Star Bulk profitable for fourth consecutive quarter

Pappas

Star Bulk Carriers Corp., a global shipping company focusing on the transportation of dry bulk cargoes, announced its unaudited financial and operating results for the third quarter and the nine months ended September 30, 2018.

Petros Pappas, Chief Executive Officer of Star Bulk, commented:

“This quarter marks the fourth consecutive profitable one, as we achieved $128.7 million in TCE Revenues, $80.1 million in Adjusted EBITDA and Net Income of $26.1 million. Our average TCE for the quarter continued to increase quarter on quarter to $14,521/day per vessel, while daily OPEX per vessel were at $4,054/day and Net Cash G&A expenses decreased to $918/day as a result of synergies from managing a larger fleet. As of today, we have fixed a minimum of 74% of Q4 2018 days at average TCE rates of $14,047 / day.

During this quarter, we repaid all outstanding deferred debt amounts originating from the September 2016 restructuring of our finance agreements. We have also concluded the refinancing of loans of approximately $617 million with new debt financing totaling over $625 million, smoothening our maturity profile, reducing our interest cost by 70 bps and expanding our banking group with prominent European and Asian financial institutions. We have also effectively eliminated all debt maturities for 2018 and 2019.

In light of the upcoming IMO regulations, we are proceeding with the retrofitting of our entire fleet with scrubbers before the end of 2019, ensuring compliance ahead of the January 1st 2020 implementation date.”

Financial Highlights

(Expressed in thousands of U.S. dollars,
except for daily rates and per share data)
Third quarter 2018 Third quarter 2017 Nine months ended September 30, 2018 Nine months ended September 30, 2017
Voyage Revenues $188,467 $80,798 $442,128 $224,269
Net income/(loss) $26,054 ($7,426) $46,682 ($33,655)
Net cash provided by operating activities $48,086 $18,139 $109,173 $38,259
EBITDA (1) $75,603 $26,091 $169,440 $63,130
Adjusted EBITDA (1) $80,058 $28,552 $178,508 $72,358
Adjusted Net income / (loss)  (2) $30,546 ($5,321) $55,782 ($25,836)
Earnings / (loss) per share basic $0.30 ($0.12) $0.65 ($0.54)
Earnings / (loss) per share diluted $0.30 ($0.12) $0.65 ($0.54)
Adjusted earnings / (loss) per share basic (2) $0.35 ($0.08) $0.78 ($0.41)
Adjusted earnings / (loss) per share diluted (2) $0.35 ($0.08) $0.77 ($0.41)
Average Number of Vessels   98.2   70.7   81.4   69.2
TCE Revenues (3) $128,726 $62,556 $299,038 $172,642
Daily Time Charter Equivalent Rate (“TCE”) (3) $14,521 $9,621 $13,605 $9,194
Fleet utilization 98.4% 99.9% 99.1% 99.4%
Average daily OPEX per vessel (4) $4,054 $4,067 $4,066 $4,024
Average daily Net Cash G&A expenses per vessel (5) $918 $1,100 $1,019 $1,143

(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).

(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”) and TCE Revenues are non-GAAP measures. 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 OPEX per vessel is calculated by dividing vessel operating expenses by Ownership days.

(5)  Average daily Net Cash G&A expenses per vessel is calculated by (1) deducting the Management fee Income (if any), from, and (2) adding the Management fee expense to, the General and Administrative expenses (net of stock-based compensation expense) and (3) then dividing the result by the sum of Ownership days and Charter-in days.

Recent Developments

DEBT FINANCING UPDATE

  • We have recently repaid all outstanding deferred debt amounts originating from the September 2016 restructuring of our finance agreements. We currently have no restrictions on vessel acquisitions or the incurrence of new debt and are free to make dividend payments to our shareholders from January 1, 2019 onwards.
  • We have also concluded the refinancing of the existing loans of approximately $617 million with new debt financing totaling over $625 million (“New Debt Financing”). The proceeds of the New Debt Financing is financing 59 vessels of all types, ranging from Newcastlemaxes down to Supramaxes, with an average age of 10.2 years. Through the New Debt Financing, we have been able to expand our banking group to include additional European and Asian financial institutions, and reduce our cost of debt as the interest margin on the New Debt Financing is 70 bps lower than the weighted average interest margin on the refinanced debt.

VESSEL DELIVERIES’ UPDATE

  • On October 10th we have taken delivery of the vessel M/V Star Bright, a 2010 built Supramax vessel, as part of the previously announced transaction for the acquisition of three firm plus four optional vessels from E.R. Capital Holding GmbH KG.
  • As part of the renewal of our fleet, on November 16th we have taken delivery of the vessel M/V Star Anna, a 2015 built Ultramax vessel, which has been acquired from a third party.

CHANGES TO OUR BOARD OF DIRECTORS

  • We appointed Ms. Emily Stephens to our Board of Directors as Class B Director and member of our Nomination and Corporate Governance Committee. Ms.  Emily Stephens serves as a managing Director in the Distressed Dept. group of Oaktree and has previously served on our Board for the period July 2014 – February 2015. Ms. Stephens fills the seat made vacant by the resignation of Ms. Jennifer Box, an Oaktree designee, who had been a director of Star Bulk and member of our Nomination and Corporate Governance Committee since February 2015. The number of Directors constituting the Board of Directors remains at ten (10).

