DryShips returns to first-quarter profit

Economou George

DryShips, a diversified owner and operator of ocean going cargo vessels, announced its unaudited financial and operating results for the quarter ended March 31, 2018.

First Quarter 2018 Financial Highlights

  • For the first quarter of 2018, the Company reported a net income of $0.8 million, or $0.01 basic and diluted earnings per share.
  • The Company reported Adjusted EBITDA of $12.9 million for the first quarter of 2018. (1)

(1) Adjusted EBITDA is a non-GAAP measure; please see later in this press release for reconciliation to net income/ (loss).

Updated Key Information as of May 7, 2018

  • Cash and cash equivalents: approximately $107.1 million (or $1.06 per share)
  • Book value of vessels: approximately $817.3 million (or $8.06 per share)
  • Debt outstanding balance: approximately $296.8 million (or $2.93 per share)
  • Number of Shares Outstanding:  101,458,263

Recent Developments

  • $50.0 million Common Stock Repurchase Program

    As of May 8, 2018, the Company has repurchased a total of 2,816,445 shares of its common stock for an aggregate amount of $11.3 million, including commissions, pursuant to its previously announced stock repurchase program under which the Company may repurchase up to $50.0 million of its outstanding common stock until February 28, 2019. The current number of the Company’s outstanding common stock is 101,458,263.

  • Dividend for the quarter ended March 31, 2018

    On May 7, 2018, the Company’s Board of Directors in accordance with its previously announced dividend policy, declared a quarterly cash dividend with respect to the quarter ended March 31, 2018. With respect to the quarter ended March 31, 2018, the Company’s Board of Directors declared a cash dividend of an aggregate $2.5 million payable on or about June 11, 2018 to common shareholders of record as of May 25, 2018. The dividend per share amount to be paid by the Company, based on the Company’s 101,458,263 common shares outstanding as of May 8, 2018, would be approximately 2.5 cents per share.

  • 2018 Annual General Meeting of Shareholders

    On May 7, 2018, the Company’s Board of Directors resolved that the Company’s 2018 Annual General Meeting of Shareholders (the “Annual Meeting”) will be held at the Company’s offices located at 109 Kifisias Avenue & Sina Street, GR 151 24, Marousi, Athens, Greece on Monday, July 16, 2018 at 4:00 p.m., local time.  The Company’s Board of Directors fixed the close of business on Monday, June 4, 2018 as the record date for the determination of the shareholders entitled to receive notice and to vote at the Annual Meeting or any adjournments or postponements thereof. Formal notice of the Annual Meeting and the Company’s proxy statement are expected to be sent to shareholders on or before Monday, June 25, 2018.

  • New Finance Lease Arrangements

    On May 4, 2018, the Company entered into finance lease arrangements with a major Chinese leasing company for the Company’s three Newcastlemax drybulk vessels, Marini, Morandi and Bacon and two Kamsarmax drybulk vessels, Castellani and Nasaka, pursuant to five memoranda of agreement and bareboat charter agreements. The financing provide for the transfer of the five drybulk vessels to the buyer for 50% of the agreed aggregate purchase price of $164.0 million and as part of the agreements, the Company’s wholly-owned subsidiaries to bareboat charter each vessel back for a period of eight years (expiry in May 2026). Charterhire under the bareboat agreements is comprised of a fixed, quarterly repayment amount corresponding to a 15-year amortization profile plus a variable component calculated at LIBOR plus margin. The Company has purchase options to re-acquire each vessel during each bareboat charter period, with the first of such options exercisable on the first anniversary of each vessel’s delivery date. There is also a purchase obligation upon the expiration of each bareboat agreement for 46.67% of the financing amount. The Company is a guarantor under the bareboat agreements, which also include customary terms, conditions and financial covenants. The vessels are expected to be delivered and leased back to the Company during May 2018.

  • Vessel Sale

    On April 27, 2018, the Company entered into a memorandum of agreement for the sale of its 2001 built Panamax vessel, the Maganari, to an unaffiliated buyer for total gross proceeds of $9.7 million. The vessel is scheduled for delivery to the buyer by end of May 2018.

  • Finance Lease Arrangement

    On April 2, 2018, the Company entered into a finance lease arrangement with a major Chinese leasing company for the Company’s Kamsarmax drybulk vessel, the Kelly, pursuant to a memorandum of agreement and a bareboat charter agreement. The financing provided for the transfer of the Kelly to the buyer for 50% of the agreed purchase price, which was calculated as the lower of (a) the vessel’s net book value as of June 30, 2017 and (b) the vessel’s fair value close to the delivery date, and as part of the agreement, the Company’s wholly-owned subsidiary bareboat chartered the vessel back for a period of ten years (expiry in April 2028). Charterhire under the bareboat arrangement is comprised of a fixed, quarterly repayment amount corresponding to a 15-year amortization profile plus a variable component calculated at LIBOR plus margin. The Company has purchase options to re-acquire the vessel during the bareboat charter period, with the first of such options exercisable on the first anniversary from the vessel’s delivery date. There is also a purchase obligation upon the expiration of the agreement for 33% of the financing amount. The Company is a guarantor under the bareboat charter, which also includes customary terms, conditions and financial covenants. On April 13, 2018, the vessel was delivered and leased back to the Company, and the Company also drew down the full financing amount of $13.1 million.

