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Scorpio Bulkers Inc. Announces Financial Results for the Fourth Quarter of 2015

Feb 29, 2016

MONACO — (Marketwired) — 02/29/16 — Scorpio Bulkers Inc. (NYSE: SALT) (“Scorpio Bulkers,” or the “Company”) today reported its results for the three months and year ended December 31, 2015.

Results for the three months and years ended December 31, 2015 and 2014

For the three months ended December 31, 2015, the Company’s adjusted net loss was $22.0 million, or $0.80 adjusted loss per diluted share, which excludes a loss on the sale of assets and a write down of assets held for sale totaling $271.3 million and the related write off of deferred financing costs on credit facilities that will no longer be used of $8.7 million, or $10.22 loss per diluted share (see Non-GAAP Financial Measures section below). For the three months ended December 31, 2015, the Company had a GAAP net loss of $302.0 million, or $11.02 loss per diluted share.

For the three months ended December 31, 2014, the Company’s adjusted net loss was $16.5 million or $1.31 adjusted loss per diluted share, which excludes a write down of assets held for sale of $55.5 million, or $4.41 loss per diluted share (see Non-GAAP Financial Measures section below). For the three months ended December 31, 2014, the Company had a GAAP net loss of $72.0 million, or $5.72 loss per diluted share.

For the year ended December 31, 2015, the Company’s adjusted net loss was $71.8 million, or $3.36 adjusted loss per diluted share, which excludes a loss on the sale of assets and a write down of assets held for sale totaling $422.9 million and the related write off of deferred financing costs on credit facilities that will no longer be used of $16.1 million, or $20.50 loss per diluted share (see Non-GAAP Financial Measures section below). For the year ended December 31, 2015, the Company had a GAAP net loss of $510.8 million, or $23.86 loss per diluted share.

For the year ended December 31, 2014, the Company’s adjusted net loss was $61.1 million or $5.33 adjusted loss per diluted share, which excludes a write down on assets held for sale of $55.5 million, or $4.84 loss per share (see Non-GAAP Financial Measures section below). For the year ended December 31, 2014, the Company had a GAAP net loss of $116.6 million, or $10.17 loss per diluted share.

Recent Significant Events

Credit Facility Amendments

During February 2016, the Company reached agreements in principle with its lenders to not make future principal repayments of approximately $67.9 million in exchange for making advance principal repayments of approximately $41.2 million in aggregate under its credit facilities. The remaining principal repayments of approximately $26.7 million will be due upon final maturity of the respective borrowings. For undelivered ships under certain credit facilities, the advance principal repayment amount is calculated on the basis of loan amount available. In regards to timing of the advance principal repayment on such undelivered ships, it is expected to be made at the time of the respective loan drawdown.

During February 2016, the Company reached agreements in principle with all its lenders to permanently reduce the level of the minimum liquidity covenant in all its credit facilities from its current level of the greater of: (i) $50 million or (ii) $850,000 per vessel, to a level of the greater of: (i) $25 million or (ii) $700,000 per vessel. On the basis of the current owned fleet size of 33 vessels, the minimum liquidity requirement will be $25 million as of today’s date. Between September 30, 2015 and October 30, 2015, the Company reached agreements to amend each of its loan agreements such that the interest coverage ratio, as defined in each agreement, will not be applicable until the first quarter of 2017, at which point the ratio will be 1.00 to 1.00 and will be calculated on a year-to-date basis for calendar year 2017. Prior to these amendments, the interest coverage ratio was applicable beginning with the third quarter of 2015.

See Liquidity and Debt for further updates and details on our credit facilities.

Termination of Time Charter Contracts

On February 22, 2016, the Company agreed to terminate the time charter-in contracts, effective March 19, 2016, of four vessels (one Post-Panamax vessel, one Ultramax vessel, one Supramax vessel and one Handymax vessel) for a one-time payment of $10 million, of which $8 million was paid on February 23, 2016 and $2 million was paid on February 29, 2016. The details of our remaining time chartered-in vessels are described herein.

Delivery Delays and Changes in the Newbuilding Contracts in respect of Certain Vessels Under Construction

In February 2016, the Company agreed in principle with certain shipyards in China to delay the scheduled delivery of the following vessels by approximately six months per vessel:

  • SBI Samson, an Ultramax vessel, is now expected to be delivered in Q4 2016 from Q2 2016
  • SBI Phoenix, an Ultramax vessel, is now expected to be delivered in Q4 2016 from Q3 2016
  • SBI Zumba, a Kamsarmax vessel, is now expected to be delivered in Q3 2016 from Q1 2016
  • SBI Parapara, a Kamsarmax vessel, is now expected to be delivered in Q4 2016 from Q1 2016
  • SBI Mazurka, a Kamsarmax vessel, is now expected to be delivered in Q4 2016 from Q2 2016
  • SBI Macarena, a Kamsarmax vessel, is now expected to be delivered in Q4 2016 from Q2 2016
  • SBI Swing, a Kamsarmax vessel, is now expected to be delivered in Q1 2017 from Q3 2016
  • SBI Jive, a Kamsarmax vessel, is now expected to be delivered in Q2 2017 from Q3 2016

In February 2016, the Company reached an agreement with a shipyard in China to reduce the price to be paid under the final installments of the construction contracts in respect to two Ultramax bulk carriers to be delivered in Q2 2016 by approximately $0.9 million in aggregate.

