Star Bulk Carriers cuts loss in third quarter

Star Bulk

Star Bulk, a global shipping company focusing on the transportation of dry bulk cargoes, announced its unaudited financial and operating results for the third quarter and nine months ended September 30, 2017.

Financial Highlights

(Expressed in thousands of U.S. dollars,
except for daily rates and per share data)
Third quarter 2017 Third quarter 2016 Nine months ended September 30, 2017 Nine months ended September 30, 2016
Voyage Revenues $80,798 $59,884 $224,269 $158,746
Net income/(loss) ($7,426) ($39,406) ($33,655) ($121,102)
EBITDA (1) $26,091 ($9,375) $63,130 ($23,985)
Adjusted EBITDA (1) $28,552 $11,869 $72,358 $6,190
Adjusted Net income / (loss) (2) ($5,321) ($20,267) ($25,836) ($88,758)
Earnings / (loss) per share basic and diluted ($0.12) ($0.86) ($0.54) ($2.72)
Adjusted earnings / (loss) per share basic and diluted (2) ($0.08) ($0.44) ($0.41) ($1.99)
Average Number of Vessels 70.7 69.5 69.2 70.4
Daily Time Charter Equivalent Rate (“TCE”) (3) $9,619 $6,885 $9,199 $5,617
Fleet utilization 99.9% 97.8% 99.4% 96.0%
Average daily OPEX per vessel (excluding pre-delivery expenses) $3,947 $3,784 $3,926 $3,722
Average daily Net Cash G&A expenses per vessel (4) (excluding one-time expenses) $1,074 $1,047 $1,107 $1,101
1. EBITDA and Adjusted EBITDA are non-GAAP measures. Please see the table at the back of this release for a reconciliation of EBITDA and Adjusted EBITDA to Net Cash Provided by / (Used in) Operating Activities, which is the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). To derive Adjusted EBITDA from EBITDA, we exclude non-cash gains / (losses) and non-recurring items.
2. Adjusted Net income / (loss) and Adjusted earnings / (loss) per share basic and diluted are non-GAAP measures. Please see the table at the back of this release for a reconciliation to Net income / (loss), which is the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.
3. Daily Time Charter Equivalent Rate (“TCE”) is a non-GAAP measure. Please see the table at the back of this release for a reconciliation to Voyage Revenues, which is the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.
4. Average daily Net Cash G&A expenses per vessel is calculated by (1) deducting the Management fee Income from, and (2) adding the Management fee expense to, the General and Administrative expenses (net of stock-based compensation expense) and (3) then dividing with the ownership days.

Petros Pappas, Chief Executive Officer of Star Bulk, commented: “We released today our Q3 2017 financial results, reporting $63.0 million in Net TCE Revenues, $18.1 million in operating cash flow, $15.7 million in free cash flow and a total cash position of $249 million. The cash flow generation of Q3 2017 will allow us to repay approximately $4.8 million of debt and capital lease obligations through the cash sweep mechanism we have as part of our restructuring agreements.

Our reported average TCE per vessel for Q3 2017 was $9,619/day with an average fleet utilization of 99.9%. We have taken advantage of the tightening market during the last 2 months by fixing 15 vessels on medium to long term charters adding cash flow visibility at healthy TCE rates above our fully loaded breakeven. Overall we have fixed 80% of our fleet available days during Q4 2017 at an average daily TCE rate of $12,615 and 25% of our fleet available days in Q1 2018 at an average daily TCE rate $11,982.

We have taken an additional step to strengthen our commercial capabilities through the establishment of our new subsidiary Star Logistics Management S.A. (“Star Logistics”). The new entity will focus on expanding our cargo flow for our Kamsarmax, Ultramax and Supramax vessels through direct contact with end users of dry bulk commodities.

Given our Q3 2017 average OPEX and net cash G&A expenses per vessel, of $3,947/day and $1,074/day respectively, we have an Adjusted EBITDA of $28.6 million, increased by 141% compared to Q3 2016. 

Operational excellence and quality leadership remain among of our top priorities as evidenced by our continued presence among the top 5 dry bulk operators in Rightship vessel condition ratings.

On the financing side, we have refinanced our Senior Notes due in 2019 with newly issued Senior Notes maturing 2022, effectively pushing back their maturity by 3 years.”

Recent Developments

Vessel Sale:
On September 15, 2017, we entered into an agreement with a third party to sell the vessel Star Vanessa at market terms. The vessel was delivered to its new owners on November 1, 2017.

Vessel Acquisition:
On October 25, 2017, we entered into an agreement to acquire Star Triumph, a Capesize vessel with carrying capacity of 176,343 deadweight tons, built at Universal Shipbuilding Shipyard in 2004. The vessel is expected to be delivered to us in December.

Issuance of $50.0 million 8.30% Notes
On November 9, 2017 we successfully closed a public offering of $50.0 million aggregate principal amount of senior unsecured notes due 2022 (the “Notes”). The Notes are not guaranteed by any of our subsidiaries and bear interest at a rate of 8.30% per year, payable quarterly in arrears commencing on February 15, 2018. The Notes may be redeemed at our option in whole or in part at any time after May 15, 2019, for a price equal to the principal amount of the Notes to be redeemed plus accrued and unpaid interest. The proceeds from the sale of the Notes will be used to redeem in full our currently outstanding 8.00% Senior Notes (the “Outstanding Notes”), which mature in November 2019. Redemption of the Outstanding Notes is expected to take place in December 2017.

