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Cash totaled $145.8 million as of March 31, 2017
– Including funds available under Eagle Bulk’s revolving credit facility revolver, total liquidity stood at $170.8 million as of March 31, 2017
Gary Vogel, Eagle Bulk’s CEO, commented, “During the first quarter, Eagle finalized the acquisition of 9 Crown-63 Ultramax dry bulk sister vessels – a transaction that will significantly increase our operating scale and provide meaningful exposure to the Ultramax segment. In total over the past year, we have acquired 11 modern Ultramax vessels as part of our fleet renewal and growth strategy which, in conjunction with the continued build-out of our active operator business model and charter-in fleet, is beginning to drive increased revenue. Importantly, these developments are occurring against the backdrop of continued improvement in the dry bulk market itself with respect to both trade demand and vessel supply fundamentals.
“Looking ahead, we are increasingly optimistic concerning Eagle’s enviable positioning within the dry bulk market, as well as our ability to generate value for all stakeholders.”
Results of Operations for the three months ended March 31, 2017 and 2016
For the three months ended March 31, 2017, the Company reported a net loss of $11.1 million, or $0.17 per share, based on a weighted average of 65,637,692 diluted shares outstanding. In the comparable quarter of 2016, the Company reported a net loss of $39.3 million, or $20.77 per share, based on a weighted average of 1,891,463 diluted shares outstanding. The net loss, excluding vessel impairment and refinancing charges, for the first quarter of 2016 was $27.5 million, or $14.53 per share. Earnings per share for the first quarter of 2016 was retrospectively adjusted to give effect for the 1 for 20 reverse stock split that became effective as of the opening of trading on August 5, 2016 (“the Reverse Stock Split”).
Net time and voyage charter revenues in the quarter ended March 31, 2017 were $45.9 million compared with $21.3 million recorded in the comparable quarter in 2016. The increase in revenue was attributable to higher time charter rates in the first quarter of 2017 as well as an increase in available days due to chartered in vessels. Our fleet utilization increased from 98.4% to 99.3% due to better vessel performance and lower off hire days.
Voyage expenses for the three months ended March 31, 2017 were $13.4 million, compared to $9.2 million in the comparable quarter in 2016. The increase was mainly attributable to an increase in the number of freight voyages in the current quarter compared to the comparable quarter in the prior year as well as increased bunker prices year over year.
Vessel expenses for the three months ended March 31, 2017 were $18.0 million compared to $20.5 million in the comparable quarter in 2016. The lower vessel expenses were attributable to the efficiencies achieved through in-house technical management of vessels as well as vessel sales of the MV Falcon, MV Harrier, MV Peregrine and MV Kittiwake during 2016, and the sale of the MV Redwing in the first quarter of 2017 offset by the purchase of two Ultramax vessels, the MV Stamford Eagle and the MV Singapore Eagle, which were delivered in fourth quarter of 2016 and first quarter of 2017, respectively. Average daily vessel operating expenses for our fleet decreased by $244 per day to $4,871 in the first quarter of 2017 as compared to $5,115 in the comparable period in 2016.
The charter hire expenses for the three months ended March 31, 2017 were $3.9 million compared to $1.5 million in the comparable quarter in 2016. The increase in charter hire expense was principally due to an increase in the number of chartered in vessels. The Company chartered in a 63,000 dwt new building vessel in May 2016 for a period of nine to 14 months and a 61,000 dwt new building vessel that was delivered in July 2016 for a period of 11 to 13 months. In addition, the Company chartered in vessels on a short-term basis as needed. The total chartered in days for the three-month period ended March 31, 2017 were 514 compared to 151 for the comparable quarter in the prior year.
Depreciation and amortization expense for the three months ended March 31, 2017 and 2016 was $7.5 million and $9.4 million, respectively. The decrease in depreciation expense is attributable to the sale of five vessels during 2016 and first quarter of 2017 and lower book value of vessels subsequent to the impairment charge of $129.0 million recorded in the first and fourth quarters of 2016 offset by the purchase of two new Ultramax vessels in the fourth quarter of 2016 and first quarter of 2017 as well as higher drydock amortization.
