UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE
SECURITIES EXCHANGE ACT OF 1934

For the month of November 2019

Commission File Number: 001-36231
 

SCORPIO BULKERS INC.
(Translation of registrant's name into English)
 

9, Boulevard Charles III, Monaco 98000
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F x   Form 40-F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o.

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o.

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.















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INFORMATION CONTAINED IN THIS FORM 6-K REPORT
 
Attached as Exhibit 99.1 to this Report on Form 6-K is Management’s Discussion and Analysis of Financial Condition and Results of Operations and the unaudited interim consolidated financial statements, and the accompanying notes thereto, for the nine month period ended September 30, 2019 of Scorpio Bulkers Inc. (the “Company”).

The information contained in this Report on Form 6-K is hereby incorporated by reference into the Company's registration statement on Form F-3 (File No. 333-217445), the Company's registration statement on Form F-3 (File No. 333-221441), the Company's registration statement on Form F-3 (File No. 333-222013) and the Company's registration statement on Form F-3 (File No. 333-222448).










SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
                    
 
 
 SCORPIO BULKERS INC.
 
 
(registrant)
 
 
 
 
 
 
Dated:
November 15, 2019
By: /s/ Hugh Baker
 
 
Hugh Baker
 
 
Chief Financial Officer
 
 
 



Exhibit
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management’s discussion and analysis of financial condition and results of operations of Scorpio Bulkers Inc. for the nine-month period ended September 30, 2019. The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements, including the notes thereto, included in this report, which have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP, and the discussion included in our Annual Report on Form 20-F for the year ended December 31, 2018, filed with the U.S. Securities and Exchange Commission, or the SEC, on March 20, 2019, or our Annual Report. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, such as those set forth in the section entitled “Risk Factors” included in our Annual Report. We use the term deadweight tons, or dwt, expressed in metric tons, each of which is equivalent to 1,000 kilograms, in describing the size of our vessels.
Unless otherwise indicated, references to “Scorpio Bulkers,” the “Company,” “we,” “our,” “us,” or similar terms refer to Scorpio Bulkers Inc. and its subsidiaries, except where the context otherwise requires.
Overview
We are an international shipping company that owns and operates the latest generation of newbuilding drybulk carriers with fuel-efficient specifications and carrying capacities of greater than 30,000 dwt in the international shipping markets. Scorpio Bulkers Inc. was incorporated in the Republic of the Marshall Islands on March 20, 2013.
Our vessels transport a broad range of major and minor bulk commodities, including ores, coal, grains, and fertilizers, along worldwide shipping routes, and are employed primarily in the spot market or in spot market-oriented pools of similarly sized vessels. At September 30, 2019, we had an operating fleet of 60 vessels consisting of 54 owned or finance leased vessels (including 17 Kamsarmax vessels and 37 Ultramax vessels), one time chartered-in Ultramax vessel and five time chartered-in Kamsarmax vessels.
The Company is organized by vessel type into two operating segments:
Ultramax - includes vessels ranging from approximately 60,200 dwt to 64,000 dwt
Kamsarmax - includes vessels ranging from approximately 82,000 dwt to 84,000 dwt

Our vessels are commercially managed by Scorpio Commercial Management S.A.M., or SCM, and technically managed by Scorpio Ship Management S.A.M., or SSM, pursuant to a master agreement (as amended and restated from time to time) effective as from January 1, 2018, or the Master Agreement. SCM and SSM are controlled by the Lolli-Ghetti family, of which Emanuele Lauro, our Chairman and Chief Executive Officer, and Filippo Lauro, our Vice President, are members. We expect that additional vessels that we may acquire in the future will also be managed under the Master Agreement or on substantially similar terms as those contained in the Master Agreement.
SCM’s commercial management services include securing employment for our vessels in the spot market or on time charters. SCM also manages the Scorpio Pools identified below, which are spot-market oriented pools of similarly sized vessels operated by companies affiliated with us, in which our vessels and vessels owned by third parties are employed.
SSM’s technical management services include providing technical support, such as arranging the hiring of qualified officers and crew, supervising the maintenance and performance of our vessels, purchasing supplies, spare parts and new equipment, arranging and supervising drydocking and repairs, and monitoring regulatory and classification society compliance and customer standards.
We have also entered into an administrative services agreement, as amended from time to time, or the Administrative Services Agreement, with Scorpio Services Holding Limited, or SSH, an entity controlled by the Lolli-Ghetti family. The administrative services provided under this agreement primarily include provision of administrative staff, office space and accounting, legal compliance, financial and information technology services. We reimburse SSH for the direct or indirect expenses it incurs in providing us with the administrative services described above.
We generate revenue by charging customers for the transportation of their drybulk cargoes using our vessels. Historically, these services generally have been provided under the following basic types of contractual relationships:

1


Commercial Pools, whereby we participate with other shipowners to operate a large number of vessels as an integrated transportation system, which offers customers greater flexibility and a higher level of service while achieving scheduling efficiencies. Pools negotiate charters primarily in the spot market but may also arrange time charter agreements. The size and scope of these pools enable them to enhance utilization rates for pool vessels by securing backhaul voyages and COAs (described below), thus generating higher effective TCE revenues than otherwise might be obtainable in the spot market.
Voyage charters, which are charters for short intervals that are priced on current, or “spot,” market rates.
Time charters, which are chartered to customers for a fixed period of time at rates that are generally fixed, but may contain a variable component based on inflation, interest rates, or current market rates.
For all of our vessels’ contractual relationships, we are responsible for crewing and other vessel operating costs for our owned or finance leased vessels and the charterhire expense for vessels that we time charter-in.
The table below illustrates the primary distinctions among these different employment arrangements:
 
Commercial Pool
 
Voyage Charter
 
Time Charter
Typical contract length
Varies
 
Single voyage
 
Up to one year or more
Hire rate basis
Varies
 
Varies
 
Daily
Voyage expenses
Pool pays
 
We pay
 
Customer pays
Vessel operating costs for owned or finance leased vessels
We pay
 
We pay
 
We pay
Charterhire expense for vessels chartered-in
We pay
 
We pay
 
We pay
Off-hire
Pool does not pay
 
Customer does not pay
 
Customer does not pay
See “Important Financial and Operational Terms and Concepts” below.
As of the date of this report, all of our owned, finance leased and time chartered-in vessels were operating in the Scorpio Kamsarmax Pool or the Scorpio Ultramax Pool, which we refer to together as the “Scorpio Pools,” which are spot market-oriented commercial pools managed by our commercial manager, SCM, a related party of ours.
Important Financial and Operational Terms and Concepts
We use a variety of financial and operational terms and concepts. These include the following:
Hire rate. The basic payment from the charterer for the use of the vessel.
Vessel revenues. Vessel revenues primarily include revenues from time charters, pool revenues, and voyage charters. Vessel revenues are affected by hire rates and the number of days a vessel operates. Vessel revenues are also affected by the mix of business between vessels on time charter, vessels in pools, and vessels operating on voyage charter. Revenues from vessels in pools and on voyage charter are more volatile, as they are typically tied to prevailing market rates.
Voyage charters. Voyage charters or spot voyages are charters under which the customer pays a transportation charge for the movement of a specific cargo between two or more specified ports. We pay all of the voyage expenses.
Voyage expenses. Voyage expenses primarily include bunkers, port charges, canal tolls, cargo handling operations and brokerage commissions paid by us under voyage charters, as well as brokerage commissions and miscellaneous voyage expenses that we are unable to collect under time charter and pool arrangements. These expenses are subtracted from voyage charter revenues to calculate TCE revenues.
Vessel operating costs. For our owned and finance leased vessels, we are responsible for vessel operating costs, which include crewing, repairs and maintenance, insurance, stores, lube oils, communication expenses, and technical management fees.

2


Technical management fees are paid to SSM. Pursuant to our Master Agreement, SSM provides us with technical management services, and we provide them with the ability to subcontract technical management of our vessels.
Charterhire. Charterhire is the amount we pay the owner for time chartered-in vessels. The amount is usually for a fixed period of time at rates that are generally fixed, but may contain a variable component based on inflation, interest rates, or current market rates. The vessel’s owner is responsible for crewing and other vessel operating costs.
Drydocking. We periodically drydock each of our owned and finance leased vessels for inspection, repairs and maintenance and any modifications to comply with industry certification or governmental requirements. Generally, each vessel is drydocked every 30 months to 60 months. We capitalize a substantial portion of the costs incurred during drydocking and amortize those costs on a straight-line basis from the completion of a drydocking to the estimated completion of the next drydocking. We immediately expense costs for routine repairs and maintenance performed during drydocking that do not improve or extend the useful lives of the vessels. The number of drydockings undertaken in a given period and the nature of the work performed determine the level of drydocking expenditures.
Depreciation. Depreciation expense typically consists of:
charges related to the depreciation of the historical cost of our owned or finance leased vessels (less an estimated residual value) over the estimated useful lives of the vessels; and
charges related to the amortization of drydocking expenditures over the estimated number of years to the next scheduled drydocking.
Time charter equivalent (TCE) revenue or rates. 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 measures, (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. TCE revenue is vessel revenue less voyage expenses, including bunkers, port charges and commissions to SCM. The TCE rate achieved on a given voyage is expressed in U.S. dollars/day and is generally calculated by dividing TCE revenue by the number of revenue days in the period. For a reconciliation of TCE revenue, deduct voyage expenses from revenue on our Statement of Operations. Please also see “Non-GAAP Financial Measures.”
Revenue days. Revenue days are the total number of calendar days our vessels were in service during a period, less the total number of off-hire days during the period associated with repairs or drydockings. Consequently, revenue days represent the total number of days available for the vessel to earn revenue. Idle days, which are days when a vessel is available to earn revenue, yet is not employed, are included in revenue days. We use revenue days to show changes in net vessel revenues between periods.
Contract of affreightment. A contract of affreightment, or COA, relates to the carriage of specific quantities of cargo with multiple voyages over the same route and over a specific period of time which usually spans a number of years. A COA does not designate the specific vessels or voyage schedules that will transport the cargo, thereby providing both the charterer and shipowner greater operating flexibility than with voyage charters alone. The charterer has the flexibility to determine the individual voyage scheduling at a future date while the shipowner may use different vessels to perform these individual voyages. As a result, COAs are mostly entered into by large fleet operators, such as pools or shipowners with large fleets of the same vessel type. We pay the voyage expenses while the freight rate normally is agreed on a per cargo ton basis.
Commercial pools. To increase vessel utilization and revenues, we participate in commercial pools with other shipowners and operators of similar modern, well-maintained vessels. By operating a large number of vessels as an integrated transportation system, commercial pools offer customers greater flexibility and a higher level of service while achieving scheduling efficiencies. Pools employ experienced commercial charterers and operators who have close working relationships with customers and brokers, while technical management is performed by each shipowner. Pools negotiate charters with customers primarily in the spot market. The size and scope of these pools enable them to enhance utilization rates for pool vessels by securing backhaul voyages and COAs, thus generating higher effective TCE revenues than otherwise might be obtainable in the spot market while providing a higher level of service offerings to customers.
Off-hire. Time a vessel is not available for service due primarily to scheduled and unscheduled repairs or drydockings. For time chartered-in vessels, we do not pay the charterhire expense when the vessel is off-hire.

