidiaries have entered into or have any future plans to enter into any contracts, agreements or other arrangements with the government of North Sudan or any entities controlled by the government of North Sudan, including any entities organized in these countries, and as a result, the Company has not earned any revenues directly from this government or entities controlled by this government during the last three fiscal years or the subsequent interim period.
The Company advises that it has no assets or liabilities associated with North Sudan for the last three fiscal years and it earned the following amounts of net voyage revenue from calls to North Sudan during 2014, 2015, 2016 and the subsequent interim period:
Fiscal year 2014: $41.5 million
Fiscal year 2015: $46.6 million
Fiscal year 2016: $60.7 million
For the nine months ended September 30, 2017: $12.9 million
Item 5 — Operating and Financial Review and Prospects, page 32
H. — Critical Accounting Policies, page 39
Vessel Impairment, page 41
4.
We note that your estimates of TCE use average estimated day rates provided by Marex for the first and second year and the average 15-year Suezmax Earnings Trend from Clarksons for the years thereafter. We also note that both are adjusted to estimate the actual TCE used to estimate the impairment of your vessels. Please tell us and revise your future filings to discuss the following:
·
your methodology of weighting these rates, including whether you considered a probability-weighted approach as discussed at ASC 360-10-35-30
·
any adjustments made to your final determination of actual TCE
·
why you use different sources for your rates in the first and second year assumptions as compared to the years thereafter
·
whether you consider inflation in your projections for operating expenses; and
·
your consideration of the possible sale of your vessels given the challenging market and the event of default on your credit facility per ASC 360-10-35-30.
Melissa Raminpour
Securities and Exchange Commission
January 19, 2018
Page 4
It would be helpful if you could provide us with an example of your calculation of actual TCE.
·
your methodology of weighting these rates, including whether you considered a probability-weighted approach as discussed at ASC 360-10-35-30
We have not applied a probability-weighted approach as discussed at ASC 360-10-35-30, as we believe that applying the combination of Marex forward rates and historical average rates (please see further response below) best captures the cyclical and volatile market conditions in our industry over time. The Company considered all conditions and available evidence that existed as of December 31, 2016 to estimate the future cash flows used to test the recoverability of our vessels including considering whether applying a probability-weighted approach may be useful.
Furthermore, our internal cash flow assumptions in accordance with ASC 360-10-35-30 purposely did not include alternative courses of action, as noted by the standard, such as potential sale of vessels before the end of their estimated useful lives.
·
any adjustments made to your final determination of actual TCE
We have made adjustments to the Marex forward rates and historical Clarksons rates to adjust for differences between these rates and the Company's actual performance.
Where the Company's observed historical entity-specific performance indicates a different rate than published by Marex, we have adjusted the two-year forward rates applied in the impairment model to match the Company's historical performance against the Marex rates. We have 13 years of entity-specific history that we have used to compare with 13 years of historical data from Marex. The comparison resulted in a required adjustment to decrease the Marex –forward rate by 2.5% to arrive at the Company's day rates utilized for the first two years in the impairment model. Please refer to Appendix I for an example of our calculation of actual TCE.
For the years thereafter (from year 3 to the end of each vessel's useful economic life) we have applied the 15-year Suezmax Earnings trend from Clarksons, applying a similar adjustment methodology as explained for the Marex rate, in which we have compared the Company's actual historical performance over the last 13 years to the historical rates obtained from Clarkson for the same period. We have used the preceding thirteen-year period, as opposed to a longer period, as this is the period we have necessary data available for actual TCE related to our own vessels.
We perform a comparison of a thirteen year period and apply the adjustment to the 15-year average (as per above). The adjustment to the 15-year historical average charter rates is considered to not have a significant impact, as opposed to applying the Company's historical actual TCE rates, on the impairment model per Dec 31, 2016. There will not be a need for this adjustment at the time when the Company has 15 years of trading history available, as we expect to apply our own historical achieved rates at that time.
