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Scorpio Bulkers Inc. Announces Financial Results for the Fourth Quarter of 2017 and Declares a Quarterly Dividend

Feb 5, 2018

MONACO, Feb. 05, 2018 (GLOBE NEWSWIRE) — Scorpio Bulkers Inc. (NYSE:SALT) (“Scorpio Bulkers”, or the “Company”), today reported its results for the three months and year ended December 31, 2017.

The Company also announced today that its Board of Directors has declared a quarterly cash dividend of $0.02 per share on the Company’s common stock.

Results for the Three Months and Year Ended December 31, 2017 and 2016

For the three months ended December 31, 2017, the Company’s GAAP net loss was $1.1 million, or $0.01 loss per diluted share.  For the same period in 2016, the Company’s GAAP net loss was $20.6 million, or $0.29 loss per diluted share.  Total vessel revenues for the three months ended December 31, 2017 were of $51.1 million, compared to $26.8 million for the three months ended December 31, 2016. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the fourth quarter of 2017 and 2016 were $22.9 million and $1.0 million, respectively (see Non-GAAP Financial Measures below).

For the year ended December 31, 2017, the Company’s GAAP net loss was $59.7 million, or $0.83 loss per diluted share compared to a GAAP net loss of $124.8 million, or $2.22 loss per diluted share for the prior year. EBITDA for the years ended December 31, 2017 and 2016 were $35.3 million and a loss of $45.7 million, respectively (see Non-GAAP Financial Measures below).

For the year ended December 31, 2017, the Company’s adjusted net loss was $41.6 million, or $0.57 adjusted loss per diluted share, which excludes the impact of 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 year ended December 31, 2016, the Company’s adjusted net loss was $99.9 million, or $1.78 adjusted loss per diluted share, which excludes a loss/write off of vessels and assets held for sale of $12.4 million, the write off of deferred financing costs on credit facilities that will no longer be used of $2.5 million and a charterhire contract termination fee of $10.0 million. Adjusted EBITDA for the years ended December 31, 2017 and 2016 were $53.5 million and a loss of $20.8 million, respectively (see Non-GAAP Financial Measures below).

TCE Revenue

TCE Revenue Earned during the Fourth Quarter of 2017

  • Our Kamsarmax fleet earned $12,605 per day
  • Our Ultramax fleet earned $10,886 per day

Voyages Fixed thus far for the First Quarter of 2018

  • Kamsarmax fleet: approximately $13,300 per day for 74% of the days
  • Ultramax fleet: approximately $9,800 per day for 63% of the days

Cash and Cash Equivalents

As of February 2, 2018, the Company had approximately $69.1 million in cash and cash equivalents.

Recent Significant Events

Vessel Acquisitions

The Company acquired nine Chinese built Ultramax dry bulk vessels in two separate transactions for a total consideration of $207.0 million, of which $186.7 million was paid in cash and $20.3 million was in the form of the Company’s common stock.  Two of the vessels were built in 2014, four were built in 2015, one was built in 2016, and two were built in 2017.  All nine vessels were delivered to the Company as of December 31, 2017.

The Company also entered into an agreement to purchase one Kamsarmax dry bulk vessel for $25.5 million, of which $18.8 million remains unpaid at December 31, 2017. The Kamsarmax vessel is a resale unit which is expected to be delivered from Jiangsu New Yangzijiang Shipbuilding Co Ltd in China in the second quarter of 2018.

Liquidity and Debt

Share Repurchase Program

The Company repurchased approximately 1.5 million shares of its common stock under the Board of Directors authorized stock repurchase program at a cost of approximately $11.0 million, or at an average cost of $7.51 per share, which was funded from available cash resources.  As of February 2, 2018, approximately $39.0 million of the $50.0 million authorized remains available for the repurchase of the Company’s common stock in open market or privately negotiated transactions. The specific timing and amounts of any repurchases will be in the sole discretion of management and may vary based on market conditions and other factors and the Company is not obligated under the terms of the program to repurchase any of its common stock. The authorization has no expiration date.

Senior Notes Repurchase Program

In December 2016, the Company’s Board of Directors authorized the repurchase of up to $20.0 million of the Company’s outstanding 7.5% Senior Notes due in 2019, or Senior Notes, in open market or privately negotiated transactions. The specific timing and amounts of the repurchases, which will be funded by available cash, will be in the sole discretion of management and vary based on market conditions and other factors. This authorization has no expiration date. As of February 2, 2018, the entire $20.0 million remains available.

