Scorpio Bulkers declares special stock dividend

Scorpio-Bulkers

Scorpio Bulkers reported its results for the three months ended September 30, 2019.

The Company also announced that on October 22, 2019, its Board of Directors declared:

• a quarterly cash dividend of $0.02 per share on the Company’s common shares; and
• a one-time special stock dividend to the shareholders of the Company of an aggregate of one million shares of common stock of Scorpio Tankers Inc.

Results for the Three and Nine Months Ended September 30, 2019 and 2018

For the third quarter of 2019, the Company’s GAAP net loss was $1.9 million, or $0.03 per diluted share, including:

• a non-cash gain of approximately $1.0 million and cash dividend income of $0.5 million, or $0.02 earnings per diluted share, primarily from the Company’s equity investment in Scorpio Tankers Inc.;
• a partial reversal of the write-down of assets held for sale of approximately $0.2 million related to the sale of the SBI Cougar and SBI Puma; and
• the write-off of deferred financing costs of approximately $0.5 million, or $0.01 per diluted share, related to the refinancing of existing debt.
For the same period in 2018, the Company’s GAAP net loss was $0.4 million, or $0.01 per diluted share.

Total vessel revenues for the third quarter of 2019 were $63.2 million, compared to $62.5 million for the same period in 2018. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the third quarters of 2019 and 2018 were $26.3 million and $28.8 million, respectively (see Non-GAAP Financial Measures below).

For the third quarter of 2019, the Company’s adjusted net loss was $2.1 million, or $0.03 adjusted loss per diluted share, which excludes the impact of the partial reversal of the write-down of assets held for sale of $0.2 million relating to the SBI Cougar and SBI Puma. Adjusted EBITDA for the third quarter of 2019 was $26.1 million. There were no such non-GAAP adjustments to net loss in the third quarter of 2018 (see Non-GAAP Financial Measures below).

For the first nine months of 2019, the Company’s GAAP net income was $29.6 million, or $0.42 per diluted share, including:

• a non-cash gain of approximately $68.6 million and cash dividend income of $1.6 million, or $1.01 earnings per diluted share, primarily from the Company’s equity investment in Scorpio Tankers Inc.;
• a write-down of assets either sold or held for sale of approximately $12.5 million, or $0.18 per diluted share, related to the sales of the SBI Electra, SBI Flamenco, SBI Cougar and SBI Puma and the write-off of deferred financing costs on the credit facilities related to the SBI Electra and SBI Flamenco; and
• the write-off of deferred financing costs of approximately $3.2 million, or $0.05 per diluted share, related to the refinancing of existing debt.
For the same period in 2018, the Company’s GAAP net loss was $5.3 million, or $0.07 per diluted share.

Total vessel revenues for the first nine months of 2019 were $164.3 million, compared to $177.3 million for the same period in 2018. EBITDA for the first nine months of 2019 and 2018 were $116.8 million and $77.2 million, respectively (see Non-GAAP Financial Measures below).

For the first nine months of 2019, the Company’s adjusted net income was $42.1 million, or $0.60 adjusted earnings per diluted share, which excludes the impact of the write-down of assets either sold or held for sale of $12.0 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 nine months of 2019 was $128.9 million. There were no such non-GAAP adjustments to net loss in the first nine months of 2018 (see Non-GAAP Financial Measures below).

TCE Revenue

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

• Our Kamsarmax fleet earned an average of $13,149 per day
• Our Ultramax fleet earned an average of $11,824 per day
Voyages Fixed thus far for the Fourth Quarter of 2019, as of the date hereof

• Kamsarmax fleet: approximately $14,083 per day on average for 50% of the days
• Ultramax fleet: approximately $13,450 per day on average for 39% of the days
Cash and Cash Equivalents

As of October 18, 2019, the Company had approximately $89.6 million in cash and cash equivalents.

