Scorpio Bulkers Inc. reported its results for the three months and year ended December 31, 2016.

Results for the Three Months Ended December 31, 2016 and 2015

For the three months ended December 31, 2016, the Company’s GAAP net loss was $20.6 million, or $0.29 loss per diluted share. For the same period in 2015 the Company’s GAAP net loss was $302.0 million, or $11.02 loss per diluted share.

There were no non-GAAP adjustments to earnings in the three months ended December 31, 2016.

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

Results for the Years Ended December 31, 2016 and 2015

For the year ended December 31, 2016, the Company had a GAAP net loss of $124.8 million, or $2.22 loss per diluted share. For the year ended December 31, 2016, the Company’s adjusted net loss was $99.9 million, or $1.78 adjusted loss per diluted share. This 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. These adjustments total a $0.44 loss per diluted share (see Non-GAAP Financial Measures in PDF).

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

Cash and Cash Equivalents

As of February 3, 2017, the Company had approximately $141.9 million in cash and cash equivalents.

TCE Revenue

TCE Revenue Earned during the Fourth Quarter of 2016

Our Kamsarmax fleet earned $7,401 per day

Our Ultramax fleet earned $7,238 per day

Voyages Fixed thus far in the First Quarter of 2017

Kamsarmax fleet: approximately $8,414 per day for 75% of the days

Ultramax fleet: approximately $8,479 per day for 73% of the days

Vessel Price Reductions

The Company reached agreements with shipyards to reduce the price to be paid under the shipbuilding contracts of one Kamsarmax vessel that was delivered in the first quarter of 2017 and one Kamsarmax vessel that is scheduled to be delivered in the second quarter of 2017 by approximately $2.5 million each.

Newbuilding Vessels Deliveries

During the fourth quarter of 2016 the Company took delivery of the following newbuilding vessels:

SBI Apollo, an Ultramax vessel, was delivered from Mitsui Engineering & Shipbuilding Co., Ltd.

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

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

Since January 1, 2017, the Company took delivery of the following newbuilding vessels:

SBI Samson, an Ultramax vessel, was delivered from Chengxi Shipyard Co. Ltd.

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

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

SBI Phoenix, an Ultramax vessel, was delivered from Chengxi Shipyard Co. Ltd.

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

As of February 3, 2017, 47 of the 48 vessels in our newbuilding program have successfully been delivered. The remaining vessel is currently expected to be delivered in the second quarter of 2017.

Newbuilding Program

Our Newbuilding Program consists of contracts for the construction of 48 dry bulk vessels, comprised of 28 Ultramax newbuildings, and 20 Kamsarmax newbuildings. As of February 3, 2017, we have taken delivery of all of the Ultramax vessels and 19 Kamsarmax vessels. The construction price for the remaining Kamsarmax vessel is $25.7 million, of which $18.6 million remains unpaid. Installment payments of $1.4 million and $17.2 million are scheduled for the first and second quarters of 2017, respectively, the latter of which will occur upon the delivery of the vessel and coincide with the expected drawdown of up to $13.2 million of available debt.

Financial Results for the Three Months Ended December 31, 2016 Compared to the Three Months Ended December 31, 2015

The Company had a GAAP net loss of $20.6 million, or $0.29 loss per diluted share for the fourth quarter of 2016 compared with a GAAP net loss of $302.0 million, or $11.02 loss per diluted share for the fourth quarter of 2015. Excluding a write down of assets held for sale of $271.3 million and the write off of deferred financing costs on credit facilities that will no longer be used of $8.7 million, adjusted net loss for the fourth quarter of 2015 was $22.0 million or $0.80 adjusted loss per diluted share (see Non-GAAP Financial Measures in PDF). There were no non-GAAP adjustments to earnings in the fourth 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 $26.8 million for the fourth quarter of 2016 and is associated with a day weighted average of 41 vessels owned and two vessels time chartered-in compared to $21.7 million during the prior year quarter, which was associated with a day weighted average of 27 vessels owned and 10 vessels time chartered-in. TCE revenue per day was $7,303 and $7,390 for the fourth quarter of 2016 and 2015, respectively. While daily TCE rates are down compared to the prior year period, rates have recovered from the all-time lows experienced in the beginning of 2016. Overall TCE revenue increased versus the prior year period despite the lower rates due to the increase in revenue days associated with the growth of our fleet.

Vessel operating costs were $19.0 million and included approximately $0.6 million of takeover costs associated with new deliveries, and $0.4 million of non-recurring expenses and related to 41 vessels owned, on average, during the period. Takeover costs will be eliminated upon the delivery of the final vessel in the second quarter of 2017. Vessel operating costs for the prior year quarter were $14.6 million and related to 27 vessels owned, on average, during the period. Sequentially, vessel operating costs remained relatively flat from the third to fourth quarter of 2016 despite an increase in average vessels owned as certain annual maintenance and class certifications were performed during the third quarter of 2016. Daily operating costs, excluding take over and other non-recurring costs, decreased from $5,330 in the third quarter of 2016 to $5,037 in the fourth quarter.