Dividend

In the fourth quarter of 2017, the Company’s Board of Directors declared and the Company paid a quarterly cash dividend of $0.02 per share totaling approximately $1.5 million.

Today, the Company’s Board of Directors declared a quarterly cash dividend of $0.02 per share, payable on or about March 15, 2018, to all shareholders of record as of February 15, 2018. As of February 2, 2018, 77,141,140 shares were outstanding.

$38.7 Million Credit Facility

On December 13, 2017, the Company entered into a senior secured credit facility for up to $38.7 million (the “$38.7 Million Credit Facility”), which was used to finance a portion of the purchase price of three Ultramax vessels acquired in the fourth quarter of 2017. The facility has a maturity date of December 13, 2022 and bears interest at LIBOR plus a margin of 2.85% per annum. This facility is secured by, among other things, a first preferred mortgage on the three Ultramax vessels and guaranteed by each vessel owning subsidiary. The entire $38.7 million available under the credit facility was drawn down, all of which remains currently outstanding.

$85.5 Million Credit Facility

On December 5, 2017, the Company entered into a senior secured credit facility for up to $85.5 million (the “$85.5 Million Credit Facility”), which was used to finance a portion of the purchase price of six Ultramax vessels acquired in the fourth quarter of 2017. The facility has a maturity date of February 15, 2023 and bears interest at LIBOR plus a margin of 2.85% per annum. This facility is secured by, among other things, a first preferred mortgage on the six Ultramax vessels and guaranteed by each vessel owning subsidiary. The entire $85.5 million available under the credit facility was drawn down, all of which remains currently outstanding.

$19.6 Million Lease Financing

On October 20, 2017, the Company entered into a financing transaction in respect of one of its Kamsarmax vessels with unaffiliated third parties involving the sale and leaseback of the SBI Rumba (the “$19.6 Million Lease Financing”), a 2015 Japanese built Kamsarmax vessel, for consideration of approximately $19.6 million. As part of the transaction, the Company will make monthly payments of $164,250 under a nine and a half year bareboat charter agreement with the buyers, that the Company could extend for a further six months. The cost of the financing is equivalent to an implied fixed interest rate of 4.23% for 10 years. The agreement also provides the Company with options to repurchase the vessel beginning on the fifth anniversary of the sale through the end of the agreement.

$409 Million Credit Facility

During the fourth quarter of 2017, the Company drew down the $79.0 million available to it under the revolving line of credit available under the $409 Million Credit Facility.  As of February 2, 2018, the Company is fully drawn on this facility.

Debt Overview

The Company’s outstanding debt balance, gross of unamortized deferred financing costs as of December 31, 2017 and February 2, 2018, are as follows (dollars in thousands).

    As of
December 31, 2017
  As of
February 2, 2018
Credit Facility   Amount
Outstanding
  Amount
Outstanding
Senior Notes   $ 73,625     $ 73,625  
$409 Million Credit Facility   174,443     173,123  
$330 Million Credit Facility   247,876     247,876  
$42 Million Credit Facility   22,354     22,354  
$67.5 Million Credit Facility   40,461     39,679  
$12.5 Million Credit Facility   10,183     10,183  
$27.3 Million Credit Facility   18,213     18,017  
$85.5 Million Credit Facility   85,500     85,500  
$38.7 Million Credit Facility   38,700     38,700  
$19.6 Million Lease Financing   19,268     19,174  
Total   $ 730,623     $ 728,231  
 

The Company’s projected quarterly debt repayments on our bank loans and senior notes and bareboat charter payments on our finance lease through 2019 are as follows (dollars in thousands):

    Principal on
Bank Loans
and Senior Notes
  Finance
Lease
  Total
Q1 2018   (1)   $ 10,843     $ 329     $ 11,172  
Q2 2018     12,161       493       12,654  
Q3 2018     11,729       493       12,222  
Q4 2018     11,069       493       11,562  
Q1 2019     10,791       493       11,284  
Q2 2019     10,592       493       11,085  
Q3 2019   (2)     84,650       493       85,143  
Q4 2019     12,554       493       13,047  
Total   $ 164,389     $ 3,780     $ 168,169  

(1) Relates to payments expected to be made from February 3, 2018 to March 31, 2018.
(2) Includes $73.6 million repayment of Senior Notes due at maturity.

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

For the fourth quarter of 2017, the Company’s GAAP net loss was $1.1 million, or $0.01 loss per diluted share.  For the same period in 2016, the Company’s GAAP net loss was $20.6 million, or $0.29 loss per diluted share.  Earnings before interest, taxes, depreciation and amortization for the fourth quarters of 2017 and 2016 were $22.9 million and $1.0 million, respectively (see Non-GAAP Financial Measures).