3


Operating days. Operating days are the total number of available days in a period with respect to owned and finance leased vessels, before deducting available days due to off-hire days and days in drydock. Operating days is a measurement that is only applicable to our owned and finance leased vessels, not our time chartered-in vessels.
Non-GAAP Financial Measures
To supplement our financial information presented in accordance with 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 U.S. 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 U.S. 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, or EBITDA, adjusted net income and related per share amounts, as well as adjusted EBITDA and TCE revenue are non-GAAP financial measures that we believe provide investors with a means of evaluating and understanding how our management evaluates our operating performance. These non-GAAP financial measures should be viewed in addition to the results reported under U.S. GAAP, and should not be considered in isolation from, as substitutes for, nor superior to financial measures prepared in accordance with U.S. GAAP.
Reconciliations of EBITDA and TCE revenue as determined in accordance with U.S. GAAP for the nine months ended September 30, 2019 and 2018, as well as reconciliations of adjusted net income and related per share amounts and adjusted EBITDA in accordance with U.S. GAAP for the nine months ended September 30, 2019 are provided below (dollars in thousands, except per share data).
EBITDA
 
 
Nine Months Ended September 30, 
In thousands
 
2019
 
2018
Net income (loss)
 
$
29,570

 
$
(5,325
)
Add Back:
 
 
 
 
Net interest expense
 
33,399

 
28,273

Depreciation and amortization (1)
 
53,864

 
54,301

EBITDA
 
$
116,833

 
$
77,249

(1) Includes depreciation, amortization of deferred financing costs and restricted stock amortization.
Adjusted Net Income
 
 
Nine Months Ended September 30,
 
 
2019
In thousands, except per share data
 
Amount
 
Per diluted share
Net income
 
$
29,570

 
$
0.42

Adjustments:
 
 
 
 
Loss / write-down on assets held for sale
 
12,041

 
0.17

Write-off of deferred financing cost
 
446

 
0.01

Total adjustments
 
12,487

 
0.18

Adjusted net income
 
$
42,057

 
$
0.60


4


Adjusted EBITDA
 
 
Nine Months Ended September 30,
In thousands
 
2019
Net income
 
$
29,570

 
Impact of Adjustments
 
 
12,487

 
Adjusted net income
 

42,057

 
Add Back:
 
 
 
 
Net interest expense
 
 
33,399

 
Depreciation and amortization (1)
 
 
53,417

 
Adjusted EBITDA
 
$
128,873

 
(1) Includes depreciation, amortization of deferred financing costs and restricted stock amortization.
TCE Revenue
Time Charter Equivalent (TCE) revenue is defined 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 we believe 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.
        
 
 
Nine Months Ended September 30, 2019
 
Nine Months Ended September 30, 2018
Time charter equivalent revenue ($000’s):
 
 
 
 
Vessel revenue
 
$
164,315

 
$
177,331

Voyage expenses
 
(846
)
 
(372
)
Time charter equivalent revenue
 
$
163,469

 
$
176,959

Time charter equivalent revenue attributable to:
 
 

 
 

Kamsarmax
 
$
60,673

 
$
64,445

Ultramax
 
102,796

 
112,514

 
 
$
163,469

 
$
176,959

Revenue days:
 
 

 
 

Kamsarmax
 
5,198

 
4,911

Ultramax
 
10,269

 
10,327

Combined
 
15,467

 
15,238

TCE per revenue day:
 
 

 
 

Kamsarmax
 
$
11,672

 
$
13,123

Ultramax
 
$
10,010

 
$
10,895

Combined
 
$
10,569

 
$
11,613


5


Executive Summary
For the first nine months of 2019, our U.S. GAAP net income was $29.6 million, or $0.42 per diluted share compared to a U.S. GAAP net loss of $5.3 million, or $0.07 loss per diluted share, in the same period in 2018. Results for the first nine months of 2019 included: a non-cash unrealized gain of approximately $68.6 million and cash dividend income of $1.6 million, or $1.01 per diluted share, primarily from our equity investment in Scorpio Tankers Inc., charges of approximately $12.5 million, or $0.18 per diluted share, related to the sales of the SBI Electra, SBI Flamenco, SBI Cougar and SBI Puma and the write-off of deferred financing costs on the credit facilities related to the SBI Electra and SBI Flamenco, and the write-off of deferred financing costs of approximately $3.2 million, or $0.05 per diluted share, related to the refinancing of existing debt. EBITDA for the first nine months of 2019 and 2018 were $116.8 million and $77.2 million, respectively (see “Non-GAAP Financial Measures”).
    
For the first nine months of 2019, our adjusted net income was $42.1 million, or $0.60 adjusted earnings per diluted share, which excludes the impact of the write-down of assets either sold or held for sale and the write-off of related deferred financing costs totaling $12.5 million. Adjusted EBITDA for the first nine months of 2019 was $128.9 million. There were no such non-GAAP adjustments to net loss in the first nine months of 2018 (see “Non-GAAP Financial Measures”).
Total vessel revenues for the first nine months of 2019 were $164.3 million, compared to $177.3 million in the prior year period. Our TCE revenue (see “Non-GAAP Financial Measures”) for the first nine months of 2019 was $163.5 million, a decrease of $13.5 million from the prior year period. The first half of 2019 proved challenging with a loss of iron exports mainly due to Vale’s dam failure and continued disruptions from the U.S. - China trade war. A strong South American and Black Sea grain season, increasing coal exports to India and China’s resumption of coal buying occurred in tandem with a rise in Atlantic cape rates. A restart of the Brazilian iron ore export program provided additional support to already rising Ultramax and Kamsarmax rates during the third quarter of 2019.
Total operating expenses for the first nine months of 2019 were $165.2 million, including the write-down of assets held for sale of $12.0 million, compared to $147.8 million for the first nine months of 2018.
Recent and Other Developments
Special Stock Dividend
On October 22, 2019, our Board of Directors declared a one-time special stock dividend to our shareholders of an aggregate of one million shares of common stock of Scorpio Tankers Inc. (NYSE:STNG), a related party. For each common share that a shareholder holds in the Company that shareholder will receive 0.0138 shares of common stock of Scorpio Tankers Inc., payable on or about December 13, 2019 to all shareholders of record as of November 15, 2019. The Scorpio Tankers Inc. common shares to be distributed in the special dividend were acquired from Scorpio Tankers Inc. in a registered underwritten public offering of its common shares in October 2018. Following the payment of the special dividend, we will continue to own approximately 4.4 million common shares of Scorpio Tankers Inc.
No fractional shares of Scorpio Tankers Inc. will be issued in connection with the special dividend, and instead our shareholders will receive cash in lieu of any fractional shares.
Quarterly Cash Dividend
In the third quarter of 2019, our Board of Directors declared and we paid a quarterly cash dividend of $0.02 per share totaling approximately $1.4 million.
On October 22, 2019, our Board of Directors declared a quarterly cash dividend of $0.02 per share, payable on or about December 13, 2019, to all shareholders of record as of November 15, 2019.
Vessel Sales
On September 17, 2019, we agreed to sell the SBI Puma and SBI Cougar, 2014 and 2015 built Ultramax vessels, respectively, for approximately $37.9 million in aggregate to an unaffiliated third party. The sale closed on October 8, 2019 and generated $16.0 million of additional liquidity after the repayment of $21.9 million of outstanding debt. As of September 30, 2019, these vessels were classified as held for sale. We recorded a loss of approximately $4.9 million in the second quarter of 2019 and wrote-off deferred financing costs of $0.2 million in October 2019 upon the repayment of $21.9 million of outstanding debt.
Vessels Time Chartered-In

6


During August 2019, we time chartered-in one Kamsarmax vessel for approximately 24 to 27 months at 118% of the Baltic Exchanges 74,000 DWT Panamax Index, or the BPI. We simultaneously time chartered this vessel out to the Scorpio Kamsarmax Pool under matching terms.
In September 2019, we exercised our option to extend the time charter-in agreement of the 2017 built Ultramax vessel for one year at $10,885 per day.
Debt
Please see “Liquidity and Capital Resources” below.
Financial Results for the Nine Months Ended September 30, 2019 Compared to the Nine Months Ended September 30, 2018
For the first nine months of 2019, our U.S. GAAP net income was $29.6 million, or $0.42 per diluted share compared to a U.S. GAAP net loss of $5.3 million, or $0.07 loss per diluted share in the same period in 2018. Results for the first nine months of 2019 included: a non-cash unrealized gain of approximately $68.6 million and cash dividend income of $1.6 million, or $1.01 per diluted share, primarily from our equity investment in Scorpio Tankers Inc., charges of approximately $12.5 million, or $0.18 per diluted share, related to the sales of the SBI Electra, SBI Flamenco, SBI Cougar and SBI Puma and the write-off of deferred financing costs on the credit facilities related to the SBI Electra and SBI Flamenco, and the write-off of deferred financing costs of approximately $3.2 million, or $0.05 per diluted share, related to the refinancing of existing debt. EBITDA for the first nine months of 2019 and 2018 were $116.8 million and $77.2 million, respectively (see “Non-GAAP Financial Measures”).
For the first nine months of 2019, our adjusted net income was $42.1 million, or $0.60 adjusted earnings per diluted share, which excludes the impact of the write-down of assets either sold or held for sale and the write-off of related deferred financing costs totaling $12.5 million. Adjusted EBITDA for the first nine months of 2019 was $128.9 million. There were no such non-GAAP adjustments to net loss in the first nine months of 2018 (see “Non-GAAP Financial Measures”).
Total vessel revenues for the first nine months of 2019 were $164.3 million compared to $177.3 million in the prior year period. Our TCE revenue (see “Non-GAAP Financial Measures”) for the first nine months of 2019 was $163.5 million, a decrease of $13.5 million from the prior year period. The first half of 2019 proved challenging with a loss of iron exports mainly due to Vale’s dam failure and continued disruptions from the U.S. - China trade war. A strong South American and Black Sea grain season, increasing coal exports to India and China’s resumption of coal buying occurred in tandem with a rise in Atlantic cape rates. A restart of the Brazilian iron ore export program provided additional support to already rising Ultramax and Kamsarmax rates during the third quarter of 2019.
Total operating expenses for the first nine months of 2019 were $165.2 million, including the write-down of assets held for sale of $12.0 million, compared to $147.8 million for the first nine months of 2018.

7


Ultramax Operations
 
Nine Months Ended September 30,
 
 
 
 
Dollars in thousands
2019
 
2018
 
Change
 
% Change
TCE Revenue:
 
 
 
 
 
 
 
Vessel revenue
$
103,234

 
$
112,778

 
$
(9,544
)
 
(8
)
Voyage expenses
438

 
264

 
174

 
66

TCE Revenue
$
102,796

 
$
112,514

 
$
(9,718
)
 
(9
)
Operating expenses:
 
 
 
 

 

Vessel operating costs
50,962

 
53,430

 
(2,468
)
 
(5
)
Charterhire expense
2,731

 
2,773

 
(42
)
 
(2
)
Vessel depreciation
27,108

 
27,887

 
(779
)
 
(3
)
General and administrative expense
3,131

 
3,255

 
(124
)
 
(4
)
Loss / write-down on assets held for sale
4,688

 

 
4,688

 
NA

Total operating expenses
$
88,620

 
$
87,345

 
$
1,275

 
1

Operating income
$
14,176

 
$
25,169

 
$
(10,993
)
 
(44
)
Vessel revenue for our Ultramax Operations decreased to $103.2 million for the first nine months of 2019 from $112.8 million in the prior year period. The year suffered a slow start due to coal import restrictions by China and the sentiment from a limited U.S. Gulf grain season from 2018. Since then grain trades with support from Chinese and Indian coal buying provided the catalyst for the long and slow recovery which ended in the recent high in the Supramax and Ultramax segments during the third quarter of 2019.
TCE revenue (see “Non-GAAP Financial Measures”) for our Ultramax Operations was $102.8 million for the first nine months of 2019 compared to $112.5 million for the prior year period, associated with a day-weighted average of 37 vessels owned or finance leased and one vessel time chartered-in. TCE revenue per day was $10,010 and $10,895 for the first nine months of 2019 and 2018, respectively.
 