Employment update
During the third quarter and in October 2017 we entered into the following medium-to long-term charter arrangements, other than as previously disclosed in our release of the second quarter ended June 30, 2017 results :

  • Amami, a 98,681 dwt Post Panamax vessel, at a gross rate of $14,000/day for a period of approximately 7 to 10 months, commencing from October 2017.
  • Star Gwyneth, an 82,790 dwt Kamsarmax vessel, at a gross rate of $14,000/day for a period of approximately 6 to 9 months, commencing from October 2017.
  • Star Georgia, an 82,298 dwt Kamsarmax vessel, at a gross rate of $13,350/day for a period of approximately 7 to 9 months, commencing from October 2017.
  • Star Mariella, an 82,266 dwt Kamsarmax vessel, at a gross rate of $14,850/day for a period of approximately 6 to 9 months, commencing from October 2017.
  • Star Nina, an 82,224 dwt Kamsarmax vessel, at a gross rate of $13,500/day for a period of approximately 7 to 9 months, commencing from September 2017.
  • Star Laura, an 82,209 dwt Kamsarmax vessel, at a gross rate of $11,500/day for a period of approximately 8 to 11 months, commencing from August 2017.
  • Star Suzanna, an 81,711 dwt Kamsarmax vessel, at a gross rate of $11,500/day for a period of approximately 6 to 8 months, commencing from September 2017.
  • Idee Fixe, a 63,458 dwt Ultramax vessel, at a gross rate of $12,000/day for a period of approximately 4 to 6 months, commencing from October 2017.
  • Roberta, a 63,426 dwt Ultramax vessel, at a gross rate of $13,000/day for a period of approximately 5 to 7 months, commencing from August 2017.
  • Star Lutas, a 61,347 dwt Ultramax vessel, at a gross rate of $12,900/day for a period of approximately 5 to 7 months, commencing from October 2017.
  • Honey Badger, a 61,320 dwt Ultramax vessel, at a gross rate of $12,500/day for a period of approximately 5 to 7 months, commencing from October 2017.
  • Star Antares, a 61,258 dwt Ultramax vessel, at a gross rate of $12,650/day for a period of approximately 5 to 7 months, commencing from September 2017.
  • Star Gamma, a 53,098 dwt Supramax vessel, at a gross rate of $11,900/day for a period of approximately 4 to 6 months, commencing from October 2017.
  • Star Theta, a 52,425 dwt Supramax vessel, at a gross rate of $13,000/day for a period of approximately 5 to 7 months, commencing from October 2017.
  • Star Epsilon, a 52,402 dwt Supramax vessel, at a gross rate of $10,750/day for a period of approximately 11 to 13 months, commencing from September 2017.

Existing On the Water Fleet (As of November 20, 2017)