Total vessel revenues for the fourth quarter of 2017 were of $51.1 million, an increase of $24.3 million from $26.8 million in the fourth quarter of 2016. Our TCE revenue (see Non-GAAP Financial Measures) for the fourth quarter of 2017 was $51.0 million, an increase of $24.2 million from the fourth quarter of 2016. During the fourth quarter of 2017, a large percentage of our fleet was positioned within the Atlantic basin allowing us to capitalize on the strong coal and petroleum coke volumes to the North Atlantic, while reducing the impact of the announced restrictions on Chinese coal imports.

Total operating expenses for the fourth quarter of 2017 were $43.2 million compared to $40.9 million in the fourth quarter of 2016.  In the fourth quarter of 2017, we took delivery of nine Ultramax vessels, which contributed approximately $2.0 million in operating expenses, consisting primarily of takeover costs and other vessel operating expenses.

Ultramax Operations

  Three Months Ended December 31,        
  2017   2016   Change   % Change
TCE Revenue:              
Vessel revenue $ 30,266     $ 16,020     $ 14,246     89  
Voyage expenses 47     (5 )   52     1,040  
TCE Revenue $ 30,219     $ 16,025     $ 14,194     89  
Operating expenses:              
Vessel operating costs 14,082     12,030     2,052     17  
Charterhire expense 936         936      
Vessel depreciation 7,819     6,765     1,054     16  
General and administrative expense 881     795     86     11  
Total operating expenses $ 23,718     $ 19,590     $ 4,128     21  
Operating income (loss) $ 6,501     $ (3,565 )   $ 10,066     282  

Vessel revenue for our Ultramax Operations increased to $30.3 million in the three months ended December 31, 2017 from $16.0 million in the three months ended December 31, 2016.

TCE revenue (see Non-GAAP Financial Measures) for our Ultramax Operations was $30.2 million for the three months ended December 31, 2017 and was associated with a day-weighted average of 29 vessels owned and one time chartered-in vessel, compared to $16.0 million for the three months ended December 31, 2016, which was associated with a day-weighted average of 26 vessels owned. TCE revenue per day was $10,886 and $7,238 for the three months ended December 31, 2017 and 2016, respectively. Our Ultramax fleet benefitted due to the fleet positional strategy in place for the fourth quarter of 2017, which was weighted towards the Atlantic. This enabled us to take advantage of the strong coal and petroleum coke export volumes, while avoiding the downside risk in the Pacific from coal import regulations instituted by Chinese Authorities.

  Three Months Ended December 31,        
Ultramax Operations: 2017   2016   Change   % Change
TCE Revenue $ 30,219     $ 16,025     $ 14,194     89  
TCE Revenue / Day $ 10,886     $ 7,238     $ 3,648     50  
Revenue Days 2,776     2,214     562     25  

Our Ultramax Operations vessel operating costs were $14.1 million for the three months ended December 31, 2017, including approximately $1.2 million of takeover costs (primarily attributable to the nine vessels acquired in the period) and contingency expenses and related to 29 vessels owned, on average during the period.  Vessel operating costs for the prior year period were $12.0 million and related to 26 vessels owned, on average during the period. Daily operating costs excluding other non-operating expenses for the three months ended December 31, 2017 were $4,749.

Charterhire expense for our Ultramax Operations was approximately $0.9 million for the three months ended December 31, 2017, and relates to the vessel we have time chartered-in at $10,125 per day since the end of the third quarter of 2017.

Ultramax Operations depreciation increased to $7.8 million in the three months ended December 31, 2017 from $6.8 million in the prior year period reflecting the increase in our weighted average vessels owned to 29 from 26.

General and administrative expense for our Ultramax Operations was $0.9 million for the three months ended December 31, 2017 and $0.8 million for the three months ended December 31, 2016.  The increase was due to an increase in administrative service fees, reflecting the growth of our fleet.

Kamsarmax Operations

  Three Months Ended December 31,        
  2017   2016   Change   % Change
TCE Revenue:              
Vessel revenue $ 20,861     $ 10,826     $ 10,035     93  
Voyage expenses 50     36     14     39  
TCE Revenue $ 20,811     $ 10,790     $ 10,021     93  
Operating expenses:              
Vessel operating costs 8,719     7,006     1,713     24  
Charterhire expense 11     2,569     (2,558 )   (100 )
Vessel depreciation 5,021     3,821     1,200     31  
General and administrative expense 324     451     (127 )   (28 )
Total operating expenses $ 14,075     $ 13,847     $ 228     2  
Operating income (loss) $ 6,736     $ (3,057 )   $ 9,793     320  

Vessel revenue for our Kamsarmax Operations increased to $20.9 million in the three months ended December 31, 2017 from $10.8 million in the three months ended December 31, 2016.