Employment update

As of today, we have fixed employment for approximately 74% of the days in Q4 2018 at average TCE rates of $14,047 per day.

More specifically:

Capesize / Newcastlemax Vessels: approximately 59% of Q4 2018 days at $19,156 per day.

Post Panamax / Kamsarmax / Panamax Vessels: approximately 79% of Q4 2018 days at $13,026 per day.

Ultramax / Supramax Vessels: approximately 82% of Q4 2018 days at $11,413 per day.

Existing On the Water Fleet (As of November 20, 2018)

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 ABOY Sienna (1) Newcastlemax 208,000 2017 August-18
6 ABOY Laetitia (1) Newcastlemax 208,000 2017 August-18
7 ABOY Karlie (1) Newcastlemax 208,000 2016 August-18
8 Star Leo (1) Newcastlemax 207,939 2018 May-18
9 Star Ariadne (1) Newcastlemax 207,812 2017 March-17
10 Star Virgo (1) Newcastlemax 207,810 2017 March-17
11 Star Libra (1) Newcastlemax 207,765 2016 June-16
12 Star Marisa (1) Newcastlemax 207,709 2016 March-16
13 Star Eleni (1) Newcastlemax 207,555 2018 January-18
14 Star Magnanimus (1) Newcastlemax 207,490 2018 March-18
15 Leviathan Capesize 182,511 2014 September-14
16 Peloreus Capesize 182,496 2014 July-14
17 Star Claudine (ex-Songa Claudine) (1) Capesize 181,258 2011 July-18
18 Star Ophelia (ex-Songa Opus) (1) Capesize 180,706 2010 July-18
19 Star Martha Capesize 180,274 2010 October-14
20 Star Pauline Capesize 180,274 2008 December-14
21 Pantagruel Capesize 180,181 2004 July-14
22 Star Borealis Capesize 179,678 2011 September-11
23 Star Polaris Capesize 179,600 2011 November-11
24 Star Lyra (ex-Songa Mountain) (1) Capesize 179,150 2009 July-18
25 ABY Scarlett Capesize 178,000 2014 August-18
26 Star Angie Capesize 177,931 2007 October-14
27 Big Fish Capesize 177,662 2004 July-14
28 Kymopolia Capesize 176,990 2006 July-14
29 Star Triumph Capesize 176,343 2004 December-17
30 ABYO Audrey Capesize 175,125 2011 August-18
31 Big Bang Capesize 174,109 2007 July-14
32 Star Aurora Capesize 171,199 2000 September-10
33 Paola Mini-Capesize 115,259 2011 August-18
34 ABML Eva Mini-Capesize 106,659 2011 August-18
35 Amami Post Panamax 98,681 2011 July-14
36 Madredeus Post Panamax 98,681 2011 July-14
37 Star Sirius Post Panamax 98,681 2011 March-14
38 Star Vega Post Panamax 98,681 2011 February-14
39 Star Piera (ex-Piera) Post-Panamax 91,951 2010 August-18
40 Star Despoina (ex-Maria Laura Prima) Post Panamax 91,945 2010 August-18

Existing On the Water Fleet (As of November 20, 2018) – continued

Vessel Name Vessel Type Capacity
(dwt.)
Year Built  Date Delivered to Star Bulk
41 Star Electra (ex-AOM Aphrodite) Post Panamax 91,827 2011 August-18
42 Songa Hirose (1) Kamsarmax 83,494 2011 July-18
43 ABY Jeannette Kamsarmax 83,000 2014 August-18
44 Star Angelina Kamsarmax 82,981 2006 December-14
45 Star Gwyneth Kamsarmax 82,790 2006 December-14
46 Star Kamila Kamsarmax 82,769 2005 September-14
47 Star Genesis (ex- Songa Genesis) (1) Kamsarmax 82,705 2010 July-18
48 Star Luna (ex-Songa Maru) (1) Kamsarmax 82,687 2008 July-18
49 Star Bianca (ex-Songa Grain) (1) Kamsarmax 82,672 2008 July-18
50 Pendulum Kamsarmax 82,619 2006 July-14
51 Star Maria Kamsarmax 82,598 2007 November-14
52 Star Markella Kamsarmax 82,594 2007 September-14
53 Star Danai Kamsarmax 82,574 2006 October-14
54 Star Georgia Kamsarmax 82,298 2006 October-14
55 Star Sophia Kamsarmax 82,269 2007 October-14
56 Star Mariella Kamsarmax 82,266 2006 September-14
57 Star Moira Kamsarmax 82,257 2006 November-14
58 Star Nina Kamsarmax 82,224 2006 January-15
59 Star Renee Kamsarmax 82,221 2006 December-14
60 Star Nasia Kamsarmax 82,220 2006 August-14
61 Star Laura Kamsarmax 82,209 2006 December-14
62 Star Jennifer Kamsarmax 82,209 2006 April-15
63 Star Helena Kamsarmax 82,187 2006 December-14
64 Star Mona (ex-Songa Moon) (1) Kamsarmax 82,158 2012 July-18
65 Songa Hadong (1) Kamsarmax 82,158 2012 July-18
66 ABY Asia (1) Kamsarmax 82,000 2017 August-18
67 Songa Devi (1) Kamsarmax 81,918 2014 July-18
68 Star Charis Kamsarmax 81,711 2013 March-17
69 Star Suzanna Kamsarmax 81,711 2013 May-17
70 Mercurial Virgo Kamsarmax 81,545 2013 July-14
71 Stardust (ex-Songa Delmar) (1) Kamsarmax 81,501 2011 July-18
72 Songa Sky (1) Kamsarmax 81,466 2010 July-18
73 Star Lydia (ex-Lydia Cafiero) Kamsarmax 81,187 2013 August-18
74 Star Nicole (ex-Nicole) Kamsarmax 81,120 2013 August-18
75 ABY Virginia Kamsarmax 81,000 2015 August-18
76 Star Flame (ex-Songa Flama) (1) Kamsarmax 80,448 2011 July-18
77 Star Iris Panamax 76,466 2004 September-14
78 Star Emily Panamax 76,417 2004 September-14
79 Idee Fixe (1) Ultramax 63,458 2015 March-15
80 Roberta (1) Ultramax 63,426 2015 March-15

