Eagle Bulk Shipping Inc., one of the world’s largest owner-operators within the midsize drybulk vessel segment, reported financial results for the quarter ended March 31, 2022.
Generated Revenues, net of $184.4 million
Achieved TCE(1) of $27,407/day basis TCE Revenue(1) of $121.6 million
Realized net income of $53.1 million, or $4.09 per basic share
Adjusted net income(1) of $64.5 million, or $4.97 per adjusted basic share(1)
Generated EBITDA(1) of $72.1 million
Adjusted EBITDA(1) of $85.0 million
Declared a quarterly dividend of $2.00 per share for the first quarter of 2022. Payable on May 25, 2022 to shareholders of record at the close of business on May 16, 2022
Looking ahead, as of May 3, 2022, our coverage position is as follows:
Q2 2022 – 83% of available days fixed at an average TCE of $29,300
Eagle’s CEO Gary Vogel commented, “Over the past few months, the tragic situation in Ukraine has had a direct impact on our industry and our Company, with cargo trading patterns being disrupted and altered. Furthermore, a significant number of our seafarer colleagues are from Ukraine, and they are all affected by what is happening to their country and their loved ones. The safety and well-being of our crew is of paramount importance, and we are focused on supporting them during this difficult time by providing assistance with temporary housing, transportation, and helping with other needs.
Notwithstanding a volatile rate environment, Eagle posted strong results in the first quarter, in what is typically the weakest period of the year. We achieved a TCE of $27,407 per day, generating an adjusted net income of $65 million for the quarter. Based on this result and our expectations for continued strong performance, Eagle’s Board declared a first quarter dividend of $2.00 per share, bringing total distributions to over $6 per share since we initiated our dividend program just seven months ago.
Demand growth for minor bulks remains healthy and continues to outpace demand for the broader drybulk market, resulting in Supramax/Ultramax vessels outperforming the larger dry bulk segments. Voyage distances have also increased, driven primarily by dislocations caused by the war in Ukraine, which has in turn helped to strengthen spot rates. On the back of this and our active management approach to trading, Eagle has thus far procured approximately 83% of its available days for the second quarter at a net TCE of $29,300 per day.”
Results of Operations for the three months ended March 31, 2022 and 2021
For the three months ended March 31, 2022, the Company reported net income of $53.1 million, or basic and diluted income of $4.09 per share and $3.27 per share, respectively. In the comparable quarter of 2021, the Company reported net income of $9.8 million, or basic and diluted income of $0.84 per share.
For the three months ended March 31, 2022, the Company reported an adjusted net income of $64.5 million, which excludes unrealized losses on derivative instruments of $11.4 million, or basic and diluted adjusted net income of $4.97 per share and $3.97 per share, respectively. In the comparable quarter of 2021, the Company reported adjusted net income of $9.3 million, which excludes unrealized gains on derivative instruments of $0.5 million, or basic and diluted adjusted net income of $0.80 per share.
Revenues, net for the three months ended March 31, 2022 were $184.4 million compared to $96.6 million in the comparable quarter in 2021. The increase in revenues was primarily attributable to higher charter rates as a result of the market recovery with increase in demand for drybulk products.
Voyage expenses for the three months ended March 31, 2022 were $43.6 million compared to $26.6 million in the comparable quarter in 2021. The increase in voyage expenses was primarily due to an increase in bunker consumption expense as bunker fuel prices increased in the first quarter, as well as an increase in voyage charter business and an increase in broker commission expense as a result of the increase in revenues.
Vessel operating expenses
Vessel operating expenses for the three months ended March 31, 2022 were $27.9 million compared to $21.5 million in the comparable quarter in 2021. The increase in vessel operating expenses was primarily attributable to higher owned days and an increase in vessel upgrades as a result of an increase in repairs and upgrades performed while vessels were in drydock. The Company continues to incur higher costs related to the delivery of stores and spares, as well as crew changes as a result of the ongoing COVID-19 pandemic. The ownership days for the three months ended March 31, 2022 and 2021 were 4,770 and 4,199, respectively.
Average daily vessel operating expenses excluding one-time, non-recurring expenses related to vessel acquisitions for the three months ended March 31, 2022 were $5,821 as compared to $4,894 for the three months ended March 31, 2021.
Charter hire expenses
Charter hire expenses for the three months ended March 31, 2022 were $22.7 million compared to $8.5 million in the comparable quarter in 2021. The increase in charter hire expenses was principally due to an increase in chartered-in days and an increase in charter hire rates due to improvement in the charter hire market. The total chartered-in days for the three months ended March 31, 2022 were 960 compared to 658 for the comparable quarter in the prior year. The Company currently charters in four Ultramax vessels on a long-term basis as of the charter-in commencement date with options to extend the charter period.