Reverse Stock Split

On December 31, 2015, the Company effected a one-for-twelve reverse stock split. The Company’s shareholders approved the reverse stock split and change in authorized common shares at the Company’s special meeting of shareholders held on December 23, 2015. Pursuant to this reverse stock split, the total number of authorized common shares was reduced to 56.3 million shares and shares outstanding were reduced from approximately 344.2 million shares to approximately 28.7 million shares. The par value was not adjusted as a result of the reverse stock split. All share and per share information contained in this press release has been retroactively adjusted to reflect the reverse stock split.

Summary of Voyages Fixed Thus Far in the First Quarter of 2016

Below is a summary of the voyages fixed thus far in the first quarter of 2016:

  • For the Kamsarmax fleet: approximately $3,209 per day for 78% of the days
  • For the Ultramax fleet: approximately $2,572 per day for 74% of the days

Vessel Sale Program Update

During the three months ended December 31, 2015, we entered into agreements with unaffiliated third parties to sell five Capesize dry bulk vessels and six newbuilding Capesize dry bulk vessels under construction for approximately $394 million. The sale of two of the Capesize dry bulk vessels and one of the newbuilding Capesize dry bulk vessel under construction was completed during the period. The sale of the remaining three Capesize dry bulk vessels and four newbuilding Capesize dry bulk vessels under construction have since been completed and the sale of the remaining newbuilding Capesize dry bulk vessel under construction is expected to be completed before the end of the first quarter of 2016.

Newbuilding Vessels Deliveries

During the fourth quarter of 2015, the Company took delivery from shipyards of the following newbuilding vessels:

  • SBI Carioca, a Kamsarmax vessel, was delivered from Hudong-Zhonghua (Group) Co., Ltd.
  • SBI Magnum, a Capesize vessel, was delivered from Sungdong Shipbuilding & Marine Engineering Co., Ltd. (1)
  • SBI Conga, a Kamsarmax vessel, was delivered from Hudong-Zhonghua (Group) Co., Ltd.
  • SBI Flamenco, a Kamsarmax vessel, was delivered from Jiangsu Yangzijiang Shipbuilding Co., Ltd.
  • SBI Ursa, an Ultramax vessel, was delivered from Dalian COSCO KHI Ship Engineering Co. Ltd.
  • SBI Cronos, an Ultramax vessel, was delivered from Imabari Shipbuilding Co., Ltd.
  • SBI Thalia, an Ultramax vessel, was delivered from Chengxi Shipyard Co., Ltd.
  • SBI Bolero, a Kamsarmax vessel, was delivered from Hudong-Zhonghua (Group) Co., Ltd.
  • SBI Orion, an Ultramax vessel, was delivered from Chengxi Shipyard Co., Ltd.
  • SBI Maduro, a Capesize vessel, was delivered from Shanghai Waigaoqiao Shipbuilding Co., Ltd. (1)

Between January 1, 2016 and February 25, 2016, the Company took delivery from shipyards of the following newbuilding vessels:

  • SBI Sousta, a Kamsarmax vessel, was delivered from Hudong-Zhonghua (Group) Co., Ltd.
  • SBI Behike, a Capesize vessel, was delivered from Daehan Shipbuilding Co., Ltd. (1)
  • SBI Rock, a Kamsarmax vessel, was delivered from Jiangsu Yangzijiang Shipbuilding Co., Ltd.
  • SBI Monterrey, a Capesize vessel, was delivered from Daehan Shipbuilding Co., Ltd. (1)
  • SBI Achilles, an Ultramax vessel, was delivered from Imabari Shipbuilding Co., Ltd.
  • SBI Montecristo, a Capesize vessel, was delivered from Sungdong Shipbuilding & Marine Engineering Co., Ltd. (1)
  • SBI Lambada, a Kamsarmax vessel, was delivered from Hudong-Zhonghua (Group) Co., Ltd.
  • SBI Hercules, an Ultramax vessel, was delivered from Imabari Shipbuilding Co., Ltd.
  • SBI Reggae, a Kamsarmax vessel, was delivered from Hudong-Zhonghua (Group) Co., Ltd.
  • SBI Perseus, an Ultramax vessel, was delivered from Chengxi Shipyard Co., Ltd.
  • SBI Aroma, a Capesize vessel, was delivered from Sungdong Shipbuilding & Marine Engineering Co., Ltd. (1)
  • SBI Hermes, an Ultramax vessel, was delivered from Imabari Shipbuilding Co., Ltd.
     

(1) Vessel sold subsequent to delivery.

Liquidity and Debt

Fleet Financing Update

The Company has debt financings in place for all of the 49 vessels in its fleet including pending new deliveries.

