SB: Net loss for the second quarter of 2017 at $1.6 million

SafeBulkers

Safe Bulkers, Inc. (the “Company”) (NYSE: SB), an international provider of marine drybulk transportation services, announced its unaudited financial results for the three and six months period ended June 30, 2017.

Summary of Second Quarter 2017 Results

  • Net revenue for the second quarter of 2017 increased by 34% to $35.0 million from $26.2 million during the same period in 2016.
  • Net loss for the second quarter of 2017 was $1.6 million as compared to $9.0 million, during the same period in 2016. Adjusted net loss(1) for the second quarter of 2017 was $2.3 million as compared to $8.7 million, during the same period in 2016.
  • EBITDA(2) for the second quarter of 2017 increased to $17.0 million as compared to $8.4 million during the same period in 2016. Adjusted EBITDA(3) for the second quarter of 2017 increased to $16.2 million from $8.8 million during the same period in 2016.
  • Loss per share(4) and Adjusted loss per share(4) for the second quarter of 2017 were $0.07 and $0.07 respectively, calculated on a weighted average number of 101,363,578 shares, compared to a Loss per share of $0.15 and Adjusted loss per share of $0.15 during the same period in 2016, calculated on a weighted average number of 83,571,957 shares.

Summary of Six Months Ended June 30, 2017 Results

  • Net revenues for the six months of 2017 increased by 34% to $68.3 million from $50.9 million during the same period in 2016.
  • Net loss for the six months of 2017 was $4.9 million as compared to $26.8 million, during the same period in 2016. Adjusted net loss(1) for the six months of 2017 was $5.8 million as compared to $23.0 million, during the same period in 2016.
  • EBITDA(2) for the six months of 2017 increased to $32.3 million as compared to $8.7 million during the same period in 2016. Adjusted EBITDA(3) for the six months of 2017 increased to $31.4 million as compared to $12.5 million during the same period in 2016.
  • Loss per share(4) and Adjusted loss per share(4) for the six months of 2017 were $0.13 and $0.14, respectively, calculated on a weighted average number of 100,329,624 shares, as compared to Loss per share(4) of $0.40 and Adjusted Loss per share(4) of $0.36 during the same period in 2016, calculated on a weighted average number of 83,557,124 shares.

(1) Adjusted Net income/(loss) is a non-GAAP measure. Adjusted Net income/(loss) represents Net income/(loss) before loss on sale of assets, gain/(loss) on derivatives and gain/(loss) on foreign currency. See Table 1.
(2) EBITDA is a non-GAAP measure and represents Net income/(loss) plus net interest expense, tax, depreciation and amortization. See Table 1.
(3) Adjusted EBITDA is a non-GAAP measure and represents EBITDA before loss on sale of assets, gain/( loss) on derivatives and gain/(loss) on foreign currency. See Table 1.
(4) Earnings/(loss) per share and Adjusted Earnings/(loss) per share represent Net Income/(loss) and Adjusted Net income/(loss) less preferred dividend and preferred deemed dividend divided by the weighted average number of shares respectively. See Table 1.

Fleet and Employment Profile

As of July 19, 2017, our operational fleet comprised of 38 drybulk vessels with an average age of 7.1 years and an aggregate carrying capacity of 3.4 million dwt. Our fleet consists of 14 Panamax class vessels, nine Kamsarmax class vessels, 12 post- Panamax class vessels and three Capesize class vessels, all built 2003 onwards. Taking into account our last contracted drybulk newbuild Kamsarmax class vessel, scheduled for delivery in 2018, our fleet will comprise of 39 vessels, 11 of which will be eco-design vessels, with an aggregate carrying capacity of 3.5 million dwt, assuming no additional vessel acquisitions or disposals.