Recent Significant Events

Special Stock Dividend

On October 22, 2019, the Company’s Board of Directors declared a one-time special stock dividend to the shareholders of the Company of an aggregate of one million shares of common stock of Scorpio Tankers Inc. (NYSE:STNG), a related party. For each common share that a shareholder holds in the Company that shareholder will receive 0.0138 shares of common stock of Scorpio Tankers Inc., payable on or about December 13, 2019 to all shareholders of record as of November 15, 2019 (the “Record Date”). The Scorpio Tankers Inc. common shares to be distributed in the special dividend were acquired from Scorpio Tankers Inc. in a registered underwritten public offering of its common shares in October 2018. Following the payment of the special dividend, the Company will continue to own approximately 4.4 million common shares of Scorpio Tankers Inc.

No fractional shares of Scorpio Tankers Inc. will be issued in connection with the special dividend, and instead the Company’s shareholders will receive cash in lieu of any fractional shares. For a discussion of the material tax consequences related to this special stock dividend, please see the Company’s Report on Form 6-K filed with the Securities and Exchange Commission on the date hereof.

Emanuele A. Lauro, the Company’s Chairman and CEO, commented, “We will continue to manage Scorpio Bulkers to best effect as we identify changes in the global marketplace. Of note, the special dividend of a portion of our shareholding in Scorpio Tankers is an appropriate step at this time. We believe in sharing the benefit of recent improvement of product tanker fundamentals with our shareholders, while we believe that the investment thesis around IMO 2020 still has much room to run. Separately, our core business continues to benefit from a number of short- and medium-term catalysts. Demand for Ultramax and Kamsarmax vessels has been resilient, particularly in light of expanded ton-miles from new, or renewed, supply lines from West to East. In addition, regulators and our core customers alike are defining significant benefits for modern, fuel-efficient vessels like ours. Notwithstanding the short-term costs of positioning new vessels or outfitting them with scrubbers, we are as confident as ever that our strategy confers sustained benefits as the regulatory and competitive environment evolves.”

Quarterly Cash Dividend

In the third quarter of 2019, the Company’s Board of Directors declared and the Company paid a quarterly cash dividend of $0.02 per share totaling approximately $1.4 million.

On October 22, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.02 per share, payable on or about December 13, 2019, to all shareholders of record as of November 15, 2019. As of October 22, 2019, 72,487,958 shares were outstanding.

Vessel Sales

On September 17, 2019, the Company agreed to sell the SBI Puma and SBI Cougar, 2014 and 2015 built Ultramax vessels, respectively, for approximately $37.9 million in aggregate to an unaffiliated third party. The sale was closed on October 8, 2019 and generated $16.0 million of additional liquidity after the repayment of $21.9 million of outstanding debt. As of June 30, 2019, these vessels were classified as held for sale. The Company recorded a loss of approximately $4.9 million in the second quarter of 2019 and wrote-off deferred financing costs of $0.2 million in October 2019 upon the repayment of $21.9 million of outstanding debt.

Debt

Senior Unsecured Notes Due September 2019

On August 2, 2019, the Company redeemed the entire outstanding balance of its Senior Unsecured Notes Due September 2019 of $73.6 million. The redemption price of the Senior Unsecured Notes Due September 2019 was equal to 100% of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, August 2, 2019.

AVIC Lease Financing

In July 2019, the Company closed the transaction to sell and leaseback three Ultramax vessels (SBI Hydra, 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 has purchase options beginning after the end of the second year of each bareboat charter agreement. The Company also has a purchase obligation for each vessel upon the expiration of each bareboat charter agreement.

$330.0 Million Credit Facility

During July 2019, the Company prepaid approximately $30.9 million of its $330.0 Million Credit Facility and wrote off deferred financing costs of approximately $0.4 million as part of the refinancing of the three vessels now financed by the AVIC Lease Financing (SBI Hydra, SBI Lyra and SBI Maia). As such, the $330.0 Million Credit Facility was repaid in full and terminated.

$38.7 Million Credit Facility

During October 2019, the Company prepaid approximately $21.9 million of its $38.7 Million Credit Facility and wrote off approximately $0.2 million of deferred financing costs as part of the sale of the SBI Puma and SBI Cougar.

Vessels Time Chartered-In

During August 2019, the Company time chartered in one Kamsarmax vessel for approximately 24 to 27 months at 118% of the Baltic Exchanges 74,000 DWT Panamax Index (“BPI”). The Company simultaneously time chartered these vessels out to the Scorpio Kamsarmax Pool under matching terms.

