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

MONACO, July 24, 2017 -- Scorpio Bulkers Inc. (NYSE:SALT) (“Scorpio Bulkers,” or the “Company”), a leading provider of marine transportation of dry bulk commodities, today reported its results for the three and six months ended June 30, 2017.

Results for the Three and Six Months Ended June 30, 2017 and 2016

For the second quarter of 2017 the Company’s GAAP net loss was $13.4 million, or $0.19 loss per diluted share.  For the same period in 2016 the Company’s GAAP net loss was $24.7 million, or $0.48 loss per diluted share.

For the six months ended June 30, 2017, the Company’s GAAP net loss was $48.0 million, or $0.67 loss per diluted share compared to a GAAP net loss of $83.0 million, or $2.05 loss per diluted share for the prior year period.

For the six months ended June 30, 2017, the Company’s adjusted net loss was $29.8 million, or $0.41 adjusted loss per diluted share, which excludes the impact of a write down of assets held for sale of $17.7 million and a write off of deferred financing costs on the credit facility related to those specific vessels of $0.5 million. For the six months ended June 30, 2016, the Company’s adjusted net loss was $58.1 million, or $1.43 adjusted loss per diluted share, which excludes a loss/write off of vessels and assets held for sale of $12.4 million, the write off of deferred financing costs on credit facilities that will no longer be used of $2.5 million and a charterhire contract termination fee of $10.0 million (see Non-GAAP Financial Measures below).

Cash and Cash Equivalents

As of July 21, 2017, the Company had approximately $148.3 million in cash and cash equivalents.

TCE Revenue

TCE Revenue Earned during the Second Quarter of 2017

• Our Kamsarmax fleet earned $9,273 per day
• Our Ultramax fleet earned $8,360 per day

Voyages Fixed thus far for the Third Quarter of 2017

• Kamsarmax fleet: approximately $8,749 per day for 50% of the days
• Ultramax fleet: approximately $9,005 per day for 56% of the days

Recent Significant Events

Reinstatement of Debt Amortization and Restoration of the Ability to Pay Dividends

During 2016, we entered into agreements with certain of our lenders to, among other things; defer future principal repayments under certain of our loan agreements.  In July 2017, we reached agreements in principal with such lenders whereby principal repayments on our debt totaling $45.4 million that were previously deferred would be reinstated to their original form.  Under these agreements in principal, we will be required to make principal payments of approximately $7.3 million in the third quarter of 2017 and quarterly principal payments ranging from $1.0 million to $4.5 million per quarter from the fourth quarter of 2017 through the fourth quarter of 2020.

All restrictions on the payment of dividends that were put in place as part of prior loan amendments have been removed from all of our credit facilities.

Completion of the Sale of Vessels

During the second quarter of 2017, we completed the sale of SBI Cakewalk and SBI Charleston for $22.5 million each. Net cash proceeds is approximately $24.2 million after repaying the outstanding loan balance of $20.1 million under the $39.6 Million Credit Facility.

Newbuilding Vessel Delivery

During the second quarter of 2017, the Company took delivery of the following newbuilding vessel:

• SBI Jive, a Kamsarmax vessel, delivered from Hudong-Zhonghua (Group) Co., Ltd.

All 46 vessels in our newbuilding program have been successfully delivered, all contracted amounts have been paid in full and we have no further obligations due to any shipyard.

Agreement to Time Charter-In One Ultramax Vessel

During the second quarter of 2017, we entered into a time charter-in agreement with an unrelated third party for one Ultramax vessel. The agreement is for two years at approximately $10,125 per day.  We have the option to extend the agreement for one year at approximately $10,885 per day. The time charter is expected to commence prior to the end of October 2017.

Debt and Liquidity Overview

The Company’s outstanding debt balance, gross of unamortized deferred financing costs as of June 30, 2017 and July 21, 2017 are as follows (dollars in thousands).

The Company’s projected quarterly debt repayments through 2019, including the impact from the reinstated principal repayments as noted above, is as follows (dollars in thousands):

Financial Results for the Three Months Ended June 30, 2017 Compared to the Three Months Ended June 30, 2016

The Company had a GAAP net loss of $13.4 million, or $0.19 loss per diluted share for the second quarter of 2017 compared with a GAAP net loss of $24.7 million, or $0.48 loss per diluted share for the second quarter of 2016.

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

TCE revenue was $37.6 million for the second quarter of 2017 and is associated with a day weighted average of 47 vessels owned and one vessel time chartered-in compared to $17.4 million during the prior year quarter, which was associated with a day weighted average of 34 vessels owned and three vessels time chartered-in. TCE revenue per day was $8,733 and $5,303 for the second quarter of 2017 and 2016, respectively.  Increased worldwide demand across all bulk sectors, regions and commodities, as well as a reduction in supply caused rates to increase compared to the prior year period.  Overall TCE revenue increased significantly versus the prior year period due to the increase in rates combined with the increase in revenue days associated with the growth of our fleet. While TCE rates continued the sequential quarter on quarter growth, rates somewhat stabilized in the second quarter of 2017 as demand for commodities slowed due to China increasing domestic coal and iron ore production.

Vessel operating costs were $21.1 million associated with 47 vessels owned, on average, during the period.  Vessel operating costs for the prior year quarter were $15.6 million and related to 34 vessels owned, on average, during the period. Sequentially, daily operating costs, excluding take over and other non-operating costs, decreased to $4,858 in the second quarter of 2017 from $5,019 in the first quarter of 2017, as a result of our cost reduction efforts. 