Vessel Name Vessel Type Capacity
(dwt.)
Year Built Date Delivered to Star Bulk
1 Goliath Newcastlemax 209,537 2015 July-15
2 Gargantua Newcastlemax 209,529 2015 April-15
3 Star Poseidon Newcastlemax 209,475 2016 February-16
4 Maharaj Newcastlemax 209,472 2015 July-15
5 Star Ariadne (1) Newcastlemax 207,812 2017 March-17
6 Star Virgo (1) Newcastlemax 207,810 2017 March-17
7 Star Libra (1) Newcastlemax 207,765 2016 June-16
8 Star Marisa (1) Newcastlemax 207,709 2016 March-16
9 Leviathan Capesize 182,511 2014 September-14
10 Peloreus Capesize 182,496 2014 July-14
11 Star Martha Capesize 180,274 2010 October-14
12 Star Pauline Capesize 180,274 2008 December-14
13 Pantagruel Capesize 180,181 2004 July-14
14 Star Borealis Capesize 179,678 2011 September-11
15 Star Polaris Capesize 179,600 2011 November-11
16 Star Angie Capesize 177,931 2007 October-14
17 Big Fish Capesize 177,662 2004 July-14
18 Kymopolia Capesize 176,990 2006 July-14
19 Star Triumph (2) Capesize 176,343 2004 December-17
20 Big Bang Capesize 174,109 2007 July-14
21 Star Aurora Capesize 171,199 2000 September-10
22 Amami Post Panamax 98,681 2011 July-14
23 Madredeus Post Panamax 98,681 2011 July-14
24 Star Sirius Post Panamax 98,681 2011 March-14
25 Star Vega Post Panamax 98,681 2011 February-14
26 Star Angelina Kamsarmax 82,981 2006 December-14
27 Star Gwyneth Kamsarmax 82,790 2006 December-14
28 Star Kamila Kamsarmax 82,769 2005 September-14
29 Pendulum Kamsarmax 82,619 2006 July-14
30 Star Maria Kamsarmax 82,598 2007 November-14
31 Star Markella Kamsarmax 82,594 2007 September-14
32 Star Danai Kamsarmax 82,574 2006 October-14
33 Star Georgia Kamsarmax 82,298 2006 October-14
34 Star Sophia Kamsarmax 82,269 2007 October-14
35 Star Mariella Kamsarmax 82,266 2006 September-14
36 Star Moira Kamsarmax 82,257 2006 November-14
37 Star Nina Kamsarmax 82,224 2006 January-15
38 Star Renee Kamsarmax 82,221 2006 December-14
39 Star Nasia Kamsarmax 82,220 2006 August-14
40 Star Laura Kamsarmax 82,209 2006 December-14
41 Star Jennifer Kamsarmax 82,209 2006 April-15
42 Star Helena Kamsarmax 82,187 2006 December-14
43 Star Charis Kamsarmax 81,711 2013 March-17
44 Star Suzanna Kamsarmax 81,711 2013 May-17
45 Mercurial Virgo Kamsarmax 81,545 2013 July-14
46 Star Iris Panamax 76,466 2004 September-14
47 Star Emily Panamax 76,417 2004 September-14
48 Idee Fixe (1) Ultramax 63,458 2015 March-15
49 Roberta (1) Ultramax 63,426 2015 March-15
50 Laura (1) Ultramax 63,399 2015 April-15
51 Kaley (1) Ultramax 63,283 2015 June-15
52 Kennadi Ultramax 63,262 2016 January-16
53 Mackenzie Ultramax 63,226 2016 March-16
54 Star Challenger Ultramax 61,462 2012 December-13
55 Star Fighter Ultramax 61,455 2013 December-13
56 Star Lutas Ultramax 61,347 2016 January-16
57 Honey Badger Ultramax 61,320 2015 February-15
58 Wolverine Ultramax 61,292 2015 February-15
59 Star Antares Ultramax 61,258 2015 October-15
60 Star Acquarius Ultramax 60,916 2015 July-15
61 Star Pisces Ultramax 60,916 2015 August-15
62 Diva Supramax 56,582 2011 July-17
63 Strange Attractor Supramax 55,742 2006 July-14
64 Star Omicron Supramax 53,489 2005 April-08
65 Star Gamma Supramax 53,098 2002 January-08
66 Star Zeta Supramax 52,994 2003 January-08
67 Star Delta Supramax 52,434 2000 January-08
68 Star Theta Supramax 52,425 2003 December-07
69 Star Epsilon Supramax 52,402 2001 December-07
70 Star Cosmo Supramax 52,247 2005 July-08
71 Star Kappa Supramax 52,055 2001 December-07
Total dwt: 7,585,704
1. Subject to a bareboat charter accounted for as a capital lease.
2. On October 25, 2017 we entered into a definitive agreement with a third party to acquire the vessel Star Triumph, which is expected to be delivered to us in December 2017.

Newbuilding Vessels (As of November 20, 2017)

Newbuilding Vessels
Vessel Name Vessel Type Capacity
(dwt.)
Shipyard Expected Delivery
Date
1 HN 1342 (tbn Star Eleni) Newcastlemax 208,000 SWS, China Jan-18
2 HN 1361 (tbn Star Magnanimus) (1) Newcastlemax 208,000 SWS, China Jan-18
3 HN 1343 (tbn Star Leo) Newcastlemax 208,000 SWS, China Jan-18
Total dwt: 624,000
1. Subject to a bareboat charter that will be accounted for as a capital lease.

Third Quarter 2017 and 2016 Results (*)

(*) Amounts relating to variations in period-on-period comparisons shown in this section are derived from the actual numbers in our books and records.

For the third quarter of 2017, total net voyage revenues were $63.0 million, compared to $43.7 million for the third quarter of 2016. This increase was primarily driven by the rise in charterhire rates during the third quarter of 2017, which led to a TCE rate of $9,619 compared to a TCE rate of $6,885 for the third quarter of 2016, representing a 40% increase, as well as the slight increase in the average number of vessels in our fleet during the third quarter of 2017 of 70.7 compared to 69.5 during the third quarter of 2016. We refer you to footnote 7 under the heading “Summary of Selected Data” set forth below for information regarding our calculation of TCE rates.

For the third quarter of 2017, operating income was $4.9 million, which includes depreciation of $21.1 million. Operating loss of $30.2 million for the third quarter of 2016 included depreciation of $20.7 million, a non-cash impairment loss of $11.8 million and a net loss on sale of vessels of $8.4 million.

Net loss for the third quarter of 2017 was $7.4 million, or $0.12 loss per share, basic and diluted, calculated based on 63,652,049 weighted average basic and diluted shares. Net loss for the third quarter of 2016 was $39.4 million, or $0.86 loss per share, basic and diluted, calculated based on 45,734,704 weighted average basic and diluted shares.

Net loss for the third quarter of 2017 mainly included the following non-cash items, other than depreciation expense:

  • Stock-based compensation expense of $2.5 million, or $0.04 per share, basic and diluted, recognized in connection with common shares granted to our directors and employees; and
  • Unrealized gain on interest rate swaps of $0.4 million or $0.006 per share, basic and diluted.

Net loss for the third quarter of 2016 mainly included the following non-cash items, other than depreciation expense:

  • Stock-based compensation expense of $1.1 million, or $0.02 per share, basic and diluted, recognized in connection with common shares granted to our directors and employees;
  • Impairment loss of $11.8 million, or $0.26 per share, basic and diluted, recognized in anticipation of the sale of Star Aline, which was completed during the fourth quarter of 2016;
  • An aggregate net loss on sale of vessels of $8.4 million, or $0.18 per share, basic and diluted, primarily relating to the sale of Star Monisha, completed during the third quarter;
  • Unrealized gain on interest rate swaps of $2.5 million or $0.06 per share, basic and diluted; and
  • Write-off of unamortized deferred finance charges of $0.5 million or $0.01 per share, basic and diluted, in connection with the cancellation of a previous loan commitment.