Nine Months Ended September 30,
 
 
 
 
Ultramax Operations:
2019
 
2018
 
Change
 
% Change
TCE Revenue (in thousands)
$
102,796

 
$
112,514

 
$
(9,718
)
 
(9
)
TCE Revenue / Day
$
10,010

 
$
10,895

 
$
(885
)
 
(8
)
Revenue Days
10,269

 
10,327

 
(58
)
 
(1
)
Our Ultramax Operations vessel operating costs were $51.0 million for the first nine months of 2019, including approximately $1.7 million of takeover costs and contingency expenses, compared with vessel operating costs of $53.4 million for the prior year period, relating to 37 vessels owned or finance leased on average during both periods. Daily operating costs excluding takeover costs and contingency expenses for the first nine months of 2019 of $4,873 were down slightly from the prior year period of $4,983 due to the timing of repairs and the purchase of spares and stores.
Charterhire expense for our Ultramax Operations was approximately $2.7 million for first nine months of 2019 and $2.8 million for the same period in 2018 and relates to the vessel we time chartered-in at $10,125 per day. In September 2019, we exercised our option to extend the time-charter for one year at $10,885 per day.
Ultramax Operations depreciation decreased from $27.9 million in the first nine months of 2018 to $27.1 million in the first nine months of 2019 as the SBI Cougar and SBI Puma were classified as held for sale since the second quarter of 2019 and subsequently sold in October 2019.
General and administrative expense for our Ultramax Operations, which consists primarily of administrative service fees, which are incurred on a per vessel per day basis, and bank charges, which are incurred based on the number of transactions, was $3.1 million for the first nine months of 2019 and $3.3 million for the same period in 2018.

8


During the first nine months of 2019, we recorded a write-down on assets held for sale related to the classification of the SBI Cougar and SBI Puma as held for sale. The sale of the vessels was completed in October 2019.
Kamsarmax Operations
 
Nine Months Ended September 30,
 
 
 
 
Dollars in thousands
2019
 
2018
 
Change
 
% Change
TCE Revenue:
 
 
 
 
 
 
 
Vessel revenue
$
61,081

 
$
64,552

 
$
(3,471
)
 
(5
)
Voyage expenses
408

 
107

 
301

 
281

TCE Revenue
$
60,673

 
$
64,445

 
$
(3,772
)
 
(6
)
Operating expenses:
 
 
 
 

 

Vessel operating costs
25,730

 
25,458

 
272

 
1

Charterhire expense
8,039

 
318

 
7,721

 
2,428

Vessel depreciation
13,695

 
14,306

 
(611
)
 
(4
)
General and administrative expense
1,594

 
1,515

 
79

 
5

Loss / write-down on assets held for sale
7,353

 

 
7,353

 
NA

Total operating expenses
$
56,411

 
$
41,597

 
$
14,814

 
36

Operating income
$
4,262

 
$
22,848

 
$
(18,586
)
 
81

Vessel revenue for our Kamsarmax Operations decreased to $61.1 million in the first nine months of 2019 from $64.6 million in the prior year period. The year had a slow start due to limited coal imports with restrictions in China and increased LNG consumptions in Europe, as well as an abrupt drop in iron ore exports after Vale’s dam failure. Rates recovered slowly until the end of the second quarter of 2019, helped by a sustained South American grain export campaign and steady Indian coal imports. At the start of the third quarter of 2019, the lack of ships in the Atlantic and the cape rates created a rally which lasted until September.
TCE revenue (see “Non-GAAP Financial Measures”) for our Kamsarmax Operations was $60.7 million for the first nine months of 2019 associated with a day-weighted average of 19 vessels owned or finance leased and two vessels time chartered-in, compared to $64.4 million for the prior year period associated with a day-weighted average of 18 vessels owned or finance leased. TCE revenue per day was $11,672 and $13,123 for the first nine months of 2019 and 2018, respectively.
 
Nine Months Ended September 30,
 
 
 
 
Kamsarmax Operations:
2019
 
2018
 
Change
 
% Change
TCE Revenue (in thousands)
$
60,673

 
$
64,445

 
$
(3,772
)
 
(6
)
TCE Revenue / Day
$
11,672

 
$
13,123

 
$
(1,451
)
 
(11
)
Revenue Days
5,198

 
4,911

 
287

 
6

Kamsarmax Operations vessel operating costs were $25.7 million for the first nine months of 2019, including approximately $0.8 million of takeover costs and contingency expenses, compared with vessel operating costs of $25.5 million for the prior year period relating to 19 and 18 vessels owned or finance leased on average, respectively, during the periods. Daily operating costs excluding takeover costs and contingency expenses for the first nine months of 2019 and 2018 were $4,990 and $4,970, respectively.
Kamsarmax Operations charterhire expense was $8.0 million in the first nine months of 2019, relating to five vessels we began time chartering-in during 2019. Prior to that, a profit and loss sharing agreement with a third party related to one Kamsarmax vessel for which we recorded our residual share of the profit or loss.
Kamsarmax Operations depreciation was $13.7 million and $14.3 million in the first nine months of 2019 and 2018, respectively, reflecting the decrease in vessels owned or finance leased due to the sale of the SBI Electra and SBI Flamenco.

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General and administrative expense for our Kamsarmax Operations was $1.6 million and $1.5 million for the first nine months of 2019 and 2018, respectively. The expense consists primarily of administrative services fees, which are incurred on a per vessel per day basis, and bank charges, which are incurred based on the number of transactions.
During the first nine months of 2019, a write-down of assets held for sale related to the sale of the SBI Electra and SBI Flamenco totaling approximately $7.4 million was recorded.
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. These general and administrative expenses, including compensation, audit, legal and other professional fees, as well as the costs of being a public company, such as director fees, were $19.3 million and $18.5 million in the first nine months of 2019 and 2018, respectively. The year over year increase is due primarily to an increase in non-cash restricted stock amortization.
We recorded a non-cash unrealized gain of approximately $68.6 million and a cash dividend of $1.6 million for the first nine months of 2019, primarily from our equity investment in Scorpio Tankers Inc.
Financial expenses, net of interest income, increased to $39.8 million in the first nine months of 2019 from $34.8 million in the prior year period due to higher levels of debt. In the first nine months of 2019, approximately $3.6 million of deferred financing costs were written off related to vessel sales and debt refinancings under our new sale and leaseback transactions. In October 2019, we wrote-off approximately $0.2 million of deferred financing costs upon the repayment of the existing debt on the SBI Cougar and SBI Puma which were sold.
Liquidity and Capital Resources
Our primary sources of funds are cash flow from our vessels, which operate in the Scorpio Pools, credit facility borrowings and equity offerings. Our liquidity and capital needs arise primarily from working capital requirements to operate our fleet, payments to meet or refinance our debt obligations and expenditures for vessel acquisition/construction, as well as to maintain the high quality of our fleet including drydocking and scrubber installations. We also make occasional repurchases of shares of our common stock at the sole discretion of management based on market conditions and other factors.

At September 30, 2019, cash and cash equivalents totaled $80.1 million. While we believe that our current cash and cash equivalents balance as well as our operating cash flows will be sufficient to fund the operation of our fleet as well as other liquidity requirements such as debt repayment and capital expenditures (such as contractual payments for scrubbers) for at least twelve months from the issuance date of these financial statements, we have taken (or expect to take) actions to improve our cash position to more favorably position us for future financing and investing activities.

Recent Financing Activities
Our recent financing activities include the following, which are more fully described in the “Secured Credit Facilities, Financing Obligations and Unsecured Notes” section below:
Senior Unsecured Notes Due September 2019

On August 2, 2019, we redeemed the entire outstanding balance of our Senior Unsecured Notes Due September 2019, or our Senior Notes, of $73.6 million. The redemption price of the Senior Notes was equal to 100% of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, August 2, 2019.
AVIC Lease Financing

In July 2019, we closed a financing transaction involving the sale and leaseback of three Ultramax vessels (SBI Hydra, SBI Lyra and SBI Maia) to AVIC International Leasing Co., Ltd. As part of this transaction, we agreed to bareboat charter-in the vessels for a period of eight years and have purchase options beginning after the end of the second year of each bareboat charter agreement. We also have a purchase obligation for each vessel upon the expiration of each bareboat charter agreement.

$330.0 Million Credit Facility


10


During July 2019, we prepaid approximately $30.9 million of our $330.0 Million Credit Facility and wrote-off deferred financing costs of approximately $0.4 million as part of the refinancing of the three vessels now financed by the AVIC Lease Financing (SBI Hydra, SBI Lyra and SBI Maia). As such, the $330.0 Million Credit Facility was repaid in full and terminated.

$38.7 Million Credit Facility

During October 2019, we prepaid approximately $21.9 million of our $38.7 Million Credit Facility and wrote-off approximately $0.2 million of deferred financing costs as part of the sale of the SBI Puma and SBI Cougar.

Cash Flow
Operating Activities
The table below summarizes the effect of the major components of our operating cash flow.
 
Nine Months Ended September 30,
 
2019
 
2018
Net income (loss)
29,570

 
(5,325
)
Non-cash items included in net income (loss)
(5,980
)
 
54,301

Related party balances
(2,769
)
 
4,117

Effect of changes in other working capital and operating assets and liabilities
1,859

 
(2,288
)
Net cash provided by operating activities
22,680

 
50,805

The cash flow provided by operating activities for the nine months ended September 30, 2019 reflects the lower time charter rates earned during the period. Our non-cash items include unrealized gains on investments, the loss/write-down on vessels held for sale, vessel depreciation, amortization of restricted stock and deferred financing costs.
Investing Activities
Net cash provided by investing activities of $30.7 million primarily reflects the proceeds received from the sale of the SBI Electra and SBI Flamenco, partially offset by payments made on our scrubber program.
Financing Activities
Net cash provided by financing activities of $40.8 million primarily reflects the net proceeds resulting from our refinancing of existing bank debt under financing obligations via our new sale and leaseback transactions.
Share Repurchase Program
On January 25, 2019, our Board of Directors authorized a new share repurchase program of up to $50.0 million of our common stock in open market or privately negotiated transactions, or the New Share Repurchase Program. This New Share Repurchase Program replaced the previous $50.0 million share repurchase program authorized in October 2018. The specific timing and amounts of the repurchases are in the sole discretion of management and may vary based on market conditions and other factors, but we are not obligated under the terms of the New Share Repurchase Program to repurchase any of our common stock. The authorization has no expiration date.
Dividend
During 2019, our Board of Directors declared quarterly cash dividends of $0.08 per share or $5.7 million, of which $4.3 million has been paid as of the date of this filing and the balance is expected to be paid on or about December 13, 2019.
Special Stock Dividend
On October 22, 2019, our Board of Directors declared a one-time special stock dividend to our shareholders of an aggregate of one million shares of common stock of Scorpio Tankers Inc. (NYSE:STNG), a related party. For each common share that a shareholder holds in the Company, that shareholder will receive 0.0138 shares of common stock of Scorpio Tankers Inc., payable on or about December 13, 2019 to all shareholders of record as of November 15, 2019. The Scorpio Tankers Inc. common shares to be distributed in the special dividend were acquired from Scorpio Tankers Inc. in a registered underwritten public offering of

11


its common shares in October 2018. Following the payment of the special dividend, we will continue to own approximately 4.4 million common shares of Scorpio Tankers Inc.
No fractional shares of Scorpio Tankers Inc. will be issued in connection with the special dividend, and instead our shareholders will receive cash in lieu of any fractional shares.
Secured Credit Facilities, Financing Obligations and Unsecured Notes
AVIC Lease Financing

On June 27, 2019, we closed a financing transaction involving the sale and leaseback of three Ultramax vessels (SBI Antares, SBI Bravo and SBI Leo) and on July 16, 2019, we closed a financing transaction involving the sale and leaseback of three additional Ultramax vessels (SBI Hydra, SBI Lyra, and SBI Maia) to AVIC International Leasing Co., Ltd. As part of these transactions, we agreed to bareboat charter-in the vessels for a period of eight years and will have purchase options beginning after the end of the second year of each bareboat charter agreement. We also have a purchase obligation for each vessel upon the expiration of each bareboat charter agreement.