Existing On the Water Fleet (As of November 20, 2018) – continued

Vessel Name Vessel Type Capacity
(dwt.)
Year Built  Date Delivered to Star Bulk
81 Laura (1) Ultramax 63,399 2015 April-15
82 Kaley (1) Ultramax 63,283 2015 June-15
83 Kennadi Ultramax 63,262 2016 January-16
84 Mackenzie Ultramax 63,226 2016 March-16
85 Star Anna Ultramax 63,000 2015 November-18
86 Star Wave (ex-Songa Wave) (1) Ultramax 61,491 2017 July-18
87 Star Challenger Ultramax 61,462 2012 December-13
88 Star Fighter Ultramax 61,455 2013 December-13
89 Star Lutas Ultramax 61,347 2016 January-16
90 Honey Badger Ultramax 61,320 2015 February-15
91 Wolverine Ultramax 61,292 2015 February-15
92 Star Antares Ultramax 61,258 2015 October-15
93 Star Aquarius Ultramax 60,916 2015 July-15
94 Star Pisces Ultramax 60,916 2015 August-15
95 ABY Monica Ultramax 60,000 2015 August-18
96 Songa Glory (1) Supramax 58,680 2012 July-18
97 Diva Supramax 56,582 2011 July-17
98 Strange Attractor Supramax 55,742 2006 July-14
99 Star Bright Supramax 55,600 2010 October-18
100 Star Omicron Supramax 53,489 2005 April-08
101 Star Gamma Supramax 53,098 2002 January-08
102 Star Zeta Supramax 52,994 2003 January-08
103 Star Delta Supramax 52,434 2000 January-08
104 Star Theta Supramax 52,425 2003 December-07
105 Star Epsilon Supramax 52,402 2001 December-07
106 Star Cosmo Supramax 52,247 2005 July-08
107 Star Kappa Supramax 52,055 2001 December-07
Total dwt: 11,752,853

Newbuilding Vessels

    Vessel Name   Vessel Type   Capacity
(dwt.)
  Shipyard   Expected delivery date
1 HN 1388 (tbn Katie K) (1) Newcastlemax 208,000 SWS Jan-19
2 HN 1389 (tbn Debbie H) (1) Newcastlemax 208,000 SWS Feb-19
3 HN 1390 (tbn Ocean Ayesha) (1) Newcastlemax 208,000 SWS Mar-19
624,000

(1)  Subject to a bareboat charter with purchase obligation at the expiration of the bareboat term.

Third Quarter 2018 and 2017 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.

Total revenues for the third quarter of 2018 increased to $188.5 million from $80.8 million in the third quarter of 2017. For the third quarter of 2018, time charter equivalent revenues (“TCE Revenues”) (total voyage revenues net of voyage expenses, charter-in hire expense, amortization of below market acquired time charter and provision for onerous contracts) were $128.7 million, compared to $62.6 million for the third quarter of 2017. This increase was primarily attributable to the significant rise in charter hire rates, which led to a TCE rate of $14,521 for the third quarter of 2018 compared to a TCE rate of $9,621 for the third quarter of 2017, representing a 51% increase. TCE Revenues also increased as a result of an increase in the average number of vessels in our fleet to 98.2 in the third quarter of 2018, up from 70.7 in the third quarter of 2017, mostly increase in larger dwt capacity vessels, following the previously announced fleet acquisitions.

Absent the adoption of the new revenue recognition standard (ASC 606) in January 2018, which has only prospective application with no effect on prior year figures, our TCE rate for the third quarter of 2018 would have been $14,812.

For the third quarter of 2018, operating income was $47.5 million, which includes depreciation of $28.8 million. Operating income of $4.9 million for the third quarter of 2017 included depreciation of $21.1 million. Depreciation increased during the third quarter of 2018 due to a higher average number of vessels in our fleet.