Set out below is a table showing the Company’s existing and newbuild vessels and their contracted employment as of July 19, 2017:

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                                                 Gross Charter
  Vessel Name     DWT    Year Built  Country of      Rate         Charter
                                    construction   [USD/day]    Duration(1)
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Panamax
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                                                              Aug 2016 - Feb
Maria            76,000     2003         Japan       6,500         2018
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                                                              Jan 2017 - Apr
Koulitsa         76,900     2003         Japan      7,500(2)       2018
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                                                              Apr 2017 - Jun
Paraskevi        74,300     2003         Japan       7,400         2018
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                                                              Jan 2017 - Mar
Vassos           76,000     2004         Japan      7,500(3)       2018
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                                                              Apr 2017 - Jun
Katerina         76,000     2004         Japan       7,500         2018
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                                                              Jul 2016 - Jul
                                                                   2017
                                                     6,750    Jul 2017 - Aug
Maritsa          76,000     2005         Japan       8,000         2017
                                                     10,100   Aug 2017 - Aug
                                                                   2018
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                                                                Feb  2017 -
Efrossini        75,000     2012         Japan       8,500       Jul 2017
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                                                              Aug 2016 - Nov
Zoe              75,000     2013         Japan       6,200(4)      2017
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                                                                   Jul 2017
Kypros Land      77,100     2014         Japan       12,300   - Sep 2017
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                                                              Jul 2017 - May
Kypros Sea       77,100     2014         Japan       11,250        2018
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                                                              Sep 2016 - May
Kypros Bravery   78,000     2015         Japan       7,500         2018
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                                                              Dec 2016 - Feb
Kypros Sky       77,100     2015         Japan       9,100         2018
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                                                              Jun 2016 - Sep
Kypros Loyalty   78,000     2015         Japan       6,250         2017
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                                                              Apr 2017 - Jul
Kypros Spirit    78,000     2016   Japan             11,750        2017
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                                  Kamsarmax
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Pedhoulas                                                     Jun 2016 - Sep
Merchant         82,300     2006         Japan       6,000         2017
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                                                              Jul 2016 - Sep
Pedhoulas                                            6,200         2017
Trader           82,300     2006         Japan       11,600   Sep 2017 - Aug
                                                                   2018
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Pedhoulas                                                      Mar 2017- Dec
Leader           82,300     2007         Japan       10,550        2017
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Pedhoulas                                                       June 2017 -
Commander        83,700     2008         Japan       10,150      Feb 2018
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Pedhoulas                                                     Apr 2017 - Jun
Builder (5)      81,600     2012         China       8,400(7)      2018
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Pedhoulas                                                     Jun 2017 - Jan
Fighter (5)      81,600     2012         China       8,475         2018
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Pedhoulas                                                     Mar 2017 - Dec
Farmer (6)     81,600         2012 China             10,675        2017
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Pedhoulas        82,000     2015         China                     Apr 2017
Cherry (6)                                           6,600        - Oct 2018
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Pedhoulas Rose                                                Jan 2017 - Mar
(6)              82,000     2017         China       8,500 (8)     2018
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                                Post-Panamax
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                                                              Jun 2017 - Jul
Marina           87,000     2006         Japan       9,000         2017
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                                                              Feb 2017 - Jun
Xenia            87,000     2006         Japan     10,000 (9)      2018
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                                                              Apr 2016 - Nov
Sophia           87,000     2007         Japan       7,250         2018
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                                                              Feb 2017 - Jul