TCE revenue (see Non-GAAP Financial Measures) for our Kamsarmax Operations was $20.8 million for the three months ended December 31, 2017 and was associated with a day-weighted average of 18 vessels owned, compared to $10.8 million for the three months ended December 31, 2016, which was associated with a day-weighted average of 15 vessels owned and two vessels time chartered-in. TCE revenue per day was $12,605 and $7,401 for the three months ended December 31, 2017 and 2016, respectively.  Our Kamsarmax vessels were able to benefit from their positioning in the Atlantic basin at the beginning of the fourth quarter of 2017 allowing us to take advantage of the strong coal volumes to the North Atlantic.

  Three Months Ended December 31,        
Kamsarmax Operations: 2017   2016   Change   % Change
TCE Revenue $ 20,811     $ 10,790     $ 10,021     93  
TCE Revenue / Day $ 12,605     $ 7,401     $ 5,204     70  
Revenue Days 1,651     1,458     193     13  

Kamsarmax Operations vessel operating costs were $8.7 million for the three months ended December 31, 2017, including approximately $0.5 million of takeover costs and contingency expenses, related to 18 vessels owned, on average during the period.  Vessel operating costs for the prior year period were $7.0 million and related to 15 vessels owned, on average during the period. Daily operating costs excluding takeover and other non-operating expenses for the three months ended December 31, 2017 were $4,943.

In the three months ended December 31, 2017 no Kamsarmax vessels were time chartered-in.  During the prior year period, two Kamsarmax vessels were time chartered-in resulting in charterhire expense of $2.6 million.

Kamsarmax Operations depreciation increased to $5.0 million in the three months ended December 31, 2017 from $3.8 million in the prior year period reflecting the increase in our weighted average vessels owned to 18 from 15.

General and administrative expense for our Kamsarmax Operations was $0.3 million and $0.5 million for the three months ended December 31, 2017 and 2016.  The expense consists primarily of administrative services fees.

Corporate

Certain general and administrative expenses we incur and all of our financial expenses are not attributable to a specific segment.  Accordingly, these costs are not allocated to any of our segments.  Corporate related expenses were $14.3 million in both the fourth quarters of 2017 and 2016.  A decrease in restricted stock amortization resulting from run-off of prior year grants was offset by an increase in financial expenses due to an increase in the LIBOR rate, higher levels of debt and the cessation of the capitalization of interest.

Financial Results for the Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

For 2017, the Company’s GAAP net loss was $59.7 million, or $0.83 loss per diluted share compared to a GAAP net loss of $124.8 million, or $2.22 loss per diluted share for the prior year. EBITDA for 2017 and 2016 were $35.3 million and a loss of $45.7 million, respectively (see Non-GAAP Financial Measures below).

For 2017, the Company’s adjusted net loss was $41.6 million, or $0.57 adjusted loss per diluted share, which excludes the impact of 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 2016, the Company’s adjusted net loss was $99.9 million, or $1.78 adjusted loss per diluted share, which excludes a loss/write off of vessels and assets held for sale of $12.4 million, the write off of deferred financing costs on credit facilities that will no longer be used of $2.5 million and a charterhire contract termination fee of $10.0 million.

Total vessel revenues for 2017 were $162.2 million, an increase of $83.8 million from $78.4 million in 2016. Our TCE revenue (see Non-GAAP Financial Measures) for 2017 was $161.8 million, an increase of $83.3 million from 2016. The increase in TCE revenue is attributable to rate increases throughout the year, a sustained increased in demand across all bulk sectors, regions and commodities, as well as a reduction in tonnage supply.  We also experienced an increase in revenue days associated with the growth of our fleet.

Total operating expenses for 2017 were $187.8 million compared to $179.1 million in 2016, which included $17.7 million and $12.4 million, respectively, related to asset disposals (as described above). The year over year increase is primarily due to an $18.6 million increase in vessel operating costs resulting from the increase in the size of our fleet.