In September 2019, the Company exercised its option to extend the time charter-in agreement of the 2017 built Ultramax vessel for one year at $10,885 per day.

Debt Overview

The Company’s outstanding debt balances, gross of unamortized deferred financing costs as of September 30, 2019 and October 18, 2019, are as follows (dollars in thousands):

As of
September 30,
2019
As of
October 18,
2019
As of
October 18,
2019
Credit Facility Amount Outstanding Amount
Committed (1)
Senior Notes $ $ $
$330 Million Credit Facility
$12.5 Million Credit Facility 8,813 8,813
$27.3 Million Credit Facility 9,008 8,813
$85.5 Million Credit Facility 47,594 47,594 5,712
$38.7 Million Credit Facility 32,400 10,500
$12.8 Million Credit Facility 11,900 11,900 1,398
$30.0 Million Credit Facility 27,753 27,753 2,585
$60.0 Million Credit Facility 27,138 27,138 2,862
$184.0 Million Credit Facility 168,916 168,916 17,448
$34.0 Million Credit Facility 32,179 32,179 3,000
$90.0 Million Credit Facility 82,100 82,100 8,706
$19.6 Million Lease Financing – SBI Rumba 17,191 17,191
$19.0 Million Lease Financing – SBI Tango 17,593 17,498
$19.0 Million Lease Financing – SBI Echo 17,671 17,580
$20.5 Million Lease Financing – SBI Hermes 19,372 19,269
$21.4 Million Lease Financing – SBI Samba 20,726 20,613
CMBFL Lease Financing 115,688 115,688 11,842
$45.0 Million Lease Financing – SBI Virgo & SBI Libra 40,783 40,529 3,000
AVIC Lease Financing 112,183 111,038 9,840
Total $ 809,008 $ 785,112 $ 66,393

(1) Includes the maximum loan amount available for the installation of scrubbers following upsizes of certain credit facilities.

The Company’s projected quarterly debt repayments on its bank loans and lease financing arrangements through 2020 are as follows (dollars in thousands):

Principal on
Bank Loans
Principal on
Lease Financing
Arrangements
Total (1)
Q4 2019 (2) 7,515 4,955 12,470
Q1 2020 10,082 7,562 17,644
Q2 2020 10,815 7,853 18,668
Q3 2020 10,489 8,320 18,809
Q4 2020 (3) 19,095 8,339 27,434
Total $57,996 $37,029 $95,025

(1) Includes estimated repayments on the upsizings of certain credit facilities for the installation of scrubbers, for which the timing of the drawdowns and repayment schedules set forth are estimates only and may vary as the timing of the related installations finalize.
(2) Relates to payments expected to be made from October 19, 2019 to December 31, 2019.
(3) Includes $8.0 million repayment of the $12.5 Million Credit Facility due at maturity.

IMO 2020

The Company’s projected schedule and estimated payments for the installation of scrubbers on all the owned and finance leased vessels in the Company’s fleet is as follows (dollars in thousands). Through October 18, 2019, the Company has paid $17.3 million towards the purchase of the scrubbers.

Number of Vessels by Type Estimated
Payments (1)
Ultramax Kamsarmax
Q4 2019 (2) 7 4 21,853
Q1 2020 10 2 27,802
Q2 2020 8 4 24,118
Q3 2020 3 4 13,927
Q4 2020 4 11,283
Q1 2021 4,281
Total 32 14 $ 103,264

(1) Includes estimated cash payments for scrubbers that are due in advance of the scheduled service and may be scheduled to occur in quarters prior to the actual installation. In addition to these installment payments, these amounts also include estimates of the installation costs of such systems. The timing of the payments set forth are estimates only and may vary as the timing of the related installations finalize.
(2) Relates to payments expected to be made from October 19, 2019 to December 31, 2019.