$12.5 Million Credit Facility

On December 22, 2015, the Company signed a loan agreement for up to $12.5 million (the “$12.5 Million Facility”) which was used to finance a portion of the purchase price of one Ultramax vessel that had been delivered to the Company in 2015. The facility may be drawn in a single tranche of up to $12.5 million, with quarterly payments of one-sixtieth of the advance commencing on the last day of the quarter following the quarter in which the advance was drawn and a balloon payment payable at the maturity date which is December 22, 2020. This facility bears interest at LIBOR plus a margin of 3.00%. This facility is secured by, among other things, a first preferred mortgage on the Ultramax newbuilding vessel and guaranteed by the collateral vessel owning subsidiary. The terms and conditions of this facility, including covenants, are similar to those in the Company’s existing credit facilities and customary for financings of this type. In December 2015, the Company drew down $11.75 million on this facility.

$27.3 Million Credit Facility

On December 22, 2015, the Company signed a loan agreement for up to $27.3 million (the “$27.3 Million Facility”) which was used to finance a portion of the purchase price of two Ultramax vessels that were delivered to the Company during the first quarter of 2016. The facility may be drawn in two tranches of up to 50% of the fair market value of each vessel, with 20 quarterly payments, assuming the full amount of the commitment is drawn, of $213,000 per tranche and a balloon payment of $9.4 million per tranche payable at the maturity date. Each tranche has a maturity of five years from the drawdown date. This facility bears interest at LIBOR plus a margin of 2.95%. This facility is secured by, among other things, a first preferred mortgage on the two Ultramax newbuilding vessels and guaranteed by each of the collateral vessel owning subsidiaries. The terms and conditions of this facility, including covenants, are similar to those in the Company’s existing credit facilities and customary for financings of this type.

In February, 2016, the Company reached an agreement in principle with the lender to add four quarterly installment payments to the balloon payment in exchange for an advance principal repayment of approximately $1.6 million. As a result of this agreement, the Company will not have to make the next eight quarterly installment payments totaling $3.1 million.

$411.3 Million Credit Facility

On December 22, 2015, the Company’s $411.3 Million Credit Facility was reduced by approximately $102.0 million, pursuant to the impending sale of three Capesize vessel contracts. Pursuant to these reductions in the commitment of this credit facility, the Company recorded a write off of approximately $3.3 million during the three months ended December 31, 2015, representing the portion of accumulated deferred financing costs relating to the facilities that are no longer available, and is included in financing costs in its Consolidated Statements of Operations. During 2015, the Company drew down $84.2 million on this facility, the proceeds of which were used to finance a portion of the contract price of three Capesize vessels that had been delivered as of December 31, 2015. As of December 31, 2015, these three Capesize vessels collateralizing the facility had been classified as held for sale. This loan was fully repaid in January 2016 and the vessels were sold. During the three months ended December 31, 2015, unamortized deferred financing costs associated with these borrowings aggregating approximately $3.8 million were written off, with such write off being included in financing costs in its Consolidated Statements of Operations.

$76.5 Million Credit Facility

On October 12, 2015, the Company signed a loan agreement of up to $76.5 million (the “$76.5 Million Facility”) which was to be used to finance a portion of the purchase price of three Capesize vessels delivered during 2015. The terms and conditions of this facility, including covenants, are similar to those in the Company’s existing credit facilities and customary for financings of this type. Pursuant to the three vessels collateralizing this facility being classified as held for sale in November 2015, this facility was canceled in December 2015. As a result, the Company recorded a write off of $1.3 million during the three months ended December 31, 2015, representing the accumulated deferred financing costs incurred, which is included in financing costs in its Consolidated Statements of Operations.

$10.9 Million Upsize to the $42 Million Credit Facility

On February 15, 2016, the Company signed an amendment with a leading European financial institution for a $10.875 million upsize to its original $42 million senior secured credit facility. The proceeds of the upsized commitment financed a portion of the purchase price of one Ultramax vessel that was delivered to the Company in Q3 2015 from Imabari Shipbuilding Co. Ltd. On February 17, 2016, the Company drew down $10.3 million on this facility. This facility will mature in September 2021. The terms and conditions of this facility, including covenants, are similar to those in the Company’s existing credit facilities and customary for facilities of this type.

In February 2016, the Company reached an agreement with the lender to add four quarterly installment payments to the balloon payment in exchange for an advance principal repayment of approximately $3.2 million. As a result of this agreement, the Company will not have to make the next eight quarterly installment payments totaling $6.5 million.

$39.6 Million Credit Facility

In February 2016, the Company reached an agreement in principle with the lender to add four quarterly installment payments to the balloon payment in exchange for an advance principal repayment of approximately $2.8 million. As a result of this agreement, the Company will not have to make the next eight quarterly installment payments totaling $4.7 million.

$409.0 Million Credit Facility

In February 2016, the Company reached an agreement in principle with the lender to add four quarterly installment payments to the balloon payment in exchange for an advance principal repayment of approximately $15.6 million (calculated on the basis of loan amounts available for undelivered ships). As a result of this agreement, the Company will not have to make the next eight quarterly installment payments totaling $31.2 million (calculated on the basis of loan amounts available for the undelivered ships).

$330.0 Million Credit Facility

In February 2016, the Company reached an agreement in principle with the lender to not make $13.8 million of the next four quarterly installment payments in exchange for an advance principal repayment of approximately $13.8 million. In addition, the lenders also agreed to extend the availability period of the credit facility to June 30, 2017 (from December 31, 2016) in order to accommodate delivery delays of certain vessels as described above in this press release.