General and administrative expenses for the three months ended March 31, 2017 and 2016 were $7.8 million and $5.3 million, respectively. General and administrative expenses include a non-cash compensation component of $2.2 million and $0.8 million for 2017 and 2016, respectively. The increase in general and administrative expenses was mainly attributable to increases in advisers’ fees, non-cash compensation expense and general and administrative expenses relating to our new office in Germany offset by a decrease in rental expense due to moving the corporate office to Stamford, Connecticut in March 2016, which necessitated payment of rent on both the current and previous offices for the three months ended March 31, 2016.
Interest expense for the three months ended March 31, 2017 and 2016 was $6.4 million and $2.8 million, respectively. The increase in interest expense was primarily due to assumption of debt under Second Lien Facility which bears a payment-in-kind interest rate of 15% including a margin over LIBOR and higher amortization of deferred financing costs and debt discount.
Refinancing charges for the three months ended March 31, 2017 and 2016 were none and $5.6 million respectively. These costs primarily relate to the professional fees incurred in connection with the refinancing transaction, which was closed on March 30, 2016.
Liquidity and Capital Resources
Net cash used in operating activities during the three months ended March 31, 2017 and 2016 was $2.0 million and $19.5 million, respectively. The cash flow from operating activities improved over the prior period primarily due to increases in charter hire rates because of improvement in the dry bulk market.
Net cash used in investing activities during the three months ended March 31, 2017 was $21.9 million compared with $0.5 million during the corresponding three months ended March 31, 2016. The increase in cash used in investing activities relates to the purchase of one Greenship Vessel (as defined below), the MV Singapore Eagle, for $17.0 million and $10.3 million paid as an advance towards the purchase of the first six Greenship Vessels, which are expected to be delivered in between the second and third quarters of 2017.
Net cash provided by financing activities during the three months ended March 31, 2017 was $93.1 million compared with $11.9 million during the corresponding three months ended March 31, 2016. The Company received net proceeds of $96.0 million in a common stock private placement, which closed on January 20, 2017 and repaid $2.9 million of its term loan under the First Lien Facility from the proceeds of the sale of the vessel MV Redwing. In the first quarter of 2016, the Company received proceeds of $60.0 million from the Second Lien Facility and repaid $15.6 million of its term loan and $30.2 million of its revolver loan under the Exit Financing Facility as part of the debt restructuring transaction, which closed on March 30, 2016. The Company paid $2.3 million as deferred financing costs relating to the restructuring transaction.
On February 28, 2017, Eagle Bulk Ultraco LLC, a wholly-owned subsidiary of the Company, entered into the Agreement with Sellers for the purchase of nine Vessels. Of the nine Vessels, three Vessels were Contingent Vessels. The approval to acquire the Contingent Vessels was obtained subsequently on March 27, 2017. The aggregate purchase price for the nine Vessels is $153.0 million. The allocated purchase price for each Vessel is $17.0 million. The Company paid a deposit of $10.3 million in the first quarter of 2017 for the purchase of the first six Vessels. Subsequent to the close of the quarter, the Company took delivery of two of the Vessels, MV Mystic Eagle and MV Southport Eagle, and the remaining Vessels are expected to be delivered charter free between May 2017 and September 2017.
As of March 31, 2017, our cash balance was $145.8 million, compared to a cash balance of $76.5 million as of December 31, 2016.
As of March 31, 2017, the Company’s debt consisted of $206.2 million in term loans, net of $4.3 million debt discount and debt issuance costs under the First Lien Facility and $69.7 million under the Second Lien Facility, net of $14.7 million debt discount and debt issuance costs.
As of March 31, 2017, our total availability in the revolving credit facility under the First Lien Facility was $25.0 million.
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 these vessels.
In addition to acquisitions that we may undertake in future periods, the 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. The Company anticipates that vessels are to be drydocked every five years for vessels younger than 15 years and every two and a half years for vessels older than 15 years. Accordingly, these expenses are deferred and amortized over that period until the next anticipated drydocking. 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. For the three months ended March 31, 2017, none of our vessels were drydocked. For the three months ended March 31, 2016, three of our vessels were drydocked, and we incurred $1.3 million in drydocking related costs.
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