Scorpio Bulkers Announces Financial Results for Q2 2019

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Scorpio Bulkers Inc. (NYSE: SALT), on Monday reported its results for the three months ended June 30, 2019. The Company also announced that today, its Board of Directors declared a quarterly cash dividend of $0.02 per share on the Company’s common shares.

Results for the Three and Six Months Ended June 30, 2019 and 2018

For the second quarter of 2019, the Company’s GAAP net income was $35.0 million, or $0.50 per diluted share, including:

  1. a non-cash gain of approximately $52.6 million and cash dividend income of $0.5 million, or $0.77 earnings per diluted share, primarily from the Company’s equity investment in Scorpio Tankers Inc.;
  2. a write-down of assets held for sale of approximately $5.2 million, or $0.08 per diluted share, related to the classification of two Ultramax vessels as held for sale, and the write-off of deferred financing costs on the credit facilities related to the SBI Electra and SBI Flamenco; and
  3. the write-off of deferred financing costs of approximately $2.7 million, or $0.04 per diluted share, related to the refinancing of existing debt.

For the same period in 2018, the Company’s GAAP net income was $0.8 million, or $0.01 per diluted share.

Total vessel revenues for the second quarter of 2019 were $49.1 million, compared to $60.6 million for the same period in 2018. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the second quarters of 2019 and 2018 were $65.2 million and $28.1 million, respectively (see Non-GAAP Financial Measures below).

For the second quarter of 2019, the Company’s adjusted net income was $40.1 million, or $0.58 adjusted earnings per diluted share, which excludes the impact of the write-down of assets held for sale of $4.7 million and the write-off of deferred financing costs on the credit facilities relating to the SBI Electra and SBI Flamenco of $0.4 million. Adjusted EBITDA for the second quarter of 2019 was $70.0 million. There were no such non-GAAP adjustments to net income in the second quarter of 2018 (see Non-GAAP Financial Measures below).

For the first half of 2019, the Company’s GAAP net income was $31.5 million, or $0.45 per diluted share, including:

  1. a non-cash gain of approximately $67.6 million and cash dividend income of $1.0 million, or $0.99 earnings per diluted share, primarily from the Company’s equity investment in Scorpio Tankers Inc.;
  2. a write-down of assets held for sale of approximately $12.7 million, or $0.19 per diluted share, related to the sale of the SBI Electra and SBI Flamenco and the write-off of deferred financing costs on the credit facilities related to such vessels, as well as the classification of two Ultramax vessels as held for sale; and
  3. the write-off of deferred financing costs of approximately $2.7 million, or $0.04 per diluted share, related to the refinancing of existing debt.

For the same period in 2018, the Company’s GAAP net loss was $5.0 million, or $0.07 loss per diluted share.

Total vessel revenues for the first half of 2019 were $99.4 million, compared to $114.9 million for the same period in 2018. EBITDA for the first halves of 2019 and 2018 were $90.6 million and $48.4 million, respectively (see Non-GAAP Financial Measures below).

For the first half of 2019, the Company’s adjusted net income was $44.2 million, or $0.64 adjusted earnings per diluted share, which excludes the impact of the write-down of assets either sold or held for sale of $12.2 million and the write-off of deferred financing costs on the credit facilities relating to the SBI Electra and SBI Flamenco of $0.4 million. Adjusted EBITDA for the first half of 2019 was $102.8 million.

TCE Revenue

TCE Revenue Earned during the Second Quarter of 2019 (see Non-GAAP Financial Measures)

  1. Kamsarmax fleet earned an average of $10,830 per day
  2. Ultramax fleet earned an average of $8,993 per day

Voyages Fixed thus far for the Third Quarter of 2019, as of the date hereof

  1. Kamsarmax fleet: approximately $12,656 per day on average for 42% of the days
  2. Ultramax fleet: approximately $9,603 per day on average for 42% of the days
  3. Cash and Cash Equivalents

As of July 19, 2019, the Company had approximately $160.0 million in cash and cash equivalents.