Fleet List

The table below describes the Company’s fleet as of May 8, 2018:

Year Gross rate Redelivery
Built DWT Per day Earliest Latest
Drybulk fleet
Panamax:
Bargara 2002 74,832 Spot N/A N/A
Capitola 2001 74,816 Spot N/A N/A
Catalina 2005 74,432 Spot N/A N/A
Levanto 2001 73,925 Spot N/A N/A
Ligari 2004 75,583 Spot N/A N/A
Maganari(1) 2001 75,941 Spot N/A N/A
Majorca 2005 74,477 Spot N/A N/A
Marbella 2000 72,561 Spot N/A N/A
Mendocino 2002 76,623 Spot N/A N/A
Rapallo 2009 75,123 Spot N/A N/A
Raraka 2012 76,037 Spot N/A N/A
Redondo 2000 74,716 Spot N/A N/A
Newcastlemax:
Bacon 2013 205,170 T/C Index Linked Aug-18 Jan-19
Judd 2015 205,796 $20,700 Jan-19 Apr-19
Marini 2014 205,854 T/C Index Linked Dec-18 Feb-19
Morandi 2013 205,854 T/C Index Linked May-18 May-18
Kamsarmax:
Castellani 2014 82,129 Spot N/A N/A
Kelly 2017 81,300 Spot N/A N/A
Matisse 2014 81,128 Spot N/A N/A
Nasaka 2014 81,918 Spot N/A N/A
Valadon 2014 81,198 Spot N/A N/A
Tanker fleet
Very Large Crude Carrier:
Shiraga 2011 320,105 Spot N/A N/A
Suezmax:
Samsara 2017 159,855 $18,000 Base rate

plus profit share

Mar.-22 May-25
Aframax:
Balla 2017 113,293 Spot N/A N/A
Stamos 2012 115,666 Spot N/A N/A
Gas Carrier fleet
Very Large Gas Carriers:
Anderida 2017 51,850 $29,997 Jun.-22 Jun.-25
Aisling 2017 51,850 $29,997 Sep.-22 Sep.-25
Mont Fort 2017 51,850 $28,833 Nov.-27 Nov.-27
Mont Gelé 2018 51,850 $28,833 Jan.-28 Jan.-28
Offshore Supply fleet
Platform Supply Vessels:
Crescendo 2012 1,457 Laid up N/A N/A
Colorado 2012 1,430 Laid up N/A N/A
Oil Spill Recovery Vessels:
Indigo 2013 1,401 Laid up N/A N/A
Jacaranda 2012 1,360 Laid up N/A N/A
Emblem 2012 1,363 Laid up N/A N/A
Jubilee 2012 1,317 Laid up N/A N/A

(1) Sold and expected to be delivered to new owners in May 2018.

Drybulk, Tanker and Gas Carrier Segments Summary Operating Data (unaudited)

(U.S. Dollars in thousands, except average daily results)

Drybulk Three Months Ended March 31,
2017 2018
Average number of vessels(1) 13.0 21.0
Total voyage days for vessels(2) 1,170 1,890
Total calendar days for vessels(3) 1,170 1,890
Fleet utilization(4) 100.0 % 100.0 %
Time charter equivalent(5) $ 5,617 $ 11,024
Vessel operating expenses (daily)(6) $ 5,146 $ 6,134

Tanker Three Months Ended March 31,
2017 2018
Average number of vessels(1) 4.0
Total voyage days for vessels(2) 360
Total calendar days for vessels(3) 360
Fleet utilization(4) 100.0 %
Time charter equivalent(5) $ 19,986
Vessel operating expenses (daily)(6) $ 7,861

Gas Carrier Three Months Ended March 31,
2017 2018
Average number of vessels(1) 3.9
Total voyage days for vessels(2) 350
Total calendar days for vessels(3) 350
Fleet utilization(4) 100.0 %
Time charter equivalent(5) $ 28,243
Vessel operating expenses (daily)(6) $ 9,737

(1) Average number of vessels is the number of vessels that constituted the Company’s fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of the Company’s fleet during the period divided by the number of calendar days in that period.

(2) Total voyage days for fleet are the total days the vessels were in the Company’s possession for the relevant period net of dry-docking and laid-up days.

(3) Calendar days are the total number of days the vessels were in the Company’s possession for the relevant period including dry-docking days and laid-up days.

(4) Fleet utilization is the percentage of time that the Company’s vessels were available for revenue generating voyage days, and is determined by dividing voyage days by fleet calendar days for the relevant period.