Ultramax Operations

  For the Year Ended December 31,        
  2017   2016   Change   % Change
TCE Revenue:              
Vessel revenue $ 94,380     $ 46,718     $ 47,662     102  
Voyage expenses 129     36     93     258  
TCE Revenue $ 94,251     $ 46,682     $ 47,569     102  
Operating expenses:              
Vessel operating costs 51,445     41,749     9,696     23  
Charterhire expense 975     5,033     (4,058 )   (81 )
Charterhire termination     7,500     (7,500 )   (100 )
Vessel depreciation 29,797     22,040     7,757     35  
General and administrative expense 3,389     2,725     664     24  
Loss / write down on assets held for sale     (130 )   130     (100 )
Total operating expenses $ 85,606     $ 78,917     $ 6,689     8  
Operating income (loss) $ 8,645     $ (32,235 )   $ 40,880     127  

Vessel revenue for our Ultramax Operations increased to $94.4 million in 2017 from $46.7 million in 2016 due to significant increases in both rates and revenue days, the latter of which is associated with the growth of our fleet.

TCE revenue (see Non-GAAP Financial Measures) for our Ultramax Operations was $94.3 million for 2017 and was associated with a day-weighted average of 28 vessels owned, compared to $46.7 million for the prior year, which was associated with a day-weighted average of 22 vessels owned and one vessel time chartered-in. TCE revenue per day was $9,159 and $5,896 for 2017 and 2016, respectively. Increased worldwide demand across all bulk sectors, regions and commodities, as well as a reduction in supply drove the increase in rates for both of our vessel types.

  For the Year Ended December 31,        
Ultramax Operations: 2017   2016   Change   % Change
TCE Revenue $ 94,251     $ 46,682     $ 47,569     102  
TCE Revenue / Day $ 9,159     $ 5,896     $ 3,263     55  
Revenue Days 10,291     7,917     2,374     30  

Our Ultramax Operations vessel operating costs were $51.4 million for 2017, including approximately $1.2 million of takeover costs associated with new deliveries and $0.6 million of other non-operating expenses and related to 28 vessels owned, on average during the period.  Vessel operating costs for the prior year were $41.7 million and related to 22 vessels owned, on average during the period. Daily operating costs excluding takeover and other non-operating expenses for 2017 were $4,842.

Charterhire expense for our Ultramax Operations decreased to $1.0 million in 2017 from $5.0 million in the prior year.  We did not time charter-in any Ultramax vessels until the end of the third quarter of 2017, when we chartered-in one Ultramax vessel at $10,125 per day. During 2016, we recorded a $7.5 million charge to terminate three time charter-in contracts. 

Ultramax Operations depreciation increased to $29.8 million in 2017 from $22.0 million in the prior year reflecting the increase in our day weighted average vessels owned to 28 from 22.

General and administrative expense for our Ultramax Operations was $3.4 million for 2017 and $2.7 million for 2016.  The increase is due to an increase in administrative services fees, reflecting the growth of our fleet.

During 2016, we recorded a reversal of loss/write off of vessels and assets held for sale related to Ultramax vessels held for sale at December 31, 2015, due to accrual adjustments and other cost true ups.

Kamsarmax Operations

  For the Year Ended December 31,        
  2017   2016   Change   % Change
TCE Revenue:              
Vessel revenue $ 67,825     $ 31,684     $ 36,141     114  
Voyage expenses 300     (81 )   381     470  
TCE Revenue $ 67,525     $ 31,765     $ 35,760     113  
Operating expenses:              
Vessel operating costs 35,336     27,083     8,253     30  
Charterhire expense 4,417     12,323     (7,906 )   (64 )
Charterhire termination     2,500     (2,500 )   (100 )
Vessel depreciation 18,713     14,522     4,191     29  
General and administrative expense 1,916     1,718     198     12  
Loss / write down on assets held for sale 17,701     11,557     6,144     53  
Total operating expenses $ 78,083     $ 69,703     $ 8,380     12  
Operating loss $ (10,558 )   $ (37,938 )   $ 27,380     72  

Vessel revenue for our Kamsarmax Operations increased to $67.8 million in 2017 from $31.7 million in 2016 due to significant increases in both rates and revenue days.

TCE revenue (see Non-GAAP Financial Measures) for our Kamsarmax Operations was $67.5 million for 2017 and was associated with a day-weighted average of 18 vessels owned and one vessel time chartered-in, compared to $31.8 million for the prior year, which was associated with a day-weighted average of 14 vessels owned and two vessels time chartered-in. TCE revenue per day was $10,051 and $5,639 for 2017 and 2016, respectively. Increased worldwide demand across all bulk sectors, regions and commodities, as well as a reduction in supply drove the increase in rates for both of our vessel types.