Net income for the third quarter of 2018 was $26.1 million, or $0.30 earnings per share, basic and diluted, based on 87,025,267 weighted average basic shares and 87,430,711 weighted average diluted shares, respectively. Net loss for the third quarter of 2017 was $7.4 million, or $0.12 loss per share, basic and diluted, based on 63,652,049 weighted average basic and diluted shares.

Net income for the third quarter of 2018 mainly included the following non-cash items, other than depreciation expense:

  • Stock-based compensation expense of $2.7 million, or $0.03 per share, basic and diluted, recognized in connection with common shares granted to our directors and employees;
  • Unrealized loss on forward freight agreements and bunker swaps of $1.3 million, or $0.01 per share, basic and diluted;
  • Loss on debt extinguishment of $1.4 million, or $0.02 per share, basic and diluted, recognized in connection with the refinancing of certain of our debt facilities;
  • Unrealized gain on derivative financial instruments of $0.7 million or $0.01 per share, basic and diluted;
  • Amortization of the fair value of below market acquired time charters of $0.7 million, or $0.01 per share, basic and diluted, associated with time charters attached to two vessels acquired during the third fiscal quarter. These below market time charters are amortized over the duration of each respective time charter agreement as an increase to voyage revenues; and
  • Provision for onerous contracts of $0.5 million, or $0.01 per share, basic and diluted, associated with one subleased vessel.

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 $0.01 per share, basic and diluted.

Adjusted net income for the third quarter of 2018, which excludes all non-cash items other than depreciation expense, was $30.5 million, or $0.35 earnings per share, basic and diluted, compared to adjusted net loss of $5.3 million, or $0.08 loss per share, basic and diluted, for the third quarter of 2017. 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 2018 and 2017, which excludes all non-cash items, was $80.1 million and $28.6 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 2018 and 2017, vessel operating expenses were $36.6 million and $26.5 million, respectively. This increase was primarily due to the increase in the average number of vessels to 98.2 from 70.7. Vessel operating expenses for the third quarter of 2017 include pre-delivery and pre-joining expenses of $0.8 million while during the third quarter of 2018 no significant pre-delivery and pre-joining expenses were incurred. Excluding these expenses, our average daily operating expenses per vessel for the third quarter of 2018 were $4,054, compared to $3,947 for the same period in 2017.

Dry docking expenses for the third quarters of 2018 and 2017 were $2.6 million and $0.7 million, respectively. During the third quarter of 2018, three of our vessels underwent their periodic dry docking surveys, while 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.

General and administrative expenses for the third quarters of 2018 and 2017 were $9.0 million and $7.8 million, respectively. The formation of our new subsidiary, Star Logistics, and the increase of the number of our employees due to the recent expansion of our fleet during the third quarter of 2018 compared to the corresponding period in 2017, resulted in higher wage expenses. Further, the expenses incurred in connection with the listing of the Company on the Oslo Stock Exchange, as well as the increase in IT expenses, resulted in increased general and administrative expenses. Additionally, general and administrative expenses for the third quarter of 2018 include stock-based compensation expense of $2.7 million. During the same quarter of 2017, general and administrative expenses included stock-based compensation expense of $2.5 million and legal fees of $0.2 million in connection with the restructuring of our indebtedness. Excluding these costs, our average daily net cash general and administrative expenses per vessel (including management fees) for the third quarter of 2018 were reduced to $918 from $1,066, during the third quarter of 2017.

Charter-in hire expense for the third quarters of 2018 and 2017 was $27.1 million and $0.5 million, respectively. The increase in charter-in hire expense was due to an increase in charter-in days to 1,511 in the third quarter of 2018, attributable to the activities of our new subsidiary Star Logistics, which was created in the fourth quarter of 2017 from 49 in the third quarter of 2017, attributable to the charter-in of the vessel Astakos.

Management fees for the third quarters of 2018 and 2017 were $3.4 million and $1.9 million, respectively. The increase is attributable to the new management agreements entered into in connection with the recently acquired fleets.

Interest and finance costs net of interest and other income/ (loss) for the third quarters of 2018 and 2017 were $20.7 million and $12.3 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 of $1,376.2 million during the third quarter of 2018 compared to $1,049.3 million for the same period in 2017.

During the third quarter of 2018, we recorded $1.4 million of loss on debt extinguishment in connection with the non-cash write-off of unamortized debt issuance costs following the refinancing of certain of our facilities discussed above in the section “Recent Developments”.

Nine months ended September 30, 2018 and 2017 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.

Total revenues for the nine months ended September 30, 2018 increased to $442.1 million from $224.3 million in the corresponding period in 2017. For the nine months ended September 30, 2018, TCE Revenues were $299.0 million, compared to $172.6 million for the nine months ended September 30, 2017. This increase was primarily attributable to the significant rise in charter hire rates, which led to a TCE rate of $13,605 for the nine months ended September 30, 2018 compared to a TCE rate of $9,194 for the nine months ended September 30, 2017, representing a 48% increase. TCE Revenues also increased as a result of an increase in the average number of vessels in our fleet to 81.4 in the nine months ended September 30, 2018, up from 69.2 in the nine months ended September 30, 2017 following the previously announced fleet acquisitions.

