Box Ships posts third-quarter loss

Box Ships

 Box Ships, a global shipping company specializing in the seaborne transportation of containers, announced its results for the third quarter and nine months ended September 30, 2015.

Three Months Ended September 30,

Nine Months Ended

September 30,

Financial Highlights

(Expressed in thousands of U.S. Dollars, except per share data)

2014

2015

2014

2015

Time charter revenues

$11,767

$11,928

$39,149

$35,097

Amortization of above/below market time charters

1,155

318

3,597

2,567

Time charter revenues, adjusted1

$12,922

$12,246

$42,746

$37,664

Net Income / (Loss)

$5,649

($794)

$4,805

($2,463)

Adjusted Net Income / (Loss)2

$716

($487)

$3,352

$1,055

EBITDA2

$11,239

$4,371

$21,589

$13,010

Adjusted EBITDA2

$6,306

$4,678

$20,136

$16,528

Earnings / (Loss) per common share (EPS), basic and diluted

$0.17

($0.04)

$0.11

($0.13)

Adjusted Earnings / (Loss) per common share, basic and diluted2

$0.01

($0.03)

$0.06

($0.02)

1 Time charter revenues, adjusted, is not a recognized measurement under generally accepted accounting principles in the United States of America (“U.S. GAAP” or “GAAP”). We believe that the presentation of Time charter revenues, adjusted is useful to investors because it presents the charter revenues recognized in the relevant period based on the contracted charter rates, excluding the amortization of above/below market time charters attached to vessels acquired. Please refer to the definition and reconciliation of this measurement to the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP at the back of this release.

2 EBITDA, Adjusted EBITDA, Adjusted Net Income / (Loss) and Adjusted Earnings / (Loss) per common share (“Adjusted EPS”) are not recognized measurements under GAAP. Please refer to the definitions and reconciliation of these measurements to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP at the back of this release.

Mr. Michael Bodouroglou, Chairman, President, Chief Executive Officer and Interim Chief Financial Officer of Box Ships Inc., commented:

“During the third quarter of 2015, the charter rates declined, taking back a large part of the increase witnessed during the first half of the year. Since the end of the third quarter of 2015, charter rates have dropped further. This has been exemplified in our recent fixtures of Box Marlin and Box Queen at $6,500 per day and $6,150 per day, respectively, which are at levels significantly lower than their previous charters. In addition to that, the idle fleet capacity has increased considerably, compared to around 1%-2% earlier in the year.

Given the current market environment, we are mainly focused in maintaining a high level of fleet utilization, by chartering our vessels with quality counterparties, while at the same time further reducing our costs. Indicatively, our adjusted total vessel operating expenses for the nine months ended September 30, 2015 were about 9% lower than the respective period in 2014.”

Results of Operations

Three months ended September 30, 2015 compared to three months ended September 30, 2014

During the third quarter of 2015, we operated an average of nine vessels. Our Net Loss and Adjusted Net Loss during the third quarter of 2015 were $0.8 million and $0.5 million, respectively, resulting in basic and diluted loss per share of $0.04 and basic and diluted adjusted loss per share of $0.03. EBITDA and Adjusted EBITDA for the third quarter of 2015 were $4.4 million and $4.7 million, respectively.

During the third quarter of 2014, we operated an average of nine vessels. Our Net Income and Adjusted Net Income during the third quarter of 2014 was $5.6 million and $0.7 million, respectively, resulting in basic and diluted earnings per share of $0.17 and basic and diluted adjusted earnings per share of $0.01. EBITDA and Adjusted EBITDA for the third quarter of 2014 was $11.2 million and $6.3 million, respectively.