Financial Results for the Three Months Ended September 30, 2019 Compared to the Three Months Ended September 30, 2018

For the third quarter of 2019, the Company’s GAAP net loss was $1.9 million, or $0.03 per diluted share, compared to a net loss of $0.4 million, or $0.01 per diluted share, for the same period in 2018. Results for the third quarter of 2019 include: a non-cash gain of approximately $1.0 million and cash dividend income of $0.5 million, or $0.02 per diluted share, primarily from the Company’s equity investment in Scorpio Tankers Inc., a reversal of charges of approximately $0.2 million related to the sale of the SBI Cougar and SBI Puma and the write-off of deferred financing costs of approximately $0.5 million, or $0.01 per diluted share, related to the refinancing of existing debt. EBITDA for the third quarters of 2019 and 2018 were $26.3 million and $28.8 million, respectively (see Non-GAAP Financial Measures below).

For the third quarter of 2019, the Company’s adjusted net loss was $2.1 million, or $0.03 per diluted share, which excludes the impact of the reversal to the write-down of assets held for sale of $0.2 million. Adjusted EBITDA for the third quarter of 2019 was $26.1 million. There were no such non-GAAP adjustments to net loss in the third quarter of 2018 (see Non-GAAP Financial Measures below).

Total vessel revenues for the third quarter of 2019 were $63.2 million compared to $62.5 million in the third quarter of 2018. The Company’s TCE revenue (see Non-GAAP Financial Measures below) for the third quarter of 2019 was $62.7 million, an increase of $0.3 million from the prior year period due primarily to higher indices, the impact of which was offset by a decrease in revenue days related the sale of two Kamsarmax vessels and scheduled drydocking.

Total operating expenses for the third quarter of 2019 were $54.5 million, including the reversal of charges related to the sale of the SBI Cougar and SBI Puma of $0.2 million, compared to $49.5 million in the third quarter of 2018.

Ultramax Operations

Three Months Ended September 30,
Dollars in thousands 2019 2018 Change % Change
TCE Revenue:
Vessel revenue $ 41,257 $ 39,722 $ 1,535 4
Voyage expenses 240 80 160 200
TCE Revenue $ 41,017 $ 39,642 $ 1,375 3
Operating expenses:
Vessel operating costs 16,798 18,178 (1,380 ) (8 )
Charterhire expense 936 936
Vessel depreciation 9,000 9,399 (399 ) (4 )
General and administrative expense 1,070 1,109 (39 ) (4 )
Loss / write-down on assets held for sale (194 ) (194 ) NA
Total operating expenses $ 27,610 $ 29,622 $ (2,012 ) (7 )
Operating income $ 13,407 $ 10,020 $ 3,387 34

Vessel revenue for the Company’s Ultramax Operations increased to $41.3 million for the third quarter of 2019 from $39.7 million in the prior year period. The weakness in rates experienced in the first half of the year was reversed in the third quarter of 2019 due to an extended South American grain season as Chinese buyers were forced to continue to source agricultural commodities from Brazil and Argentina rather than the United States. The strength of Atlantic rates created a large value imbalance between the two basins, encouraging vessels to ballast. Global ultramax supply has moved to a more balanced split between the Atlantic and Pacific basins due to the start of our fleet’s drydock and scrubber fitting program.

TCE revenue (see Non-GAAP Financial Measures below) for the Company’s Ultramax Operations was $41.0 million for the third quarter of 2019 compared to $39.6 million for the prior year period. During both periods, the Company’s Ultramax fleet consisted of a day-weighted average of 37 vessels owned or finance leased and one vessel time chartered-in. TCE revenue per day was $11,824 and $11,342 for the third quarters of 2019 and 2018, respectively.

Three Months Ended September 30,
Ultramax Operations: 2019 2018 Change % Change
TCE Revenue (in thousands) $ 41,017 $ 39,642 $ 1,375 3
TCE Revenue / Day $ 11,824 $ 11,342 $ 482 4
Revenue Days 3,469 3,495 (26 ) (1 )

The Company’s Ultramax Operations vessel operating costs were $16.8 million for the third quarter of 2019, including approximately $0.5 million of takeover costs and contingency expenses, compared with vessel operating costs of $18.2 million in the prior year period, relating to the 37 vessels owned or finance leased on average during both periods. Daily operating costs excluding takeover costs and contingency expenses for the third quarters of 2019 and 2018 were $4,796 and $5,037, respectively. Daily operating costs for the third quarter of 2019 decreased from the third quarter of 2018 due primarily to the timing of repairs and the purchase of spares and stores.

