Scorpio Bulkers Inc. Announces Financial Results for the First Quarter of 2017

MONACO, April 20, 2017 (GLOBE NEWSWIRE) — Scorpio Bulkers Inc. (NYSE:SALT) (“Scorpio Bulkers,” or the “Company”) today 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

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.

Debt and Liquidity Overview

We made the following drawdowns, gross of any simultaneous prepayments from our credit facilities during the first quarter of 2017:

  Credit Facility           Drawdown Amount
($ thousands)
  Collateral
1   $330 Million Credit Facility   $ 12,000       SBI Phoenix
2   $330 Million Credit Facility   13,200     SBI Swing
3   $409 Million Credit Facility   13,200     SBI Mazurka
4   $330 Million Credit Facility   13,200     SBI Jive

The Company’s outstanding debt balance, gross of unamortized deferred financing costs as of March 31, 2017 and April 19, 2017 are as follows (dollars in thousands). The Company expects to pay off the $39.6 Million Credit Facility in full upon the completion of the sale of the two Kamsarmax vessels. 

            Credit Facility               Amount Outstanding  
  Senior Notes   $ 73,625      
  $39.6 Million Credit Facility   20,144    
  $409 Million Credit Facility   179,473    
  $330 Million Credit Facility   263,122    
  $42 Million Credit Facility   38,512    
  $67.5 Million Credit Facility   40,461    
  $12.5 Million Credit Facility   10,379    
  $27.3 Million Credit Facility   19,375    
  Total   $ 645,091    

The Company’s projected quarterly debt repayments through 2019, including the repayment of debt on the two Kamsarmaxes that we agreed to sell, is as follows (dollars in thousands):

            Q2 2017 (1 )                                           $ 23,130    
  Q3 2017   6,130    
  Q4 2017   6,130    
  Q1 2018   6,130    
  Q2 2018   6,130    
  Q3 2018   6,130    
  Q4 2018   6,326    
  Q1 2019   6,326    
  Q2 2019   6,326    
  Q3 2019 (2 ) 79,951    
  Q4 2019   6,326    
  Total   159,035    

(1)   Relates to payments expected to be made from April 19, 2017 to June 30, 2017, including $20.1 million in repayment of debt on the two Kamsarmaxes that we agreed to sell.
(2) Includes $73.6 million repayment of Senior Notes due at maturity

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.

Scorpio Bulkers Inc. and Subsidiaries
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
 
    Unaudited
    Three Months Ended March 31,  
    2017   2016  
Revenue:          
Vessel revenue   $ 34,728     $ 10,244    
Operating expenses:          
Voyage expenses   117     65    
Vessel operating costs   21,801     15,315    
Charterhire expense   1,971     8,544    
Charterhire contract termination charge       10,000    
Vessel depreciation   11,582     7,292    
General and administrative expenses   7,728     7,787    
Loss / write down on assets held for sale   17,702     12,433    
Total operating expenses   60,901     61,436    
Operating loss   (26,173 )   (51,192 )  
Other income (expense):          
Interest income   262     93    
Foreign exchange gain (loss)   (94 )   (118 )  
Financial expense, net   (8,559 )   (7,043 )  
Total other expense   (8,391 )   (7,068 )  
Net loss   $ (34,564 )   $ (58,260 )  
           
Loss per common share – basic and diluted(1)   $ (0.48 )   $ (1.96 )  
Weighted-average shares outstanding – basic and diluted(1)   71,735     29,794    

(1)   Diluted weighted average shares outstanding excludes the impact of restricted shares for the three months ended March 31, 2017 and 2016, as the impact would be anti-dilutive since the Company is in a net loss position.

Scorpio Bulkers Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
 
    Unaudited    
    March 31, 2017   December 31, 2016
Assets        
Current assets        
Cash and cash equivalents   $ 126,598     $ 101,734  
Accounts receivable   5,714     7,050  
Prepaid expenses and other current assets   5,449     6,696  
Assets held for sale   44,340      
Total current assets   182,101     115,480  
Non-current assets        
Vessels, net   1,336,262     1,234,081  
Vessels under construction   27,251     180,000  
Deferred financing costs, net   3,857     3,307  
Other assets   13,598     14,289  
Total non-current assets   1,380,968     1,431,677  
Total assets   $ 1,563,069     $ 1,547,157  
         
Liabilities and shareholders’ equity        
Current liabilities        
Bank loans, net   $ 40,832     $ 13,480  
Accounts payable and accrued expenses   8,855     11,070  
Total current liabilities   49,687     24,550  
Non-current liabilities        
Bank loans, net   515,076     493,793  
Senior Notes, net   72,329     72,199  
Total non-current liabilities   587,405     565,992  
Total liabilities   637,092     590,542  
Shareholders’ equity        
Preferred stock, $0.01 par value; 50,000,000 shares authorized; no shares issued or outstanding        
Common stock, $0.01 par value per share; authorized 112,500,000 shares; issued and outstanding 75,309,486 and 75,298,676 shares as of March 31, 2017 and December 31, 2016, respectively   753     753  
Paid-in capital   1,718,284     1,714,358  
Accumulated deficit   (793,060 )   (758,496 )
Total shareholders’ equity   925,977     956,615  
Total liabilities and shareholders’ equity   $ 1,563,069     $ 1,547,157  