Absent the adoption of the new revenue recognition standard (ASC 606) in January 2018, which has only prospective application with no effect to prior year figures, our TCE rate for the nine months ended September 30, 2018 would have been $13,664.

For the nine months ended September 30, 2018, operating income was $98.0 million, which includes depreciation of $72.0 million. Operating income of $1.6 million for the nine months ended September 30, 2017 included depreciation of $61.5 million and a net loss on sale of vessels of $0.4 million. Depreciation increased during the nine months ended September 30, 2018 due to a higher average number of vessels in our fleet.

Net income for the nine months ended September 30, 2018 was $46.7 million, or $0.65 earnings per share, basic and diluted, based on 71,872,575 weighted average basic shares and 72,206,527 weighted average diluted shares, respectively. Net loss for the nine months ended September 30, 2017 was $33.7 million, or $0.54 loss per share, basic and diluted, based on 62,681,807 weighted average basic and diluted shares.

Net income for the nine months ended September 30, 2018 mainly included the following non-cash items, other than depreciation expense:

  • Stock-based compensation expense of $7.7 million, or $0.11 per share, basic and diluted, recognized in connection with common shares granted to our directors and employees; and
  • Unrealized loss on forward freight agreements and bunker swaps of $1.0 million, or $0.01 per share, basic and diluted.
  • Loss on debt extinguishment of $1.5 million, or $0.02 per share, basic and diluted, recognized in connection with the refinance of certain of our debt facilities;
  • Unrealized gain on derivative financial instruments of $0.7 million or $0.01 per share, basic and diluted;
  • Amortization of the fair value of below market acquired time charters of $0.7 million, or $0.01 per share, basic and diluted, associated with time charters attached to two acquired vessels. These below market time charters are amortized over the duration of each respective charter as an increase to voyage revenues; and
  • Provision for onerous contracts of $0.5 million, or $0.01 per share, basic and diluted, associated with one subleased vessel.

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 debt issuance costs of $0.4 million or $0.01 per share, basic and diluted, in connection with the cancellation of a previous loan commitment.

Adjusted net income for the nine months ended September 30, 2018, which excludes all non-cash items other than depreciation expense, was $55.8 million, or $0.78 earnings per share, basic and $0.77 earnings per share, diluted, compared to adjusted net loss of $25.8 million, or $0.41 loss per share, basic and diluted, for the nine months ended September 30, 2017. 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, 2018 and 2017, which excludes all non-cash items, was $178.5 million and $72.4 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, 2018 and 2017, vessel operating expenses were $90.3 million and $76.0 million, respectively. This increase was primarily due to the increase in the average number of vessels to 81.4 from 69.2. Vessel operating expenses for the nine months ended September 30, 2018 and 2017 include pre-delivery and pre-joining expenses of $1.1 million and $1.9 million, respectively, incurred in connection with the delivery of the new vessels in our fleet during each period. Excluding these expenses, our average daily operating expenses per vessel for the nine months ended September 30, 2018 were $4,018, compared to $3,926 in the same period in 2017.

Dry docking expenses for the nine months ended September 30, 2018 and 2017 were $5.8 million and $3.9 million, respectively. During the nine months ended September 30, 2018, five of our vessels underwent their periodic dry docking surveys, while during the nine months ended September 30, 2017, four vessels underwent and completed their periodic dry docking surveys.

General and administrative expenses for the nine months ended September 30, 2018 and 2017 were $26.7 million and $25.1 million, respectively. The formation of our new subsidiary, Star Logistics, the increase of the number of our employees due to the recent expansion of our fleet and a higher USD/EUR exchange rate during the nine months ended September 30, 2018 compared to the corresponding period in 2017 resulted in higher wage expenses. Additionally, general and administrative expenses for the nine months ended September 30, 2018 include stock-based compensation expense of $7.7 million. During the same period in 2017, general and administrative expenses included stock-based compensation expense of $8.9 million and legal fees of $0.9 million in connection with the restructuring of our indebtedness. Excluding these expenses, our average daily net cash general and administrative expenses per vessel (including management fees) for the nine months ended September 30, 2018 were reduced to $1,019 from $1,094, during the corresponding period in 2017.

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.

Charter-in hire expense for the nine months ended September 30, 2018 and 2017 was $67.9 million and $2.2 million, respectively. The increase in charter-in hire expense was due to an increase in charter-in days to 3,596 in the nine months ended September 30, 2018 (attributable to the activities of our new subsidiary Star Logistics, which was created in the fourth quarter of 2017) from 230 in the nine months ended September 30, 2017 (attributable to the charter-in of the vessel Astakos).

Management fees for the nine months ended September 30, 2018 and 2017 were $7.3 million and $5.6 million, respectively. The increase is attributable to the new management agreements entered into in connection with the recently acquired fleets.

Interest and finance costs net of interest and other income/ (loss) for the nine months ended September 30, 2018 and 2017 were $50.7 million and $34.9 million, respectively. The increase is mainly attributable to the increase in (i) the weighted average balance of our outstanding indebtedness of $1,162.8 million during the nine months ended September 30, 2018 compared to $1,021.6 million for the same period in 2017 and (ii) LIBOR between the corresponding periods.