Melissa Raminpour
Securities and Exchange Commission
January 19, 2018
Page 5
·
why you use different sources for your rates in the first and second year assumptions as compared to the years thereafter
As disclosed on page 41 of the 20-F, in estimating TCE, the Company has applied Marex forward day rates as the basis for the first two years and 15-year historical day rates for the years thereafter.
The Company used different sources for the rates for the first and second year assumptions as the Marex forward rates are only available for the first and second year (available forward rate estimate periods). We have used the Marex forward rates, as opposed to Clarksons forward rates or any other forward rates, as the Company has historically tracked the Marex forward rates against the Company's achieved rates, and thus we have a better understanding of how the Marex forward rates correlate to the Company's achieved rates than any other forward rates.
Using this external data for the first and second year is considered a more precise forecast as it captures the shorter-term expected market development of our business. We believe using the Marex rates for the first and second year results in a more accurate impairment model than if we were to apply the 15-year historical date rates for this period. We note that we have consistently applied the approach of using the adjusted 15-year Suezmax Earnings trend from Clarksons and the adjusted Marex forward rates in our previous impairment assessments.
For the years thereafter, we believe historical market information is a reasonable proxy for our specific cash flows based on our existing business strategy. We operate in a cyclical and volatile market environment. The Company utilized the 15-year historical average charter rates specific for our type of vessels, as this average is most likely to encompass the charter rate cycles that the Company's fleet will experience over its remaining expected useful life.
This approach included objective data reflecting both positive and negative cycles impacting our business and by using a long-term average we will, in our opinion, capture the high, low and average trends in the market. The Company considered using a different time period in our vessel impairment model, however, it is our opinion that the historical average charter rates for the trailing one, five, and 10-year periods are each too short a time frame, and do not necessarily include the peaks and troughs of the market cycle.
Based on this, we believe that a 15-year historical average remains the best basis for estimating future cash flows beyond the first two years.
Melissa Raminpour
Securities and Exchange Commission
January 19, 2018
Page 6
·
whether you consider inflation in your projections for operating expenses; and
In our projections for operating expenses, we have applied approximately a one percent compounded growth factor for the operating expenses. We have only applied this growth factor to the operating expenses and have not applied any growth factor in projecting our future revenue estimates.
When estimating the future increase in operating expenses, we have analyzed the development in our operating expenses over the last thirteen years (2004-2016). We have calculated the average increase per year in the operating expenses based on our actual historical entity-specific data.
We have used the preceding thirteen-year period, as opposed to a longer period, as this is the period we have necessary data available for operating expenses related to our own vessels.
·
your consideration of the possible sale of your vessels given the challenging market and the event of default on your credit facility per ASC 360-10-35-30.
The Company has never sold one of its vessels and it is the Company's policy and strategy to hold vessels in use for the long-term as the Company believes that the vessels will each generate profitable cash flows over this time. The Company did not at December 31, 2016 (and does not) anticipate or consider any need for the sale of any vessels, potentially realizing a loss on such a vessel sale, when performing our impairment analysis (ASC 360-10-35-30).
In light of the Staff's comment, the Company will revise its disclosure in future filings of its Annual Report on Form 20-F to include the additional information as discussed above.
Goodwill, page 43
5.
We note that you have one reporting unit with goodwill attributed to it. We also note that you performed a goodwill impairment assessment as of December 31, 2016 using an income valuation approach and the estimated fair value of your reporting unit exceeded its carrying value. We note from your accounting policy on page F-13 (Goodwill) that you use a discounted cash flow model to determine the fair value of a reporting unit unless there is a readily determinable fair market value. Further, we note that your market capitalization was lower than the book value of stockholders' equity at December 31, 2016. Please respond to the following:
·
Tell us and revise your future filings to disclose the percentage by which the fair value of the reporting unit exceeded the carrying value.