Net revenues

Net revenues represent charter hire earned, net of commissions. During the third quarter of 2015 and 2014, our vessels operated a total of 806 and 827 days, respectively, out of a total of 828 calendar days in both periods. During the third quarter of 2015, we had a total of 13 unscheduled off-hire days, mainly related to nine idle days of Box Trader, and nine scheduled off-hire days related to the dry-docking of Box China. Currently, all vessels in our fleet are employed under fixed rate time charters, having an average weighted remaining charter duration of three months (weighted by aggregate contracted charter hire). Our net revenues for the third quarter of 2015 of $11.4 million were relatively unchanged year over year compared to $11.5 million in the third quarter of 2014. The improved average daily rates and increased revenues for six of our vessels in the third quarter of 2015 were offset by the decreased revenues of Box Hong Kong and Box China due to the termination of their charters with OOCL in May and June 2015, respectively, under which the vessels were earning a gross daily rate of $26,800 while their current charters with MSC are at a gross daily rate of $13,000.

Our net revenues are also net of the amortization of above/below market time charters, which decreased our revenues and net income for the third quarter of 2015 and 2014 by $0.3 million and $1.2 million, respectively, or $0.01 and $0.04 per common share, respectively. Our average time charter equivalent rate, or TCE rate, for the third quarter of 2015 was $13,184 per vessel per day, which was 1% below our average TCE rate of $13,352 per vessel per day during the third quarter of 2014, mainly due to the reasons outlined above. Our adjusted TCE rate was $13,579 per vessel per day in the third quarter of 2015, 8% lower than our adjusted TCE of $14,748 for the third quarter of 2014. TCE rate is not a recognized measurement under GAAP. Please see the table at the back of this release for a reconciliation of TCE rates to time charter revenues, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.

Voyage expenses

Voyage expenses for the third quarter of 2015 and 2014 amounted to $0.8 million and $0.4 million, respectively. Voyage expenses for the third quarter of 2015 primarily relate to bunkers consumed by the Box Trader and Box China of $0.1 million, loss in value of bunkers of $0.3 million and war risk insurance costs and sundry voyage expenses of $0.3 million, whereas voyage expenses for the third quarter of 2014 related mainly to war risk insurance costs.

Vessels operating expenses

Vessels operating expenses including the amortization of other intangible assets for the third quarter of 2015 and 2014 amounted to $4.1 million and $4.3 million, respectively, or $4.1 million and $4.0 million, respectively, on an adjusted basis to exclude the amortization of other intangible assets. On average, our vessels’ operating expenses for the third quarter of 2015 were relatively stable year over year at $4,992 per vessel per day, compared to $5,224 per vessel per day, in the third quarter of 2014, or $4,903 per vessel per day on an adjusted basis. The amortization of other intangible assets for the third quarter of 2015 was nil, whereas the amortization of other intangible assets for the respective quarter in 2014 amounted to $0.3 million.

Dry-docking expenses

During the third quarter of 2015, one of our vessels, the Box China, completed its dry-docking, and three vessels underwent intermediate surveys in-lieu of dry-dock which resulted in nine off-hire days and expenses amounting to $0.4 million. There were no dry-dockings in the third quarter of 2014.

Management fees charged by a related party

Management fees charged by Allseas Marine S.A. (our “Manager” or “Allseas”) for the third quarter of 2015 and 2014 were $0.6 million and $0.7 million, or $721 (€648.93) per vessel per day, and $867 (€646.99) per vessel per day, respectively. Management fees charged by a related party represent fees for management and technical services in accordance with our management agreements and are adjusted annually in accordance with the official Eurozone inflation rate. This fee is charged on a daily basis per vessel and is affected by the number of vessels in our fleet, the number of calendar days during the period, the official Eurozone inflation rate and the U.S. Dollar/Euro exchange rate at the beginning of each month.

Depreciation

Depreciation for our fleet for each of the third quarters of 2015 and 2014 was $3.8 million.

