DryShips to buy four ships from Economou affiliates

Economou

DryShips, a diversified owner and operator of ocean going cargo vessels, announced its unaudited financial and operating results for the quarter ended September 30, 2018.

Third Quarter 2018 Financial Highlights

  • For the third quarter of 2018, the Company reported net income of $11.6 million, or $0.12 basic and diluted earnings per share.

    Included in the third quarter of 2018 results are gains from the sale of vessels to unaffiliated buyers and vessel impairments totaling $5.1 million, or $0.05 earnings per share. Excluding the aforementioned gains and vessel impairments, the Company’s net results would have amounted to net income of $6.5 million, or $0.07 earnings per share.

  • The Company reported Adjusted EBITDA of $17.2 million for the third quarter of 2018.(1)

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

Recent Developments

  • Acquisition of Vessels

    On October 29, 2018, the Company agreed to purchase four vessels from entities that may be deemed to be beneficially owned by the Company’s Chairman and Chief Executive Officer, Mr. George Economou, for an aggregate purchase price of $198.5 million. The vessels to be acquired are three Newcastlemax drybulk carriers, two of which built in 2016 and one built in 2017 and one coated Aframax tanker built in 2010. The purchase includes existing financing in place and will be effected by way of stock purchase agreements and/or long-term bareboat charter parties with purchase obligations.

    All vessels are expected to be delivered to DryShips before the end of 2018 and in connection with the transaction, entities that may be deemed to be beneficially owned by Mr. George Economou, have also agreed to time charter the three Newcastlemaxes on index-linked time charters of flexible durations, with optionality for DryShips to convert these index-linked time charters to fixed rate charters.

    TMS Dry Ltd. and TMS Tankers Ltd., entities that may be deemed to be beneficially owned by Mr. George Economou, have agreed to forgo all commissions effective under the various respective management agreements in connection with the aforementioned vessel purchases.

    The vessel purchases were approved by the independent directors of the Company’s board of directors, based on the fair market value of each vessel as determined by independent third party broker valuations.

  • Vessel Deliveries

    On August 14, August 17 and August 20, 2018, the Company’s Panamax vessels Bargara, Capitola and Mendocino, were each delivered to their respective new owners according to the terms of the previously announced Memoranda of Agreement.

    On October 15, 2018, the VLGC Mont Gelé, in accordance to the terms of the previously announced Memorandum of Agreement, was delivered to its new owners and the vessel’s then outstanding $35.2 million loan balance was fully repaid along with its associated costs.

  • Common Stock Repurchase Program

    On October 5, 2018, the Company completed in full its previously announced $50.0 million stock repurchase program (the “Repurchase Program”). Under the Repurchase Program, the Company has repurchased a total of 10,864,227 shares of its common stock for an aggregate amount of $50.5 million, including commissions. The current outstanding number of shares of the Company’s common stock is 93,410,481.

    On October 29, 2018, the Company’s Board of Directors authorized a new stock repurchase program, under which the Company may repurchase up to $50 million of its outstanding common shares for a period of 12 months (the “New Repurchase Program”). DryShips may repurchase shares in privately negotiated or open-market purchases in accordance with applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The specific timing and amount of repurchases, if any, will be at the discretion of the Company’s management and will depend upon a variety of factors, including market conditions, regulatory requirements and other corporate considerations. The Company is not obligated under the program to purchase any shares. Due to applicable securities laws, the Company’s repurchase of shares will not begin at the earliest until the second business day after the release of the Company’s financial statements for the third quarter ending September 30, 2018. The New Repurchase Program may be suspended or discontinued at any time. The Company expects to finance the stock purchases with existing cash balances.