During the nine months ended September 30, 2018, we recorded $1.5 million of loss on debt extinguishment in connection with the non-cash write-off of unamortized debt issuance costs following the refinance of certain of our facilities discussed above in the section “Recent Developments”. During the nine months ended September 30, 2017, we recorded $0.4 million of loss on debt extinguishment, in connection with the cancellation of a previous loan commitment.

Liquidity and Capital Resources
Cash Flows

Net cash provided by operating activities for the nine months ended September 30, 2018 and 2017 was $109.2 million and $38.3 million, respectively.

The positive change was due to the significant recovery of the dry bulk market during the nine months ended September 30, 2018, which resulted in a significantly higher TCE rate of $13,605 compared to $9,194 for the nine months ended September 30, 2017. The increase in TCE rates as well as the increase in the Company’s average number of vessels is reflected in the increase of Adjusted EBITDA to $178.5 million for the nine months ended September 30, 2018 from $72.4 million for the corresponding period in 2017. This positive effect was partially offset by (i) a net working capital outflow of $16.5 million during the nine months ended September 30, 2018 compared to a net working capital inflow of $0.4 million for the nine months ended September 30, 2017 and (ii) by higher net interest expense for the nine months ended September 30, 2018 compared to the corresponding period in 2017.

Net cash used in investing activities for the nine months ended September 30, 2018 and 2017 was $271.5 million and $118.4 million, respectively.

For the nine months ended September 30, 2018, net cash used in investing activities mainly consisted of $273.0 million paid for advances and other capitalized expenses for our newbuilding and newly acquired vessels delivered during the period, offset partially by hull and machinery insurance proceeds of $1.5 million.

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; and
  •   $1.4 million of hull and machinery insurance proceeds.

Net cash provided by financing activities for the nine months ended September 30, 2018 and 2017 was $127.0 million and $133.5 million, respectively.

For the nine months ended September 30, 2018, net cash provided by financing activities mainly consisted of:

  • $317.7 million increase in lease obligations; and
  • $393.0 million of proceeds drawn under the newly entered loan facilities;

offset partially by:

  • $576.7 lease and debt obligations paid in aggregate in connection with: (i) the regular amortization of outstanding vessel financings and capital lease installments, (ii) early repayment due to the refinancing of certain of our facilities as further discussed above in the section “Recent Developments”; (iii) payments under our cash sweep mechanism and (iv) full repayment of deferred debt amounts; and
  • $7.7 million of financing fees paid in connection with the new facilities.

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 for the financing of Star Charis and Star Suzanna, which were delivered to us during that period and the refinancing of the Heron Vessels Facility (as defined in our annual report on form  20-F for 2017); and
  • $50.4 million of proceeds, net of aggregate fees and expenses of $1.0 million, from a private placement of our common shares, which was 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 our lenders 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, the new facility used for the financing of Star Charis and Star Suzanna and the refinancing of the Heron Vessels Facility.

Summary of Selected Data

(TCE rates expressed in U.S. dollars)
Third quarter 2018 Third quarter 2017
Average number of vessels (1) 98.2 70.7
Number of vessels (2) 105 71
Average age of operational fleet (in years) (3)   7.8 8.0
Ownership days (4) 9,039 6,509
Available days (5) 8,865 6,502
Charter-in days (6) 1,511   49
Fleet utilization (7) 98.4% 99.9%
Daily Time Charter Equivalent Rate (8) $14,521 $9,621
Average daily OPEX per vessel (9) $4,054 $4,067
Average daily OPEX per vessel (excl. pre-delivery expenses) $4,054 $3,947
Average daily Net Cash G&A expenses per vessel (excluding one-time expenses) (10) $918 $1,066
Nine months ended September 30, 2018 Nine months ended September 30, 2017
Average number of vessels (1) 81.4 69.2
Number of vessels (2) 105 71
Average age of operational fleet (in years) (3)   7.8 8.0
Ownership days (4) 22,213 18,892
Available days (5) 21,980 18,777
Charter-in days (6) 3,596 230
Fleet utilization (7) 99.1% 99.4%
Daily Time Charter Equivalent Rate (8) $13,605 $9,194
Average daily OPEX per vessel (9) $4,066 $4,024
Average daily OPEX per vessel (excl. pre-delivery expenses) $4,018 $3,926
Average daily Net Cash G&A expenses per vessel (excluding one-time expenses) (10) $1,019 $1,094

(1)  Average number of vessels is the number of vessels that constituted our owned fleet for the relevant period, as measured by the sum of the number of days each operating vessel was a part of our owned 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 days after subtracting off-hire days for major repairs, dry docking or special or intermediate surveys and scrubber installation.
(6) Charter-in days are the total days that we charter-in third-party vessels.
(7)  Fleet utilization is calculated by dividing (x) Available days plus Charter-in days by (y) Ownership days plus charter-in days for the relevant period.
(8)  Represents the weighted average daily TCE rates of our operating fleet (including owned fleet and fleet under charter-in arrangements). 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, charter-in hire expense, amortization of fair value of above/below market acquired time charter agreements and provision for onerous contracts, if any) 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, bareboat charters and pool arrangements) under which its vessels may be employed between the periods. We include 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 assists investors and our management in evaluating our financial performance. For the detail calculation please see the table at the back of this release with the reconciliation of Voyage Revenues to TCE.
(9) Average daily OPEX per vessel is calculated by dividing vessel operating expenses by Ownership days.
(10) Average daily Net Cash G&A expenses per vessel is calculated by (1) deducting the Management fee Income (if any), from, and (2) adding the Management fee expense to, the General and Administrative expenses (net of stock-based compensation expense) and (3) then dividing by the Ownership days and Charter-in days. 