(5) Time charter equivalent, or TCE, is a measure of the average daily revenue performance of a vessel on a per voyage basis. The Company’s method of calculating TCE is consistent with industry standards and is determined by dividing voyage revenues (net of voyage expenses) by voyage days for the relevant time period. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage and are paid by the charterer under a time charter contract, as well as commissions. TCE revenues, a non-U.S. GAAP measure, provides additional meaningful information in conjunction with revenues from the Company’s vessels, the most directly comparable U.S. GAAP measure, because it assists the Company’s management in making decisions regarding the deployment and use of its vessels and in evaluating their financial performance. TCE is also a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company’s performance despite 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. Please see below for a reconciliation of TCE rates to voyage revenues.

(6) Daily vessel operating expenses, which includes crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs is calculated by dividing vessel operating expenses by fleet calendar days net of laid-up days for the relevant time period.

Drybulk, Tanker and Gas Carrier Segments Summary Operating Data (unaudited) – continued

(In thousands of U.S. dollars, except for TCE rate, which is expressed in U.S. Dollars, and voyage days)

Drybulk Three Months Ended March 31,
2017 2018
Voyage revenues $ 8,488 $ 22,533
Voyage expenses (1,916 ) (1,698 )
Time charter equivalent revenues $ 6,572 $ 20,835
Total voyage days for fleet 1,170 1,890
Time charter equivalent (TCE) $ 5,617 $ 11,024

Tanker Three Months Ended March 31,
2017 2018
Voyage revenues $ $ 11,229
Voyage expenses (4,034 )
Time charter equivalent revenues $ $ 7,195
Total voyage days for fleet 360
Time charter equivalent (TCE) $ $ 19,986

Gas Carrier Three Months Ended March 31,
2017 2018
Voyage revenues $ $ 10,293
Voyage expenses (408 )
Time charter equivalent revenues $ $ 9,885
Total voyage days for fleet 350
Time charter equivalent (TCE) $ $ 28,243

DryShips Inc.

Financial Statements

Unaudited Condensed Consolidated Statements of Operations

(Expressed in Thousands of U.S. Dollars

except for share and per share data)

Three Months Ended March 31,
2017 2018
REVENUES:
Voyage revenues $ 11,808 $ 44,055
11,808 44,055
EXPENSES:
Voyage expenses 2,234 6,140
Vessel operating expenses 8,154 18,100
Depreciation 812 6,818
General and administrative expenses 8,713 7,169
Other, net (12 ) (18 )
Operating income/(loss) (8,093 ) 5,846
OTHER INCOME / (EXPENSES):
Interest and finance costs, net of interest income (2,439 ) (4,890 )
Other, net (175 ) (183 )
Total other expenses, net (2,614 ) (5,073 )
Net income/(loss) (10,707 ) 773
Net income/(loss) attributable to DryShips Inc.

$

(10,707 )

$

773
Net income/(loss) attributable to DryShips Inc. common stockholders (10,707 ) 773
Earnings/(Losses) per common share, basic and diluted (1) $ (168.69 ) $ 0.01
Weighted average number of shares, basic and diluted (1) 63,470 103,682,222

(1) Share and per share data for 2017 give effect to cumulative 1-for-980 reverse stock splits between April 11, 2017 and July 21, 2017.

DryShips Inc.

Unaudited Condensed Consolidated Balance Sheets

(Expressed in Thousands of U.S. Dollars) December 31, 2017 March 31, 2018
ASSETS
Cash, cash equivalents, including restricted cash (current and non-current) $ 30,226 $ 88,177
Other current and non-current assets 123,713 90,108
Advances for vessels under construction 31,898
Vessels, net 749,088 819,366
Total assets 934,925 997,651
LIABILITIES AND STOCKHOLDERS’ EQUITY
Total debt 216,969 295,998
Total other liabilities 10,920 8,782
Total stockholders’ equity 707,036 692,871
Total liabilities and stockholders’ equity $ 934,925 $ 997,651
SHARE COUNT DATA
Common stock issued 104,274,708 104,274,708
Less: Treasury stock (2,816,445)
Common stock issued and outstanding 104,274,708 101,458,263

Adjusted EBITDA Reconciliation

Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, and certain other non-cash items as described below. Adjusted EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations, as determined by United States generally accepted accounting principles (“U.S. GAAP”), and the Company’s calculation of adjusted EBITDA may not be comparable to that reported by other companies. Adjusted EBITDA is included herein because it is a basis upon which the Company measures its operations. Adjusted EBITDA is also used by the Company’s lenders as a credit metric and the Company believes that it presents useful information to investors regarding a company’s ability to service and/or incur indebtedness.

The following table reconciles net income/(loss) to Adjusted EBITDA:

(U.S. Dollars in thousands) Three

Months

Ended

March 31,

2017

Three

Months

Ended

March 31,

2018

Net income/(loss) attributable to Dryships Inc $ (10,707 ) $ 773
Add: Net interest expense 2,439 4,890
Add: Depreciation 812 6,818
Add: Dry-dockings and class survey costs 389
Add: Income taxes 9
Adjusted EBITDA $ (7,447 ) $ 12,870

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