This transaction provides financing for the installation of scrubbers for each of the six vessels included at the lowest of (i) 82% of the scrubber market value, (b) 82% of the scrubber price and (c) approximately $1.6 million, which will amortize over five years at approximately $82,000 per quarter per vessel once drawn down.

As of the date of this filing, the outstanding balance on this facility was approximately $111.0 million.

$45.0 Million Lease Financing - SBI Virgo and SBI Libra

On May 21, 2019, we closed a financing transaction with an unaffiliated third party involving the sale and leaseback of the SBI Virgo and SBI Libra for a consideration of $21.0 million per vessel. As part of this transaction, we agreed to bareboat charter-in the vessels for a period of 11 years and will have purchase options beginning after the end of the fourth year of each bareboat charter agreement.

This transaction provides up to $1.5 million of financing for the installation of scrubbers for each of the vessels included. These will amortize at approximately $1,370 per day per vessel for the first two years and $685 per day per vessel for the following two years once drawn down.

As of the date of this filing, the outstanding balance on this facility was approximately $40.3 million.

CMBFL Lease Financing

On May 24, 2019, we closed a financing transaction with CMB Financial Leasing Co., Ltd. involving the sale and leaseback of three Ultramax vessels (SBI Pegasus, SBI Subaru and SBI Ursa) and four Kamsarmax vessels (SBI Lambada, SBI Macarena, SBI Carioca and SBI Capoeira). As part of this transaction, we agreed to bareboat charter-in the vessels for a period of seven years. In addition, we have purchase options beginning after the end of the third year of each bareboat charter agreement, as well as a purchase option for each vessel upon the expiration of each bareboat charter agreement.

This transaction provides financing for the installation of scrubbers for each of the seven vessels included at the lowest of (i) 75% of the scrubber market value, (b) 75% of the scrubber price or (c) approximately $1.7 million, which will amortize proportionally over the remaining term of the lease with a balloon payment made at maturity.

As of the date of this filing, the outstanding balance on this facility was approximately $115.6 million.

$21.4 Million Lease Financing - SBI Samba

On April 15, 2019, we closed a financing transaction with an unaffiliated third party involving the sale and leaseback of the SBI Samba, a 2015 Japanese built Kamsarmax vessel, for consideration of $21.4 million. As part of the transaction, we make monthly payments of $208,354 under a five-year bareboat charter agreement with the buyer. The transaction also provides us with the option to repurchase the vessel beginning on the third anniversary of the sale until the end of the bareboat charter agreement.

As of the date of this filing, the outstanding balance on this facility was approximately $20.5 million.


12


$19.0 Million Lease Financing - SBI Echo
On July 18, 2018, we closed a financing transaction with an unaffiliated third party involving the sale and leaseback of the SBI Echo, a 2015 Japanese built Ultramax vessel, for consideration of $19.0 million. As part of the transaction, we make monthly payments of $164,250 under a five-year bareboat charter agreement with the buyer. The transaction also provides us with options to repurchase the vessel beginning on the third anniversary of the sale until the end of the bareboat charter agreement.
    
As of the date of this filing, the outstanding balance on this facility was approximately $17.6 million.

$19.0 Million Lease Financing - SBI Tango
On July 18, 2018, we closed a financing transaction with an unaffiliated third party involving the sale and leaseback of the SBI Tango, a 2015 Japanese built Ultramax vessel, for consideration of $19.0 million. As part of the transaction, we make monthly payments of $164,250 per day under a five-year bareboat charter agreement with the buyer. The transaction also provides us with options to repurchase the vessel beginning on the third anniversary of the sale until the end of the bareboat charter agreement.

As of the date of this filing, the outstanding balance on this facility was approximately $17.5 million.
$20.5 Million Lease Financing - SBI Hermes
On November 16, 2018, we closed a financing transaction with an unaffiliated third party involving the sale and leaseback of the SBI Hermes, a 2016 Japanese built Ultramax vessel, for consideration of $20.5 million. As part of the transaction, we make monthly payments of $177,938 per day under a five-year bareboat charter agreement with the buyer. The transaction also provides us with options to repurchase the vessel beginning on the third anniversary of the sale until the end of the bareboat charter agreement.

As of the date of this filing, the outstanding balance on this facility was approximately $19.3 million.
$19.6 Million Lease Financing - SBI Rumba
On October 25, 2017, we closed a financing transaction with unaffiliated third parties involving the sale and leaseback of the SBI Rumba, a 2015 Japanese built Kamsarmax vessel, for consideration of approximately $19.6 million. As part of the transaction, we have agreed to make monthly payments of $164,250 under a nine and a half year bareboat charter agreement with the buyers, which we have the option to extend for a further six months. The agreement also provides us with options to repurchase the vessel beginning on the fifth anniversary of the sale until the end of the bareboat charter agreement.
As of the date of this filing, the outstanding balance on this facility was approximately $17.1 million.
$42.0 Million Credit Facility

On January 30, 2015, we entered into a senior secured credit facility for up to $42.0 million with a leading European financial institution to finance a portion of the purchase price of two Kamsarmax vessels then in our then existing Newbuilding Program which were delivered to us, and subsequently upsized by $10.8 million to finance a portion of the purchase price of one Ultramax vessel. Each tranche for the Kamsarmax vessels had a final maturity of six years from the drawdown date of the respective vessel, while the tranche for the Ultramax vessel was scheduled to mature on September 21, 2021. This facility bore interest at LIBOR plus a margin of 2.97%. This facility was secured by, among other things, a first preferred mortgage on the three vessels and was guaranteed by each of the vessel owning subsidiaries.

During the second quarter of 2019, we repaid and terminated this credit facility upon the completion of the $21.4 Million Lease Financing - SBI Samba.

$30.0 Million Credit Facility

On September 13, 2018, we entered into a senior secured credit facility for up to $30.0 million with ING Bank N.V. to refinance two of our Kamsarmax vessels (SBI Zumba and SBI Parapara). The facility has a final maturity date of five years from drawdown date and bears interest at LIBOR plus a margin of 2.20% per annum. This facility is secured by, among other things, a first preferred mortgage on the two Kamsarmax vessels and is guaranteed by each of the vessel owning subsidiaries.

On August 28, 2019, this facility was increased by approximately $2.6 million in the aggregate for the financing of the installation of scrubbers on the two vessels financed under this facility. Once drawn down the amounts will amortize over twelve equal quarterly payments.

13



As of the date of this filing, the outstanding balance on this facility was approximately $27.8 million.

$60.0 Million Credit Facility

On September 11, 2018, we entered into a senior secured credit facility for up to $60.0 million to finance up to 60% of the fair market value of two Ultramax vessels (SBI Perseus and SBI Phoebe) and two Kamsarmax vessels (SBI Electra and SBI Flamenco). The SBI Electra and SBI Flamenco were sold in the second quarter of 2019 and the related debt was repaid. The facility has a final maturity date of five years from drawdown date and bears interest at LIBOR plus a margin of 2.25% per annum. This facility is secured by, among other things, a first preferred mortgage on the two remaining Ultramax vessels and is guaranteed by each of the vessel owning subsidiaries.

On July 23, 2019, this facility was increased by approximately $2.9 million in the aggregate for the financing of the installation of scrubbers on the two vessels financed under this facility, which will amortize in equal quarterly payments over the remaining term of the facility once drawn down (but no more than 14 quarterly installments).

As of the date of this filing, the outstanding balance on this facility was approximately $27.1 million.

$184.0 Million Credit Facility

On September 21, 2018, we entered into a senior secured credit facility for up to $184.0 million with Nordea Bank ABP, New York Branch, and Skandinaviska Enskilda Banken AB (publ) to refinance up to 60% of the fair market value of six Ultramax vessels (SBI Athena, SBI Thalia, SBI Zeus, SBI Hera, SBI Poseidon and SBI Apollo) and six Kamsarmax vessels (SBI Conga, SBI Bolero, SBI Sousta, SBI Rock, SBI Reggae and SBI Mazurka). The facility, which is comprised of a term loan of up to $104.0 million and a revolver of up to $80.0 million, has a final maturity date of five years from signing date and bears interest at LIBOR plus a margin of 2.40% per annum. This facility is secured by, among other things, a first preferred mortgage on the twelve vessels and is guaranteed by each of the vessel owning subsidiaries.

On June 19, 2019, this facility was increased by approximately $17.4 million in the aggregate for the financing of the installation of scrubbers on the twelve vessels financed under this facility. The repayment profile is on a fifteen year age adjusted profile.

As of the date of this filing, the outstanding balance on this facility was approximately $128.9 million.

$34.0 Million Credit Facility
On October 3, 2018, we entered into a senior secured credit facility for up to $34.0 million with a leading European financial institution to refinance up to 62.5% of the fair market value of two Kamsarmax vessels (SBI Jive and SBI Swing).  The loan facility, which is comprised of a term loan up to $17.0 million and a revolver up to $17.0 million, has a final maturity date of seven years from signing date and bears interest at LIBOR plus a margin of 2.35% per annum. This facility is secured by, among other things, a first preferred mortgage on the two vessels and is guaranteed by each of the vessel owning subsidiaries.

On June 17, 2019, this facility was increased by approximately $3.0 million in the aggregate for the financing of the installation of scrubbers for each of the two vessels which will amortize at approximately $125,000 per quarter per vessel once drawn down.

As of the date of this filing, the outstanding balance on this facility was approximately $32.2 million.


14


$330.0 Million Credit Facility

On July 29, 2014, we entered into a $330.0 million senior secured credit facility with Credit Agricole Corporate and Investment Bank and Deutsche Bank AG London to finance a portion of the purchase price of 22 of the vessels in our then existing newbuilding program, which was subsequently reduced by $15.0 million due to our sale of one of the vessels that was to collateralize this facility. This facility bore interest at LIBOR plus a margin of 2.925% per annum and had a term of seven years. This facility was secured by, among other things, a first preferred cross-collateralized mortgage on each of the 21 vessels (consisting of 15 Ultramax vessels and six Kamsarmax vessels) and was guaranteed by each of the vessel owning subsidiaries.

During the third quarter of 2019, we repaid and terminated this credit facility upon the completion of the AVIC Lease Financing.

$90.0 Million Credit Facility
On November 8, 2018, we entered into a senior secured credit facility for up to $90.0 million with Nordea Bank ABP, New York Branch and DVB Bank SE. The loan facility, which has a final maturity date of five years from signing date and bears interest at LIBOR plus a margin of 2.35% per annum, is being used to finance up to 60% of the fair market value of six Ultramax vessels (SBI Orion, SBI Hyperion, SBI Tethys, SBI Hercules, SBI Samson and SBI Phoenix). This facility is secured by, among other things, a first preferred mortgage on the six vessels and is guaranteed by each of the vessel owning subsidiaries.

On June 14, 2019, this facility was increased by approximately $8.7 million in the aggregate for the financing of the installation of scrubbers on the six vessels financed under this facility. The repayment profile is on a fifteen-year age adjusted profile.

    As of the date of this filing, the outstanding balance on this facility was approximately $82.1 million.

$12.5 Million Credit Facility

On December 22, 2015, we entered into a senior secured credit facility for up to $12.5 million, which was used to finance a portion of the purchase price of one Ultramax vessel in our then existing Newbuilding Program which was delivered to us. The facility has a maturity date of December 22, 2020. This facility bears interest at LIBOR plus a margin of 3.00% per annum. This facility is secured by, among other things, a first preferred mortgage on the Ultramax vessel and is guaranteed by the vessel owning subsidiary.

As of the date of this filing, the outstanding balance on this facility was approximately $8.8 million.