$67.5 Million Credit Facility

In February 2016, the Company reached an agreement in principle with the lender to add four quarterly installment payments to the balloon payment in exchange for an advance principal repayment of approximately $4.3 million (calculated on the basis of loan amount available for the undelivered ship). As a result of this agreement, the Company will not have to make the next eight quarterly installment payments totaling $8.7 million (calculated on the basis of loan amount available for the undelivered ship).

We made the following drawdowns from our credit facilities during the three months ended December 31, 2015:

 

                                       Drawdown amount
                Credit facility          ($ thousands)     Collateral
        ------------------------------ ---------------- ---------------
      1 $411.3 Million Credit Facility $         27,900    SBI Magnum
      2 $409 Million Credit Facility             17,221    SBI Conga
      3 $330 Million Credit Facility             15,000     SBI Ursa
      4 $67.5 Million Credit Facility            14,833   SBI Electra
      5 $409 Million Credit Facility             17,221    SBI Bolero
      6 $409 Million Credit Facility             14,988    SBI Thalia
      7 $67.5 Million Credit Facility            14,833   SBI Flamenco
      8 $330 Million Credit Facility             13,950    SBI Orion
      9 $76.5 Million Credit Facility            25,500    SBI Maduro
     10 $409 Million Credit Facility             16,072    SBI Sousta
     11 $12.5 Million Credit Facility            11,750    SBI Cronos

 

As of February 25, 2016, the Company had $205.1 million in cash and cash equivalents. As of February 25, 2016, the Company’s outstanding debt balance, and amount available to draw is as follows (dollars in thousands):

 

                                       As of
                                    December 31,
                                        2015       As of February 25, 2016
---------------------------------- ------------- ---------------------------
                                       Amount        Amount        Amount
          Credit facility           outstanding   outstanding   available *
---------------------------------- ------------- ------------- -------------
Senior Notes                       $      73,625$      73,625 $          --
$39.6 Million Credit Facility             30,754        25,333            --
$409 Million Credit Facility              94,473       114,375       115,800
$330 Million Credit Facility             173,950       201,025       105,000
$42 Million Credit Facility               36,588        44,290            --
$67.5 Million Credit Facility             29,666        41,307        16,350
$411.3 Million Credit Facility            83,261            --            --
$12.5 Million Credit Facility             11,750        11,750            --
$27.3 Million Credit Facility                 --        23,250            --
                                   ------------- ------------- -------------
Total                              $     534,067$     534,955$     237,150
                                   ============= ============= =============

 

* Reflects the maximum loan amount available on undrawn vessels.

Newbuilding Program

Our Newbuilding Program consists of contracts for the construction of 49 dry bulk vessels, comprised of 28 Ultramax newbuildings, and 21 Kamsarmax newbuilding. Of this total, through February 25, 2016, we have taken delivery of 14 Kamsarmax and 19 Ultramax vessels. The aggregate construction price for the remaining 16 dry bulk vessels is $466.6 million. Of this amount, $298.6 million remains unpaid as of February 25, 2016 and is scheduled to be paid in installments through the delivery dates of each vessel. The estimated future payment dates, which reflect the agreements in principle described above with certain shipyards in China to delay the scheduled delivery of eight vessels, and amounts are as follows (dollars in millions) (1):

 

                          Q1 2016  $       6.9 (2)
                          Q2 2016         80.2
                          Q3 2016         72.4
                          Q4 2016         98.3
                          Q1 2017         19.7
                          Q2 2017  $      21.1
                                   -----------
                                   $     298.6
                                   ===========

(1)  These are estimates only and are subject to change as construction
     progresses.
(2)  Relates to payments expected to be made from February 25, 2016 to March
     31, 2016. This excludes $134.1 million paid from January 1 to February
     25, 2016.


 

Vessels Held for Sale

As of February 25, 2016, one Capesize newbuilding vessel contract, with a total construction price of $55.3 million, remains classified as held for sale. Through February 25, 2016, we paid $27.6 million under this contract. The remaining unpaid amount of $27.7 million is due upon delivery of this vessel, which is expected to occur in March 2016.

From January 1, 2016 through February 25, 2016, we completed the sale of the seven vessels and vessels under construction. $62.6 million of installment payments were made during that period.

Explanation of Components of Financial Results for the three months ended December 31, 2015 and 2014

For the three months ended December 31, 2015 and 2014, the Company recorded net losses of $302.0 million and $72.0 million, respectively.

Time charter equivalent, or 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 $21.7 million for the three months ended December 31, 2015, associated with 10 vessels time chartered-in and 30 vessels owned, comprised of ten Kamsarmax vessels, 15 Ultramax vessels and five Capesize vessels, compared to TCE revenue of $17.4 million during the three months ended December 31, 2014, associated with chartering in 22 vessels and two owned Kamsarmax vessels. At December 31, 2015 the five Capesize owned vessels were classified as held for sale. TCE revenue per day was $7,390 and $8,587 for the three months ended December 31, 2015 and 2014, respectively (see the breakdown of daily TCE averages below). The decrease in TCE revenue per day is due to the decline in rates resulting from the weakness in the dry bulk market. The increase in TCE revenue during the three months ended December 31, 2015 compared to the prior year period is primarily attributable to increases in revenue days associated with the increase in vessels.