Melissa Raminpour
Securities and Exchange Commission
Show Raw Text
CORRESP 1 filename1.htm Seward & Kissel llp ONE BATTERY PARK PLAZA NEW YORK, NEW YORK 10004 TELEPHONE: (212) 574-1200 FACSIMILE: (212) 480-8421 WWW.SEWKIS.COM 901 K STREET, NW WASHINGTON, D.C. 20001 TELEPHONE: (202) 737-8833 FACSIMILE: (202) 737-5184 January 19, 2018 VIA EDGAR Melissa Raminpour Branch Chief, Office of Transportation and Leisure United States Securities and Exchange Commission 100 F Street N.E. Washington, DC 20549-5546 Re: Nordic American Tankers Limited Form 20-F for the Fiscal Year Ended December 31, 2016 Filed May 1, 2017 File No. 001-13944 Dear Ms. Raminpour: We refer to the annual report on Form 20-F, filed by Nordic American Tankers Limited (the "Company") with the Securities and Exchange Commission (the "Commission") on May 1, 2017 (the "Annual Report"). By letter dated December 15, 2017 (the "Comment Letter"), the staff of the Commission (the "Staff") provided the Company with its comments to the Annual Report. The following numbered paragraphs of this letter correspond to the numbered paragraphs of the Comment Letter. For your convenience, each response is prefaced by the exact text of the Staff's corresponding comment in bold text. General 1. We note that on June 22, 2017 and December 12, 2017 you filed on Forms 6-K your 2017 first and third quarter earnings releases, respectively. We also note that your website provides an earnings release to your investors for the second quarter of 2017. Please file your second quarter 2017 earnings release on Form 6-K. Refer to General Instruction B of Form 6-K. On December 18, 2017, the Company filed its second quarter 2017 earnings release on Form 6-K. Melissa Raminpour Securities and Exchange Commission January 19, 2018 Page 2 Form 20-F for Fiscal Year Ended December 31, 2016 Item 3 — Key Information D. — Risk Factors, page 4 From time to time, our vessels call on ports located in countries that are subject to restrictions imposed by the U.S. or other governments, which could adversely affect our reputation and the market for our common stock, page 11 2. In your letter to us dated August 15, 2015, you described your vessels' calls on ports in Sudan. You disclose in the Form 20-F that your vessels may, on charterers' instructions, call on ports in Sudan. Sudan is identified by the U.S. Department of State as a state sponsor of terrorism, and is subject to U.S. export controls. You do not discuss in the Form 20-F contacts with Sudan. Please describe to us the nature and extent of any past, current and anticipated contacts with Sudan since the referenced letter, whether through subsidiaries, charterers, or other direct or indirect arrangements. You should describe any goods, services or fees you have provided into Sudan, directly or indirectly, and any agreements, arrangements or other contacts you have had with the government of Sudan or entities it controls. We emphasize that neither the vessels nor the Company employs U.S. citizens and does not carry U.S.-origin cargoes in connection with the business in the port of Bashayer in North Sudan. The Company's vessels have only made calls at this port in North Sudan. 13 vessels owned by the Company made 21 calls to North Sudan during 2015. These calls involved loading of oil cargoes in the North Sudanese port of Bashayer to be carried to international locations outside of the United States pursuant to voyage charters with non-U.S. charterers. During these calls in 2015, the Company incurred approximately $532,000 in port charges which were paid to local port authorities. To our knowledge there is only one oil port in North Sudan. 16 vessels owned by the Company made 25 calls to North Sudan during 2016. All of these calls involved loading of oil cargoes in the North Sudanese port of Bashayer to be carried to international locations outside of the United States pursuant to voyage charters with non-U.S. charterers. During these calls in 2016, the Company incurred approximately $620,000 in port charges which were paid to local port authorities. During 2017 the oil lifted in our suezmax tankers was reduced compared with 2015 and 2016. 4 vessels owned by the Company made 6 calls to North Sudan for the nine months ended September 30, 2017. All of these calls involved loading of oil cargoes in the North Sudanese port of Bashayer to be carried to international locations outside of the United States pursuant to voyage charters with non-U.S. charterers. During these calls in 2017, the Company incurred approximately $151,000 in port charges which were paid to local port authorities. Other than as set forth above, the Company has not provided any goods, services or fees into North Sudan, directly or indirectly, and the Company has no agreements, arrangements or other contacts with the government of North Sudan. All of the Company's vessels are operating in the spot- and time-charter market, and the loading and discharging ports are determined by our customers. The Company can therefore not estimate if any future charterers will choose to conduct voyages to North Sudan. Please see the map of North Sudan and South Sudan attached hereto under Exhibit A. Melissa Raminpour Securities and Exchange Commission January 19, 2018 Page 3 3. Please tell us