  For the Year Ended December 31,        
Kamsarmax Operations: 2017   2016   Change   % Change
TCE Revenue $ 67,525     $ 31,765     $ 35,760     113  
TCE Revenue / Day $ 10,051     $ 5,639     $ 4,412     78  
Revenue Days 6,718     5,633     1,085     19  

Kamsarmax Operations vessel operating costs were $35.3 million for 2017, including approximately $1.4 million of takeover costs associated with new deliveries and $1.0 million of other non-operating expenses and related to 18 vessels owned, on average during the period.  Vessel operating costs for the prior year were $27.1 million and related to 14 vessels owned, on average during the period. Daily operating costs excluding takeover and other non-operating expenses for 2017 were $5,028.

Charterhire expense for our Kamsarmax Operations decreased to $4.4 million in 2017 from $12.3 million in the prior year reflecting the reduction in the number of vessels time chartered-in from four at the start of 2016 to none at the end of 2017. During 2016, we recorded a $2.5 million charge to terminate one time charter-in contract.

Kamsarmax Operations depreciation increased to $18.7 million in 2017 from $14.5 million in the prior year reflecting the increase in our weighted average vessels owned to 18 from 14.

General and administrative expense for our Kamsarmax Operations was $1.9 million and $1.7 million for 2017 and 2016, respectively.  The increase is due to an increase in administrative services fees, reflecting the growth of our fleet.

During 2017, we recorded a write down on assets held for sale related to the sale of two Kamsarmax vessels to an unaffiliated third party and in 2016, we recorded a write down of vessels and assets held for sale related to the cancellation of a shipbuilding contract for a Kamsarmax vessel.

Corporate

Corporate general and administrative and financial expenses increased from $53.3 million in 2016 to $57.9 million in 2017, as increases in financial expenses due to increasing LIBOR rates, higher levels of debt and reduced capitalization of interest outweighed decreases in restricted stock amortization as prior year grants, with higher fair values than current grants, vested and were fully expensed.

During 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
December 31,
  Year Ended December 31,
    2017   2016   2017   2016
Revenue:                
Vessel revenue   $ 51,127     $ 26,846     $ 162,205     $ 78,402  
Operating expenses:                
Voyage expenses   97     31     429     (45 )
Vessel operating costs   22,801     19,036     86,664     68,832  
Charterhire expense   947     2,569     5,392     17,356  
Charterhire contract termination charge               10,000  
Vessel depreciation   12,840     10,586     48,510     36,562  
General and administrative expenses   6,551     8,715     29,081     33,995  
Loss / write down on assets held for sale           17,701     12,433  
Total operating expenses   43,236     40,937     187,777     179,133  
Operating loss   7,891     (14,091 )   (25,572 )   (100,731 )
Other income (expense):                
Interest income   197     301     1,100     933  
Foreign exchange loss   (15 )   49     (292 )   (116 )
Financial expense, net   (9,141 )   (6,816 )   (34,962 )   (24,921 )
Total other expense   (8,959 )   (6,466 )   (34,154 )   (24,104 )
Net loss   $ (1,068 )   $ (20,557 )   $ (59,726 )   $ (124,835 )
                 
Loss per common share – basic and diluted   $ (0.01 )   $ (0.29 )   $ (0.83 )   $ (2.22 )
Weighted-average shares outstanding – basic and diluted   71,702     71,672     71,794     56,174  

 

Scorpio Bulkers Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
 
    Unaudited    
    December 31, 2017   December 31, 2016
Assets        
Current assets        
Cash and cash equivalents   $ 68,535     $ 101,734  
Accounts receivable   7,933     7,050  
Prepaid expenses and other current assets   6,087     6,696  
Total current assets   82,555     115,480  
Non-current assets        
Vessels, net   1,534,782     1,234,081  
Vessels under construction   6,710     180,000  
Deferred financing costs, net   3,068     3,307  
Other assets   16,295     14,289  
Total non-current assets   1,560,855     1,431,677  
Total assets   $ 1,643,410     $ 1,547,157  
         
Liabilities and shareholders’ equity        
Current liabilities        
Bank loans, net   $ 46,993     $ 13,480  
Capital lease obligation   1,144      
Accounts payable and accrued expenses   10,453     11,070  
Total current liabilities   58,590     24,550  
Non-current liabilities        
Bank loans, net   576,967     493,793  
Capital lease obligation   17,747      
Senior Notes, net   72,726     72,199  
Total non-current liabilities   667,440     565,992  
Total liabilities   726,030     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 74,902,364 and 75,298,676 shares as of
December 31, 2017 and December 31, 2016, respectively
  762     753  
Paid-in capital   1,745,844     1,714,358  
Common stock held in treasury, at cost; 1,465,448 shares at December 31,
2017
  (11,004 )    
Accumulated deficit   (818,222 )   (758,496 )
Total shareholders’ equity   917,380     956,615  
Total liabilities and shareholders’ equity   $ 1,643,410     $ 1,547,157  