$27.3 Million Credit Facility

On December 22, 2015, we entered into a senior secured credit facility for up to $27.3 million, which was originally used to finance a portion of the purchase price of two Ultramax vessels in our then existing Newbuilding Program. Each tranche had or has a maturity of five years from the drawdown date. This facility bears interest at LIBOR plus a margin of 2.95% per annum. During 2018, we repaid approximately $8.8 million of the $27.3 Million Credit Facility upon the completion of the $20.5 Million Lease Financing - SBI Hermes transaction and refinanced the SBI Hermes. This facility is secured by, among other things, a first preferred mortgage on the remaining Ultramax vessel and is guaranteed by the vessel owning subsidiary.

As of the date of this filing, the outstanding balance on this facility was approximately $8.8 million.
$85.5 Million Credit Facility
On December 5, 2017, we entered into a senior secured credit facility for up to $85.5 million which was used to finance a portion of the purchase price of six Ultramax vessels we 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. Subsequently, two Ultramax vessels were financed by the $45.0 Million Lease Financing - SBI Virgo and SBI Libra. This facility is secured by, among other things, a first preferred mortgage on the four remaining Ultramax vessels and is guaranteed by each vessel owning subsidiary.
On October 21, 2019, this facility was increased by approximately $5.7 million in the aggregate for the financing for the installation of scrubbers on the four remaining vessels financed under this facility, which will amortize in equal quarterly payments (once drawn down) until December 31, 2022.

15



As of the date of this filing, the outstanding balance on this facility was approximately $47.6 million.
$38.7 Million Credit Facility
On December 13, 2017, we entered into a senior secured credit facility for up to $38.7 million which was used to finance a portion of the purchase price of three Ultramax vessels we 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. During October 2019, the Company prepaid approximately $21.9 million of this facility and wrote-off approximately $0.2 million of deferred financing costs as part of the sale of the SBI Puma and SBI Cougar. This facility is secured by, among other things, a first preferred mortgage on the remaining Ultramax vessel and is guaranteed by the vessel owning subsidiary.
As of the date of this filing, the outstanding balance on this facility was approximately $10.5 million.

$12.8 Million Credit Facility
On June 21, 2018, we entered into a $12.8 million senior secured credit facility with BNP Paribas to finance a portion of the purchase price of one Kamsarmax vessel, the SBI Lynx, delivered from Jiangsu New Yangzijiang Shipbuilding Co., Ltd. in China in June 2018. The loan facility has a final maturity date of June 15, 2023 and bears interest at LIBOR plus a margin of 2.40% per annum. This facility is secured by, among other things, a first preferred mortgage on the vessel and is guaranteed by the vessel owning subsidiary.

On August 6, 2019, this facility was increased by approximately $1.4 million for the financing of the installation of a scrubber on the vessel financed under this facility, which will be repaid in full upon final maturity on June 15, 2023.

As of the date of this filing, the outstanding balance on this facility was approximately $11.9 million.

Security
    
Our secured credit facilities are secured by, among other things: a first priority mortgage over the relevant vessels; a first priority assignment of earnings and insurances from the mortgaged vessels for the specific facility; a pledge of the earnings account of the mortgaged vessels for the specific facility; and a pledge of the equity interests of each vessel owning subsidiary under the specific facility.

Loan Covenants
 
Certain of our credit facilities and financing obligations discussed above, have, among other things, the following financial covenants, as amended or waived, the most stringent of which require us to maintain:
The ratio of net debt to total capitalization of no greater than 0.60 to 1.00.
Consolidated tangible net worth (adjusted for a minimum amount of $100.0 million in historical non-operating costs and to exclude certain future non-operating items, including impairments) of no less than $500.0 million plus: (i) 25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter commencing on or after December 31, 2013, and (ii) 50% of the value of any new equity issues occurring on or after December 31, 2013.
Minimum liquidity of not less than the greater of $25.0 million and $0.7 million per owned or finance leased vessel.
Minimum fair value of the collateral for each credit facility, such that the aggregate fair value of the vessels collateralizing the credit facility be between 140% and 160% of the aggregate principal amount outstanding under such credit facility, or, if we do not meet these thresholds, to prepay a portion of the loan or provide additional security to eliminate the shortfall.
Minimum fair value of the vessel for certain financing obligations be 115% of the principal amount outstanding under such financing obligation, or, if we do not meet this threshold, to prepay a portion of the financing obligation or provide additional security to eliminate the shortfall.
Our credit facilities and financing obligations discussed above have, among other things, the following restrictive covenants which may restrict our ability to, among other things:

16


incur additional indebtedness;
sell the collateral vessel, if applicable;
make additional investments or acquisitions;
pay dividends; or
effect a change of control of the Company.

A violation of any of the financial covenants contained in our credit facilities described above may constitute an event of default under all of our credit facilities, which, unless cured within the grace period set forth under the credit facility, if applicable, or waived or modified by our lenders, provides our lenders with the right to, among other things, require us to post additional collateral, enhance our equity and liquidity, increase our interest payments, pay down our indebtedness to a level where we are in compliance with our loan covenants, sell vessels in our fleet, reclassify our indebtedness as current liabilities, accelerate our indebtedness, and foreclose their liens on our vessels and the other assets securing the credit facilities, which would impair our ability to continue to conduct our business.
Furthermore, our credit facilities contain a cross-default provision that may be triggered by a default under one of our other credit facilities. A cross-default provision means that a default on one loan would result in a default on certain of our other loans. Because of the presence of cross-default provisions in certain of our credit facilities, the refusal of any one lender under our credit facilities to grant or extend a waiver could result in certain of our indebtedness being accelerated, even if our other lenders under our credit facilities have waived covenant defaults under the respective credit facilities. If our secured indebtedness is accelerated in full or in part, it would be very difficult in the current financing environment for us to refinance our debt or obtain additional financing and we could lose our vessels and other assets securing our credit facilities if our lenders foreclose their liens, which would adversely affect our ability to conduct our business.
Moreover, in connection with any waivers of or amendments to our credit facilities that we have obtained, or may obtain in the future, our lenders may impose additional operating and financial restrictions on us or modify the terms of our existing credit facilities. These restrictions may further restrict our ability to, among other things, pay dividends, make capital expenditures or incur additional indebtedness, including through the issuance of guarantees. In addition, our lenders may require the payment of additional fees, require prepayment of a portion of our indebtedness to them, accelerate the amortization schedule for our indebtedness and increase the interest rates they charge us on our outstanding indebtedness.

As of the date of this filing, we were in compliance with all of the financial covenants contained in our credit facilities that we had entered into as of the date of this filing.

Please see Note 9, Debt, to our consolidated financial statements for additional information about these credit facilities.

Senior Unsecured Notes
On September 22, 2014, we issued $65.0 million aggregate principal amount of our 7.50% Senior Unsecured Notes in a registered public offering. The Senior Notes were due to mature on September 15, 2019 and could be redeemed in whole or in part at any time, or from time to time, after September 15, 2016. Interest on the Senior Notes was payable quarterly on each of March 15, June 15, September 15 and December 15, commencing on December 15, 2014. We used the net proceeds we received to fund installment payments due under our then existing Newbuilding Program. On October 16, 2014, we issued an additional $8.625 million aggregate principal amount of our Senior Notes, pursuant to the underwriters’ option to purchase additional Senior Notes. Our Senior Notes commenced trading on the NYSE on September 29, 2014 under the symbol “SLTB.”
On August 2, 2019, we redeemed the entire outstanding balance of the Senior Notes of $73,625,000. The redemption price of the Senior Notes was equal to 100% of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, August 2, 2019.
Critical Accounting Estimates
There have been no material changes to our significant accounting estimates since December 31, 2018 other than those reflected in our unaudited interim condensed consolidated financial statements for the nine-month period ended September 30, 2019 included elsewhere herein.  For a description of our critical accounting estimates and all of our significant accounting policies, see Note 1 to our audited financial statements and "Item 5 - Operating and Financial Review and Prospects," included in our Annual Report.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

17


As of September 30, 2019, our contractual obligations and commitments consisted principally of future minimum payments under non-cancelable time charter-in agreements and future minimum purchases under non-cancelable purchase agreements. Other than noted below, there have been no significant changes to such arrangements and obligations since December 31, 2018.

Time chartered-in vessels
During the nine months ended September 30, 2019, we time chartered-in five Kamsarmax vessels and exercised our option to extend the time charter-in on one Ultramax vessel for one year. The terms of the contracts are summarized as follows:
Vessel Type
 
Year Built
 
DWT
 
Country of Build
 
Daily Base Rate
 
Earliest Expiry
Ultramax
 
2017
 
62,100

 
Japan
 
$10,885
 
30-Sep-20
 
(1) 
Kamsarmax
 
2019
 
81,100

 
China
 
Variable
 
10-Mar-21
 
(2) 
Kamsarmax
 
2019
 
81,100

 
China
 
Variable
 
7-Apr-21
 
(3) 
Kamsarmax
 
2018
 
82,000

 
China
 
$12,000
 
25-June-21
 
(4) 
Kamsarmax
 
2018
 
81,100

 
China
 
Variable
 
13-Jul-21
 
(5) 
Kamsarmax
 
2015
 
81,100

 
China
 
Variable
 
22-Jul-21
 
(6) 

(1)
This vessel was originally time chartered-in for 22 to 24 months at our option at $10,125 per day. In September 2019, we exercised our option to extend the time charter for one year at $10,885 per day. The vessel was delivered to us in September 2017.
(2)
This vessel has been time chartered-in for 24 to 27 months at our option at 118% of the BPI. The vessel was delivered to us in March 2019.
(3)
This vessel has been time chartered-in for 24 to 27 months at our option at 118% of the BPI. The vessel was delivered to us in May 2019.
(4)
This vessel is time chartered-in for 24 months at $12,000 per day for the first twelve months and at $12,500 per day for the second twelve months. We have the option to extend this time charter for 12 months at $13,000 per day and an additional 12 months at $14,500 per day. We also have options to purchase the vessel beginning after the first year. The vessel was delivered to us in July 2019.
(5)
This vessel has been time chartered-in for 24 to 27 months at our option at 120% of the BPI. The vessel was delivered to us in July 2019.
(6)
This vessel has been time chartered-in for 24 to 27 months at our option at 118% of the BPI. The vessel was delivered to us in August 2019.

Financial Guarantees

In October 2019, we agreed to guarantee certain obligations of certain related parties arising from bunker purchases made through October 2020 on behalf of the vessels we own. The maximum potential amount of future payments is $2.0 million.





18


INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
Page
 
 
 
 
 
 

F- 1

Scorpio Bulkers Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)


 
September 30,
 
December 31,
 
2019
 
2018
 
(unaudited)
 
 
Assets
 
 
 
Current assets
 
 
 

Cash and cash equivalents
$
80,134

 
$
67,495

Inventories
5,992

 
3,595

Due from related parties
9,949

 
7,338

Prepaid expenses and other current assets
6,732

 
5,671

Total current assets
102,807

 
84,099

Non-current assets
 
 
 

Vessels, net
1,379,057

 
1,507,918

Equity investments
1,522

 

Equity investments-related party
160,865

 
92,281

Assets held for sale
36,939

 

Deferred financing costs, net
3,151

 
3,706

Other assets
59,165

 
474

Due from related parties
14,606

 
15,348

Total non-current assets
1,655,305

 
1,619,727

Total assets
$
1,758,112

 
$
1,703,826

 
 
 
 

Liabilities and shareholders’ equity
 
 
 

Current liabilities
 
 
 

Bank loans, net
$
37,573

 
$
60,310

Financing obligations
28,745

 
4,594

Senior Notes, net

 
73,253

Accounts payable and accrued expenses
47,753

 
13,976

Due to related parties
323

 
481

Total current liabilities
114,394

 
152,614

Non-current liabilities
 
 
 

Bank loans, net
403,997

 
621,179

Financing obligations
327,482

 
69,229

Other liabilities
19,489

 

Total non-current liabilities
750,968

 
690,408

Total liabilities
865,362

 
843,022

Commitment and contingencies (Note 7)


 


Shareholders’ equity
 
 
 

Preferred shares, $0.01 par value per share; 50,000,000 shares authorized; no shares issued or outstanding

 

Common shares, $0.01 par value per share; authorized 212,500,000 shares as of September 30, 2019 and December 31, 2018; outstanding 72,487,958 shares and 71,217,258 shares as of September 30, 2019 and December 31, 2018, respectively
809

 
796

Paid-in capital
1,750,011

 
1,747,648

Common shares held in treasury, at cost; 8,567,846 shares at September 30, 2019 and December 31, 2018
(56,720
)
 
(56,720
)
Accumulated deficit
(801,350
)
 
(830,920
)

F- 2

Scorpio Bulkers Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)


Total shareholders’ equity
892,750

 
860,804

Total liabilities and shareholders’ equity
$
1,758,112

 
$
1,703,826


See notes to the unaudited condensed consolidated financial statements.


