Form 8-K Pangaea Logistics Soluti For: Aug 14
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 14, 2015
PANGAEA LOGISTICS SOLUTIONS LTD.
(Exact Name of Registrant as Specified in Charter)
Bermuda | 001-36139 | N/A |
(State or Other Jurisdiction | (Commission | (IRS Employer |
of Incorporation) | File Number) | Identification No.) |
109 Long Wharf, Newport, Rhode Island 02840
(Address of Principal Executive Offices) (Zip Code)
(401) 846-7790
(Registrant’s Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e 4(c)) | |
Item 2.01 | Results of Operations and Financial Condition. |
On August 14, 2015, Registrant issued a press release announcing financial results for the six months ended June 30, 2015. The full text of this press release is included as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this Current Report, including the exhibit attached hereto, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement pursuant to the Securities Act of 1933.
Item 7.01 | Regulation FD Disclosure. |
The slide presentation contains summary information regarding the Company and includes financial results for the three months ended June 30, 2015 and 2014, and for the year ended December 31, 2014. The presentation, which may be distributed to potential shareholders, is attached as Exhibit 99.2 to this Current Report on Form 8-K. Statements in this Current Report on Form 8-K, may contain certain statements about the Company and its consolidated subsidiaries that do not directly or exclusively relate to historical facts. The statements are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are necessarily estimates reflecting the best judgment and current expectations, plans, assumptions and beliefs about future events (in each case subject to change) of the Company’s senior management and management of its subsidiaries and involve a number of risks, uncertainties and other factors, some of which may be beyond the Company’s control that could cause actual results to differ materially from those expressed or implied in such forward-looking statements. Without limitation, any statements preceded or followed by or that include the words “targets,” “plans,” “believes,” “expects,” “intends,” “will,” “likely,” “may,” “anticipates,” “estimates,” “projects,” “should,” “would,” “expect,” “positioned,” “strategy,” “future,” “potential,” “plan,” “forecast,” or words, phrases or terms of similar substance or the negative thereof, are forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements are discussed under the heading “Risk Factors” and “Forward-Looking Statements” in the company’s most recent annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), as they may be updated in any future reports filed with the SEC. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, the Company’s actual results, performance, or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements included herein are made as of the date hereof, and the Company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances. The information in this Current Report, including the exhibit attached hereto, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement pursuant to the Securities Act of 1933.
Item 9.01 | Financial Statements, Pro Forma Financial Information and Exhibits. |
(d) | Exhibits |
Exhibit | Description |
99.1 | Press Release of Pangaea Logistics Solutions Ltd. dated August 14, 2015 announcing financial results for the three months ended June 30, 2015 and 2014. |
99.2 | Investor Presentation of Pangaea Logistics Solutions Ltd. dated August 14, 2015 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: August 14, 2015
PANGAEA LOGISTICS SOLUTIONS LTD. | ||
By: | /s/ Anthony Laura | |
Name: Anthony Laura Title: Chief Financial Officer | ||
Pangaea Logistics Solutions Ltd. Reports Financial Results for the Three Months Ended June 30, 2015
Company Reports Profitable Quarter Against Backdrop of Industry Losses
NEWPORT, RI – August 13, 2015 – Pangaea Logistics Solutions Ltd. (“Pangaea” or the “Company”) (NASDAQ: PANL), a global provider of comprehensive maritime logistics solutions, announced today its results for the quarter ended June 30, 2015.