the approximate dollar amounts of any revenues, assets and liabilities associated with Sudan for the last three fiscal years and the subsequent interim period. The Company advises that it has no assets or liabilities associated with North Sudan for the last three fiscal years and neither the Company nor its subsidiaries have entered into or have any future plans to enter into any contracts, agreements or other arrangements with the government of North Sudan or any entities controlled by the government of North Sudan, including any entities organized in these countries, and as a result, the Company has not earned any revenues directly from this government or entities controlled by this government during the last three fiscal years or the subsequent interim period. The Company advises that it has no assets or liabilities associated with North Sudan for the last three fiscal years and it earned the following amounts of net voyage revenue from calls to North Sudan during 2014, 2015, 2016 and the subsequent interim period: Fiscal year 2014: $41.5 million Fiscal year 2015: $46.6 million Fiscal year 2016: $60.7 million For the nine months ended September 30, 2017: $12.9 million Item 5 — Operating and Financial Review and Prospects, page 32 H. — Critical Accounting Policies, page 39 Vessel Impairment, page 41 4. We note that your estimates of TCE use average estimated day rates provided by Marex for the first and second year and the average 15-year Suezmax Earnings Trend from Clarksons for the years thereafter. We also note that both are adjusted to estimate the actual TCE used to estimate the impairment of your vessels. Please tell us and revise your future filings to discuss the following: · your methodology of weighting these rates, including whether you considered a probability-weighted approach as discussed at ASC 360-10-35-30 · any adjustments made to your final determination of actual TCE · why you use different sources for your rates in the first and second year assumptions as compared to the years thereafter · whether you consider inflation in your projections for operating expenses; and · your consideration of the possible sale of your vessels given the challenging market and the event of default on your credit facility per ASC 360-10-35-30. Melissa Raminpour Securities and Exchange Commission January 19, 2018 Page 4 It would be helpful if you could provide us with an example of your calculation of actual TCE. · your methodology of weighting these rates, including whether you considered a probability-weighted approach as discussed at ASC 360-10-35-30 We have not applied a probability-weighted approach as discussed at ASC 360-10-35-30, as we believe that applying the combination of Marex forward rates and historical average rates (please see further response below) best captures the cyclical and volatile market conditions in our industry over time. The Company considered all conditions and available evidence that existed as of December 31, 2016 to estimate the future cash flows used to test the recoverability of our vessels including considering whether applying a probability-weighted approach may be useful. Furthermore, our internal cash flow assumptions in accordance with ASC 360-10-35-30 purposely did not include alternative courses of action, as noted by the standard, such as potential sale of vessels before the end of their estimated useful lives. · any adjustments made to your final determination of actual TCE We have made adjustments to the Marex forward rates and historical Clarksons rates to adjust for differences between these rates and the Company's actual performance. Where the Company's observed historical entity-specific performance indicates a different rate than published by Marex, we have adjusted the two-year forward rates applied in the impairment model to match the Company's historical performance against the Marex rates. We have 13 years of entity-specific history that we have used to compare with 13 years of historical data from Marex. The comparison resulted in a required adjustment to decrease the Marex –forward rate by 2.5% to arrive at the Company's day rates utilized for the first two years in the impairment model. Please refer to Appendix I for an example of our calculation of actual TCE. For the years thereafter (from year 3 to the end of each vessel's useful economic life) we have applied the 15-year Suezmax Earnings trend from Clarksons, applying a similar adjustment methodology as explained for the Marex rate, in which we have compared the Company's actual historical performance over the last 13 years to the historical rates obtained from Clarkson for the same period. We have used the preceding thirteen-year period, as opposed to a longer period, as this is the period we have necessary data available for actual TCE related to our own vessels. We perform a comparison of a thirteen year period and apply the adjustment to the 15-year average (as per above). The adjustment to the 15-year historical average charter rates is considered to not have a significant impact, as opposed to applying the Company's historical actual TCE rates, on the impairment model per Dec 31, 2016. There will not be a need for this adjustment at the time when the Company has 15 years of trading history