Scorpio Bulkers Inc. and Subsidiaries
Statements of Cash Flows (unaudited)
(Amounts in thousands)
 
    For the Three Months Ended March 31,
    2017   2016
Operating activities        
Net loss   $ (34,564 )   $ (58,260 )
Adjustment to reconcile net loss to net cash used by operating activities:        
Restricted stock amortization   3,862     4,514  
Vessel depreciation   11,582     7,292  
Amortization of deferred financing costs   1,360     834  
Write off of deferred financing costs   470     2,456  
Loss / write down on assets held for sale   16,471     10,555  
Changes in operating assets and liabilities:        
Increase (decrease) in accounts receivable   1,337     (2,599 )
(Decrease) increase in prepaid expenses and other current assets   (697 )   4,500  
(Decrease) increase in accounts payable and accrued expenses   (1,556 )   3,185  
Net cash used in operating activities   (1,735 )   (27,523 )
Investing activities        
Proceeds from sale of assets held for sale       269,376  
Payments on assets held for sale       (98,445 )
Payments for vessels and vessels under construction   (22,421 )   (148,365 )
Net cash used in investing activities   (22,421 )   22,566  
Financing activities        
Proceeds from issuance of common stock       60,703  
Proceeds from issuance of long-term debt   51,600     106,843  
Repayments of long-term debt   (2,580 )   (130,885 )
Debt issue costs paid       (1,819 )
Net cash provided by financing activities   49,020     34,842  
Increase in cash and cash equivalents   24,864     29,885  
Cash at cash equivalents, beginning of period   101,734     200,300  
Cash and cash equivalents, end of period   $ 126,598     $ 230,185  

Scorpio Bulkers Inc. and Subsidiaries
Other Operating Data (unaudited)
 
    Three Months Ended
March 31, 2017
    Three Months Ended
March 31, 2016
 
Time charter equivalent revenue ($000’s) (1):          
Vessel revenue   $ 34,728     $ 10,244    
Voyage expenses   (117 )   (65 )  
Time charter equivalent revenue   $ 34,611     $ 10,179    
Time charter equivalent revenue attributable to:          
Kamsarmax   $ 14,900     $ 4,360    
Ultramax   19,711     5,819    
    $ 34,611     $ 10,179    
Revenue days:          
Kamsarmax   1,626     1,309    
Ultramax   2,395     1,681    
Combined   4,021     2,990    
TCE per revenue day (1):          
Kamsarmax   $ 9,164     $ 3,331    
Ultramax   $ 8,230     $ 3,462    
Combined   $ 8,608     $ 3,404    
                   

(1)       We define Time Charter Equivalent (TCE) revenue as voyage revenues less voyage expenses.  Such TCE revenue, divided by the number of our available days during the period, or revenue days, is TCE per revenue day, which is consistent with industry standards.  TCE per revenue day is a common shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charter hire rates for vessels on voyage charters are generally not expressed in per-day amounts while charter hire rates for vessels on time charters generally are expressed in such amounts.

We report TCE revenue, a non-GAAP financial measure, because (i) we believe it provides additional meaningful information in conjunction with voyage revenues and voyage expenses, the most directly comparable U.S.-GAAP measure, (ii) it assists our management in making decisions regarding the deployment and use of our vessels and in evaluating their financial performance, (iii) 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 bareboat charters) under which the vessels may be employed between the periods, and (iv) we believe that it presents useful information to investors.


Fleet List as of April 19, 2017
 
Owned vessels delivered from shipyards 
 
Vessel Name   Year Built    DWT    Vessel Type
SBI Cakewalk (1)   2014   82,000     Kamsarmax
SBI Charleston (1)   2014   82,000     Kamsarmax
SBI Samba   2015   84,000     Kamsarmax
SBI Rumba   2015   84,000     Kamsarmax
SBI Capoeira   2015   82,000     Kamsarmax
SBI Electra   2015   82,000     Kamsarmax
SBI Carioca   2015   82,000     Kamsarmax
SBI Conga   2015   82,000     Kamsarmax
SBI Flamenco   2015   82,000     Kamsarmax
SBI Bolero   2015   82,000     Kamsarmax
SBI Sousta   2016   82,000     Kamsarmax
SBI Rock   2016   82,000     Kamsarmax
SBI Lambada   2016   82,000     Kamsarmax
SBI Reggae   2016   82,000     Kamsarmax
SBI Zumba   2016   82,000     Kamsarmax
SBI Macarena   2016   82,000     Kamsarmax
SBI Parapara   2017   82,000     Kamsarmax
SBI Mazurka   2017   82,000     Kamsarmax
SBI Swing   2017   82,000     Kamsarmax
SBI Jive   2017   82,000     Kamsarmax
Total Kamsarmax       1,644,000      
             