Second Quarter Highlights
• | Net Income attributable to Pangaea Logistics Solutions Ltd. was $5.5 million in the second quarter of 2015, compared to $1.2 million in the second quarter of 2014 |
• | Pro forma adjusted earnings per common share1 increased to $0.15 in the second quarter of 2015, compared to $0.04 pro forma adjusted earnings per share in the second quarter of 2014 |
• | Adjusted EBITDA2 increased 68% to $10.3 million in the second quarter of 2015, compared with $6.1 million in the second quarter of 2014, illustrating the Company's continued execution on its strategy in a difficult environment |
• | Cash flow from operations was $12.8 million in the first half of 2015, compared with $9.7 million in the first half of 2014 |
• | At the end of the quarter, Pangaea had $34.2 million in cash and cash equivalents |
• | Announced a 3-5 year Contract of Affreightment ("COA") utilizing the Company's ice-class tonnage that has the potential to produce up to $135 million in revenue over five years |
• | Secured extensions to two COAs with the potential to generate up to $22 million in revenue over the next three years |
Edward Coll, Chairman and Chief Executive Officer of Pangaea Logistics Solutions, stated, “The momentum from an especially strong start to 2015 continued in the second quarter of 2015. Like many margin driven businesses, our earnings can, and often do, move independently of revenues. This quarter's strength illustrates that our performance is a function of our utilization and route selection, not simply revenues or shipping days. As we have discussed in prior quarters, our business is highly differentiated from shipping or drybulk companies; we are a logistics-focused service provider. We are not asset-heavy and we avoid speculative long-term third-party charters. This disciplined approach to our business has served us well as many others in the industry have been challenged by a difficult rate environment.”
1 Earnings per share represents total earnings allocated to common stock divided by the weighted average number of common shares outstanding. Pro Forma adjusted earnings per share represents adjusted total earnings allocated to common stock divided by the weighted average number of shares giving effect to the merger with Quartet Merger Corp. as if it had been consummated as of January 1, 2014. See Reconciliation of Adjusted EBITDA and Pro Forma Adjusted Earnings Per Share.
2 Adjusted EBITDA is a non-GAAP measure and represents operating earnings before interest expense, income taxes, depreciation and amortization, and other non-operating income and/or expense, if any. See Reconciliation of Adjusted EBITDA and Pro Forma Adjusted Earnings Per Share.
1
Results for the Quarter Ended June 30, 2015
The Company reported net income of $5.5 million, or $0.15 per common share, for the second quarter of 2015, an increase of more than threefold compared to the second quarter of 2014 when the Company reported net income of $1.2 million, or $0.04 per common share on a pro forma adjusted basis. This improvement was primarily attributable to our improved operating margin, which nearly tripled to 10.8% from 3.7% as the Company successfully focused on profitable voyage revenue from COAs and benefited from declining bunker and charter-in costs during the period.
Total revenue of $65.1 million for the quarter ended June 30, 2015 decreased 27% from the $89.8 million generated in the same quarter in 2014 and comprised $60.9 million in voyage revenue and $4.2 million in charter revenue, year-over-year decreases of 24% and 57%, respectively.
The decline in total revenue was primarily attributable to a 13% decrease in the Company’s total shipping days from 4,000 days in the second quarter of 2014 to 3,477 days in the second quarter of 2015. Total shipping days are the sum of voyage days, which are tied to COAs and decreased 11% year-over-year, and charter days, which are subject to market rates and decreased 22% year-over-year. This reflects the Company’s strategy of limiting its exposure to declining rates by chartering in vessels only to meet the demands of specific voyage contracts in order to maximize profitability.
Coll noted, “Our focus on vessel positioning through route selection propelled us to another profitable quarter. Although nominal measures such as total shipping days are down in 2015 when compared to 2014 for the second quarter and year-to-date, we flexibly reduced shipping days to manage the lower rate environment. This was in large part because our backbone of COAs continued to help us geographically position vessels well.”
Markets
“Comparisons to our performance of a year ago are difficult as both the industry and the macroeconomic environment have changed since then,” Coll continued. “Fuel prices have meaningfully declined with a corollary impact on charter revenues. We have navigated well through the charter market’s record low rates created by modest demand growth and high vessel supply. It is always difficult to forecast the future rate environment, and at this point we are still uncertain of direction when we consider the weak general demand for the commodities we carry around the world.”
Business Updates
During the quarter the Company increased its ownership in Nordic Bulk Carriers AS ("NBC"), through the acquisition of shares for $0.25 million and the conversion of $4.0 million of intercompany debt. Following these transactions the Company's ownership of NBC increased from 51% to 99.5%.