Unaudited Consolidated Statement of Operations

(Expressed in thousands of U.S. dollars except for share and per share data) Third quarter 2018   Third quarter 2017 Nine months ended September 30, 2018 Nine months ended September 30, 2017
 
     
Revenues:  
Voyage revenues $   188,467 $   80,798 $   442,128 $   224,269
Total revenues   188,467 80,798 442,128 224,269
   
Expenses:  
Voyage expenses (32,382 ) (17,781 ) (74,968 ) (49,430 )
Charter-in hire expense (27,128 )   (461 ) (67,891 )   (2,197 )
Vessel operating expenses (36,647 ) (26,469 ) (90,328 ) (76,029 )
Dry docking expenses (2,576 ) (652 ) (5,845 ) (3,900 )
Depreciation (28,795 ) (21,107 ) (72,038 ) (61,494 )
Management fees (3,366 ) (1,929 ) (7,279 )   (5,618 )
General and administrative expenses (9,047 ) (7,779 ) (26,749 ) (25,095 )
Gain/(Loss) on forward freight agreements and bunker swaps   (1,058 )   – 942   (541 )
Other operational loss   –   28   – (723 )
Other operational gain   (2 )   318   39 2,780
Gain/(Loss) on sale of vessels   –   (27 )   – (398 )
Operating income/(loss)   47,466 4,939 98,011 1,624
Interest and finance costs (21,353 ) (13,107 ) (51,691 ) (36,873 )
Interest and other income/(loss) 636 794 1,030 2,017
Gain/(Loss) on derivative financial instruments   708 (33 ) 707 67
Loss on debt extinguishment   (1,449 )   (28 ) (1,470 ) (386 )
Total other expenses, net (21,458 ) (12,374 ) (51,424 ) (35,175 )
Income/(Loss) before equity in investee 26,008 (7,435 ) 46,587 (33,551 )
 
Equity in income/(loss) of investee 46 60 95 64
Income/(Loss) before taxes   $    26,054 $    (7,375 ) $    46,682 $    (33,487 )
   
US Source Income taxes   –   (51 )   –   (168 )
 
Net income/(loss)   $    26,054 $    (7,426 ) $    46,682 $    (33,655 )
Earnings/(loss) per share, basic $   0.30 $   (0.12 ) $   0.65 $   (0.54 )
Earnings/(loss) per share, diluted $   0.30 $   (0.12 ) $   0.65 $   (0.54 )
Weighted average number of shares outstanding, basic 87,025,267 63,652,049 71,872,575 62,681,807
Weighted average number of shares outstanding, diluted 87,430,711 63,652,049 72,206,527 62,681,807

Unaudited Consolidated Condensed Balance Sheets

(Expressed in thousands of U.S. dollars)
ASSETS September 30, 2018 December 31, 2017
Cash and cash equivalents $   224,461 $   257,911
Other current assets   90,668   54,715
TOTAL CURRENT ASSETS   315,129   312,626
Advances for vessels under construction and acquisition of vessels 49,538 48,574
Vessels and other fixed assets, net 2,660,348 1,775,081
Other non-current assets 11,285 9,483
TOTAL ASSETS $    3,036,300 $    2,145,764
Current portion of long-term debt and finance lease commitments $   184,116 $   189,306
Other current liabilities 59,672 29,968
TOTAL CURRENT LIABILITIES   243,788   219,274
Long-term debt and finance lease commitments non-current(net of unamortized deferred finance fees of $13,164 and $7,154, respectively) 1,231,360 789,878
Senior Notes (net of unamortized deferred finance fees of $1,693 and $2,000, respectively) 48,307 48,000
Other non-current liabilities 5,326 560
TOTAL LIABILITIES $    1,528,781 $    1,057,712
STOCKHOLDERS’ EQUITY 1,507,519 1,088,052
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $    3,036,300 $    2,145,764

Unaudited Cash Flow Data

(Expressed in thousands of U.S. dollars) Nine months ended September 30, 2018   Nine months ended September 30, 2017
Net cash provided by / (used in) operating activities $   109,173 $   38,259
Net cash provided by / (used in) investing activities   (271,546 )   (118,396 )
Net cash provided by / (used in) financing activities   127,023   133,491