Charterhire expense decreased to $2.6 million in the fourth quarter of 2016 from $10.8 million in the prior year period, reflecting the reduction in the number of vessels time chartered-in from 10 vessels to two vessels, on a day weighted average, respectively. One of the remaining time chartered-in vessels was redelivered in February 2017 and the other is expected to be redelivered in July 2017.

Depreciation increased to $10.6 million in the fourth quarter of 2016 from $6.6 million in the prior year period, reflecting the increase in our weighted average vessels owned to 41 from 27.

General and administrative expense decreased to $8.7 million from $9.6 million in the prior year period as decreases in restricted stock amortization, due to the run off of awards granted at a higher fair value, and legal expenses were offset by an increase in commercial management fees, reflecting the growth of our fleet.

During the fourth quarter of 2015, we recorded a loss of $271.3 million associated with the sale of 11 Capesize vessels and newbuilding Capesize dry bulk vessels under construction and wrote off $8.7 million of deferred financing costs accumulated on two credit facilities for which the commitments were reduced pursuant to the removal from the facilities of certain vessels that have been sold.

Financial Results for the Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

The Company had a GAAP net loss of $124.8 million, or $2.22 loss per diluted share for the year ended December 31, 2016 compared with a GAAP net loss of $510.8 million, or $23.86 loss per diluted share for the year ended December 31, 2015. Excluding a loss/write off of vessels and assets held for sale of $12.4 million, a write off of deferred financing costs on credit facilities that will no longer be used of $2.5 million and a charterhire contract termination fee of $10.0 million, adjusted net loss for the year ended December 31, 2016 was $99.9 million, or $1.78 adjusted loss per diluted share. Excluding a loss/write off of vessels and assets held for sale of $422.9 million and the write off of deferred financing costs on credit facilities that will no longer be used of $16.1 million, adjusted net loss for the year ended December 31, 2015, was $71.8 million or $3.36 adjusted loss per diluted share (see Non-GAAP Financial Measures in PDF).

TCE revenue was $78.4 million for 2016 and is associated with a day weighted average of 36 vessels owned and three vessels time chartered-in compared to $61.7 million during the prior year, which was associated with a day weighted average of 16 vessels owned and 12 vessels time chartered-in. TCE revenue per day was $5,789 and $7,173 for 2016 and 2015, respectively. The decrease in TCE revenue per day was due to the depressed market in which we operated for most of the year. Overall TCE revenue increased versus the prior year despite the lower rates due to the increase in revenue days associated with the growth of our fleet.

Vessel operating costs were $68.8 million, including approximately $2.8 million of takeover costs associated with new deliveries and $2.2 million of other non-recurring expenses and related to 36 vessels owned, on average during the period. Takeover costs will no longer be incurred after the delivery of the final vessel in our newbuilding program (expected in the second quarter of 2017). Vessel operating costs for the prior year were $29.4 million and related to 16 vessels owned, on average during the period. Daily operating costs, excluding takeover and other non-recurring expenses for 2016 were $5,129.

Charterhire expense decreased to $17.4 million in 2016 from $51.4 million in the prior year reflecting the reduction in the number of vessels time chartered-in. During 2016 we recorded a $10.0 million charge to terminate four time charter-in contracts. Terminating these contracts reduced our cash outflow and had a positive impact on our future operating results as the contracts were at above current market rates. Of the two remaining time chartered-in vessels, one was redelivered in February 2017 and the other is expected to be redelivered in July 2017.

Depreciation increased to $36.6 million in 2016 from $14.3 million in the prior year reflecting the increase in our weighted average vessels owned to 36 from 16.

General and administrative expense was $34.0 million and $35.4 million for 2016 and 2015, respectively, and included $18.6 million and $24.6 million of restricted stock amortization, respectively. The decrease in restricted stock amortization was due to prior year grants, with higher fair values than current grants, vesting and being fully expensed as well as the reversal of expense related to cancelled awards. This decrease was offset by an increase in commercial management fees, reflecting the growth of our fleet.

During 2016, the Company recorded a loss/write off 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. The loss recorded in the prior year period was associated with writing down 24 vessels and construction contracts that were sold or classified as held for sale during 2015, as well as incremental write-downs of certain construction contracts that were classified as held for sale at December 31, 2014.

During 2016 and 2015, the Company wrote off $2.5 million and $16.1 million, respectively, of deferred financing costs accumulated on credit facilities for which the commitments were reduced pursuant to the removal from the facilities of certain vessels that have been sold or classified as held for sale. In addition, during 2016, the Company agreed to reduce the aggregate available loan amounts by $45.2 million resulting in the write off of approximately $1.3 million of deferred financing costs.

Full Report

Source: Scorpio Bulkers Inc.