Adjusted net loss for the third quarter of 2017, which excludes all non-cash items other than depreciation expense, was $5.3 million, or $0.08 loss per share, basic and diluted, compared to $20.3 million, or $0.44 loss per share, basic and diluted, for the third quarter of 2016. A reconciliation of Net income / (loss) to Adjusted Net income/ (loss) and Adjusted earnings / (loss) per share basic and diluted is set forth below in the financial tables contained in this release.

Adjusted EBITDA for the third quarter of 2017 and 2016, which excludes all non-cash items, was $28.6 million and $11.9 million, respectively. A reconciliation of EBITDA and Adjusted EBITDA to net cash provided by/(used in) operating activities is set forth below in the financial tables contained in this release.

For the third quarter of 2017 and 2016, vessel operating expenses were $26.5 million and $24.2 million, respectively. Vessel operating expenses for the third quarter of 2017 include one-time expenses, consisting mainly of pre-delivery and pre-joining expenses, of $0.8 million while no such expenses incurred during the third quarter of 2016. Excluding these expenses, our average daily operating expenses per vessel for the third quarter of 2017 and 2016 were $3,947 and $3,784, respectively.

Dry docking expenses for the third quarter of 2017 and 2016 were $0.7 million and $1.4 million, respectively. During the third quarter of 2017, one of our vessels completed its periodic dry docking survey, which had started during the second quarter of 2017. During the third quarter of 2016, two vessels underwent their periodic dry docking surveys.

General and administrative expenses for the third quarter of 2017 and 2016 were $7.8 million and $6.0 million, respectively. These expenses for the third quarter of 2017 include stock-based compensation expense of $2.5 million and legal fees of $0.2 million incurred in connection with the restructuring of our indebtedness. During the same quarter of 2016, general and administrative expenses included stock-based compensation expense of $1.1 million. Excluding the above-mentioned expenses, our average daily net cash general and administrative expenses per vessel (including all management fees) for the third quarter of 2017 and 2016 were $1,074 and $1,047, respectively.

During the third quarter of 2017 and 2016, we recognized other operational gain of $0.3 million and $1.3 million, respectively, consisting of gain from insurance claims.

Interest and finance costs for the third quarter of 2017 and 2016 were $13.1 million and $10.6 million, respectively. The increase is attributable to the increase in i) LIBOR between the corresponding periods and ii)the weighted average balance of our outstanding indebtedness to $1,049.3 million during the third quarter of 2017 compared to $977.8 million for the same period in 2016.

During the third quarter of 2017 we recorded an immaterial loss on derivative financial instruments, while during the third quarter of 2016, we recorded a gain on derivative financial instruments of $1.4 million, representing realized and unrealized gain on the five swaps that were not designated as accounting hedges during the corresponding period, due to the increase in LIBOR compared to previous period in 2016.

Nine months ended September 30, 2017 and 2016 Results (*)

(*) Amounts relating to variations in period — on — period comparisons shown in this section are derived from the actual numbers in our books and records.

For the nine months ended September 30, 2017, total net voyage revenues were $174.8 million, compared to $105.2 million for the nine months ended September 30, 2016. The increase in net voyage revenues was driven by the increase in charter hire rates during the corresponding periods. This increase led to a TCE rate of $9,199 for the nine months ended September 30, 2017, compared to a TCE rate of $5,617 for same period in 2016, representing a 64% increase, while the average number of vessels in our fleet during the nine months ended September 30, 2017 of 69.2 was slightly lower compared to 70.4 during the corresponding period in 2016. We refer you to footnote 7 under the heading “Summary of Selected Data” set forth below for information regarding our calculation of TCE rates.

For the nine months ended September 30, 2017, operating income was $1.6 million, which included depreciation of $61.5 million and a net loss on sale of vessels of $0.4 million. Operating loss of $85.9 million for the nine months ended September 30, 2016 included depreciation of $61.6 million, a non-cash impairment loss of $18.5 million and a net loss on sale of vessels of $8.4 million.

Net loss for the nine months ended September 30, 2017 was $33.7 million, or $0.54 loss per share, basic and diluted, calculated based on 62,681,807 weighted average basic and diluted shares. Net loss for the nine months ended September 30, 2016 was $121.1 million, or $2.72 loss per share, basic and diluted, calculated based on 44,503,221 weighted average basic and diluted shares.

Net loss for the nine months ended September 30, 2017 mainly included the following non-cash items, other than depreciation expense:

  • Stock-based compensation expense of $8.9 million, or $0.14 per share, basic and diluted, recognized in connection with common shares granted to our directors and employees;
  • Loss on sale of vessel of $0.4 million, or $0.01 per share, basic and diluted, in connection with the sale of Star Eleonora in March 2017;
  • Unrealized gain on interest rate swaps of $1.7 million or $0.03 per share, basic and diluted; and
  • Write-off of unamortized deferred finance charges of $0.4 million or $0.01 per share, basic and diluted, in connection with the cancellation of a previous loan commitment.