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 operating activities, 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, we excluded non-cash gains/losses such as those related to sale of vessels, stock-based compensation expense the write-off of the unamortized fair value of above/below market acquired time charters, impairment losses, the write-off of claims receivable, change in fair value of forward freight agreements and bunker swaps, provision for onerous contracts, and the equity in income/(loss) of investee, if any. We excluded the items described above when deriving Adjusted EBITDA 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 2018 Third quarter 2017 Nine months ended September 30, 2018 Nine months ended September 30, 2017
Net cash provided by/(used in) operating activities $   48,086 $   18,139 $   109,173 $   38,259
Net decrease / (increase)  in current assets 26,901 1,832 39,663 6,697
Net increase / (decrease) in operating  liabilities, excluding current portion of long term debt (17,294 ) (3,981 ) (23,249 ) (7,138 )
Loss on debt extinguishment   (1,449 )   (28 )   (1,470 )   (386 )
Stock – based compensation (2,724 ) (2,493 ) (7,735 ) (8,853 )
Amortization of deferred finance charges (789 ) (687 ) (2,156 ) (1,975 )
Unrealized and accrued gain/(loss) on derivative financial instruments 657 533 1,230 1,239
Unrealized gain / (loss) on forward freight agreements and bunker swaps   (1,304 )   –   (955 )   (41 )
Total other expenses, net 21,458 12,374 51,424 35,175
Fair value hedge adjustment (82 )   – 1,323   –
Other non-current assets 1,972   – 1,972   –
Gain on hull and machinery claims   125   319   125   319
Income tax   –   51   –   168
Gain/(Loss) on sale of vessel   –   (28 )   –   (398 )
Equity in income/(loss) of investee 46 60 95 64
EBITDA $    75,603   $    26,091 $    169,440   $    63,130
Less:
Equity in income of investee   (46 )   (60 )   (95 )   (64 )
Plus:
Stock-based compensation   2,724   2,493   7,735   8,853
Loss on sale of vessel   –   28   –   398
Provision for onerous contracts   473   –   473   –
Unrealized loss on forward freight agreements and bunker swaps   1,304   –   955   41
Adjusted EBITDA $    80,058   $    28,552 $    178,508   $    72,358

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

To derive Adjusted Net Income from Net Income we excluded non-cash items, if any, as provided in the table below. We believe that Adjusted Net Income assists our management and investors by increasing the comparability of our performance from period to period with that of other companies in our industry since it eliminates the effects of such non-cash items as loss on sale of assets, gain/(loss) on derivatives, impairment losses and other items which may vary from year to year, are not part of our daily business and derive from reasons unrelated to overall operating performance. In addition we believe that the presentation of the respective measure provides investors with supplemental data relating to our financial condition and results of operations; and therefore with a more complete understanding of factors affecting our business than GAAP measures alone.
The following table reconciles Net income / (loss) to Adjusted Net income / (loss):

(Expressed in thousands of U.S. dollars) Third quarter 2018 Third quarter 2017 Nine months ended September 30, 2018 Nine months ended September 30, 2017
Net income / (loss) $    26,054 $    (7,426 ) $    46,682 $    (33,655 )
Amortization of fair value of below market acquired time charter agreements   (704 )   –   (704 )   –
Stock – based compensation 2,724 2,493 7,735 8,853
Unrealized (gain) / loss on forward freight agreements and bunker swaps   1,304   – 955   41
Provision for onerous contracts   473   – 473   –
Unrealized (gain) / loss on derivative financial instruments (708 ) (369 ) (734 ) (1,743 )
(Gain) / loss on sale of vessel   –   28   – 398
Amortization of deferred gain from sale and leaseback   –   (15 )   –   (52 )
Loss on debt extinguishment   1,449   28 1,470 386
Equity in income/(loss) of investee (46 ) (60 ) (95 ) (64 )
Adjusted Net income / (loss) $    30,546 $    (5,321 ) $    55,782 $    (25,836 )
Weighted average number of shares outstanding, basic 87,025,267 63,652,049 71,872,575 62,681,807
Weighted average number of shares outstanding, diluted 87,430,711 63,652,049 72,206,527 62,681,807
Adjusted Basic Earnings / (Loss) Per Share $    0.35 $    (0.08 ) $    0.78 $    (0.41 )
Adjusted Diluted Earnings / (Loss) Per Share $    0.35 $    (0.08 ) $    0.77 $    (0.41 )

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

(In thousands of U.S. Dollars, except as otherwise stated)  
   
Third quarter 2018   Third quarter 2017 Nine months ended September 30, 2018   Nine months ended September 30, 2017
Voyage revenues $   188,467 $   80,798 $   442,128 $   224,269
Less:
Voyage expenses (32,382 ) (17,781 ) (74,968 ) (49,430 )
Charter-in hire expenses   (27,128 ) (461 )   (67,891 ) (2,197 )
Provision for onerous contracts   473   –   473   –
Amortization of fair value of below/above market acquired time charter agreements     (704 )   –     (704 )   –
Time Charter equivalent revenues $    128,726   $    62,556 $    299,038   $    172,642
               
Available days for fleet   8,865 6,502 21,980 18,777
Daily Time Charter Equivalent Rate (“TCE”) $    14,521   $    9,621 $    13,605   $    9,194

 

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