Charterhire expense for the Company’s Ultramax Operations was approximately $0.9 million for both the third quarters of 2019 and 2018 and relates to the vessel the Company time chartered-in at $10,125 per day. In September 2019, the Company exercised its option to extend the time-charter for one year at $10,885 per day.

Ultramax Operations depreciation decreased slightly from $9.4 million to $9.0 million as the SBI Cougar and SBI Puma were classified as held for sale since the second quarter of 2019 and therefore were not depreciated. The sale of these vessels was completed in October 2019.

General and administrative expense for the Company’s Ultramax Operations, which consists primarily of administrative service fees, which are incurred on a per vessel per day basis, and bank charges, which are incurred based on the number of transactions, was $1.1 million for both the third quarters of 2019 and 2018.

Kamsarmax Operations

Three Months Ended September 30,
Dollars in thousands 2019 2018 Change % Change
TCE Revenue:
Vessel revenue $ 21,970 $ 22,743 $ (773 ) (3 )
Voyage expenses 261 4 257 6,425
TCE Revenue $ 21,709 $ 22,739 $ (1,030 ) (5 )
Operating expenses:
Vessel operating costs 8,398 8,833 (435 ) (5 )
Charterhire expense 6,552 108 6,444 5,967
Vessel depreciation 4,533 4,899 (366 ) (7 )
General and administrative expense 482 542 (60 ) (11 )
Total operating expenses $ 19,965 $ 14,382 $ 5,583 39
Operating income $ 1,744 $ 8,357 $ (6,613 ) (79 )

Vessel revenue for the Company’s Kamsarmax Operations decreased to $22.0 million in the third quarter of 2019 from $22.7 million in the prior year period due primarily to a decrease in revenue days related to the sale of two Kamsarmax vessels and scheduled drydocking.

TCE revenue (see Non-GAAP Financial Measures) for the Company’s Kamsarmax Operations was $21.7 million for the third quarter of 2019 associated with a day-weighted average of 17 vessels owned or finance leased and four vessels time chartered-in, compared to $22.7 million for the prior year period associated with a day-weighted average of 19 vessels owned or finance leased. TCE revenue per day was $13,149 and $13,649 for the third quarters of 2019 and 2018, respectively. Constraints on vessel supply in the Atlantic Basin were supportive of freight rates throughout the quarter. Chinese buyers were forced to source agricultural commodities from Brazil and Argentina rather than the United States. In addition, Brazilian miner Vale resumed its export program after a prolonged disruption from dam failures. These ‘fronthaul’ voyages, and a significant number of larger dry cargo vessels fitting exhaust gas cleaning systems, or ‘scrubbers’, in drydocks in Asia pushed rates to recent highs.

Three Months Ended September 30,
Kamsarmax Operations: 2019 2018 Change % Change
TCE Revenue (in thousands) $ 21,709 $ 22,739 $ (1,030 ) (5 )
TCE Revenue / Day $ 13,149 $ 13,649 $ (500 ) (4 )
Revenue Days 1,651 1,666 (15 ) (1 )

Kamsarmax Operations vessel operating costs were $8.4 million for the third quarter of 2019, including approximately $0.6 million of takeover costs and contingency expenses, compared with vessel operating costs of $8.8 million in the prior year period, relating to 17 and 19 vessels owned or finance leased on average, respectively, during the periods. Daily operating costs excluding takeover costs and contingency expenses for the third quarters of 2019 and 2018 were relatively flat at $4,968 and $4,931, respectively.

Kamsarmax Operations charterhire expense was $6.6 million in the third quarter of 2019, relating to five vessels the Company time chartered in during the period. While the Company did not time charter-in any Kamsarmax vessels in the third quarter 2018, it had a profit and loss sharing agreement with a third party related to one Kamsarmax vessel for which it recorded its residual share of the loss in the third quarter of 2018.