Voyage expenses for the three months ended December 31, 2015 and 2014 were $0.3 million, respectively. The costs incurred during 2015 are primarily comprised of brokerage commissions on vessels we time charter-out and miscellaneous costs that we are unable to recoup under time charter and pool arrangements. Voyage expenses in 2014 relate primarily to voyage charters for certain vessels we time chartered-in prior to their joining the Scorpio Group Pools.

Vessel operating costs for the three months ended December 31, 2015 were $14.6 million related to 30 vessels owned during the three months ended December 31, 2015. Vessel operating costs for the three months ended December 31, 2014 were $1.2 million related to two Kamsarmax vessels owned during the three months ended December 31, 2014.

Charterhire expense was $10.8 million and $23.7 million for the three months ended December 31, 2015 and 2014, respectively. Such decrease during the three months ended December 31, 2015 compared to the prior year period relates to fewer of vessels time chartered-in during the current year period. See the Company’s Fleet List below for the terms of these agreements.

Depreciation for the three months ended December 31, 2015 was $6.6 million and relates to 30 vessels owned. Depreciation for the three months ended December 31, 2014 was $0.6 million and related to two vessels owned during the three months ended December 31, 2015.

General and administrative expense was $9.6 million and $8.4 million for the three months ended December 31, 2015 and 2014, respectively. Such amounts included $6.1 million and $6.3 million of restricted stock amortization and the balance primarily related to payroll, directors’ fees, professional fees and insurance in both periods.

During the three months ended December 31, 2015 a loss of $271.3 million associated with the sale of 11 Capesize vessels and newbuilding Capesize dry bulk vessels under construction was recorded. Three of these Capesize vessels and newbuilding Capesize dry bulk vessels under construction were sold during the period. The remaining three Capesize vessels and five contracts to construct Capesize vessels were classified as assets held for sale at December 31, 2015. During the three months ended December 31, 2014, a loss of $55.5 million was recorded associated with writing down seven contracts to construct vessels that were classified as held for sale.

During the three months ended December 31, 2015, we recorded a $8.7 million loss associated with writing off a portion of deferred financing costs accumulated on two credit facilities for which the commitments were reduced pursuant to the removal from the facilities of certain vessels that have been sold.

Explanation of Components of Financial Results for the Years ended December 31, 2015 and 2014

For the years ended December 31, 2015 and 2014, the Company recorded a net loss of $510.8 million and $116.6 million, respectively.

TCE revenue was $61.7 million for the year ended December 31, 2015, associated with 20 vessels time chartered-in and 30 vessels owned during the period compared to TCE revenue of $45.3 million during the years ended December 31, 2014, associated with 24 time chartered-in vessels and two owned vessel during the period. TCE revenue per day was $7,173 and $7,931 for the years ended December 31, 2015 and 2014, respectively (see the breakdown of daily TCE averages below). The decrease in TCE revenue per day is due to the weakness in the dry bulk market. The increase in TCE revenue during the year ended December 31, 2015 compared to the prior year period is primarily attributable to the increase in the number of revenue days associated with the increase in vessels.

Voyage expenses for the year ended December 31, 2015 were $0.8 million, compared to $3.7 million for the three months ended December 31, 2014. The costs incurred in 2015 are primarily comprised of brokerage commissions on vessels we time charter-out and miscellaneous costs that we are unable to recoup under time charter and pool arrangements. Voyage expenses in 2014 relate primarily to voyage charters for certain vessels we time chartered-in prior to their joining the Scorpio Group Pools.

Vessel operating costs for the year ended December 31, 2015 was $29.4 million related to 30 vessels owned. Vessel operating costs for the year ended December 31, 2014 were $1.6 million related to two vessels owned for the year ended December 31, 2015.

Charterhire expense was $51.4 million and $73.2 million for the years ended December 31, 2015 and 2014, respectively. This decrease is due to fewer vessels chartered-in during 2015 compared to the prior year. See the Company’s Fleet List below for the terms of these agreements.

Depreciation for the year ended December 31, 2015 was $14.3 million and 30 vessels owned. Depreciation for the year ended December 31, 2014 was $0.7 million relates to two vessels owned for the year ended December 31, 2014.

General and administrative expense was $35.4 million and $31.8 million for the years ended December 31, 2015 and 2014, respectively. Such amounts included $24.6 million and $23.9 million of noncash restricted stock amortization and the balance primarily related to payroll, directors’ fees, professional fees and insurance in both periods.

During the year ended December 31, 2015, we recorded a loss of $422.9 million associated with writing down 24 vessels and construction contracts that we sold or classified as held for sale during the year ended December 31, 2015, as well as incremental write downs of certain construction contracts for vessels that were classified as held for sale at December 31, 2014. During the year ended December 31, 2014 we recorded a loss of $55.5 million associated with writing down seven construction contracts for vessels that were classified as held for sale at December 31, 2014.

In addition, during the year ended December 31, 2015, we recorded financial expense, net of $19.5 million, which consists primarily of a $16.1 million loss associated with writing off a portion of deferred financing costs accumulated on five credit facilities for which the commitments were reduced pursuant to the removal from the facility of certain vessels that have been classified as held for sale. In addition, during 2015, we recorded interest expense of $1.0 million. During the year ended December 31, 2014, we incurred no write offs and all of our interest expense was capitalized.

