Scorpio Bulkers Posts Net Income of $40.6 million in Q4

Scorpio-Bulkers

Scorpio Bulkers reported its results for the three months ended December 31, 2019.

The Company also announced that on January 27, 2020, its Board of Directors declared a quarterly cash dividend of $0.02 per share on the Company’s common shares.

Results for the Three and Twelve Months Ended December 31, 2019 and 2018

For the fourth quarter of 2019, the Company’s GAAP net income was $15.1 million, or $0.21 per diluted share, including:

  • a non-cash gain of approximately $46.1 million and cash dividend income of $0.5 million, or $0.66 per diluted share, primarily from the Company’s equity investment in Scorpio Tankers Inc.;
  • a write-down of assets held for sale of approximately $25.2 million, or $0.36 per diluted share, related to the classification of four Ultramax vessels as held for sale; and
  • a write-off of approximately $0.2 million of deferred financing costs on the credit facility related to the SBI Puma and the SBI Cougar.

For the same period in 2018, the Company’s GAAP net loss was $7.4 million, or $0.11 per diluted share. These results include a non-cash loss of approximately $7.7 million and cash dividend income of $0.5 million, or $0.10 per diluted share, from the Company’s equity investment in Scorpio Tankers Inc. and a write-off of deferred financing costs of $1.7 million, or $0.03 per diluted share, related to the refinancing of debt.

Total vessel revenues for the fourth quarter of 2019 were $60.3 million, compared to $65.2 million for the same period in 2018. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the fourth quarters of 2019 and 2018 were $41.5 million and $23.3 million, respectively (see Non-GAAP Financial Measures below).

For the fourth quarter of 2019, the Company’s adjusted net income was $40.6 million, or $0.57 adjusted per diluted share, which excludes the impact of the write-down of assets held for sale of approximately $25.2 million relating to the classification of four Ultramax vessels as held for sale and the write-off of approximately $0.2 million of deferred financing costs on the credit facility related to the SBI Puma and the SBI Cougar. Adjusted EBITDA for the fourth quarter of 2019 was $66.7 million. There were no such non-GAAP adjustments to net loss in the fourth quarter of 2018 (see Non-GAAP Financial Measures below).

For the year ended December 31, 2019, the Company’s GAAP net income was $44.7 million, or $0.64 per diluted share, including:

  • a non-cash gain of approximately $114.7 million and cash dividend income of $2.2 million, or $1.68 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 $38.0 million, or $0.55 per diluted share, related to the classification of four vessels as held for sale, 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 four vessels sold; and
  • the write-off of deferred financing costs of approximately $3.1 million, or $0.04 per diluted share, related to the refinancing of existing debt.

For the same period in 2018, the Company’s GAAP net loss was $12.7 million, or $0.18 per diluted share, including a non-cash loss of approximately $7.7 million and cash dividend income of $0.5 million, or $0.10 per diluted share, from the Company’s equity investment in Scorpio Tankers Inc. and a write-off of deferred financing costs of $3.8 million, or $0.05 per diluted share, related to the refinancing of debt.

Total vessel revenues for the year ended December 31, 2019 were $224.6 million, compared to $242.5 million for the same period in 2018. EBITDA for the year ended December 31, 2019 and 2018 were $158.3 million and $100.6 million, respectively (see Non-GAAP Financial Measures below).

For the year ended December 31, 2019, the Company’s adjusted net income was $82.6 million, or $1.19 adjusted per diluted share, which excludes the impact of the write-down of assets either sold or held for sale of $37.3 million and the write-off of deferred financing costs on the credit facilities relating to the vessels sold of $0.7 million. Adjusted EBITDA for the year ended December 31, 2019 was $195.6 million. There were no such non-GAAP adjustments to net loss in the year ended December 31, 2018 (see Non-GAAP Financial Measures below).

TCE Revenue

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

  • Our Kamsarmax fleet earned an average of $11,934 per day
  • Our Ultramax fleet earned an average of $11,244 per day

Voyages Fixed thus far for the First Quarter of 2020, as of the date hereof

  • Kamsarmax fleet: approximately $12,242 per day on average for 57% of the days
  • Ultramax fleet: approximately $10,505 per day on average for 49% of the days

Cash and Cash Equivalents

As of January 24, 2020, the Company had approximately $65.9 million in cash and cash equivalents.

Recent Significant Events

Special Stock Dividend

In the fourth quarter of 2019, the Company’s Board of Directors declared a one-time special stock dividend to the shareholders of the Company of an aggregate of approximately one million shares of common stock of Scorpio Tankers Inc. (NYSE:STNG), a related party. For each common share that a shareholder held in the Company on November 15, 2019, that shareholder received 0.0138 shares of common stock of Scorpio Tankers Inc. Following the payment of the special dividend, the Company continues to own approximately 4.4 million common shares of Scorpio Tankers Inc.

Quarterly Cash Dividend

In the fourth 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 January 27, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.02 per share, payable on or about March 13, 2020, to all shareholders of record as of February 14, 2020. As of January 24, 2020, 72,482,958 shares were outstanding.

Vessel Sales

In October 2019, the Company completed the sale of the SBI Puma and SBI Cougar, 2014 and 2015 built Ultramax vessels, respectively, that the Company agreed to sell in September 2019, for approximately $37.9 million in aggregate to an unaffiliated third party. The Company recorded a loss of approximately $4.9 million in the second quarter of 2019 and wrote-off deferred financing costs of approximately $0.2 million in the fourth quarter of 2019 upon the repayment of $21.9 million of outstanding debt.