F- 3

Scorpio Bulkers Inc. and Subsidiaries
Condensed Consolidated Statement of Operations (unaudited)
(Amounts in thousands, except per share amounts)



 
 
For the Nine Months Ended September 30,
 
 
2019
 
2018
Revenue:
 
 
 
 

Vessel revenue
 
$
1,445

 
$

Vessel revenue-related party
 
162,870

 
177,331

Total vessel revenue
 
164,315

 
177,331

Operating expenses:
 
 
 
 

Voyage expenses
 
701

 
372

Voyage expenses-related party
 
145

 

Vessel operating costs
 
66,703

 
67,255

Vessel operating costs-related party
 
9,989

 
11,633

Charterhire expense
 
10,770

 
3,091

Vessel depreciation
 
40,803

 
42,193

General and administrative expenses
 
17,393

 
17,189

General and administrative expenses-related party
 
6,608

 
6,094

Loss / write-down on assets held for sale
 
11,637

 

Loss / write-down on assets held for sale-related party
 
404

 

Total operating expenses
 
165,153

 
147,827

Operating (loss) income
 
(838
)
 
29,504

Other income (expense):
 
 
 
 

Interest income
 
1,227

 
756

Income from equity investment
 
22

 

Income from equity investment - related party
 
70,205

 

Foreign exchange loss
 
(33
)
 
(73
)
Financial expense, net
 
(41,013
)
 
(35,512
)
Total other income (expense)
 
30,408

 
(34,829
)
Net income (loss)
 
$
29,570

 
$
(5,325
)
Weighted-average shares outstanding:
 
 
 
 

Basic
 
67,889

 
72,649

Diluted
 
69,610

 
72,649

Income (loss) per common share:
 
 
 
 

Basic
 
$
0.44

 
$
(0.07
)
Diluted
 
$
0.42

 
$
(0.07
)
 
See notes to the unaudited condensed consolidated financial statements.


F- 4

Scorpio Bulkers Inc. and Subsidiaries
Condensed Consolidated Statement of Changes in Shareholders’ Equity (unaudited)
(Dollars in thousands)


 
Number of
shares
outstanding
 
Common
stock
 
Paid-in
capital
 
Treasury Shares
 
Accumulated deficit
 
Total
Balance as of January 1, 2019
71,217,258

 
$
796

 
$
1,747,648

 
$
(56,720
)
 
$
(830,920
)
 
$
860,804

Net income
 
 
 
 
 
 
 
 
29,570

 
29,570

Common stock issued

 



 

 

 

Issuance of restricted stock, net of forfeitures
1,270,700

 
13

 
(13
)
 

 

 

Cash dividends declared on stock ($0.06 per common share)

 

 
(4,298
)
 

 

 
(4,298
)
Treasury Stock

 

 

 

 

 

Restricted stock amortization

 

 
6,674

 

 

 
6,674

Balance as of September 30, 2019
72,487,958

 
$
809

 
$
1,750,011

 
$
(56,720
)
 
$
(801,350
)
 
$
892,750


 
Number of
shares
outstanding
 
Common
stock
 
Paid-in
capital
 
Treasury Shares
 
Accumulated deficit
 
Total
Balance as of January 1, 2018
74,902,364

 
$
762

 
$
1,745,844

 
$
(11,004
)
 
$
(818,222
)
 
$
917,380

Net loss
 
 
 
 
 
 
 
 
(5,325
)
 
(5,325
)
Common stock issued
1,592,594

 
16

 
(16
)
 

 

 

Issuance of restricted stock, net of forfeitures
1,824,698

 
18

 
(18
)
 

 

 

Cash dividends declared on stock ($0.06 per common share)

 

 
(4,579
)
 

 

 
(4,579
)
Treasury Stock
(2,641,479
)
 

 

 
(18,710
)
 

 
(18,710
)
Restricted stock amortization

 

 
5,625

 

 

 
5,625

Balance as of September 30, 2018
75,678,177

 
$
796

 
$
1,746,856

 
$
(29,714
)
 
$
(823,547
)
 
$
894,391



See notes to the unaudited condensed consolidated financial statements.


F- 5

Scorpio Bulkers Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)


 
For the Nine Months Ended September 30,
 
2019
 
2018
Operating activities
 
 
 

Net income (loss)
$
29,570

 
$
(5,325
)
Adjustment to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Restricted stock amortization
6,674

 
5,625

Vessel depreciation
40,803

 
42,193

Amortization of deferred financing costs
5,941

 
6,483

Write-off of deferred financing costs
446

 

Loss / write-down on assets held for sale
10,385

 

Net unrealized gains on investments
(68,606
)
 

Dividend income on equity investments
(1,623
)
 

Changes in operating assets and liabilities:
 
 
 
Drydocking expenditures
(2,265
)
 

Decrease in prepaid expenses and other current assets
(2,829
)
 
(266
)
Increase in accounts payable accrued expenses
6,953

 
(2,022
)
Decrease in related party balances
(2,769
)
 
4,117

Net cash provided by operating activities
22,680

 
50,805

Investing activities
 
 
 

Equity investment
(1,500
)
 

Proceeds from sale of vessels
47,302

 

Dividend income on equity investments
1,623

 

Scrubber payments
(16,678
)
 

Payments for vessels and vessels under construction

 
(21,423
)
Net cash provided by (used in) investing activities
30,747

 
(21,423
)
Financing activities
 
 
 
Proceeds from issuance of debt
300,070

 
324,725

Repayments of long term debt
(332,052
)
 
(251,515
)
Share repurchases

 
(18,710
)
Dividend paid
(4,298
)
 
(4,579
)
Debt issue cost paid
(4,508
)
 
(5,029
)
Net cash (used in) provided by financing activities
(40,788
)
 
44,892

Increase in cash and cash equivalents
12,639

 
74,274

Cash and cash equivalents, beginning of period
67,495

 
68,535

Cash and cash equivalents, end of period
$
80,134

 
$
142,809

Supplemental cash flow information:
 
 
 
Interest paid
$
37,167

 
$
29,334

Non-cash investing and financing activities
 
 
 
Right of use asset at inception
$
54,191

 
$

See notes to the unaudited condensed consolidated financial statements.

F- 6

SCORPIO BULKERS INC. AND SUBSIDIARIES
Unaudited Notes to Condensed Consolidated Financial Statements


1.
Organization and Basis of Presentation
Company
Scorpio Bulkers Inc. and its subsidiaries (together the “Company”) is an international shipping company that owns and operates the latest generation newbuilding drybulk carriers with fuel-efficient specifications and carrying capacities of greater than 30,000 dwt in the international shipping markets. Scorpio Bulkers Inc. was incorporated in the Republic of the Marshall Islands on March 20, 2013.

The Company’s vessels transport a broad range of major and minor bulk commodities, including ores, coal, grains, and fertilizers, along worldwide shipping routes, and are, or are expected to be, employed primarily in the spot market or in spot market-oriented pools of similarly sized vessels. As of September 30, 2019, the Company owned or finance leased 54 vessels consisting of 17 Kamsarmax vessels and 37 Ultramax vessels and time chartered in six vessels consisting of five Kamsarmax vessels and one Ultramax vessel.
The Company is organized by vessel type into two operating segments (see Note 16, Segments, to the condensed consolidated financial statements):
Ultramax - includes vessels ranging from approximately 60,200 DWT to 64,000 DWT
Kamsarmax - includes vessels ranging from approximately 82,000 DWT to 84,000 DWT

The Company’s vessels are commercially managed by Scorpio Commercial Management S.A.M., or SCM, an entity controlled by the Lolli-Ghetti family of which Emanuele Lauro, the Company’s Chairman and Chief Executive Officer, and Filippo Lauro, the Company’s Vice President, are members. SCM’s services include securing employment for the Company’s vessels in pools, in the spot market and on time charters.

The Company’s vessels are technically managed by Scorpio Ship Management S.A.M., or SSM, an entity controlled by the Lolli-Ghetti family. SSM facilitates vessel support such as crew, provisions, deck and engine stores, insurance, maintenance and repairs, and other services as necessary to operate the vessels such as drydocks and vetting/inspection under a technical management agreement.

The Company has also entered into an administrative services agreement, as amended from time to time, or the Administrative Services Agreement, with Scorpio Services Holding Limited, or SSH, an entity controlled by the Lolli-Ghetti family. The administrative services provided under this agreement primarily include provision of administrative staff, office space and accounting, legal compliance, financial and information technology services. SSH is also reimbursed for the direct or indirect expenses that it incurs in providing the Company with the administrative services described above.
Basis of accounting
The condensed consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. All material intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of financial position as of September 30, 2019 and the Company’s result of operations for the nine months ended September 30, 2019 and 2018, and cash flows for the nine months ended September 30, 2019 and 2018. The condensed consolidated balance sheet as of December 31, 2018 was derived from audited financial statements but does not contain all the footnote disclosures from the annual financial statements.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reporting amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets, liabilities, revenues and expenses. Actual results could differ from those estimates.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in accordance with Securities and Exchange Commission, or the SEC, rules and regulations; however, management believes that the disclosures herein are adequate to make the information presented not misleading. This

F- 7

SCORPIO BULKERS INC. AND SUBSIDIARIES
Unaudited Notes to Condensed Consolidated Financial Statements

report should be read in conjunction with the audited financial statements and the notes included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2018.
Going concern
The Company’s revenue is primarily derived from pool revenue. The bulker shipping industry is volatile and has experienced a sustained cyclical downturn recently. While the outlook has brightened, if the recovery is not sustained, this could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.

The fair market values of the Company’s vessels also experience high volatility. The fair value of the vessels may increase or decrease depending on a number of factors including, but not limited to, the prevailing level of charter rates and day rates, general economic and market conditions affecting the international shipping industry, types, sizes and ages of vessels, supply and demand for vessels, availability of or developments in other modes of transportation, competition from other shipping companies, cost of newbuildings, governmental or other regulations and technological advances. In addition, as vessels grow older they generally decline in value. If the fair value of its vessels declines, the Company may not be in compliance with certain provisions of its credit facilities and it may not be able to refinance its debt. The prepayment of certain credit facilities may be necessary for the Company to maintain compliance with certain covenants in the event that the value of its vessels falls below a certain level. Additionally, if the Company sells one or more of its vessels at a time when vessel prices have fallen, the sale price may be less than the vessel’s carrying value on its consolidated financial statements, resulting in a loss on sale or an impairment loss being recognized, ultimately leading to a reduction in earnings. Furthermore, if vessel values fall significantly, this could indicate a decrease in the recoverable amount for the vessel which may result in an impairment adjustment in the carrying value of the vessel.

These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, nor to the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern.