 


                    Scorpio Bulkers Inc. and Subsidiaries
                    Consolidated Statements of Operations
                (Dollars in thousands, except per share data)

                              Unaudited
                     Three months  Three months
                         ended         ended      Year ended    Year ended
                     December 31,  December 31,  December 31,  December 31,
                         2015          2014          2015          2014
                     ------------  ------------  ------------  ------------
Revenue:
  Vessel revenue     $     22,017$     17,732$     62,521$     48,987
                     ------------  ------------  ------------  ------------
Total vessel revenue $     22,017$     17,732$     62,521$     48,987
                     ------------  ------------  ------------  ------------
Operating expenses:
  Voyage expenses             306           309           787         3,727
  Vessel operating
   costs                  14, 583         1,218        29,372         1,600
  Charterhire
   expense                 10,794        23,746        51,389        73,214
  Vessel
   depreciation             6,598           569        14,263           686
  General and
   administrative
   expenses                 9,605         8,376        35,382        31,761
  Loss / write down
   on assets held
   for sale               271,258        55,487       422,937        55,487
                     ------------  ------------  ------------  ------------
Total operating
 expenses                 313,144        89,705       554,130       166,475
                     ------------  ------------  ------------  ------------
Operating loss           (291,127)      (71,973)     (491,609)     (117,488)
                     ------------  ------------  ------------  ------------
Other (expense)
 income:
  Interest income              77           130           356         1,052
  Foreign exchange
   (loss) gain                (18)           43           (12)           43
  Financial expense,
   net                    (10,958)         (198)      (19,524)         (172)
                     ------------  ------------  ------------  ------------
Total other
 (expense) income         (10,899)          (25)      (19,180)          923
                     ------------  ------------  ------------  ------------
Net loss             $   (302,026)$    (71,998)$   (510,789)$   (116,565)
                     ============  ============  ============  ============

Loss per common
 share- basic and
 diluted (1)         $     (11.02)$      (5.72)$     (23.86)$     (10.17)

Weighted-average
 shares outstanding-
 basic and diluted
 (1)                   27,399,103    12,593,330    21,410,177    11,466,072

 

 

(1)  Diluted weighted average shares outstanding excludes the impact of
     restricted shares for the three months and years ended December 31,
     2015 and 2014, 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, except per share data)

                                                     As of December 31,
                                                     2015          2014
                                                 ------------  ------------
Current assets
  Cash and cash equivalents                      $    200,300$    272,673
  Due from related party                                   --        42,373
  Prepaid expenses and other current assets            19,444         3,872
  Assets held for sale                                172,888        43,781
                                                 ------------  ------------
Total current assets                                  392,632       362,699
                                                 ------------  ------------
Non-current assets
  Vessels, net                                        764,454        66,633
  Vessels under construction                          288,282       866,844
  Deferred financing costs, net                        12,807         3,181
  Other assets                                         27,261        24,848
                                                 ------------  ------------
  Total non-current assets                          1,092,804       961,506
                                                 ------------  ------------
Total assets                                     $  1,485,436$  1,324,205
                                                 ============  ============

Liabilities and shareholders' equity
Current liabilities
  Bank loans                                     $    110,226$      3,300
  Accounts payable and accrued expenses                16,838        17,042
                                                 ------------  ------------
Total current liabilities                             127,064        20,342
                                                 ------------  ------------
Non-current liabilities
  Bank loans                                          350,216        30,250
  Senior Notes                                         73,625        73,625
                                                 ------------  ------------
Total non-current liabilities                         423,841       103,875
                                                 ------------  ------------
Total liabilities                                     550,905       124,217
                                                 ------------  ------------
Shareholders' equity
  Common stock, $0.01 par value per share;
   authorized 56,250,000 shares; issued and
   outstanding 28,686,561 and 15,024,974 shares
   as of December 31, 2015 and December 31,
   2014, respectively                                     287         1,803
  Paid-in capital                                   1,567,905     1,321,057
  Accumulated deficit                                (633,661)     (122,872)
                                                 ------------  ------------
Total shareholders' equity                            934,531     1,199,988
                                                 ------------  ------------
Total liabilities and shareholders' equity       $  1,485,436$  1,324,205
                                                 ============  ============



                   Scorpio Bulkers Inc. and Subsidiaries
                          Statements of Cash Flows
                           (Dollars in thousands)