Net loss for the nine months ended September 30, 2016 mainly included the following items, other than depreciation expense:

  • Stock-based compensation expense of $3.4 million, or $0.08 per share, basic and diluted, recognized in connection with common shares granted to our directors and employees;
  • Impairment loss of $18.5 million, or $0.42 per share, basic and diluted, relating to (i) the sale of two operating vessels and (ii) the write-off of capitalized items for two newbuilding vessel contracts cancelled during the first quarter 2016;
  • An aggregate net loss on sale of vessels of $8.4 million, or $0.19 per basic and diluted share;
  • Write-off of unamortized deferred finance charges of $2.3 million or $0.05 per share, basic and diluted, in connection with: (i) the mandatory prepayment of outstanding amounts under several loans due to the sale of the corresponding mortgaged vessels and (ii) the cancellation of certain loan commitments resulting from (a) the sale of certain newbuilding vessels upon their delivery from the shipyards and (b) the termination of two newbuilding contracts; and
  • Unrealized gain on interest rate swaps of $0.3 million or $0.01 per share, basic and diluted.

Adjusted net loss for the nine months ended September 30, 2017, which excludes all non-cash items, other than depreciation expense, amounted to $25.8 million, or $0.41 loss per share, basic and diluted, compared to $88.8 million, or $1.99 loss per share, basic and diluted, for the nine months ended September 30, 2016. A reconciliation of Net income / (loss) to Adjusted Net income/ (loss) and Adjusted earnings / (loss) per share basic and diluted is set forth below in the financial tables contained in this release.

Adjusted EBITDA for the nine months ended September 30, 2017 and 2016, which excludes all non-cash items, was $72.4 million and $6.2 million, respectively. A reconciliation of EBITDA and Adjusted EBITDA to net cash provided by/(used in) operating activities is set forth below in the financial tables contained in this release.

For the nine months ended September 30, 2017 and 2016, vessel operating expenses were $76.0 million and $73.6 million, respectively. Vessel operating expenses for the respective periods include one-time expenses, consisting mainly of pre-delivery and pre-joining expenses, of $1.9 million and $1.8 million, respectively. Excluding these amounts, our average daily operating expenses per vessel for the nine months ended September 30, 2017 and 2016 were $3,926 and $3,722, respectively.

Dry docking expenses for the nine months ended September 30, 2017 and 2016 were $3.9 million and $3.0 million, respectively. During the nine months ended September 30, 2017, four vessels underwent and completed their periodic dry docking surveys during this period. During the same period in 2016, five vessels completed their respective dry docking surveys, two of which started in December 2015.

General and administrative expenses for the nine months ended September 30, 2017 and 2016 were $25.1 million and $19.3 million, respectively. These expenses for the nine months ended September 30, 2017 include stock-based compensation expense of $8.9 million and legal fees of $0.9 million incurred in connection with the restructuring of our indebtedness. During the nine months ended September 30, 2016, general and administrative expenses included stock-based compensation expense of $3.4 million and professional advisory services of $0.3 million that were not part of our ordinary course of business. Excluding the above mentioned stock-based compensation expense and one-time expenses, our average daily net cash general and administrative expenses per vessel (including all management fees) for the nine months ended September 30, 2017 and 2016, remained constant at $1,107 and $1,101, respectively.

During the nine months ended September 30, 2017, we recognized other operational gain of $2.8 million, resulting mainly from the settlement proceeds of a commercial dispute. During the nine months ended September 30, 2016 we recognized other operational gain of $1.4 million, consisting of gain from insurance claims.

Interest and finance costs for the nine months ended September 30, 2017 and 2016 were $36.9 million and $30.3 million, respectively. The increase is attributable to: (i) the increase in LIBOR between the corresponding periods, (ii) the increase in the weighted average balance of our outstanding indebtedness to $1,021.6 million during the nine months ended September 30, 2017 compared to $982.6 million for the same period in 2016, and (iii) the decrease of interest capitalized from general debt in connection with the payments made for our newbuilding vessels to $1.8 million from $3.3 million, respectively, which is recognized as credit in the interest and finance costs.

During the nine months ended September 30, 2017, we recorded a gain on derivative financial instruments of $0.01 million, while during the corresponding period in 2016 we recorded a loss on derivative financial instruments of $3.3 million in connection with our interest rate swaps that did not qualify for hedge accounting. The reversal of the aforementioned loss into gain is attributable to the increase in LIBOR.

Liquidity and Capital Resources

Cash Flows
Net cash provided by operating activities for the nine months ended September 30, 2017 was $38.5 million, whereas net cash used in operating activities for the nine months ended September 30, 2016 was $40.6 million.

The positive change is due to: (i) the general positive growth across the majority of our operational metrics as described above, which is reflected in the Adjusted EBITDA of $72.4 million for the nine months ended September 30, 2017 compared to Adjusted EBITDA of $6.2 million for the corresponding period in 2016, and (ii) a working capital inflow of $0.6 million during the nine months ended September 30, 2017 compared to a $14.0 million working capital outflow for the nine months ended September 30, 2016. The increase was partially offset by higher interest expense for the nine months ended September 30, 2017 compared to the corresponding period in 2016.