General and administrative expenses

General and administrative (“G&A”) expenses for the third quarter of 2015 and 2014 amounted to $1.1 million and $1.5 million, respectively, or $1,361 and $1,810 per vessel per day, respectively. The decrease in G&A expenses is mainly due to the decreased share-based compensation, which amounted to $0.2 million for the third quarter of 2015 compared to $0.5 million in the same period of 2014.

Interest and finance costs

Interest and finance costs amounted to $1.4 million and $1.8 million for the third quarter of 2015 and 2014, respectively. This decrease in interest and finance costs is due to the decrease in our average borrowings outstanding period over period.

UNAUDITED CONSOLIDATED CONDENSED CASH FLOW INFORMATION

(Expressed in thousands of U.S. Dollars)

Nine Months Ended September 30,

2014

2015

Net cash from Operating Activities

$

15,915

$

12,799

Net cash used in Financing Activities

(22,269)

(11,102)

Net (decrease) / increase in cash and cash equivalents

$

(6,354)

$

1,697

Net cash from Operating Activities

Net cash from Operating Activities for the nine months ended September 30, 2015 was $12.8 million. Our vessels generated positive cash flows from revenues, net of commissions, of $35.5 million, while we paid $22.7 million for expenses, of which $3.8 million relates to the payment of interest on our bank loans.

Net cash from Operating Activities for the nine months ended September 30, 2014 was $15.9 million. Our vessels generated positive cash flows from revenues, net of commissions, of $42.6 million, while we paid $26.7 million for expenses, of which $4.5 million relates to the payment of interest on our bank loans.

Net cash used in Financing Activities

Net cash used in Financing Activities for the nine months ended September 30, 2015 was $11.1 million. During the nine months ended September 30, 2015, we repaid $9.6 million of our debt and made cash payments to our preferred shareholders of $1.5 million.

Net cash used in Financing Activities for the nine months ended September 30, 2014 was $22.3 million. On April 15, 2014, we completed the public offering and concurrent private placement of 5,500,000 units, each consisting of one common share and one warrant to purchase 0.40 common shares at a public offering price of $2.05 per unit, resulting in net proceeds of $10.6 million in the aggregate, net of underwriting discounts, commissions and other offering costs of $0.7 million in the aggregate. During the nine months ended September 30, 2014, we repaid $31.3 million of our debt, paid financing costs of $0.1 million and made cash payments to our preferred shareholders of $1.5 million.

Liquidity:

As of September 30, 2015, our cash and restricted cash (current and non-current) amounted to $16.3 million in aggregate, of which $8.0 million is considered restricted for minimum liquidity purposes under our loan agreements. As of September 30, 2015, we had total outstanding indebtedness of $125.4 million, of which $13.1 million is scheduled to be repaid in the forthcoming 12-month period, of which $2.2 million has been repaid as of the date of this release. Furthermore, as of September 30, 2015, we were in compliance with the covenants contained in our loan agreements, as amended to give effect to waivers that we were granted during 2014 and 2015. As of September 30, 2015, had the waivers not been granted, we would not have been in compliance with certain of our financial covenants and security cover ratios contained in the loan agreements. The waivers are due to expire on June 29, 2016, and in accordance with U.S. GAAP, unless the waivers are extended for a period of more than one year after the balance sheet date or the loans are refinanced prior to the issuance of the consolidated financial statements, our total debt will be required to be presented as current even though we were in compliance as of September 30, 2015.

Finally, we have no borrowing capacity under our existing loan facilities and no capital commitments. We anticipate that our current financial resources, together with cash generated from operations, will be sufficient to fund the operations of our current fleet, including our working capital requirements, for the next 12 months, assuming that the debt will not be accelerated by our lenders.

Preferred Stock Payments:

On October 1, 2015, we made a cash payment of $0.5 million with respect to our Series C Preferred Shares, for the period from July 1, 2015 through September 30, 2015. As of September 30, 2015, 916,333 Series C Preferred Shares were outstanding.