Kamsarmax Operations depreciation was $4.5 million and $4.9 million in the third quarters of 2019 and 2018, respectively, as the number of vessels owned or finance leased on average decreased to 17 in the third quarter of 2019 from 19 in the third quarter of 2018 due to the sale of the SBI Electra and SBI Flamenco.

General and administrative expense for the Company’s Kamsarmax Operations was $0.5 million for both the third quarters of 2019 and 2018. The expense consists primarily of administrative services fees, which are incurred on a per vessel per day basis, and bank charges, which are incurred based on the number of transactions.

Corporate

Certain general and administrative expenses the Company incurs, as well as all of its financial expenses and investment income or losses, are not attributable to a specific segment. Accordingly, these costs are not allocated to the Company’s segments. These general and administrative expenses, including compensation, audit, legal and other professional fees, as well as the costs of being a public company, such as director fees, were $6.4 million and $5.4 million in the third quarters of 2019 and 2018, respectively. The quarter over quarter increase is due primarily to an increase in non-cash restricted stock amortization.

The Company recorded a non-cash gain of approximately $1.0 million for the third quarter of 2019 and a cash dividend of $0.5 million primarily from its equity investment in Scorpio Tankers Inc.

Financial expenses, net of interest income decreased to $12.3 million in the third quarter of 2019 from $13.3 million in the prior year period due to a write off of $2.0 million of deferred finance charges related to then existing debt in the third quarter of 2018, offset in part by higher levels of debt in the third quarter of 2019. In the third quarter of 2019, approximately $0.4 million of deferred financing costs were written off related to debt refinancings under the Company’s new sale and leaseback transactions. In October 2019, the Company wrote-off approximately $0.2 million upon the repayment of the existing debt on the SBI Cougar and SBI Puma which were sold.

Financial Results for the Nine Months Ended September 30, 2019 Compared to the Nine Months Ended September 30, 2018

For the first nine months of 2019, the Company’s GAAP net income was $29.6 million, or $0.42 per diluted share, compared to a GAAP net loss of $5.3 million, or $0.07 loss per diluted share, for the same period in 2018. Results for the first nine months of 2019 include: a non-cash gain of approximately $68.6 million and cash dividend income of $1.6 million, or $1.01 per diluted share, primarily from the Company’s equity investment in Scorpio Tankers Inc., charges of approximately $12.5 million, or $0.18 per diluted share, related to the sales of the SBI Electra, SBI Flamenco, SBI Cougar and SBI Puma and the write-off of deferred financing costs on the credit facilities related to the SBI Electra and SBI Flamenco, and the write-off of deferred financing costs of approximately $3.2 million, or $0.05 per diluted share, related to the refinancing of existing debt. EBITDA for the first nine months of 2019 and 2018 were $116.8 million and $77.2 million, respectively (see Non-GAAP Financial Measures below).

For the first nine months of 2019, the Company’s adjusted net income was $42.1 million, or $0.60 adjusted earnings per diluted share, which excludes the impact of the write-down of assets either sold or held for sale and the write-off of related deferred financing costs totaling $12.5 million. Adjusted EBITDA for the first nine months of 2019 was $128.9 million. There were no such non-GAAP adjustments to net loss in the first nine months of 2018 (see Non-GAAP Financial Measures below).

Total vessel revenues for the first nine months of 2019 were $164.3 million compared to $177.3 million in the prior year period. The Company’s TCE revenue (see Non-GAAP Financial Measures below) for the first nine months of 2019 was $163.5 million, a decrease of $13.5 million from the prior year period. The first half of 2019 proved challenging with a loss of iron exports mainly due to Vales dam failure and continued disruptions from the U.S. – China trade war. A strong South American and Black Sea grain season, increasing coal exports to India and China’s resumption of coal buying occurred in tandem with a rise in Atlantic cape rates. A restart of the Brazilian iron ore export program provided additional support to already rising Ultramax and Kamsarmax rates during the third quarter of 2019.

Total operating expenses for the first nine months of 2019 were $165.2 million, including the write-down of assets either sold or held for sale of $12.0 million, compared to $147.8 million in the first nine months of 2018.