Net cash used in investing activities for the nine months ended September 30, 2017 and 2016 was $118.2 million and $12.6 million, respectively.

For the nine months ended September 30, 2017, net cash used in investing activities consisted of:

  • $127.4 million paid for advances and other capitalized expenses for our newbuilding and newly delivered vessels;

offset partially by:

  • $7.6 million of proceeds from the sale of Star Eleonora;
  • $1.4 million of hull and machinery insurance proceeds; and
  • a net decrease of $0.2 million in restricted cash, as required under our loan agreements

For the nine months ended September 30, 2016, net cash used in investing activities consisted of:

  • $388.7 million paid for advances and other capitalized expenses for our newbuilding and newly delivered vessels;

offset partially by:

  • $154.3 million of proceeds from the sale of vessels;
  • $220.3 million of proceeds from the sale of certain newbuilding vessels, which were sold upon their delivery from the shipyard;
  • $1.3 million of hull and machinery insurance proceeds; and
  • a net decrease of $0.1 million in restricted cash required under our loan agreements.

Net cash provided by financing activities for the nine months ended September 30, 2017 and 2016 was $133.5 million and $28.4 million, respectively.

For the nine months ended September 30, 2017, net cash provided by financing activities consisted of:

  • $79.9 million increase in capital lease obligations, relating to two delivered newbuilding vessels, under bareboat charters;
  • $30.8 million of proceeds drawn under a loan facility used for the financing of Star Charis and Star Suzanna and the refinancing of the Heron Vessels Facility (as defined in our 2016 20-F) ;and
  • $50.4 million of proceeds, net of aggregate private placement agent’s fees and expenses of $1.0 million, from a private placement of our common shares completed in February 2017;

offset partially by:

  • $12.0 million paid in aggregate in connection with the regular amortization of outstanding vessel financings, capital lease installments, the partial prepayment of a loan facility due to the sale of Star Eleonora and the prepayment to the banks of an amount equal to 20% of the equity used for the acquisition of three vessels during the period;
  • $14.8 million used for the prepayment in full of the Heron Vessels Facility; and
  • $0.9 million of financing fees, paid in connection with the restructuring of our indebtedness and the new facility used for the financing of Star Charis and Star Suzanna and the refinancing of the Heron Vessels Facility;

For the nine months ended September 30, 2016, net cash provided by financing activities consisted of:

  • $50.3 million of proceeds, net of underwriting discounts and commissions of $0.9 million and offering expenses of $0.3 million, from a public offering of our common shares completed in September 2016;
  • an aggregate of $65.4 million of proceeds from loan facilities for the financing of delivery installments for four of our newbuilding vessels delivered during this period; and
  • an $86.4 million increase in capital lease obligations, relating to two delivered newbuilding vessels under bareboat charters.

offset partially by:

  • $173.5 million paid in aggregate in connection with the regular amortization of outstanding vessel financings, capital lease installments and mandatory prepayment of several loan facilities due to the sale of the corresponding mortgaged vessels;
  • $0.2 million of financing fees, paid in connection with the restructuring of our indebtedness.

Summary of Selected Data

(TCE rates expressed in U.S. dollars)
Third quarter Third quarter
2017 2016
Average number of vessels (1) 70.7 69.5
Number of vessels (2) 71 69
Average age of operational fleet (in years) (3) 8.0 7.7
Ownership days (4) 6,509 6,396
Available days (5) 6,551 6,343
Fleet utilization (6) 99.9% 97.8%
Daily Time Charter Equivalent Rate (7) $9,619 $6,885
Average daily OPEX per vessel (8) $4,067 $3,784
Average daily OPEX per vessel (excl. pre-delivery expenses) $3,947 $3,784
Nine months ended Nine months ended
September 30, 2017 September 30, 2016
Average number of vessels (1) 69.2 70.4
Number of vessels (2) 71 69
Average age of operational fleet (in years) (3) 8.0 7.7
Ownership days (4) 18,892 19,292
Available days (5) 19,007 18,781
Fleet utilization (6) 99.4% 96.0%
Daily Time Charter Equivalent Rate (7) $9,199 $5,617
Average daily OPEX per vessel (8) $4,024 $3,813
Average daily OPEX per vessel (excl. pre-delivery expenses) $3,926 $3,722

(1) Average number of vessels is the number of vessels that constituted our operating fleet for the relevant period, as measured by the sum of the number of days each operating vessel was a part of our operating fleet during the period divided by the number of calendar days in that period.
(2) As of the last day of the periods reported.
(3) Average age of operational fleet is calculated as of the end of each period.
(4) Ownership days are the total calendar days each vessel in the fleet was owned by us
for the relevant period.
(5) Available days for the fleet are the ownership and charter-in days after subtracting off-hire days for major repairs, dry docking or special or intermediate surveys and lay-up days, if any.
(6) Fleet utilization is calculated by dividing available days by ownership days plus charter-in days for the relevant period.
(7) Represents the weighted average daily TCE rates of our entire fleet. TCE rate is a measure of the average daily revenue performance of a vessel on a per voyage basis. Our method of calculating TCE rate is determined by dividing voyage revenues (net of voyage expenses and amortization of fair value of above/below market acquired time charter agreements) by available days for the relevant time period. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by the charterer under a time charter contract, as well as commissions. TCE rate is 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., voyage charters, time charters and bareboat charters) under its vessels may be employed between the periods. We included TCE revenues, a non-GAAP measure, as it provides additional meaningful information in conjunction with voyage revenues, the most directly comparable GAAP measure, and it assists our management in making decisions regarding the deployment and use of our operating vessels and in evaluating our financial performance.
(8) Average daily OPEX per vessel is calculated by dividing vessel operating expenses by ownership days.