 

Scorpio Bulkers Inc. and Subsidiaries
Statements of Cash Flows (unaudited)
(Amounts in thousands)
 
    For the Year Ended December 31,
    2017   2016
Operating activities        
Net loss   $ (59,726 )   $ (124,835 )
Adjustment to reconcile net loss to net cash used by        
operating activities:        
Restricted stock amortization   12,645     18,609  
Vessel depreciation   48,510     36,562  
Amortization of deferred financing costs   6,085     4,137  
Write off of deferred financing costs   470     3,781  
Loss / write down on assets held for sale   16,471     10,555  
Changes in operating assets and liabilities:        
(Decrease) increase in accounts receivable   (882 )   1,146  
Decrease (increase) in prepaid expenses and other assets   (4,032 )   3,617  
Increase (decrease) in accounts payable and accrued expenses   41     (5,768 )
Net cash provided by (used in) operating activities   19,582     (52,196 )
Investing activities        
Proceeds from sale of assets held for sale   44,340     271,376  
Payments on assets held for sale       (98,445 )
Payments for vessels and vessels under construction   (217,033 )   (408,307 )
Net cash used in investing activities   (172,693 )   (235,376 )
Financing activities        
Proceeds from issuance of common stock       128,112  
Proceeds from issuance of long-term debt   287,554     247,243  
Repayments of long-term debt   (153,003 )   (185,239 )
Common stock repurchased   (11,004 )    
Dividend paid   (1,509 )    
Debt issue costs paid   (2,126 )   (1,110 )
Net cash used in financing activities   119,912     189,006  
Decrease in cash and cash equivalents   (33,199 )   (98,566 )
Cash at cash equivalents, beginning of period   101,734     200,300  
Cash and cash equivalents, end of period   $ 68,535     $ 101,734  

 

Scorpio Bulkers Inc. and Subsidiaries
Other Operating Data (unaudited)
 
    Three Months Ended
December 31,
  For the Year Ended
December 31,
    2017   2016   2017   2016
Time charter equivalent revenue ($000’s) (1):                
Vessel revenue   $ 51,127     $ 26,846     $ 162,205     $ 78,402  
Voyage expenses   (97 )   (31 )   (429 )   45  
Time charter equivalent revenue   $ 51,030     $ 26,815     $ 161,776     $ 78,447  
Time charter equivalent revenue attributable to:                
Kamsarmax   $ 20,811     $ 10,790     $ 67,525     $ 31,765  
Ultramax   30,219     16,025     94,251     46,682  
    $ 51,030     $ 26,815     $ 161,776     $ 78,447  
Revenue days:                
Kamsarmax   1,651     1,458     6,718     5,633  
Ultramax   2,776     2,214     10,291     7,917  
Combined   4,427     3,672     17,009     13,550  
TCE per revenue day (1):                
Kamsarmax   $ 12,605     $ 7,401     $ 10,051     $ 5,639  
Ultramax   $ 10,886     $ 7,238     $ 9,159     $ 5,896  
Combined   $ 11,527     $ 7,303     $ 9,511     $ 5,789  

(1) We define Time Charter Equivalent (TCE) revenue as vessel 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 vessel 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. See Non-GAAP Financial Measures.

Fleet List as of February 2, 2018

Vessel Name   Year Built    DWT    Vessel Type
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       1,480,000      
             
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
SBI Gemini   2015   64,000     Ultramax
SBI Libra   2017   64,000     Ultramax
SBI Puma   2014   64,000     Ultramax
SBI Jaguar   2014   64,000     Ultramax
SBI Cougar   2015   64,000     Ultramax
SBI Aries   2015   64,000     Ultramax
SBI Taurus   2015   64,000     Ultramax
SBI Pisces   2016   64,000     Ultramax
SBI Virgo   2017   64,000     Ultramax
Total Ultramax       2,307,800      
Total Owned or Finance Leased Vessels DWT   3,787,800      

Time chartered-in vessels

The Company currently time charters-in one Ultramax vessel. The terms of the contract are summarized as follows:

Vessel Type   Year Built   DWT   Where Built   Daily Base
Rate
  Earliest Expiry
Ultramax   2017   62,100     Japan   $ 10,125     30-Sep-19   (1 )
Total TC DWT       62,100                  

(1) This vessel is time chartered-in for 22 to 24 months at the Company’s option at $10,125 per day. The Company has the option to extend this time charter for one year at $10,885 per day. The vessel was delivered to the Company in September 2017.