Depreciation and amortization
Depreciation and amortization expense for the three months ended March 31, 2022 and 2021 was $14.6 million and $12.5 million, respectively. Total depreciation and amortization expense for the three months ended March 31, 2022 includes $11.7 million of vessel and other fixed asset depreciation and $2.9 million relating to the amortization of deferred drydocking costs. Comparable amounts for the three months ended March 31, 2021 were $10.5 million of vessel and other fixed asset depreciation and $2.0 million of amortization of deferred drydocking costs. The increase in depreciation expense is due to the acquisition of nine Ultramax vessels in 2021, offset by the sale of one vessel in the third quarter of 2021. The increase in amortization of deferred drydock costs is related to completing eleven drydocks since the first quarter of 2021.
General and administrative expenses
General and administrative expenses for the three months ended March 31, 2022 and 2021 were $10.1 million and $7.7 million, respectively. General and administrative expenses include stock-based compensation of $1.5 million and $0.9 million for the three months ended March 31, 2022 and 2021, respectively. The increase in general and administrative expenses was mainly attributable to an increase in legal and consulting expenses, compensation and benefits, and stock-based compensation expense.
Other operating expense
Other operating expense for the three months ended March 31, 2022 and 2021 was $0.1 million and $1.0 million, respectively. In March 2021, the U.S. government began investigating an allegation that one of our vessels may have improperly disposed of ballast water that entered the engine room bilges during a repair. The Company posted a surety bond as security for any fines, penalties or associated costs that may be issued. Other operating expense consists of expenses relating to the incident, which include legal fees, surety bond expenses, vessel off-hire, crew changes and travel costs.
Interest expense for the three months ended March 31, 2022 and 2021 was $4.4 million and $8.3 million, respectively. The decrease in interest expense is primarily due to a decrease in outstanding debt and lower interest rates due to the refinancing of the Company’s debt in the fourth quarter of 2021.
Realized and unrealized loss on derivative instruments, net
Realized and unrealized loss on derivative instruments, net for the three months ended March 31, 2022 and 2021 was $7.9 million and $0.7 million, respectively. The increase in realized and unrealized losses is primarily related to losses incurred on our freight forward agreements as a result of the increase in charter hire rates. The non-cash unrealized losses on forward freight agreements (“FFA”) for the remaining nine months of 2022 amounted to $14.3 million based on 2,520 days hedged at a weighted average FFA contract price of $20,942 per day.
As of March 31, 2022, our cash and cash equivalents including restricted cash was $83.7 million compared to $86.2 million as of December 31, 2021.
As of March 31, 2022, the Company’s outstanding debt of $389.2 million which excludes debt discount and debt issuance costs consisted of $275.1 million under the Global Ultraco Debt Facility and $114.1 million under the Convertible Bond Debt.
In addition, as of March 31, 2022, we had $100.0 million in an undrawn revolver facility available under the Global Ultraco Debt Facility.
We continuously evaluate potential transactions that we believe will be accretive to earnings, enhance shareholder value or are in the best interests of the Company, including without limitation, business combinations, the acquisition of vessels or related businesses, repayment or refinancing of existing debt, the issuance of new securities, share repurchases or other transactions.
Capital Expenditures and Drydocking
Our capital expenditures relate to the purchase of vessels and capital improvements to our vessels, which are expected to enhance the revenue earning capabilities and safety of the vessels.
In addition to acquisitions that we may undertake in future periods, the Company’s other major capital expenditures include funding the Company’s program of regularly scheduled drydocking necessary to comply with international shipping standards and environmental laws and regulations. Although the Company has some flexibility regarding the timing of its drydocking, the costs are relatively predictable. Management anticipates that vessels are to be drydocked every two and a half years for vessels older than 15 years and five years for vessels younger than 15 years. Funding of these requirements is anticipated to be met with cash from operations. We anticipate that this process of recertification will require us to reposition these vessels from a discharge port to shipyard facilities, which will reduce our available days and operating days during that period.
Drydocking costs incurred are deferred and amortized to expense on a straight-line basis over the period through the date of the next scheduled drydocking for those vessels. In the three months ended March 31, 2022, four of our vessels completed drydock and one vessel was in drydock as of March 31, 2022, and we incurred drydocking expenditures of $10.8 million. In the three months ended March 31, 2021, four of our vessels completed drydock and we incurred drydocking expenditures of $4.8 million.