                                                     For the years ended
                                                        December 31,
                                                 --------------------------
                                                     2015          2014
                                                 ------------  ------------
Operating activities
Net loss                                         $   (510,789)$   (116,565)
Adjustment to reconcile net loss to net cash
 used by operating activities:
  Restricted stock amortization                        24,599        23,869
  Vessel depreciation                                  14,263           686
  Amortization of deferred financing costs              1,988           150
  Write off of deferred financing costs                16,085            --
  Loss / write down on assets held for sale           422,937        55,487
Changes in operating assets and liabilities:
  Increase in prepaid expenses and other current
   assets                                              (9,597)      (18,981)
  Increase in accounts payable and accrued
   expenses                                             5,372         5,014
                                                 ------------  ------------
Net cash used in operating activities                 (35,142)      (50,340)
                                                 ------------  ------------
Investing activities
  Security deposit refunded (paid) on assets
   held for sale                                       31,277       (31,277)
  Proceed from sale of assets held for sale           281,050            --
  Payments on assets held for sale                    (92,433)           --
  Payments for vessels and vessels under
   construction                                      (875,970)     (651,505)
                                                 ------------  ------------
Net cash used in investing activities                (656,076)     (682,782)
                                                 ------------  ------------
Financing activities
  Proceeds from issuance of common stock              217,997       187,615
  Proceeds from issuance of long-term debt            489,561        33,550
  Proceeds from Senior Notes offering                      --        73,625
  Repayments of long-term debt                        (62,669)           --
  Debt issue costs paid                               (26,044)      (22,891)
                                                 ------------  ------------
Net cash provided by financing activities             618,845       271,899
                                                 ------------  ------------
Decrease in cash and cash equivalents                 (72,373)     (461,223)
Cash at cash equivalents, beginning of period         272,673       733,896
                                                 ------------  ------------
Cash and cash equivalents, end of period         $    200,300$    272,673
                                                 ============  ============



                    Scorpio Bulkers Inc. and Subsidiaries
                      Other Operating Data (unaudited)
                           (Dollars in thousands)

                                    Three      Three
                                   months     months
                                    ended      ended   Year ended Year ended
                                  December   December   December   December
                                  31, 2015   31, 2014   31, 2015   31, 2014
                                 ---------- ---------- ---------- ----------
Time charter equivalent revenue
 (1):
  Vessel revenue                 $   22,017$   17,732$   62,521$   48,987
  Voyage expenses                       306        309        787      3,727
                                 ---------- ---------- ---------- ----------
  Time charter equivalent
   revenue                       $   21,711$   17,423$   61,734$   45,260
                                 ========== ========== ========== ==========
Time charter equivalent revenue
 attributable to:
  Kamsarmax                      $    7,304$   13,631$   26,381$   35,117
  Ultramax                           10,426      3,792     26,595     10,143
  Capesize                            3,981         --      8,758         --
                                 ---------- ---------- ---------- ----------
                                 $   21,711$   17,423$   61,734$   45,260
                                 ========== ========== ========== ==========
Revenue days:
  Kamsarmax                           1,100      1,570      3,961      4,527
  Ultramax                            1,526        459      3,889      1,180
  Capesize                              312         --        757         --
                                 ---------- ---------- ---------- ----------
Combined                              2,938      2,029      8,607      5,707
                                 ========== ========== ========== ==========
TCE per revenue day (1):
  Kamsarmax                      $    6,640$    8,682$    6,660$    7,757
  Ultramax                       $    6,832$    8,261$    6,839$    8,599
  Capesize                       $   12,760 $       -- $   11,569 $       --
  Combined                       $    7,390$    8,587$    7,173$    7,931

(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 February 25, 2016


Owned vessels delivered from shipyards

             Vessel Name               Year Built       DWT      Vessel Type
------------------------------------- ------------ ------------ ------------
SBI Cakewalk                              2014           82,000   Kamsarmax
SBI Charleston                            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
                                                   ------------
           Total Kamsarmax                            1,152,000

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
                                                   ------------
            Total Ultramax                            1,177,000
                                                   ------------
  Total Owned Vessels DWT                             2,329,000
                                                   ============



Vessels under construction

Kamsarmax

                                     Expected
            Vessel Name            Delivery (1)            DWT    Shipyard
  --------------------------------------------------------------------------
1 Hull 1093 - TBN SBI Twist           Q2-16             82,000  Yangzijiang
2 Hull S1726A - TBN SBI Zumba         Q3-16             82,000     Hudong
3 Hull S1231 - TBN SBI Macarena       Q4-16             82,000     Hudong
4 Hull S1735A - TBN SBI Parapara      Q4-16             82,000     Hudong
5 Hull S1736A - TBN SBI Mazurka       Q4-16             82,000     Hudong
6 Hull S1232 - TBN SBI Swing          Q1-17             82,000     Hudong
7 Hull S1233 - TBN SBI Jive           Q2-17             82,000     Hudong
                                                 -------------
  Kamsarmax NB DWT                                     574,000
                                                 -------------


Ultramax

                                     Expected
            Vessel Name            Delivery (1)            DWT    Shipyard
  --------------------------------------------------------------------------
1 Hull 1907 - TBN SBI Hera            Q2-16             60,200     Mitsui
2 Hull 1906 - TBN SBI Zeus            Q2-16             60,200     Mitsui
3 Hull 1911 - TBN SBI Poseidon        Q3-16             60,200     Mitsui
4 Hull 1912 - TBN SBI Apollo          Q3-16             60,200     Mitsui
5 Hull NE194 - TBN SBI Hyperion       Q2-16             61,000     Nacks
6 Hull NE195 - TBN SBI Tethys         Q2-16             61,000     Nacks
7 Hull CX0655 - TBN SBI Samson        Q4-16             64,000    Chengxi
8 Hull CX0613 - TBN SBI Phoebe        Q3-16             64,000    Chengxi
9 Hull CX0656 - TBN SBI Phoenix       Q4-16             64,000    Chengxi
                                                 -------------
  Ultramax NB DWT                                      554,800
                                                 -------------
  Total Newbuild DWT                                 1,128,800
                                                 =============