Fleet List

The table below describes the Company’s fleet as of October 29, 2018:

Year Gross rate Redelivery
Built DWT Per day Earliest Latest
Drybulk fleet
Newcastlemax:
Bacon 2013 205,170 T/C Index Linked Nov-18 Jan-19
Huahine 2013 206,037 $24,500 Feb-19 Apr-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 $22,000 Feb-19 May-19
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
 
Panamax:
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
Majorca 2005 74,477 Spot N/A N/A
Rapallo 2009 75,123 Spot N/A N/A
Raraka 2012 76,037 Spot N/A N/A
Tanker fleet
Very Large Crude Carrier:
Shiraga 2011 320,105 Spot N/A N/A
 
Suezmax:
Marfa 2017 159,513 Spot N/A N/A
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(1) 2017 51,850 $29,997 Jun.-22 Jun.-25
Aisling(1) 2017 51,850 $29,997 Sep.-22 Sep.-25
Mont Fort(1) 2017 51,850 $28,833 Nov.-27 Nov.-27
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 Q4 2018.

Drybulk, Tanker and Gas Carrier Segments Summary Operating Data (unaudited)
(U.S. Dollars in thousands, except average daily results)

Drybulk Three Months Ended September 30, Nine Months Ended  September  30,
2017 2018 2017 2018
Average number of vessels(1) 21.8 18.2 16.8 20.0
Total voyage days for vessels(2) 2,002 1,654 4,582 5,394
Total calendar days for vessels(3) 2,002 1,655 4,582 5,448
Fleet utilization(4) 100.0 % 99.9 % 100.0 % 99.0 %
Time charter equivalent(5) $ 8,557 $ 13,555 $ 7,323 $ 11,940
Vessel operating expenses (daily)(6) $ 6,085 $ 5,615 $ 5,918 $ 6,469

 

Tanker Three Months Ended September 30, Nine Months Ended  September  30,
2017 2018 2017 2018
Average number of vessels(1) 4.0 5.1 2.0 4.4
Total voyage days for vessels(2) 368 460 543 1,207
Total calendar days for vessels(3) 368 460 543 1,207
Fleet utilization(4) 100.0 % 100.0 % 100.0 % 100.0 %
Time charter equivalent(5) $ 10,932 $ 18,474 $ 10,650 $ 17,837
Vessel operating expenses (daily)(6) $ 7,763 $ 7,224 $ 11,013 $ 7,558
Gas Carrier Three Months Ended September 30, Nine Months Ended September 30,
2017 2018 2017 2018
Average number of vessels(1) 1.2 4.0 0.4 4.0
Total voyage days for vessels(2) 111 368 114 1,082
Total calendar days for vessels(3) 111 368 114 1,082
Fleet utilization(4) 100.0 % 100.0 % 100.0 % 100.0 %
Time charter equivalent(5) $ 28,216 $ 27,666 $ 27,860 $ 27,941
Vessel operating expenses (daily)(6) $ 15,678 $ 7,152 $ 22,447 $ 8,454

(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 September 30, Nine Months Ended September 30,
2017 2018 2017 2018
Voyage revenues $ 19,203 $ 24,613 $ 39,916 $ 69,894
Voyage expenses (2,072 ) (2,193 ) (6,364 ) (5,492 )
Time charter equivalent revenues $ 17,131 $ 22,420 $ 33,552 $ 64,402
Total voyage days for fleet 2,002 1,654 4,582 5,394
Time charter equivalent (TCE) $ 8,557 $ 13,555 $ 7,323 $ 11,940
Tanker Three Months Ended September 30, Nine Months Ended September 30,
2017 2018 2017 2018
Voyage revenues $ 7,466 $ 14,360 $ 11,072 $ 35,507
Voyage expenses (3,443 ) (5,862 ) (5,289 ) (13,978 )
Time charter equivalent revenues $ 4,023 $ 8,498 $ 5,783 $ 21,529
Total voyage days for fleet 368 460 543 1,207
Time charter equivalent (TCE) $ 10,932 $ 18,474 $ 10,650 $ 17,837
Gas Carrier Three Months Ended September 30, Nine Months Ended September 30,
2017 2018 2017 2018
Voyage revenues $ 3,266 $ 10,589 $ 3,316 $ 31,472
Voyage expenses (134 ) (408 ) (140 ) (1,240 )
Time charter equivalent revenues $ 3,132 $ 10,181 $ 3,176 $ 30,232
Total voyage days for fleet 111 368 114 1,082
Time charter equivalent (TCE) $ 28,216 $ 27,666 $ 27,860 $ 27,941