Cash payments on our Series C Preferred Shares accrue cumulatively at a rate of 9.00% per annum per $25.00 stated liquidation preference per Series C Preferred Share and are payable, when, as and if declared by the Board of Directors, on January 1, April 1, July 1 and October 1 of each year. Our ability to make cash payments will be subject, among other things, to the restrictions in our loan agreements, the provisions of Marshall Islands law and other factors to be considered by our Board of Directors.

Recent Developments:

Share Repurchase Program Update:

As of the date of this release, under the previously announced share repurchase program, we repurchased 208,160 shares of our common stock in the open market, for a total consideration of approximately $0.1 million.

Chartering Update and Strategy:

In October 2015, the Box Trader entered into a time charter with Gold Star Line Ltd. (“GOLD STAR”) for a period of 60 to 180 days, which commenced on October 12, 2015, at a daily gross charter rate of $7,500 for the first 90 days and $8,500 for the remaining period.

In November 2015, the Box Marlin entered into a time charter with CMA CGM for a period of two to eight months, which commenced on November 12, 2015, at a daily gross charter rate of $6,500.

In December 2015, the Box Queen entered into a time charter with CMA CGM for a period of 100 to 310 days, which commenced on December 9, 2015, at a daily gross charter rate of $6,150.

Pursuant to our chartering strategy, we focus on short- to medium-term time charters with staggered maturities, which provide us with the benefit of stable cash flows from a diversified portfolio of charterers, while preserving the flexibility to capitalize on potentially rising rates when the current time charters expire. We may also, under certain circumstances, opportunistically employ our vessels on the spot market. Based on the earliest redelivery dates, the Company has secured under time charter contracts 21% of its fleet capacity for 2016.

Fleet List:

The following table provides additional information about our fleet as of December 14, 2015:

Vessel

Year
Built

TEU

Charterer

Daily Gross Charter Rate (1)

Charter Expiration (2)

Notes

Box Voyager

2010

3,426

CNC

$10,600

March 2016

3, 11

Box Trader

2010

3,426

GOLD STAR

$7,500

December 2015

4

CMA CGM Kingfish

2007

5,095

CMA CGM

$15,500

January 2016

5

Box Marlin

2007

5,095

CMA CGM

$6,500

January 2016

6

Box Queen 

2006

4,546

CMA CGM

$6,150

March 2016

7

Maule

2010

6,589

Hapag Lloyd

$38,000

April 2016

8, 11

Box Emma

2004

5,060

CMA CGM

$11,500

February 2016

9, 11

Box Hong Kong

1995

5,344

MSC

$13,000

June 2016

10

Box China

1996

5,344

MSC

$13,000

July 2016

10

Total

43,925

Notes:

1)

Daily gross charter rates do not reflect commissions payable by us to third party chartering brokers and Seacommercial, totaling 6.5% for Box Trader, 5% for Box Hong Kong and Box China, 4.75% for Box Voyager, CMA CGM Kingfish, Box Marlin, Box Queen and Box Emma, and 2.50% for Maule, including, in each case, 1.25% to Seacommercial.

2)

Based on the earliest redelivery date.

3)

The employment was extended for a period of twelve months and commenced on March 31, 2015.

4)

The vessel is expected to be redelivered on or about December 25, 2015.

5)

The employment was extended for a period of five to eight months and commenced on August 15, 2015.

6)

The employment is for a period of two to eight months and commenced on November 12, 2015.

7)

The employment is for a period of 100 days to 310 days and commenced on December 9, 2015.

8)

Effective April 10, 2015, all rights and obligations under the charter were novated to Hapag Lloyd AG from CSAV. All other terms remain unchanged.

9)

The employment is for a period of twelve months and commenced in March 2015. Effective December 9, 2015, the charter rate was reduced to $11,500 per day.

10)

The employment is for a period of twelve to sixteen months and commenced end of June 2015 / beginning of July 2015.

11)

The charterer has the option to increase or decrease the term of the charter by 30 days.

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