Vessel Under Construction

Kamsarmax Vessel

Vessel Name   Expected Delivery    DWT   Shipyard
Hull 2215 – TBN SBI Lynx   Q2-18   82,000     Jiangsu Yangzijiang Shipbuilding Co. Ltd.
Total Kamsarmax Newbuilding DWT   82,000      
 

Conference Call on Results:

A conference call to discuss the Company’s results will be held today, Monday, February 5, 2018, at 11:00 AM Eastern Standard Time / 5:00 PM Central European Time.  Those wishing to listen to the call should dial 1 (866) 219-5268 (U.S.) or 1 (703) 736-7424 (International) at least 10 minutes prior to the start of the call to ensure connection. The conference participant passcode is 7087839.

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://edge.media-server.com/m6/p/95xtxviv

About Scorpio Bulkers Inc.

Scorpio Bulkers Inc. is a provider of marine transportation of dry bulk commodities.  Scorpio Bulkers Inc. has an operating fleet of 56 vessels consisting of 55 wholly-owned or finance leased drybulk vessels (including 18 Kamsarmax vessels and 37 Ultramax vessels), and one time chartered-in Ultramax vessel. In addition, one Kamsarmax vessel which is being constructed at Jiangsu New Yangzijiang Shipbuilding Co Ltd in China is expected to be delivered to the Company in the second quarter of 2018. Upon final delivery of the last vessel, the Company’s owned and finance leased fleet is expected to have a total carrying capacity of approximately 3.9 million dwt and all of our owned vessels will have carrying capacities of greater than 60,000 dwt. 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

To supplement our financial information presented in accordance with accounting principles generally accepted in the U.S., (“GAAP”), management uses certain “non-GAAP financial measures” as such term is defined in Regulation G promulgated by the SEC. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in, or excluded from, the most directly comparable measure calculated and presented in accordance with GAAP. Management believes the presentation of these measures provides investors with greater transparency and supplemental data relating to our financial condition and results of operations, and therefore a more complete understanding of factors affecting our business than GAAP measures alone. In addition, management believes the presentation of these matters is useful to investors for period-to-period comparison of results as the items may reflect certain unique and/or non-operating items such as asset sales, write-offs, contract termination costs or items outside of management’s control.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted net loss and related per share amounts, as well as adjusted EBITDA and TCE Revenue are non-GAAP performance measures that we believe provide 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.  Please see below for reconciliations of EBITDA, adjusted net loss and related per share amounts, and adjusted EBITDA.  Please see “Other Operating Data” for a reconciliation of TCE revenue.

EBITDA (unaudited)

  Three Months Ended December 31,   For the Year Ended December 31,
In thousands 2017   2016   2017   2016
Net loss $ (1,068 )   $ (20,557 )   $ (59,726 )   $ (124,835 )
Add Back:              
Net interest expense 7,107       5,119     27,307     16,326  
Depreciation and amortization (1) 16,903       16,412     67,710     62,835  
EBITDA $ 22,942     $ 974     $ 35,291     $ (45,674 )

(1) Includes depreciation, amortization of deferred financing costs and restricted stock amortization.

Adjusted net loss (unaudited)

  For the Year Ended December 31,
In thousands, except per share data 2017   2016
  Amount   Per share   Amount   Per share
Net loss $ (59,726 )   $ (0.83 )   $ (124,835 )   $ (2.22 )
Adjustments:              
Loss / write down on assets held for sale 17,701     0.25     12,433     0.22  
Write down of deferred financing cost 470     0.01     2,456     0.05  
Charterhire contract termination charge         10,000     0.18  
Total adjustments $ 18,171     $ 0.26     $ 24,889     $ 0.44  
Adjusted net loss $ (41,555 )   $ (0.57 )   $ (99,946 )   $ (1.78 )
 

Adjusted EBITDA (unaudited)

  For the Year Ended
December 31,
In thousands 2017   2016
Net loss $ (59,726 )   $ (124,835 )
Impact of Adjustments 18,171     24,889  
Adjusted net loss (41,555 )   (99,946 )
Add Back:      
Net interest expense 27,307     16,326  
Depreciation and amortization (1) 67,710     62,835  
Adjusted EBITDA $ 53,462     $ (20,785 )

(1) Includes depreciation, amortization of deferred financing costs and restricted stock amortization.

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)

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Source: Scorpio Bulkers