"The Nordic American System"
Nordic American has an operating model that is sustainable in both weak and strong tanker markets, which we believe differentiates Nordic American from other publicly traded tanker companies. The "Nordic American System" is transparent and predictable. As a general policy, the Company has a conservative profile with a keen focus on risk management.
Our dividend payments are important for our shareholders. At the same time we recognize the need to expand our fleet under conditions advantageous to the Company. Therefore, we always focus on the balance between fleet expansion and payment of dividend. Dividend payments over time depend upon positive cash flow in the Company. NAT maximizes cash flows by employing all of its vessels in the spot market through Orion Tanker Pool which increases the efficiency and utilization of the fleet. Over time, the spot market gives better earnings than the time charter market. The amount of dividend to be paid is decided at the sole discretion of the board.
Growth is a central element of the "Nordic American System". It is important that NAT grows accretively, which means that over time our transportation capacity increases more percentagewise than our share count. Going forward, we will always have an eye on the age of the fleet which is now 10.8 years on average after the delivery of the new acquisition. However, our ships that are 15 years old are in the same excellent condition as our younger ships. Top quality is dependent upon our high quality maintenance program. Nordic American has one type of vessel only -- the Suezmax vessel. This type of vessel can carry one million barrels of oil. The Suezmax vessel is highly versatile, able to be utilized on most long-haul trade routes. A homogenous fleet produces advantages of scale, streamlining operating and administration costs. This keeps our cash break-even point low.
The valuation of NAT should not be based upon net asset value (NAV), a measure that only is linked to the steel value of each individual ship and not on NAT as a company well-versed in managing a large homogenous fleet. We believe the value of the fleet is the correct measurement, not the so called market value of each individual ship.
We pay our dividend from cash on hand. NAT has a cash break-even level of about $12,000 per day per vessel, which we consider low in the industry. The cash break-even rate is the amount of average daily revenue our vessels would need to earn in order to cover our vessel operating expenses, cash general and administrative expenses, interest expense and all other cash charges.
The Board has declared a dividend of $0.16 per share for 1Q2013 to shareholders of record as of April 30, 2013. The dividend will be paid on or about May 14, 2013. The number of shares outstanding was 54,825,751 as of March 31, 2013. After the closing of the stock issue April 5, there are 66,038,251 shares in issue of which 23,000 are shares in treasury.
The Company acquired Scandic American Shipping Ltd. ("Scandic"), the Manager of NAT, in January 2013. The acquisition, according to USGAAP, was accounted for using the acquisition method based on settlement gain or -loss on pre-exisiting relationship and fair value of the assets and liabilities of Scandic. Because of the USGAAP rules a one time charge of $5.0m has been debited the accounts for 1Q2013. The theoretical value according to the USGAAP rules, is not the same as the commercial market valuation of Scandic which was undertaken for the NAT board by Morgan Stanley & Co. LLC.
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