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 September 30,

Nine Months Ended September 30,
  2017 2018 2017 2018
REVENUES:
Voyage revenues $ 29,934 $ 49,562 $ 58,123 $ 136,873
29,934 49,562 58,123 136,873
 
EXPENSES:
Voyage expenses 5,767 8,463 12,396 20,710
Vessel operating expenses 17,382 15,496 41,068 54,156
Depreciation 5,530 5,705 8,632 19,679
Impairment loss,(gain)/loss from sale of vessels and other (5,099 ) 300 (10,208 )
General and administrative expenses 7,843 7,219 23,638 22,000
Other, net 1,304 (12 ) 939
Operating income/(loss) (6,588 ) 16,474 (27,899 ) 29,597
OTHER EXPENSES:
Interest and finance costs, net of interest income (3,604 ) (4,795 ) (8,313 ) (13,600 )
Loss on private placement (7,600 ) (7,600 )
Other, net (190 ) (76 ) (521 ) (45 )
Total other expenses, net (11,394 ) (4,871 ) (16,434 ) (13,645 )
Net income/(loss) (17,982 ) 11,603 (44,333 ) 15,952
Net income/(loss) attributable to DryShips Inc.

$

(17,982 )

$

11,603 $ (44,333 ) $ 15,952
Net income/(loss) attributable to DryShips Inc. common stockholders (15,177 ) 11,603 (41,528 ) 15,952
Earnings/(Losses) per common share, basic and diluted $ (0.42 ) $ 0.12 $ (3.36 ) $ 0.16
Weighted average number of shares, basic and diluted 36,186,606 97,325,053 12,356,150 100,518,047

 

DryShips Inc.

Unaudited Condensed Consolidated Balance Sheets

(Expressed in Thousands of U.S. Dollars
except for share data)
December 31, 2017 September 30, 2018
 
ASSETS  
Cash, cash equivalents, including restricted cash (current and non-current) $ 30,226 $ 157,410
Other current and non-current assets 123,713 89,057
Vessels held for sale 297,280
Advances for vessels under construction 31,898
Vessels, net 749,088 563,592
Total assets 934,925 1,107,339
 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
   
Total debt 216,969 424,100
Total other liabilities 10,920 11,893
Total stockholders’ equity 707,036 671,346
Total liabilities and stockholders’ equity $ 934,925 $ 1,107,339
 
SHARE COUNT DATA
Common stock issued 104,274,708 104,274,708
Less: Treasury stock (10,367,948 )
Common stock issued and outstanding 104,274,708 93,906,760

Adjusted EBITDA Reconciliation

Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, vessel sales and impairments 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, 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:

(Expressed in Thousands of U.S. Dollars) Three Months Ended
September 30,
Nine Months Ended
September 30,
  2017 2018 2017 2018
 
Net income/(loss) attributable to Dryships Inc $ (17,982 ) $ 11,603 $ (44,333 ) $ 15,952
Add: Net interest expense 3,604 4,795 8,313 13,600
Add: Depreciation 5,530 5,705 8,632 19,679
Add: Dry-dockings and class survey costs 210 3,909
Add: Impairment loss, (gain)/loss from sale of vessel and other (5,099 ) 300 (10,208 )
Add: Loss on private placement 7,600 7,600
Add: Write-off of capitalized expenses 470
Add: Income taxes 61 2 81 4
Adjusted EBITDA $ (1,187 ) $ 17,216 $ (19,407 ) $ 43,406

 

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