SBI Antares   2015   61,000     Ultramax
SBI Athena   2015   64,000     Ultramax
SBI Bravo   2015   61,000     Ultramax
SBI Leo   2015   61,000     Ultramax
SBI Echo   2015   61,000     Ultramax
SBI Lyra   2015   61,000     Ultramax
SBI Tango   2015   61,000     Ultramax
SBI Maia   2015   61,000     Ultramax
SBI Hydra   2015   61,000     Ultramax
SBI Subaru   2015   61,000     Ultramax
SBI Pegasus   2015   64,000     Ultramax
SBI Ursa   2015   61,000     Ultramax
SBI Thalia   2015   64,000     Ultramax
SBI Cronos   2015   61,000     Ultramax
SBI Orion   2015   64,000     Ultramax
SBI Achilles   2016   61,000     Ultramax
SBI Hercules   2016   64,000     Ultramax
SBI Perseus   2016   64,000     Ultramax
SBI Hermes   2016   61,000     Ultramax
SBI Zeus   2016   60,200     Ultramax
SBI Hera   2016   60,200     Ultramax
SBI Hyperion   2016   61,000     Ultramax
SBI Tethys   2016   61,000     Ultramax
SBI Phoebe   2016   64,000     Ultramax
SBI Poseidon   2016   60,200     Ultramax
SBI Apollo   2016   60,200     Ultramax
SBI Samson   2017   64,000     Ultramax
SBI Phoenix   2017   64,000     Ultramax
Total Ultramax       1,731,800      
Total Owned Vessels DWT                 3,375,800        
 

 (1)   Classified as held for sale. 

Time chartered-in vessel

The Company currently has time chartered-in one dry bulk vessel. The terms of the contract is summarized as follows:

Vessel Type         Year Built   DWT   Where Built   Daily Base Rate   Earliest Expiry
Kamsarmax   2012   82,000     South Korea   $ 15,500     30-Jul-17   (1 )
  Total TC DWT       82,000                  
 

(1)     This vessel has been time chartered-in for 39 to 44 months at the Company’s option at $15,500 per day.  The Company has the option to extend this time charter for one year at $16,300 per day.  The vessel was delivered on April 23, 2014.    

Conference Call Details:

Thursday, April 20, 2017 at 9:00 AM Eastern Daylight Time / 3:00 PM Central European Time.

Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1 (866) 219-5268 (U.S.) or 1 (703) 736-7424 (International). The conference participant passcode is 7616205.  The information provided on the teleconference is only accurate at the time of the conference call, and the Company will take no responsibility for providing updated information.

Slides and Audio Webcast:

There will also be a simultaneous live webcast over the internet, through the Scorpio Bulkers Inc. website www.scorpiobulkers.com. Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.
Webcast URL: http://edge.media-server.com/m/p/fevw4kr2 

About Scorpio Bulkers Inc.

Scorpio Bulkers Inc. is a provider of marine transportation of dry bulk commodities. Upon completion of the above mentioned sales, Scorpio Bulkers Inc. will own 46 vessels, consisting of 18 Kamsarmax vessels and 28 Ultramax vessels. The Company also time charters-in one dry bulk Kamsarmax vessel. The owned fleet will have a total carrying capacity of approximately 3.2 million deadweight tonnes. Additional information about the Company is available on the Company’s website www.scorpiobulkers.com, which is not a part of this press release.

Non-GAAP Financial Measures (unaudited)

This press release describes adjusted net loss and related per share amounts, which is not a measure prepared in accordance with GAAP. We believe the non-GAAP financial measure presented in this press release provides investors with a means of evaluating and understanding how the Company’s management evaluates the Company’s operating performance.  These non-GAAP financial measures should not be considered in isolation from, as substitutes for, nor superior to financial measures prepared in accordance with GAAP.

Adjusted net loss

In thousands, except per share data

  For the Three Months Ended March 31,
  2017   2016
  Amount   Per share   Amount   Per share
Net loss $ (34,564 )   $ (0.48 )   $ (58,260 )   $ (1.96 )
Adjustments:              
Loss / write down on assets held for sale       17,702     0.25     12,433     0.42  
Write down of deferred financing cost 470     0.01     2,456     0.08  
Charterhire contract termination charge         10,000     0.34  
Total adjustments 18,172     0.25     14,889     0.50  
Adjusted net loss $ (16,392 )   $ (0.23 )   $ (33,371 )   $ (1.12 )

Forward-Looking Statements

Matters discussed in this press release may constitute forward-looking statements.  The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words “believe,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect,” “pending” and similar expressions identify forward-looking statements.

The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, our management’s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.

In addition to these important factors, other important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the failure of counterparties to fully perform their contracts with us, the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand for dry bulk vessel capacity, changes in our operating expenses, including bunker prices, drydocking and insurance costs, the market for our vessels, availability of financing and refinancing, charter counterparty performance, ability to obtain financing and comply with covenants in such financing arrangements, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, vessels breakdowns and instances of off-hires and other factors.  Please see our filings with the Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties.

CONTACT: Contact:

Scorpio Bulkers Inc.
+377-9798-5715 (Monaco)
+1-646-432-1675 (New York)