available, as we expect to apply our own historical achieved rates at that time. Melissa Raminpour Securities and Exchange Commission January 19, 2018 Page 5 · why you use different sources for your rates in the first and second year assumptions as compared to the years thereafter As disclosed on page 41 of the 20-F, in estimating TCE, the Company has applied Marex forward day rates as the basis for the first two years and 15-year historical day rates for the years thereafter. The Company used different sources for the rates for the first and second year assumptions as the Marex forward rates are only available for the first and second year (available forward rate estimate periods). We have used the Marex forward rates, as opposed to Clarksons forward rates or any other forward rates, as the Company has historically tracked the Marex forward rates against the Company's achieved rates, and thus we have a better understanding of how the Marex forward rates correlate to the Company's achieved rates than any other forward rates. Using this external data for the first and second year is considered a more precise forecast as it captures the shorter-term expected market development of our business. We believe using the Marex rates for the first and second year results in a more accurate impairment model than if we were to apply the 15-year historical date rates for this period. We note that we have consistently applied the approach of using the adjusted 15-year Suezmax Earnings trend from Clarksons and the adjusted Marex forward rates in our previous impairment assessments. For the years thereafter, we believe historical market information is a reasonable proxy for our specific cash flows based on our existing business strategy. We operate in a cyclical and volatile market environment. The Company utilized the 15-year historical average charter rates specific for our type of vessels, as this average is most likely to encompass the charter rate cycles that the Company's fleet will experience over its remaining expected useful life. This approach included objective data reflecting both positive and negative cycles impacting our business and by using a long-term average we will, in our opinion, capture the high, low and average trends in the market. The Company considered using a different time period in our vessel impairment model, however, it is our opinion that the historical average charter rates for the trailing one, five, and 10-year periods are each too short a time frame, and do not necessarily include the peaks and troughs of the market cycle. Based on this, we believe that a 15-year historical average remains the best basis for estimating future cash flows beyond the first two years. Melissa Raminpour Securities and Exchange Commission January 19, 2018 Page 6 · whether you consider inflation in your projections for operating expenses; and In our projections for operating expenses, we have applied approximately a one percent compounded growth factor for the operating expenses. We have only applied this growth factor to the operating expenses and have not applied any growth factor in projecting our future revenue estimates. When estimating the future increase in operating expenses, we have analyzed the development in our operating expenses over the last thirteen years (2004-2016). We have calculated the average increase per year in the operating expenses based on our actual historical entity-specific data. We have used the preceding thirteen-year period, as opposed to a longer period, as this is the period we have necessary data available for operating expenses related to our own vessels. · your consideration of the possible sale of your vessels given the challenging market and the event of default on your credit facility per ASC 360-10-35-30. The Company has never sold one of its vessels and it is the Company's policy and strategy to hold vessels in use for the long-term as the Company believes that the vessels will each generate profitable cash flows over this time. The Company did not at December 31, 2016 (and does not) anticipate or consider any need for the sale of any vessels, potentially realizing a loss on such a vessel sale, when performing our impairment analysis (ASC 360-10-35-30). In light of the Staff's comment, the Company will revise its disclosure in future filings of its Annual Report on Form 20-F to include the additional information as discussed above. Goodwill, page 43 5. We note that you have one reporting unit with goodwill attributed to it. We also note that you performed a goodwill impairment assessment as of December 31, 2016 using an income valuation approach and the estimated fair value of your reporting unit exceeded its carrying value. We note from your accounting policy on page F-13 (Goodwill) that you use a discounted cash flow model to determine the fair value of a reporting unit unless there is a readily determinable fair market value. Further, we note that your market capitalization was lower than the book value of stockholders' equity at December 31, 2016. Please respond to the following: · Tell us and revise your future filings to disclose the percentage by which the fair value of the reporting unit exceeded the carrying value. Melissa Raminpour Securities and Exchange Commission