Unaudited Consolidated Statement of Operations

(Expressed in thousands of U.S. dollars except for share and per share data) Third quarter 2017 Third quarter 2016 Nine months ended September 30, 2017 Nine months ended September 30, 2016
Revenues:
Voyage revenues $ 80,798 $ 59,884 $ 224,269 $ 158,746
Management fee income 28 119
Total revenues 80,798 59,912 224,269 158,865
Expenses:
Voyage expenses (17,781 ) (16,217 ) (49,430 ) (53,501 )
Charter-in hire expense (461 ) (777 ) (2,197 ) (2,695 )
Vessel operating expenses (26,469 ) (24,202 ) (76,029 ) (73,566 )
Dry docking expenses (652 ) (1,448 ) (3,900 ) (3,031 )
Depreciation (21,107 ) (20,746 ) (61,494 ) (61,593 )
Management fees (1,929 ) (1,869 ) (5,618 ) (5,780 )
General and administrative expenses (7,779 ) (5,957 ) (25,095 ) (19,255 )
Gain/(Loss) on forward freight agreements (541 ) 283
Impairment loss (11,843 ) (18,537 )
Other operational loss 28 3 (723 ) (106 )
Other operational gain 319 1,344 2,780 1,394
Gain/(Loss) on sale of vessels (28 ) (8,365 ) (398 ) (8,386 )
Operating income/(loss) 4,939 (30,165 ) 1,624 (85,908 )
Interest and finance costs (13,107 ) (10,603 ) (36,873 ) (30,297 )
Interest and other income/(loss) 794 354 2,017 508
Gain/(Loss) on derivative financial instruments (33 ) 1,396 67 (3,285 )
Loss on debt extinguishment (28 ) (451 ) (386 ) (2,252 )
Total other expenses, net (12,374 ) (9,304 ) (35,175 ) (35,326 )
Income/(Loss) before equity in investee (7,435 ) (39,469 ) (33,551 ) (121,234 )
Equity in income/(loss) of investee 60 63 64 132
Income/(Loss) before taxes $ (7,375 ) $ (39,406 ) $ (33,487 ) $ (121,102 )
US Source Income taxes (51 ) (168 )
Net income/(loss) $ (7,426 ) $ (39,406 ) $ (33,655 ) $ (121,102 )
Earnings/(loss) per share, basic $ (0.12 ) $ (0.86 ) $ (0.54 ) $ (2.72 )
Earnings/(loss) per share, diluted $ (0.12 ) $ (0.86 ) $ (0.54 ) $ (2.72 )
Weighted average number of shares outstanding, basic 63,652,049 45,734,704 62,681,807 44,503,221
Weighted average number of shares outstanding, diluted 63,652,049 45,734,704 62,681,807 44,503,221

Unaudited Consolidated Condensed Balance Sheets

(Expressed in thousands of U.S. dollars)
ASSETS September 30, 2017 December 31, 2016
Cash and cash equivalents $ 235,551 $ 181,758
Other current assets 50,622 46,708
TOTAL CURRENT ASSETS 286,173 228,466
Advances for vessels under construction and acquisition of vessels and other assets 46,615 64,570
Vessels and other fixed assets, net 1,786,391 1,707,209
Other non-current assets 9,454 11,457
TOTAL ASSETS $ 2,128,633 $ 2,011,702
Current portion of long-term debt and lease commitments (*) $ 80,819 $ 6,235
Other current liabilities 27,551 21,884
TOTAL CURRENT LIABILITIES 108,370 28,119
Long-term debt and lease commitments non-current(net of unamortized deferred finance fees of $7,731 and $9,253, respectively) 907,183 896,332
8% 2019 Senior Notes (net of unamortized deferred finance fees of $919 and $1,243, respectively) 49,081 48,757
Other non-current liabilities 490 1,264
TOTAL LIABILITIES $ 1,065,124 $ 974,472
STOCKHOLDERS’ EQUITY 1,063,509 1,037,230
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,128,633 $ 2,011,702

*The current portion of long term debt and lease commitments includes an amount of approximately $4.8 million that we expect to pay to our lenders through the cash sweep mechanism set in place as part of restructuring of our indebtedness.

Unaudited Cash Flow Data

(Expressed in thousands of U.S. dollars) Nine months ended September 30, 2017 Nine months ended September 30, 2016
Net cash provided by / (used in) operating activities $ 38,475 $ (40,628 )
Net cash provided by / (used in) investing activities (118,173 ) (12,599 )
Net cash provided by / (used in) financing activities 133,491 28,370

EBITDA and Adjusted EBITDA Reconciliation

We consider EBITDA to represent net income before interest, income taxes, depreciation and amortization. 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, or U.S. GAAP, and our calculation of EBITDA may not be comparable to that reported by other companies. EBITDA is included herein because it is a basis upon which we assess our liquidity position, because it is a measure used by our lenders as a measure of our compliance with certain loan covenants and because we believe that it presents useful information to investors regarding our ability to service and/or incur indebtedness.