During the fourth quarter of 2019, the Company’s Board of Directors made the decision to sell four Ultramax vessels and as such these vessels were classified as held for sale at December 31, 2019. The Company recorded a loss of approximately $25.2 million in the fourth quarter of 2019 and expects to write-off deferred financing costs of approximately $0.8 million upon closing of the sale and repaying the outstanding debt.

Debt

$38.7 Million Credit Facility

During October 2019, the Company prepaid $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.

Debt Overview

The Company’s outstanding debt balances, gross of unamortized deferred financing costs as of December 31, 2019 and January 24, 2020, are as follows (dollars in thousands):

As of
December 31,
2019
As of
January 24,
2020
As of
January 24,
2020
Credit Facility Amount Outstanding Amount
Committed (1)
$12.5 Million Credit Facility $ 8,617 $ 8,617 $
$27.3 Million Credit Facility 8,813 8,617
$85.5 Million Credit Facility 46,499 46,499
$38.7 Million Credit Facility 10,200 10,200
$12.8 Million Credit Facility 11,475 11,475 1,398
$30.0 Million Credit Facility 27,198 27,198 2,585
$60.0 Million Credit Facility 26,573 26,573 2,862
$184.0 Million Credit Facility 130,145 165,145 17,448
$34.0 Million Credit Facility 31,571 31,571 3,000
$90.0 Million Credit Facility 82,100 82,100 8,706
$19.6 Million Lease Financing – SBI Rumba 16,883 16,780
$19.0 Million Lease Financing – SBI Tango 17,303 17,207
$19.0 Million Lease Financing – SBI Echo 17,396 17,305
$20.5 Million Lease Financing – SBI Hermes 19,059 18,954
$21.4 Million Lease Financing – SBI Samba 20,384 20,269
CMBFL Lease Financing 113,006 113,006 11,842
$45.0 Million Lease Financing – SBI Virgo & SBI Libra 40,027 39,772 3,000
AVIC Lease Financing 111,450 110,304 8,200
Total $ 738,699 $ 771,592 $ 59,041
  1. Includes the maximum loan amount available for the installation of exhaust gas cleaning systems, or 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)
Q1 2020 (2) $ 9,065 $ 5,656 $ 14,721
Q2 2020 10,527 7,875 18,402
Q3 2020 10,281 8,342 18,623
Q4 2020 (3) 18,575 8,454 27,029
Total $ 48,448 $ 30,327 $ 78,775
  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 finalizes.
  2. Relates to payments expected to be made from January 25, 2020 to March 31, 2020.
  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 January 24, 2020, the Company has completed the installation of scrubbers on eight of its vessels.

Completed Scrubber Installation
by Vessel Type
Estimated
Payments (1)
Ultramax Kamsarmax
Q1 2020 (2) 9 5 20,209
Q2 2020 10 4 25,028
Q3 2020 1 5 15,467
Q4 2020 4 8,622
Q1 2021 2 4,467
Total 26 14 $ 73,793
  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 finalizes.
  2. Relates to payments expected to be made from January 25, 2020 to March 31, 2020.

Financial Results for the Three Months Ended December 31, 2019 Compared to the Three Months Ended December 31, 2018

For the fourth quarter of 2019, the Company’s GAAP net income was $15.1 million, or $0.21 per diluted share, compared to a net loss of $7.4 million, or $0.11 per diluted share, for the same period in 2018. Results for the fourth quarter of 2019 include: a non-cash gain of approximately $46.1 million and cash dividend income of $0.5 million, or $0.66 per diluted share, primarily from the Company’s equity investment in Scorpio Tankers Inc., charges of approximately $25.2 million related to the classification of four Ultramax vessels as held for sale and the write-off of deferred financing costs of approximately $0.2 million on the credit facility related to the SBI Puma and the SBI Cougar. Results for the fourth quarter of 2018 include a non-cash loss of approximately $7.7 million and cash dividend income of $0.5 million, or $0.10 per diluted share, from the Company’s equity investment in Scorpio Tankers Inc. and a write-off of deferred financing costs of $1.7 million, or $0.03 per diluted share, related to the refinancing of debt.

EBITDA for the fourth quarters of 2019 and 2018 were $41.5 million and $23.3 million, respectively (see Non-GAAP Financial Measures below).

For the fourth quarter of 2019, the Company’s adjusted net income was $40.6 million, or $0.57 adjusted per diluted share, which excludes the impact of the write-down of assets held for sale of approximately $25.2 million and the write-off of deferred financing costs of approximately $0.2 million on the credit facility related to the SBI Puma and the SBI Cougar. Adjusted EBITDA for the fourth quarter of 2019 was $66.7 million. There were no such non-GAAP adjustments to net loss in the fourth quarter of 2018 (see Non-GAAP Financial Measures below).

Total vessel revenues for the fourth quarter of 2019 were $60.3 million compared to $65.2 million in the fourth quarter of 2018. The Company’s TCE revenue (see Non-GAAP Financial Measures below) for the fourth quarter of 2019 was $56.9 million, a decrease of $8.1 million from the prior year period.

Total operating expenses for the fourth quarter of 2019 were $80.9 million, including the charge related to the classification of four Ultramax vessels as held for sale of approximately $25.2 million and an increase in charterhire expense of approximately $5.4 million due to an increase in the number vessels time chartered-in, compared to $51.4 million in the fourth quarter of 2018.

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