Recently adopted accounting standards

The Company has adopted Financial Accounting Standards Board, or the FASB, Accounting Standards Codification, or the ASC, Topic 842, “Leases” effective January 1, 2019 using the modified retrospective transition approach, which allows the Company to recognize a cumulative effect adjustment to the opening balance of accumulated deficit in the period of adoption rather than restate its comparative prior year periods. Under the new lease standard, lessees are required to recognize a right-of-use asset and a lease liability for substantially all leases. The cumulative effect adjustment to the Company’s opening balance of accumulated deficit was zero.
The Company determines if an arrangement contains a lease at inception. This determination requires judgment with arrangements generally considered to contain a lease when all of the following apply:
It conveys the right to control the use of an identified asset for a period of time to the lessee;
The lessee enjoys substantially all economic benefits from the use of the asset; and
The lessee directs the use of the identified asset.
At the present time, substantially all of the Company’s revenues are sourced from commercial pools, which along with time charters, fall under the guidance of U.S. GAAP for leases. Based on the Company's analysis of its contracts, the Company determined that its pool arrangements meet the definition of operating leases under ASC 842. As lessor, the Company leases its vessels to pools, which manage the vessels in order to enter into transportation contracts with their customers and enjoy the economic benefits derived from such arrangements.  Furthermore, the pools can direct the use of a vessel (subject to certain limitations in the pool or charter agreement) throughout the period of use. The Company, as lessor, elected to apply the practical expedient to not separate lease and associated non-lease components and instead to account for each separate lease component and the associated non-lease components as a single component, as the criteria for not separating the lease and non-lease components of its arrangements are met since: (a) the timing and pattern of transfer are the same for both the lease and non-lease components, (b) the lease component of the contracts, if accounted for separately, would be classified as an operating lease, and (c) the lease component is the predominant component in the arrangement.
Under the commercial pool agreements, the pool participants share the revenue generated by the entire pool in accordance with a point system that allocates points to each vessel in the pool, based upon performance, age and other factors. As a pool participant,

F- 8

SCORPIO BULKERS INC. AND SUBSIDIARIES
Unaudited Notes to Condensed Consolidated Financial Statements

the Company accounts for its vessels as assets and records lease revenue for each period as the variability associated with lease payments is resolved.
At times, the Company charters in vessels to supplement its own fleet and engages them in time charters to the commercial pools. Subsequent to the January 1, 2019 adoption date, the Company entered into agreements to lease six vessels from a third party for which it recognized the operating lease right-of-use assets and the corresponding lease liabilities on the consolidated balance sheet. At lease commencement, the Company calculates the present value of lease payments discounted at the rate implicit in the lease, if available, or otherwise at its incremental borrowing rate. The Company’s incremental borrowing rate reflects the interest rate it would need to pay to borrow funds on a collateralized basis over a similar term and in a similar economic environment.
The Company also enters into sale and leaseback transactions, all of which contain lessee fixed price repurchase obligations. In accordance with ASC 842, such transactions are accounted for as failed sales and accordingly, the Company continues to recognize these vessels at their net book values on the consolidated balance sheet while also recognizing their financial liabilities for the financing amount drawn down on the accompanying consolidated balance sheet under “Financing obligation” and the variable amount of consideration paid under “Financial expense, net” in the accompanying condensed consolidated statement of operations.
The Company recognizes lease payments for all operating leases as charterhire expense on the condensed consolidated statements of operations on a straight-line basis over the lease term.
In May 2014, the FASB issued Accounting Standard Update, or ASU, 2014-09, “Revenue from Contracts with Customers” (Topic 606). This standard requires entities to (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company adopted ASU 2014-09 for the reporting period commencing on January 1, 2018 and elected to use the modified retrospective approach. Its adoption primarily changes the method of recognizing revenue for voyage charters from the discharge-to-discharge method to the loading-to-discharge method. Under the discharge-to-discharge method, revenue is recognized from the discharge of the prior voyage, or contract date of the current voyage if later, until the discharge of the current voyage. Under the load-to-discharge method, revenue is recognized from the load of a voyage until its discharge. The Company’s quantitative assessment of the effects of the adoption of this new guidance indicated that the financial impact of the change in timing of revenue recognition as outlined above required no adjustment to the opening retained earnings as of January 1, 2018 as the Company was not engaged in any voyage charters. At the present time, virtually all of the Company’s revenues are sourced from commercial pools which, along with time charters, fall under the guidance of ASC Topic 842 “Leases”.


2.
Cash and cash equivalents
Cash and cash equivalents includes $30.0 million and $10.1 million of short-term deposits with original maturities of less than three months, at September 30, 2019 and December 31, 2018, respectively.


F- 9

SCORPIO BULKERS INC. AND SUBSIDIARIES
Unaudited Notes to Condensed Consolidated Financial Statements

3.
Earnings Per Common Share 
The following is a reconciliation of the basic and diluted earnings per share computations (amounts in thousands, except per share amounts):
 
 
September 30,
Nine Months Ended
 
2019
 
2018
Net income (loss) for basic and diluted earnings per share
 
$
29,570

 
$
(5,325
)
 
 
 
 
 
Common shares outstanding and common stock equivalents:
 
 
 
 
  Weighted average shares basic
 
67,889

 
72,649

Effect of dilutive securities
 
1,721

 

Weighted average common shares - diluted
 
69,610

 
72,649

 
 
 
 
 
Income (loss) per share:
 
 
 
 
Basic
 
$
0.44

 
$
(0.07
)
Diluted
 
$
0.42

 
$
(0.07
)
The following is a summary of anti-dilutive equity awards not included in detailed earnings per share computations for the nine months ended September 30, 2019 and 2018 (in thousands).
 
 
September 30,
 
 
2019
 
2018
Anti-dilutive equity awards
 
1,091

 
3,777


4.
Vessels, net
At September 30, 2019 the Company owned or finance leased 17 Kamsarmax vessels and 37 Ultramax vessels. A rollforward of activity within vessels is as follows (amounts in thousands):
Balance at December 31, 2018
$
1,507,918

Transferred to assets held for sale
(96,276
)
Other additions
8,218

Depreciation
(40,803
)
Balance at September 30, 2019
$
1,379,057

Depreciation includes depreciation related to the Company’s finance leased vessels.
All of the Company’s vessels serve as collateral against existing loan facilities.

Owned or Finance Leased Vessels
Vessel Name
 
Year Built
 
DWT
 
Vessel Type
SBI Antares
 
2015
 
61,000

 
Ultramax
SBI Athena
 
2015
 
64,000

 
Ultramax
SBI Bravo
 
2015
 
61,000

 
Ultramax
SBI Leo
 
2015
 
61,000

 
Ultramax

F- 10

SCORPIO BULKERS INC. AND SUBSIDIARIES
Unaudited Notes to Condensed Consolidated Financial Statements

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 Aries
 
2015
 
64,000

 
Ultramax
SBI Taurus
 
2015
 
64,000

 
Ultramax
SBI Gemini
 
2015
 
64,000

 
Ultramax
SBI Pisces
 
2016
 
64,000

 
Ultramax
SBI Libra
 
2017
 
64,000

 
Ultramax
SBI Virgo
 
2017
 
64,000

 
Ultramax
SBI Jaguar
 
2014
 
64,000

 
Ultramax
SBI Cougar
*
2015
 
64,000

 
Ultramax
SBI Puma
*
2014
 
64,000

 
Ultramax
Total Ultramax
 
 
 
2,307,800

 
 
SBI Samba
 
2015
 
84,000

 
Kamsarmax
SBI Rumba
 
2015
 
84,000

 
Kamsarmax
SBI Capoeira
 
2015
 
82,000

 
Kamsarmax
SBI Carioca
 
2015
 
82,000

 
Kamsarmax
SBI Conga
 
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 Swing
 
2017
 
82,000

 
Kamsarmax

F- 11

SCORPIO BULKERS INC. AND SUBSIDIARIES
Unaudited Notes to Condensed Consolidated Financial Statements

SBI Mazurka
 
2017
 
82,000

 
Kamsarmax
SBI Jive
 
2017
 
82,000

 
Kamsarmax
SBI Lynx
 
2018
 
82,000

 
Kamsarmax
Total Kamsarmax
 
 
 
1,398,000

 
 
Total Owned or Financed Leased Vessels DWT
 
3,705,800

 
 
* Classified as held for sale at September 30, 2019


F- 12

SCORPIO BULKERS INC. AND SUBSIDIARIES
Unaudited Notes to Condensed Consolidated Financial Statements

5.
Assets Held for Sale
Assets held for sale at September 30, 2019 were $36.9 million. There were no vessels classified as held for sale at December 31, 2018.
In March 2019, the Company entered into agreements with unaffiliated third parties to sell the SBI Electra and SBI Flamenco, two 2015 Chinese built Kamsarmax vessels, for approximately $48.0 million in aggregate. Delivery of the vessels occurred in the second quarter of 2019. As a result, the Company classified the vessels as held for sale and recorded a write-down of approximately $7.4 million.
During the second quarter of 2019, the Company’s Board of Directors made the decision to sell the SBI Puma and SBI Cougar, 2014 and 2015 built Ultramax vessels, respectively, and as such these vessels were classified as held for sale at September 30, 2019. As a result, the Company recorded a write-down of approximately $4.7 million. During the third quarter of 2019, the Company entered into agreements with unaffiliated third parties to sell both vessels. The sales closed in October 2019.

6.
Commitments and Contingencies
Legal Matters
The Company is periodically involved in litigation and various legal matters that arise in the normal course of business. Such matters are subject to many uncertainties and outcomes which are not predictable. At the current time, the Company does not believe that any legal matters could have a material adverse effect on its financial position or future results of operations and therefore has not recorded any reserves in relation thereto as of September 30, 2019.
Other
The Company also has certain commitments related to the commercial and technical management of its vessels. As of September 30, 2019, we would be obligated to pay termination fees of $3.6 million to SCM and SSM if we were to cancel our Master Agreement as of September 30, 2019. We are also required to pay SCM for each vessel that we own an amount equal to three months of commissions that SCM would have expected to earn had the contracts not been terminated. Due to the variable nature of the commissions, they have been excluded from these figures. There are no material post-employment benefits for our executive officers or directors. By law, our employees in Monaco are entitled to a one-time payment of up to two months salary upon retirement if they meet certain minimum service requirements.
As of September 30, 2019, the Company’s contractual obligations and commitments consisted principally of debt repayments, future minimum payments under non-cancelable time chartered-in agreements and future minimum purchases under non-cancelable purchase agreements. Other than the addition of the five Kamsarmax vessels time chartered-in for which the details are listed below, there have been no significant changes to such arrangements and obligations since December 31, 2018.
Time chartered-in vessels
During the nine months ended September 30, 2019, the Company time chartered-in five Kamsarmax vessels and exercised its option to extend the time charter-in on one Ultramax vessel for one year. The terms of the contracts are summarized as follows:
Vessel Type
 
Year Built
 
DWT
 
Country of Build
 
Daily Base Rate
 
Earliest Expiry
Ultramax
 
2017
 
62,100

 
Japan
 
$10,885
 
30-Sep-20
 
(1) 
Kamsarmax
 
2019
 
81,100

 
China
 
Variable
 
10-Mar-21
 
(2) 
Kamsarmax
 
2019
 
81,100

 
China
 
Variable
 
7-Apr-21
 
(3) 
Kamsarmax
 
2018
 
82,000

 
China
 
$12,000
 
25-June-21
 
(4) 
Kamsarmax
 
2018
 
81,100

 
China
 
Variable
 
13-Jul-21
 
(5) 
Kamsarmax
 
2015
 
81,100

 
China
 
Variable
 
22-Jul-21
 
(6) 

(1)
This vessel was originally time chartered-in for 22 to 24 months at the Company’s option at $10,125 per day. In September 2019, the Company exercised its option to extend the time charter for one year at $10,885 per day. The vessel was delivered to the Company in September 2017.