Vessels Held for Sale


                             Expected
                             Delivery
         Vessel Name           (1)         DWT        Owned / Shipyard
  --------------------------------------------------------------------------
1 Hull S1214 - TBN SBI                         Sungdong Shipbuilding &
   Cohiba                     Q1-16    180,000 Marine Engineering Co., Ltd.
                                      ---------
                                       180,000
                                      =========

 

As used in this earnings release “Chengxi” refers to Chengxi Shipyard Co., Ltd., “Hudong” refers to Hudong-Zhonghua Shipbuilding (Group) Co., Inc., “Mitsui” refers to Mitsui Engineering & Shipbuilding Co. Ltd., “Nacks” refers to Nantong COSCO KHI Ship Engineering Co., and “Yangzijiang” refers to Jiangsu Yangzijiang Shipbuilding Co. Ltd.

 

(1)  Expected delivery date relates to the quarter during which each vessel
     is currently expected to be delivered from the shipyard.

 

Time chartered-in vessels

In the first quarter of 2016, we have agreed with the charterers to terminate four time chartered-in contracts for a one-time payment of $10 million. The termination is effective March 19, 2016, and the vessels will be returned on such date. These four vessels are not reflected in the table below. The Company has time chartered-in three dry bulk vessels. The terms of the time charter-in contracts are summarized as follows:

 

                                                  Daily
                                                  Base      Earliest
  Vessel Type   Year Built    DWT   Where Built   Rate       Expiry
-------------- ----------- -------- ----------- -------- -------------
Kamsarmax          2012      82,000 South Korea $ 15,500 30-Jul-17 (1)
Panamax            2004      77,500    China    $ 14,000 03-Jan-17 (2)
Supramax           2008      58,000    China    $ 12,250 12-Jun-16 (3)
                           --------
  Total TC DWT              217,500
                           ========

(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.
(2)  This vessel has been time chartered-in for 32 to 38 months at the
     Company's option at $14,000 per day. The vessel was delivered on May 3,
     2014.
(3)  This vessel has been time chartered-in for 21 to 25 months at the
     Company's option at $12,250 per day. The Company has the option to
     extend this time charter for one year at $13,000 per day. The vessel
     was delivered on September 13, 2014.


 

Conference Call Details:

Monday, February 29, 2016 at 8:00 AM, Eastern Standard Time and 2:00 PM Central European Time.

Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1 (888) 599-4880 (U.S.) or 1 (913)-981-5544 (International). The conference participant passcode is 9944837. 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: https://www.webcaster4.com/Webcast/Page/608/13479

About Scorpio Bulkers Inc.

Scorpio Bulkers Inc. is a provider of marine transportation of dry bulk commodities. Scorpio Bulkers Inc. currently owns 33 vessels, consisting of 14 Kamsarmax vessels and 19 Ultramax vessels. The Company also time charters-in three dry bulk vessels (consisting of one Supramax, one Panamax and one Kamsarmax vessels) and has contracted for 16 dry bulk vessels consisting of seven Kamsarmax and nine Ultramax), from shipyards in Japan and China. Upon final delivery of all of the vessels the owned fleet is expected to have a total carrying capacity of approximately 3.5 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

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, or superior to financial measures prepared in accordance with GAAP.

 


Adjusted net loss

In thousands, except per share data

                               For the three months ended December 31,
                                   2015                      2014
                         ------------------------  ------------------------
                            Amount     Per share      Amount     Per share
                         (unaudited)  (unaudited)  (unaudited)  (unaudited)
                         -----------  -----------  -----------  -----------
Net loss                 $  (302,026)$    (11.02)$   (71,998)$     (5.72)
Adjustments:
  Loss / write down on
   assets held for sale      271,258         9.90       55,487         4.41
  Write down of deferred
   financing cost              8,748         0.32           --           --
                         -----------  -----------  -----------  -----------
Total adjustments            280,006        10.22       55,487         4.41
                         -----------  -----------  -----------  -----------
Adjusted net loss        $   (22,020)$     (0.80)$   (16,511)$     (1.31)
                         ===========  ===========  ===========  ===========


                                  For the years ended December 31,
                                   2015                      2014
                         ------------------------  ------------------------
                            Amount     Per share      Amount     Per share
                         (unaudited)  (unaudited)  (unaudited)  (unaudited)
                         -----------  -----------  -----------  -----------
Net loss                 $  (510,789)$    (23.86)$  (116,565)$    (10.17)
Adjustments:
  Loss / write down on
   assets held for sale      422,937        19.75       55,487         4.84
  Write down of deferred
   financing cost             16,085         0.75           --           --
                         -----------  -----------  -----------  -----------
Total adjustments            439,022        20.50       55,487         4.84
                         -----------  -----------  -----------  -----------
Adjusted net loss        $   (71,767)$     (3.36)$   (61,078)$     (5.33)
                         ===========  ===========  ===========  ===========


 

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:

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

Source: Scorpio Bulkers Inc.