21-04-2017

Scorpio Bulkers Inc. Trims First Quarter Losses on Improved Dry Bulk Market

ScorpioB

Scorpio Bulkers Inc. reported its results for the three months ended March 31, 2017.

Results for the Three Months Ended March 31, 2017 and 2016

For the first quarter of 2017 the Company’s GAAP net loss was $34.6 million, or $0.48 loss per diluted share. For the same period in 2016 the Company’s GAAP net loss was $58.3 million, or $1.96 loss per diluted share.

For the first quarter of 2017, the Company’s adjusted net loss was $16.4 million or $0.23 adjusted loss per diluted share, which excludes a write down of assets held for sale of $17.7 million, and a write off of deferred financing costs on the credit facility related to those specific vessels of $0.5 million. For the first quarter of 2016, the Company’s adjusted net loss was $33.4 million or $1.12 adjusted loss per diluted share, which excludes a write down of assets held for sale of $12.4 million, the write off of deferred financing costs of $2.5 million and a charterhire contract termination fee of $10.0 million (see Non-GAAP Financial Measures below).

Cash and Cash Equivalents

As of April 19, 2017, the Company had approximately $135.3 million in cash and cash equivalents.

TCE Revenue

TCE Revenue Earned during the First Quarter of 2017

Our Kamsarmax fleet earned $9,164 per day
Our Ultramax fleet earned $8,230 per day
Voyages Fixed thus far in the Second Quarter of 2017

Kamsarmax fleet: approximately $9,914 per day for 59% of the days
Ultramax fleet: approximately $8,852 per day for 57% of the days

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Recent Significant Events

Agreement for the Sale of Vessels

During the first quarter of 2017, we entered into agreements with an unaffiliated third party to sell the SBI Charleston and SBI Cakewalk, two 2014 built Kamsarmax vessels, for approximately $22.5 million each.

As such, as of March 31, 2017, we classified these vessels as held for sale, recorded a loss of $17.1 million and wrote off $0.5 million of deferred financing costs. We also classified the related debt of approximately $20.1 million as a current liability. Net cash proceeds after paying off the related debt, as well as the termination fees and commissions, is approximately $24.2 million.

The sales are expected to be completed in the second quarter of 2017.

Newbuilding Vessels Deliveries

During the first quarter of 2017, the Company took delivery of the following newbuilding vessels:

SBI Samson, an Ultramax vessel, delivered from Chengxi Shipyard Co. Ltd.
SBI Parapara, a Kamsarmax vessel, delivered from Hudong-Zhonghua (Group) Co., Ltd.
SBI Swing, a Kamsarmax vessel, delivered from Hudong-Zhonghua (Group) Co., Ltd.
SBI Phoenix, an Ultramax vessel, delivered from Chengxi Shipyard Co. Ltd.
SBI Mazurka, a Kamsarmax vessel, delivered from Hudong-Zhonghua (Group) Co., Ltd.
Since April 1, 2017, the Company took delivery of the final vessel in our newbuilding program:

SBI Jive, a Kamsarmax vessel, delivered from Hudong-Zhonghua (Group) Co., Ltd.
All 48 vessels in our newbuilding program have successfully been delivered. As of March 31, 2017, all contracted amounts have been paid in full and we have no further obligations due to any shipyard.

Financial Results for the Three Months Ended March 31, 2017 Compared to the Three Months Ended March 31, 2016

The Company had a GAAP net loss of $34.6 million, or $0.48 loss per diluted share for the first quarter of 2017 compared with a GAAP net loss of $58.3 million, or $1.96 loss per diluted share for the first quarter of 2016.

Excluding a write down of assets held for sale of $17.7 million and the write off of deferred financing costs on the credit facility related to the vessels held for sale of $0.5 million, adjusted net loss for the first quarter of 2017 was $16.4 million or $0.23 adjusted loss per diluted share. Similarly, excluding a write down of assets held for sale of $12.4 million, the write off of deferred financing costs of $2.5 million and a charterhire contract termination fee of $10.0 million, adjusted net loss for the first quarter of 2016 was $33.4 million or $1.12 adjusted loss per diluted share (see Non-GAAP Financial Measures below).

Time charter equivalent (TCE) revenue, a Non-GAAP financial measure, is vessel revenues less voyage expenses (including bunkers, port charges, broker fees and other miscellaneous expenses that we are unable to recoup under time charter and pool arrangements). TCE revenue is included herein because it is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company’s performance irrespective of changes in the mix of charter types (i.e., spot charters, time charters, and pool charters), and it provides useful information to investors and management.

TCE revenue was $34.6 million for the first quarter of 2017 and is associated with a day weighted average of 47 vessels owned and one vessel time chartered-in compared to $10.2 million during the prior year quarter, which was associated with a day weighted average of 31 vessels owned and seven vessels time chartered-in. TCE revenue per day was $8,608 and $3,404 for the first quarter of 2017 and 2016, respectively. TCE rates continued the sequential quarter on quarter growth experienced since recovering from the all-time lows experienced in the first quarter of 2016. The increase in rates is attributable to increased worldwide demand across all bulk sectors, regions and commodities, as well as a diminishing supply side as fewer vessels are now on order. Overall TCE revenue increased significantly versus the prior year period due to the increase in rates combined with the increase in revenue days associated with the growth of our fleet.

Vessel operating costs were $21.8 million and included approximately $1.1 million of takeover costs associated with new deliveries, and $0.9 million of non-operating expenses and related to 47 vessels owned, on average, during the period. Takeover costs will be eliminated upon the delivery of the final vessel in the second quarter of 2017. Vessel operating costs for the prior year quarter were $15.3 million and related to 31 vessels owned, on average, during the period. Sequentially, daily operating costs, excluding take over and other non-operating costs, remained relatively flat at $5,019 in the first quarter of 2017 versus $5,037 in the fourth quarter of 2016. We expect that the per day cost will decrease due to certain measures undertaken to increase awareness and responsibility.

Charterhire expense decreased to $2.0 million in the first quarter of 2017 from $8.5 million in the prior year period, reflecting the reduction in the number of vessels time chartered-in from seven vessels to one vessel, on a day weighted average, respectively. We also recorded a charterhire contract termination fee of $10.0 million to terminate four time charter-in agreements during the first quarter of 2016. The remaining time chartered-in vessel is expected to be redelivered in July 2017.

Depreciation increased to $11.6 million in the first quarter of 2017 from $7.3 million in the prior year period, reflecting the increase in our weighted average vessels owned to 47 from 31.

General and administrative expense decreased slightly to $7.7 million from $7.8 million in the prior year period as decreases in restricted stock amortization, due to the run off of awards granted at a higher fair value, were offset by an increase in commercial management fees, primarily reflecting the growth of our fleet.

During the first quarter of 2017, we recorded a write down on assets held for sale of $17.1 million related to the sale of two Kamsarmax vessels to an unaffiliated third party and also recorded a $0.6 million adjustment related to vessels previously sold. During the first quarter of 2016, the Company recorded a write down of vessels and assets held for sale of $12.4 million of which $11.6 million related to the cancellation of a shipbuilding contract for a Kamsarmax bulk carrier and $0.8 million in additional expenses related to vessels held for sale at December 31, 2015.

During the first quarters of 2017 and 2016, we wrote off $0.5 million and $2.5 million, respectively, of deferred financing costs accumulated on credit facilities for which the related vessels were sold or the commitments were otherwise reduced.

Source: Scorpio Bulkers

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