Eleni            87,000     2008         Japan       9,750         2017
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                                                              Jun 2017 - Aug
Martine          87,000     2009         Japan       10,150        2017
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                                                              Jun 2017 - Aug
Andreas K        92,000     2009      South Korea    8,300         2017
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                                                              Jun 2017 - Jul
                                                     7,500    2017       Jul
Panayiota K      92,000     2010      South Korea    17,500     2017 - Aug
                                                                   2017
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                                                              Feb 2017 - Nov
Venus Heritage   95,800     2010         Japan       8,600         2017
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                                                              Feb 2017 - Oct
Venus History    95,800     2011         Japan       8,850         2017
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                                                              Jun 2017 - Oct
Venus Horizon    95,800     2012         Japan       9,250         2017
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                                                              May 2017 - Jul
Troodos Sun      85,000     2016         Japan       12,731        2017
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                                                     11,350   Mar 2017 - Jul
Troodos Air      85,000     2016         Japan        (10)         2018
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                                  Capesize
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                                                              Sep 2011 - Jun
Kanaris         178,100     2010         China        25,928       2031
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                                                              Feb 2012 - Dec
Pelopidas       176,000     2011         China        38,000       2021
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                                                       24,376 Jan 2014 - Jan
Lake Despina    181,400     2014         Japan        (11)         2024
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Total dwt of
existing fleet 3,421,800
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                                     Country of  Gross Charter
  Hull Number     DWT     Expected  construction     Rate         Charter
                          delivery                 [USD/day]    Duration(1)
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Kamsarmax
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Hull 1552        81,600   H1 2018       Japan
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Total dwt of
orderbook        81,600
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1) The start date represents either the actual start date or, in the case of a contracted charter that had not commenced as of July 19, 2017, the scheduled start date. The actual start date and redelivery date may differ from the referenced scheduled start and redelivery dates depending on the terms of the charter and market conditions and does not reflect the options to extend the period time charter.
2) The charter agreement grants the charterer the option to extend the period time charter for an additional 10 to 14 months period at a gross daily charter rate of $9,000.
3) The charter agreement grants the charterer the option to extend the period time charter for an additional 10 to 14 months period at a gross daily charter rate of $9,000.
4) The charter agreement grants the charterer the option to extend the period time charter for an additional 10 to 15 months period at a gross daily charter rate of $8,200.
5) Vessel sold and leased back on a net daily bareboat charter rate of $6,500 for a period of 10 years, for which the Company agreed to exercise its purchase option in September 2017, at a predetermined purchase price.
6) Vessel sold and leased back on a net daily bareboat charter rate of $6,500 for a period of 10 years, with a purchase obligation at the end of the 10th year and purchase options in favor of the Company after the second year of the bareboat charter, at annual intervals and predetermined purchase prices.
7) The charter agreement grants the charterer the option to extend the period time charter for an additional 10 to 14 months period at a gross daily charter rate of $9,900.
8) The charter agreement grants the charterer the option to extend the period time charter for an additional 11 to 14 months period at a gross daily charter rate of $10,000.
9) The charter agreement grants the charterer the option to extend the period time charter for an additional 12 to 16 months period at a gross daily charter rate of $12,500.
10) The charter agreement grants the charterer the option to extend the period time charter for an additional 12 to 16 months period at a gross daily charter rate of $12,500.
11) A period time charter of ten years at a gross daily charter rate of $23,100 for the first two and a half years and of $24,810 for the remaining period. In January 2017, the period time charter was amended to reflect substitution of the initial charterer with its subsidiary guaranteed by the initial charterer and changes in payment terms; all other charter terms remained unchanged. The charter agreement grants the charterer an option to purchase the vessel at any time beginning at the end of the seventh year of the charter, at a price of $39 million less a 1.00% commission, decreasing thereafter on a pro-rated basis by $1.5 million per year. The Company holds a right of first refusal to buy back the vessel in the event that the charterer exercises its option to purchase the vessel and subsequently offers to sell such vessel to a third party. The charter agreement also grants the charterer the option to extend the period time charter for an additional twelve months at a time at a gross daily charter rate of $26,330, less 1.25% total commissions, which option may be exercised by the charterer a maximum of two times.