Recent Significant Events

Vessel Sales

In June 2019, the Company completed the sale of the SBI Electra and SBI Flamenco, two 2015 Chinese built Kamsarmax vessels that the Company agreed to sell in March 2019, for approximately $48.0 million in aggregate. The Company recorded a loss of approximately $7.8 million, including the write-off of deferred financing costs, during the first half of 2019.

During the second quarter of 2019, the Company’s Board of Directors made the decision to sell two Ultramax vessels and as such these vessels were classified as held for sale at June 30, 2019. The Company recorded a loss of approximately $4.9 million in the second quarter of 2019 and expects to write-off deferred financing costs of $0.2 million upon closing of the sale and repaying the outstanding debt.

$45.0 Million Lease Financing – SBI Virgo and SBI Libra

In May 2019, the Company 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 each. As part of this transaction, the Company has agreed to bareboat charter-in the vessels for a period of eleven years and will have purchase options beginning after the end of the fourth year of each bareboat charter agreement.

$85.5 Million Credit Facility

During May 2019, the Company prepaid approximately $27.6 million of its $85.5 Million Credit Facility and wrote off approximately $0.3 million of deferred financing costs as part of the refinancing of the two vessels now financed by the $45.0 Million Lease Financing – SBI Virgo and SBI Libra.

AVIC Lease Financing

In April 2019, the Company agreed to sell and leaseback six Ultramax vessels (SBI Antares, SBI Bravo, SBI Hydra, SBI Leo, SBI Lyra and SBI Maia) to AVIC International Leasing Co., Ltd. As part of this transaction, the Company has 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. The Company also has a purchase option for each vessel upon the expiration of each bareboat charter agreement.

The Company closed the transaction with regards to the SBI Antares, SBI Bravo and SBI Leo in June 2019 and with regards to the SBI Hydra, SBI Lyra and SBI Maia in July 2019.

$330.0 Million Credit Facility

During May 2019, the Company prepaid approximately $74.8 million of its $330.0 Million Credit Facility and wrote off approximately $1.2 million of deferred financing costs as part of the refinancing of the seven vessels now financed by the CMBFL Lease Financing.

During June and July 2019, the Company prepaid approximately $29.1 million and $30.9 million, respectively, of its $330.0 Million Credit Facility and wrote off deferred financing costs of approximately $0.3 million and $0.4 million, respectively, as part of the refinancing of the six vessels now financed by the AVIC Lease Financing.

$60.0 Million Credit Facility

During June 2019, the Company prepaid approximately $28.7 million of its $60.0 Million Credit Facility and wrote off approximately $0.4 million of deferred financing costs as part of the sale of the SBI Electra and SBI Flamenco.

Vessels Time Chartered-In

The Company time chartered-in four Kamsarmax vessels, for approximately 24 to 27 months.

Three vessels were initially time chartered-in at rates tied to the Baltic Exchange’s 74,000 DWT Panamax Index (“BPI”), (two at 118% of the BPI and one at 120% of the BPI). The daily base rate in respect of one vessel was subsequently converted from 118% of the BPI to a fixed rate of $14,170 per day effective July 2019. As of June 30, 2019, two of the vessels were delivered to the Company and the third is expected to be delivered to the Company between July and August of 2019. The Company simultaneously time chartered these vessels out to the Scorpio Kamsarmax Pool under matching terms.

The fourth Kamsarmax vessel was chartered-in at $12,000 per day for the first twelve months and $12,500 per day for the second twelve months.  The Company has options to extend the time charter-in agreement to 36 and 48 months at $13,000 per day and $14,500 per day, respectively, as well as purchase options beginning after twelve months.

IMO 2020

In June 2019, the Company exercised its option to purchase and install exhaust gas cleaning systems (“scrubbers”) on nine of its Kamsarmax vessels in 2020.  After exercising this option, the Company has contracts to purchase and install scrubbers on 37 of its vessels and has the option to purchase scrubbers for nine additional vessels in 2020.

Sea News, July 23