Ultramax Operations

Nine Months Ended September 30,
Dollars in thousands 2019 2018 Change % Change
TCE Revenue:
Vessel revenue $ 103,234 $ 112,778 $ (9,544 ) (8 )
Voyage expenses 438 264 174 66
TCE Revenue $ 102,796 $ 112,514 $ (9,718 ) (9 )
Operating expenses:
Vessel operating costs 50,962 53,430 (2,468 ) (5 )
Charterhire expense 2,731 2,773 (42 ) (2 )
Vessel depreciation 27,108 27,887 (779 ) (3 )
General and administrative expense 3,131 3,255 (124 ) (4 )
Loss / write-down on assets held for sale 4,688 4,688 NA
Total operating expenses $ 88,620 $ 87,345 $ 1,275 1
Operating income $ 14,176 $ 25,169 $ (10,993 ) (44 )

Vessel revenue for the Company’s Ultramax Operations decreased to $103.2 million for the first nine months of 2019 from $112.8 million in the prior year period. The year suffered a slow start due to coal import restrictions by China and the sentiment from a limited U.S. Gulf grain season from 2018. Since then grain trades with support from Chinese and Indian coal buying provided the catalyst for the long and slow recovery which ended in the recent high in the Supramax and Ultramax segments during the third quarter of 2019.

TCE revenue (see Non-GAAP Financial Measures below) for the Company’s Ultramax Operations was $102.8 million for the first nine months of 2019 compared to $112.5 million for the prior year period. During both periods, the Company’s Ultramax fleet consisted of a day-weighted average of 37 vessels owned or finance leased and one vessel time chartered-in. TCE revenue per day was $10,010 and $10,895 for the first nine months of 2019 and 2018, respectively.

Nine Months Ended September 30,
Ultramax Operations: 2019 2018 Change % Change
TCE Revenue (in thousands) $ 102,796 $ 112,514 $ (9,718 ) (9 )
TCE Revenue / Day $ 10,010 $ 10,895 $ (885 ) (8 )
Revenue Days 10,269 10,327 (58 ) (1 )

The Company’s Ultramax Operations vessel operating costs were $51.0 million for the first nine months of 2019, including approximately $1.7 million of takeover costs and contingency expenses, compared with vessel operating costs of $53.4 million in the prior year period, relating to the 37 vessels owned or finance leased on average during both periods. Daily operating costs excluding takeover costs and contingency expenses for the first nine months of 2019 of $4,873 was down slightly from the prior year period of $4,983 due to the timing of repairs and the purchase of spares and stores.

Charterhire expense for the Company’s Ultramax Operations was approximately $2.7 million for first nine months of 2019 and $2.8 million for the same period in 2018 and relates to the vessel the Company time chartered-in at $10,125 per day. In September 2019, the Company exercised its option to extend the time-charter for one year at $10,885 per day.

Ultramax Operations depreciation decreased from $27.9 million in the first nine months of 2018 to $27.1 million in the first nine months of 2019 as the SBI Cougar and SBI Puma were classified as held for sale since the second quarter of 2019 and subsequently sold in October 2019.

General and administrative expense for the Company’s Ultramax Operations, which consists primarily of administrative service fees, which are incurred on a per vessel per day basis, and bank charges, which are incurred based on the number of transactions, was $3.1 million for the first nine months of 2019 and $3.3 million for the same period in 2018.

During the first nine months of 2019, the Company recorded a write-down on assets held for sale related to the classification of the SBI Cougar and SBI Puma as held for sale. The sale of the vessels was completed in October 2019.