To derive Adjusted EBITDA from EBITDA and Adjusted Net income/(loss) from Net income/(loss), we excluded certain gains/losses such as those related to sale of vessels, stock-based compensation expense, the write-off of the unamortized fair value of above-market acquired time charters, impairment losses, change in fair value of forward freight agreements and the equity in income/(loss) of investee. We excluded the items described above when deriving Adjusted EBITDA and Adjusted Net income/(loss) because we believe that these items do not reflect the ongoing operational cash inflows and outflows of our fleet.

The following table reconciles net cash provided by operating activities to EBITDA and Adjusted EBITDA:

(Expressed in thousands of U.S. dollars) Third quarter 2017 Third quarter 2016 Nine months ended September 30, 2017 Nine months ended September 30, 2016
Net cash provided by/(used in) operating activities $ 18,139 $ (4,656 ) $ 38,475 $ (40,628 )
Net decrease / (increase) in current assets 1,832 (522 ) 6,481 4,188
Net increase / (decrease) in operating liabilities, excluding current portion of long term debt (3,981 ) 4,917 (7,138 ) 9,645
Impairment loss (11,843 ) (18,537 )
Loss on debt extinguishment (28 ) (451 ) (386 ) (2,252 )
Stock – based compensation (2,493 ) (1,099 ) (8,853 ) (3,384 )
Amortization of deferred finance charges (687 ) (628 ) (1,975 ) (2,189 )
Unrealized and accrued gain/(loss) on derivative financial instruments 533 3,905 1,239 2,100
Change in fair value of forward freight agreements (41 )
Total other expenses, net 12,374 9,304 35,175 35,326
Gain on hull and machinery claims 319 319
Income tax 51 168
Gain/(Loss) on sale of vessel (28 ) (8,365 ) (398 ) (8,386 )
Equity in income/(loss) of investee 60 63 64 132
EBITDA $ 26,091 $ (9,375 ) $ 63,130 $ (23,985 )
Less:
Equity in income of investee (60 ) (63 ) (64 ) (132 )
Plus:
Stock-based compensation 2,493 1,099 8,853 3,384
Change in fair value of forward freight agreements 41
Impairment loss 11,843 18,537
Loss on sale of vessel 28 8,365 398 8,386
Adjusted EBITDA $ 28,552 $ 11,869 $ 72,358 $ 6,190

Net income / (loss) and Adjusted Net income / (loss) Reconciliation

(Expressed in thousands of U.S. dollars) Third quarter 2017 Third quarter 2016 Nine months ended September 30, 2017 Nine months ended September 30, 2016
Net income / (loss) $ (7,426 ) $ (39,406 ) $ (33,655 ) $ (121,102 )
Amortization of fair value of above market acquired time charter agreements 254
Stock – based compensation 2,493 1,099 8,853 3,384
Unrealized (gain) / loss on forward freight agreements 41
Unrealized (gain) / loss on derivative financial instruments (369 ) (2,537 ) (1,743 ) (281 )
(Gain) / loss on sale of vessel 28 8,365 398 8,386
Vessel impairment loss 11,843 18,537
Amortization of deferred gain (15 ) (19 ) (52 ) (56 )
Loss on debt extinguishment 28 451 386 2,252
Equity in income/(loss) of investee (60 ) (63 ) (64 ) (132 )
Adjusted Net income / (loss) $ (5,321 ) $ (20,267 ) $ (25,836 ) $ (88,758 )
Weighted average number of shares outstanding,basic and diluted 63,652,049 45,734,704 62,681,807 44,503,221
Adjusted Basic and Diluted Earnings / (Loss) Per Share $ (0.08 ) $ (0.44 ) $ (0.41 ) $ (1.99 )

Voyage Revenues to Daily Time Charter Equivalent (“TCE”) Reconciliation

(In thousands of U.S. Dollars, except as otherwise stated)
Third quarter 2017 Third quarter 2016 Nine months ended September 30, 2017 Nine months ended September 30, 2016
Voyage revenues $ 80,798 $ 59,884 $ 224,269 $ 158,746
Less:
Voyage expenses (17,781 ) (16,217 ) (49,430 ) (53,501 )
Amortization of fair value of below/above market acquired time charter agreements 254
Time Charter equivalent revenues $ 63,017 $ 43,667 $ 174,839 $ 105,499
Available days for fleet 6,551 6,343 19,007 18,781
Daily Time Charter Equivalent Rate (“TCE”) $ 9,619 $ 6,885 $ 9,199 $ 5,617

Conference Call details:

Our management team will host a conference call to discuss our financial results on Monday, November 20, 2017 at 11:00 a.m., Eastern Time (ET).

Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1(866) 819-7111 (from the US), 0(800) 953-0329 (from the UK) or + (44) (0) 1452 542 301 (from outside US). Please quote “Star Bulk.”

A replay of the conference call will be available until Monday, November 27, 2017. The United States replay number is 1(866) 247-4222; from the UK 0(800) 953-1533; the standard international replay number is (+44) (0) 1452 550 000 and the access code required for the replay is: 3128607#.

LEAVE A COMMENT

×

Comments are closed.