F- 13

SCORPIO BULKERS INC. AND SUBSIDIARIES
Unaudited Notes to Condensed Consolidated Financial Statements

(2)
This vessel has been time chartered-in for 24 to 27 months at the Company’s option at 118% of the BPI. The vessel was delivered to the Company in March 2019.
(3)
This vessel has been time chartered-in for 24 to 27 months at the Company’s option at 118% of the BPI. The vessel was delivered to the Company in May 2019.
(4)
This vessel is time chartered-in for 24 months at $12,000 per day for the first twelve months and at $12,500 per day for the second twelve months. The Company has the option to extend this time charter for 12 months at $13,000 per day and an additional 12 months at $14,500 per day. The Company also has options to purchase the vessel beginning after the first year. The vessel was delivered to the Company in July 2019.
(5)
This vessel has been time chartered-in for 24 to 27 months at the Company’s option at 120% of the BPI. The vessel was delivered to the Company in July 2019.
(6)
This vessel has been time chartered-in for 24 to 27 months at the Company’s option at 118% of the BPI. The vessel was delivered to the Company in August 2019.



7.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following (in thousands):
 
As of
 
September 30, 2019
 
December 31, 2018
Accounts payable
$
1,609

 
$
4,948

Accrued operating
39,474

 
1,705

Accrued administrative
6,670

 
7,323

Accounts payable and accrued expenses
$
47,753

 
$
13,976

Accounts payable primarily consists of obligations to suppliers arising in the normal course of business. Accrued operating relates to obligations arising from operation of the Company’s owned, finance leased and chartered-in vessels (see Note 14, “Leases” for additional information), such as operating costs. Accrued administrative relates to obligations that are corporate or financing in nature, such as payroll, professional fees, interest and commitment fees.
8.
Common Shares
Share Repurchase Program
During the nine months ended September 30, 2019, the Company’s Board of Directors authorized a new share repurchase program to purchase up to an aggregate of $50.0 million of the Company’s common shares. This new share repurchase program replaced the Company’s previous share repurchase program that was authorized in October 2018 and that was terminated in conjunction with the authorization of the new share repurchase program. The specific timing and amounts of the repurchases will be in the sole discretion of management and may vary based on market conditions and other factors. The Company is not obligated under the terms of the program to repurchase any of its common shares. The authorization has no expiration date.
Dividend
During the nine months ended September 30, 2019, the Company’s Board of Directors declared and the Company paid quarterly cash dividends totaling $0.06 per share or approximately $4.3 million in aggregate.



F- 14

SCORPIO BULKERS INC. AND SUBSIDIARIES
Unaudited Notes to Condensed Consolidated Financial Statements

9.
Debt
The Company’s long-term debt consists of Senior Notes, bank loans and financing obligations summarized as follows (in thousands):
 
September 30, 2019
 
December 31, 2018
Unsecured Senior Notes
$

 
$
73,625

 
 
 
 
Credit Facilities:
 
 
 
$330 Million Credit Facility

 
140,677

$42 Million Credit Facility

 
14,105

$12.5 Million Credit Facility
8,813

 
9,400

$27.3 Million Credit Facility
9,008

 
9,008

$85.5 Million Credit Facility
47,594

 
78,972

$38.7 Million Credit Facility
32,400

 
35,100

$12.8 Million Credit Facility
11,900

 
12,325

$30.0 Million Credit Facility
27,753

 
29,420

$60.0 Million Credit Facility
27,138

 
58,797

$184.0 Million Credit Facility
168,916

 
180,229

$34.0 Million Credit Facility
32,179

 
34,000

$90.0 Million Credit Facility
82,100

 
90,000

$19.6 Million Lease Financing - SBI Rumba
17,191

 
18,101

$19.0 Million Lease Financing - SBI Tango
17,593

 
18,451

$19.0 Million Lease Financing - SBI Echo
17,671

 
18,481

$20.5 Million Lease Financing - SBI Hermes
19,372

 
20,299

$21.4 Million Lease Financing - SBI Samba
20,726

 

CMBFL Lease Financing
115,688

 

$45.0 Million Lease Financing - SBI Virgo & SBI Libra
40,783

 

AVIC Lease Financing
112,183

 

Total bank loans and financing obligations outstanding
809,008

 
767,365

Less: Current portion
(67,465
)
 
(66,156
)
 
$
741,543

 
$
701,209

(amounts in thousands)
September 30, 2019
 
December 31, 2018
 
Current
 
Non-current
 
Total
 
Current
 
Non-current
 
Total
Total debt, gross
$
67,465

 
$
741,543

 
$
809,008

 
$
139,781

 
$
701,209

 
$
840,990

Unamortized deferred financing costs
(1,147
)
 
(10,064
)
 
(11,211
)
 
(1,624
)
 
(10,801
)
 
(12,425
)
Total debt, net
$
66,318

 
$
731,479

 
$
797,797

 
$
138,157

 
$
690,408

 
$
828,565

Unsecured Senior Notes
On September 22, 2014, the Company issued $65.0 million in aggregate principal amount of 7.5% Senior Notes due September 2019, or the Senior Notes, and on October 16, 2014 the Company issued an additional $8.6 million aggregate principal amount of Senior Notes when the underwriters partially exercised their option to purchase additional Senior Notes on the same terms and conditions.

F- 15

SCORPIO BULKERS INC. AND SUBSIDIARIES
Unaudited Notes to Condensed Consolidated Financial Statements

The Senior Notes were redeemed on August 2, 2019. The redemption price of the Senior Notes was equal to 100% of the principal amount redeemed, plus accrued and unpaid interest to, but excluding, August 2, 2019.
The Senior Notes bore interest at a rate of 7.5% per year, payable quarterly on each March 15, June 15, September 15 and December 15, commencing on December 15, 2014. The Senior Notes were redeemable at the Company’s option in whole or in part, at any time on or after September 15, 2016 at a redemption price equal to 100% of the principal amount to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.
The Senior Notes were the Company’s senior unsecured obligations and ranked equally with all of its existing and future senior unsecured and unsubordinated debt and were effectively subordinated to its existing and future secured debt, to the extent of the value of the assets securing such debt, and were structurally subordinated to all existing and future debt and other liabilities of the Company’s subsidiaries. No sinking fund was provided for the Senior Notes. The Senior Notes were issued in minimum denominations of $25.00 and integral multiples of $25.00 in excess thereof and were listed on the New York Stock Exchange under the symbol “SLTB”. The Senior Notes required the Company to comply with certain covenants, including financial covenants; restrictions on consolidations, mergers or sales of assets and prohibitions on paying dividends or returning capital to equity holders if a covenant breach or an event of default has occurred or would have occurred as a result of such payment. If the Company underwent a change of control, holders may have required it to repurchase for cash all or any portion of their notes at a change of control repurchase price equal to 101% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the change of control purchase date.
The financial covenants included:
Net borrowings shall not equal or exceed 70% of total assets.
Tangible net worth shall always exceed $500.0 million.


F- 16

SCORPIO BULKERS INC. AND SUBSIDIARIES
Unaudited Notes to Condensed Consolidated Financial Statements

Secured Credit Facilities
The Company has 10 credit agreements with banks in place, which are collateralized by the Company’s vessels. The following is a summary of those credit agreements as of September 30, 2019:
($000’s)
 
$12.5 Million Credit Facility
 
$27.3 Million Credit Facility
 
$85.5 Million Credit Facility
 
$38.7 Million Credit Facility
 
$12.8 Million Credit Facility
 
$30.0 Million Credit Facility
 
$60.0 Million Credit Facility
 
$184.0 Million Credit Facility
 
$34.0 Million Credit Facility
 
$90.0 Million Credit Facility
Date of Agreement
 
December 22, 2015
 
December 22, 2015
 
December 5, 2017
 
December 13, 2017
 
June 21, 2018
 
September 13, 2018
 
September 11, 2018
 
September 21, 2018
 
October 3, 2018
 
November 8, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Vessels Financed
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Kamsarmax
 

 

 

 

 
1

 
2

 

 
6

 
2

 

Ultramax
 
1

 
1

 
4

 
3

 

 

 
2

 
6

 

 
6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Rate-LIBOR+
 
3.000
%
 
2.950
%
 
2.850
%
 
2.850
%
 
2.400
%
 
2.200
%
 
2.250
%
 
2.400
%
 
2.350
%
 
2.350
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commitment Fee
 
%
 
1.180
%
 
1.140
%
 
0.998
%
 
0.960
%
 
0.880
%
 
0.900
%
 
0.960
%
 
1.175
%
 
1.000
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maturity Date
 
December 22, 2020
 
5 years from each drawdown
 
February 15, 2023
 
December 13, 2022
 
June 15, 2023
 
September 18, 2023
 
September 14, 2023
 
September 21, 2023
 
October 3, 2025
 
November 8, 2023
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount outstanding
 
8,813

 
9,008

 
47,594

 
32,400

 
11,900

 
27,753

 
27,138

 
168,916

 
32,179

 
82,100

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Carrying Value of Vessels Collateralized
 
27,877
 
28,600
 
86,859
 
56,646
 
26,568
 
59,787
 
51,929
 
338,214
 
54,229

 
159,605

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount Available
 

 

 

 

 
1,398

 
2,585

 
2,862

 
17,448

 
3,000

 
8,706

Secured Credit Facilities and Financing Obligations

$30.0 Million Credit Facility

On August 28, 2019, this facility was increased by approximately $2.6 million in the aggregate for the financing of the installation of scrubbers on the two vessels financed under this facility. Once drawn down the amounts will amortize over 12 equal quarterly payments.

$60.0 Million Credit Facility

On July 23, 2019, this facility was increased by approximately $2.9 million in the aggregate for the financing of the installation of scrubbers on the two vessels financed under this facility, which will amortize in equal quarterly payments over the remaining term of the facility once drawn down (but no more than 14 quarterly payments).


F- 17

SCORPIO BULKERS INC. AND SUBSIDIARIES
Unaudited Notes to Condensed Consolidated Financial Statements

$184.0 Million Credit Facility

On June 19, 2019, this facility was increased by approximately $17.4 million in the aggregate for the financing of the installation of scrubbers on the twelve vessels financed under this facility. The repayment profile is on a fifteen-year age adjusted profile.

$34.0 Million Credit Facility

On June 17, 2019, this facility was increased by approximately $3.0 million in the aggregate for the financing of the installation of scrubbers for each of the two vessels which will amortize at approximately $125,000 per quarter per vessel once drawn down.

$90.0 Million Credit Facility

On June 14, 2019, this facility was increased by approximately $8.7 million in the aggregate for the financing of the installation of scrubbers on the six vessels financed under this facility. The repayment profile is on a fifteen-year age adjusted profile.

$12.8 Million Credit Facility

On August 6, 2019, this facility was increased by approximately $1.4 million for the financing of the installation of a scrubber on the vessel financed under this facility, which will be repaid in full upon final maturity on June 15, 2023.

$19.6 Million Lease Financing - SBI Rumba

On October 25, 2017, the Company closed a financing transaction with unaffiliated third parties involving the sale and leaseback of the SBI Rumba, 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, which the Company has the option to extend for a further six months. The agreement also provides the Company with options to repurchase the vessel beginning on the fifth anniversary of the sale and until the end of the bareboat charter agreement.

$19.0 Million Lease Financing - SBI Tango

On July 18, 2018, the Company closed a financing transaction with an unaffiliated third party involving the sale and leaseback of the SBI Tango, a 2015 Japanese built Ultramax vessel, for consideration of  $19.0 million. As part of the transaction, the Company makes monthly payments of $164,250 under a five-year bareboat charter agreement with the buyer. The agreement also provides the Company with options to repurchase the vessel beginning on the third anniversary of the sale until the end of the bareboat charter agreement.

$19.0 Million Lease Financing - SBI Echo

On July 18, 2018, the Company closed a financing transaction with an unaffiliated third party involving the sale and leaseback of the SBI Echo, a 2015 Japanese built Ultramax vessel, for consideration of $19.0 million. As part of the transaction, the Company makes monthly payments of $164,250 under a five-year bareboat charter agreement with the buyer. The agreement also provides the Company with options to repurchase the vessel beginning on the third anniversary of the sale until the end of the bareboat charter agreement.

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