The contracted employment of fleet ownership days as of July 19, 2017 was:

2017 (remaining)   73%
2017 (full year)   88%
2018               27%
2019               8%

Order book, capital expenditure requirements and liquidity as of July 19, 2017

The remaining order book consisted of one newbuild vessel; our wholly-owned subsidiary Pinewood Shipping Corporation has contracted to acquire Hull No. 1552 with scheduled delivery date in 2018 and has agreed to issue $16.9 million of preferred equity to an unaffiliated investor upon delivery.

The remaining capital expenditure requirements amounted to $31.4 million, consisting of $4.1 million payable in 2017 and $27.3 million payable in 2018

We had liquidity of $98.9 million, consisting of $86.7 million in cash and bank time deposits and $12.2 million in restricted cash, in addition to $16.9 million of preferred equity financing and the capacity to borrow against one unencumbered vessel.

Update on the sale and leaseback transaction

In June 2017, we exercised options under the sale and leaseback agreements to purchase two Kamsarmax class vessels at an aggregate predetermined price of $43.8 million. The transaction will consummate in September 2017, and the Company will finance the acquisition of the vessels through cash on hand and committed credit facilities of up to $30.0 million.

The sale and leaseback transaction has been accounted as a financing transaction. Following the exercise of the purchase options, the outstanding obligation of these two vessels, amounting to $43.5 million as of end June 2017, has been included in the current portion of long term debt. Deferred finance costs will be written off upon the consummation of the transaction.

Preferred Shares Exchange offer

In March 2017, the Company announced the commencement of an exchange offer (the “Exchange Offer”) for any and all of its outstanding 8.00% Series B Cumulative Redeemable Perpetual Preferred Shares, liquidation preference $25.00 per share (the “Series B Preferred Shares”). The Exchange Offer expired and was settled in April 2017.

Holders who elected to exchange their Series B Preferred Shares in the Exchange Offer received, for each such Series B Preferred Share, (i) $22.50 in cash and (ii) two newly issued shares of common stock of the Company.

Pursuant to the Exchange Offer, a total of 1,106,254 Series B Preferred Shares were tendered, representing 74.46% of the 1,485,768 Series B Preferred Shares outstanding at the commencement of the Exchange Offer. The Exchange Offer resulted in a cash payment of $24.9 million and the issuance of 2,212,508 shares of common stock to holders of validly tendered and accepted Series B Preferred Shares. Following settlement of the Exchange Offer, 379,514 shares of the Series B Preferred Shares remained outstanding.

The difference of $2.1 million, between (i) the cash paid to the preferred shareholders and the fair value of issued common shares and (ii) the carrying amount of the preferred stock immediately before the exchange net of issuance costs, was recorded as preferred deemed dividend during the second quarter of 2017.

Dividend Policy

The Company has not declared a dividend on the Company’s common stock for the second quarter of 2017. The Company had 101,515,760 shares of common stock issued and outstanding as of July 19, 2017.

The Company declared in July a cash dividend of $0.50 per share on its 8.00% Series B Cumulative Redeemable Perpetual Preferred Shares (NYSE: SB.PR.B), on its 8.00% Series C Cumulative Redeemable Perpetual Preferred Shares (NYSE: SB.PR.C) and on its 8.00% Series D Cumulative Redeemable Perpetual Preferred Shares (NYSE: SB.PR.D) for the period from April 30, 2017 to July 29, 2017 payable on July 31, 2017 to the respective shareholders of record as of July 24, 2017.

The declaration and payment of dividends, if any, will always be subject to the discretion of the Board of Directors of the Company. The timing and amount of any dividends declared will depend on, among other things: (i) the Company’s earnings, financial condition and cash requirements and available sources of liquidity; (ii) decisions in relation to the Company’s growth and leverage strategies; (iii) provisions of Marshall Islands and Liberian law governing the payment of dividends; (iv) restrictive covenants in the Company’s existing and future debt instruments; and (v) global economic and financial conditions.

Management Commentary

Dr. Loukas Barmparis, President of the Company, said: “In the second quarter of 2017, we continued to see improved rates for our new time charters resulting in improved quarterly revenues on a year over year basis. We are also targeting to reduce our financial outflows by refinancing two Kamsarmax vessels which were under a sale and leaseback arrangement”.

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