Kamsarmax Operations

Nine Months Ended September 30,
Dollars in thousands 2019 2018 Change % Change
TCE Revenue:
Vessel revenue $ 61,081 $ 64,552 $ (3,471 ) (5 )
Voyage expenses 408 107 301 281
TCE Revenue $ 60,673 $ 64,445 $ (3,772 ) (6 )
Operating expenses:
Vessel operating costs 25,730 25,458 272 1
Charterhire expense 8,039 318 7,721 2,428
Vessel depreciation 13,695 14,306 (611 ) (4 )
General and administrative expense 1,594 1,515 79 5
Loss / write-down on assets held for sale 7,353 7,353 NA
Total operating expenses $ 56,411 $ 41,597 $ 14,814 36
Operating income $ 4,262 $ 22,848 $ (18,586 ) (81 )

Vessel revenue for the Company’s Kamsarmax Operations decreased to $61.1 million in the first nine months of 2019 from $64.6 million in the prior year period. The year had a slow start due to limited coal imports with restrictions in China and increased LNG consumptions in Europe, as well as an abrupt drop in iron ore exports after the Vale’s dam failure. Rates recovered slowly until the end of the second quarter of 2019, helped by a sustained South American grain export campaign and steady Indian coal imports. At the start of the third quarter of 2019, the lack of ships in the Atlantic and the cape rates created a rally which lasted until September.

TCE revenue (see Non-GAAP Financial Measures) for the Company’s Kamsarmax Operations was $60.7 million for the first nine months of 2019 associated with a day-weighted average of 19 vessels owned or finance leased and two vessels time chartered-in, compared to $64.4 million for the prior year period associated with a day-weighted average of 18 vessels owned or finance leased. TCE revenue per day was $11,672 and $13,123 for the first nine months of 2019 and 2018, respectively.

Nine Months Ended September 30,
Kamsarmax Operations: 2019 2018 Change % Change
TCE Revenue (in thousands) $ 60,673 $ 64,445 $ (3,772 ) (6 )
TCE Revenue / Day $ 11,672 $ 13,123 $ (1,451 ) (11 )
Revenue Days 5,198 4,911 287 6

Kamsarmax Operations vessel operating costs were $25.7 million for the first nine months of 2019, including approximately $0.8 million of takeover costs and contingency expenses, compared with vessel operating costs of $25.5 million in the prior year period, relating to 19 and 18 vessels owned or finance leased on average, respectively, during the periods. Daily operating costs excluding takeover costs and contingency expenses were relatively flat for the first nine months of 2019 and 2018 at $4,990 and $4,970, respectively.

Kamsarmax Operations charterhire expense was $8.0 million in the first nine months of 2019, relating to five vessels the Company began time chartering in during 2019. Prior to that, a profit and loss sharing agreement with a third party related to one Kamsarmax vessel for which it recorded its residual share of the profit or loss.

Kamsarmax Operations depreciation was $13.7 million and $14.3 million in the first nine months of 2019 and 2018, respectively reflecting the decrease in vessels owned or finance leased due to the sale of the SBI Electra and SBI Flamenco.

General and administrative expense for the Company’s Kamsarmax Operations was $1.6 million and $1.5 million for the first nine months of 2019 and 2018, respectively. The expense consists primarily of administrative services fees, which are incurred on a per vessel per day basis, and bank charges, which are incurred based on the number of transactions.

During the first nine months of 2019, the Company recorded write-downs of assets held for sale related to the sale of the SBI Electra and SBI Flamenco totaling approximately $7.4 million.

Corporate

Certain general and administrative expenses the Company incurs, as well as all of its financial expenses and investment income or losses, are not attributable to a specific segment. Accordingly, these costs are not allocated to the Company’s segments. These general and administrative expenses, including compensation, audit, legal and other professional fees, as well as the costs of being a public company, such as director fees, were $19.3 million and $18.5 million in the first nine months of 2019 and 2018, respectively. The quarter over quarter increase is due primarily to an increase in non-cash restricted stock amortization.

The Company recorded a non-cash gain of approximately $68.6 million and a cash dividend of $1.6 million for the first nine months of 2019 primarily from its equity investment in Scorpio Tankers Inc.

Financial expenses, net of interest income increased to $39.8 million in the first nine months of 2019 from $34.8 million in the prior year period due to higher levels of debt. In the first nine months of 2019, approximately $3.6 million of deferred financing costs were written off related to vessel sales and debt refinancings under the Company’s new sale and leaseback transactions. In October 2019, we wrote-off approximately $0.2 million upon the repayment of the existing debt on the SBI Cougar and SBI Puma which were sold.

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