Charterhire expense decreased to $1.7 million in the second quarter of 2017 from $3.6 million in the prior year period, reflecting the reduction in the number of vessels time chartered-in from three vessels to one vessel, on a day weighted average, respectively.  The existing time chartered-in vessel is expected to be redelivered in August 2017.  An additional time charter-in is expected to commence no later than the end of October 2017. The agreement is for two years at approximately $10,125 per day with an option to extend for one year at approximately $10,885 per day.

Depreciation increased to $12.0 million in the second quarter of 2017 from $8.7 million in the prior year period, reflecting the increase in our weighted average vessels owned to 47 from 34.

General and administrative expense decreased to $7.6 million from $8.6 million in the prior year period due primarily to decreases in restricted stock amortization caused by the run off of awards granted at a higher fair value and a reduction in legal fees, offset in part by an increase in administrative fees reflecting the growth of our fleet.

Financial Results for the Six Months Ended June 30, 2017 Compared to the Six Months Ended June 30, 2016

The Company had a GAAP net loss of $48.0 million, or $0.67 loss per diluted share for the six months ended June 30, 2017 compared with a GAAP net loss of $83.0 million, or $2.05 loss per diluted share for the six months ended June 30, 2016.

For the six months ended June 30, 2017, the Company’s adjusted net loss was $29.8 million, or $0.41 adjusted loss per diluted share, which excludes the impact of a write down of assets held for sale of $17.7 million and a write off of deferred financing costs on the credit facility related to those specific vessels of $0.5 million. For the six months ended June 30, 2016, the Company’s adjusted net loss was $58.1 million, or $1.43 adjusted loss per diluted share, which excludes a loss/write off of vessels and assets held for sale of $12.4 million, the write off of deferred financing costs on credit facilities that will no longer be used of $2.5 million and a charterhire contract termination fee of $10.0 million (see Non-GAAP Financial Measures below).

TCE revenue was $72.2 million in the first half of 2017 and is associated with a day weighted average of 47 vessels owned and one vessel time chartered-in compared to $27.6 million during the prior year period, which was associated with a day weighted average of 33 vessels owned and five vessels time chartered-in. TCE revenue per day was $8,673 and $4,396 for first half of 2017 and 2016, respectively.  TCE revenue increased significantly versus the prior year due to the increase in rates, attributable to increased worldwide demand across all bulk sectors, regions and commodities, as well as a reduction in supply as fewer vessels are now on order, combined with the increase in revenue days associated with the growth of our fleet.

Vessel operating costs were $42.9 million and included approximately $1.2 million of takeover costs associated with new deliveries, and $1.3 million of non-operating expenses and related to 47 vessels owned, on average, during the first half of 2017.  Vessel operating costs for the prior year period were $30.9 million and related to 33 vessels owned, on average. Daily operating costs, excluding take over and other non-operating costs, were $4,944 in the first half of 2017. 

Charterhire expense decreased to $3.6 million for the first half of 2017 from $12.2 million in the prior year period, reflecting the reduction in the number of vessels time chartered-in from five vessels to one vessel, on a day weighted average, respectively.  Included in the prior year figures is a charterhire contract termination fee of $10.0 million incurred to terminate four time charter-in agreements. The existing time chartered-in vessel is expected to be redelivered in August 2017.  An additional time charter-in is expected to commence no later than the end of October 2017. The agreement is for two years at approximately $10,125 per day with an option to extend for one year at approximately $10,885 per day.

Depreciation increased to $23.6 million in the first half of 2017 from $16.0 million in the prior year period, reflecting the increase in our weighted average vessels owned to 47 from 33.

General and administrative expense decreased to $15.3 million from $16.4 million in the prior year period due primarily to decreases in restricted stock amortization, due to the run off of awards granted at a higher fair value, offset by an increase in administrative fees reflecting the growth of our fleet.

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

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

Time chartered-in vessels

The Company currently has time chartered-in one Kamsarmax dry bulk vessel and has agreed to time charter-in one Ultramax dry bulk vessel. The terms of these contracts are summarized as follows:

Conference Call on Results:

A conference call to discuss the Company’s results will be held today, Monday, July 24, 2017, at 9:00 AM Eastern Daylight Time / 3:00 PM Central European Time.  Those wishing to listen to the call should dial 1 (866) 219-5268 (U.S.) or 1 (703) 736-7424 (International) at least 10 minutes prior to the start of the call to ensure connection. The conference participant passcode is 52360565.

There will also be a simultaneous live webcast over the internet, through the Scorpio Bulkers Inc. website www.scorpiobulkers.com. Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.
Webcast URL: http://edge.media-server.com/m/p/7uhppvwg 

About Scorpio Bulkers Inc.

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

Non-GAAP Financial Measures

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

Adjusted net loss and related per share amounts are non-GAAP performance measures that we believe provide investors with a means of evaluating and understanding how the Company’s management evaluates the Company’s operating performance.  These non-GAAP financial measures should not be considered in isolation from, as substitutes for, nor superior to financial measures prepared in accordance with GAAP.

Adjusted net loss (unadjusted)

In thousands, except per share data

Forward-Looking Statements

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

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

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

Contact:

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