During the quarter the Company also announced considerable new contracting activity with clients, specifically:
• | On May 20, 2015 the Company announced that it had entered into a new three to five-year COA with a major international steel producer utilizing its ice-class tonnage that has potential to produce up to $135 million in revenue over five years. |
2
• | On June 1, 2015 the Company announced extensions to two of its COAs with leading global companies that together have the potential to generate up to $22 million in revenue over the next three years and optimally position the Company to execute on its backhaul strategy. |
“This was another strong and profitable quarter for Pangaea Logistics Solutions,” concluded Mr. Coll “Our ability to both secure new, mutually beneficial business relationships and see that revenue flow through to the bottom line are the result of our unparalleled level of industry expertise and distinctive, conservative strategy. We continue to focus on providing our customers with excellent service and thus allow us to position vessels attractively and profitably. In today’s low and volatile rate environment, we believe that this strategy allows us to deliver positive results with limited downside risks and positions us for better earnings in higher rate environments.”
Cash Flows
Cash and cash equivalents were $34.1 million as of June 30, 2015, compared with $29.8 million on December 31, 2014.
For the six months ended June 30, 2015, the Company’s net cash provided by operating activities was $12.8 million, compared to $12.0 million for the year to date ended June 30, 2014.
For the six months ended June 30, 2015 and 2014, net cash used in investing activities was $40.6 million and $8.9 million, respectively. Net cash provided by financing activities was $32.2 million and $(0.5) million for the six months ended June 30, 2015 and 2014, respectively. These increases reflect the Company's purchase of new ice-class ships, including the m/v Nordic Olympic and m/v Nordic Odin, partially offset by the sale of the m/v Bulk Cajun. The Company also used cash available from operating earnings to pay off its corporate credit line of $3 million.
Conference Call Details
The Company’s management team will host a conference call to discuss the Company's financial results tomorrow, Friday, August 14, 2015 at 8:00 a.m., Eastern Time (ET). To access the conference call, please dial (888) 895-3561 (domestic) or (904) 685-6494 (international) approximately ten minutes before the scheduled start time and reference ID# 97471493.
A supplemental slide presentation will accompany this quarter’s conference call and can be found attached to the Current Report on Form 8-K that the Company filed concurrently with this press release. This document will be available at http://www.pangaeals.com/company-filings or at sec.gov.
A recording of the call will also be available for one week and can be accessed by calling (855) 859-2056 (domestic) or (404) 537-3406 (international) and referencing ID# 97471493.
3
Pangaea Logistics Solutions Ltd.
Consolidated Statements of Income
Consolidated Statements of Income
Three months ended June 30, | |||||||
2015 | 2014 | ||||||
(unaudited) | (unaudited) | ||||||
Revenues: | |||||||
Voyage revenue | $60,902,796 | $79,921,090 | |||||
Charter revenue | 4,199,976 | 9,858,151 | |||||
65,102,772 | 89,779,241 | ||||||
Expenses: | |||||||
Voyage expense | 28,129,297 | 41,891,955 | |||||
Charter hire expense | 15,195,199 | 33,984,808 | |||||
Vessel operating expenses | 7,116,502 | 7,732,252 | |||||
General and administrative | 3,916,119 | 2,352,591 | |||||
Depreciation and amortization | 3,271,238 | 2,744,576 | |||||
Loss (gain) on sale of vessels | 477,888 | (2,286,232) | |||||
Total expenses | 58,106,243 | 86,419,950 | |||||
Income from operations | 6,996,529 | 3,359,291 | |||||
Other income (expense): | |||||||
Interest expense, net | (1,279,933) | (1,474,773) | |||||
Interest expense related party debt | (110,763) | (20,234) | |||||
Imputed interest on related party long-term debt | — | — | |||||
Unrealized gain (loss) on derivative instruments | 363,096 | (1,200,334) | |||||
Other income | 60,935 | 74,227 | |||||
Total other expense, net | (966,665) | (2,621,114) | |||||
Net income | 6,029,864 | 738,177 | |||||
(Income) loss attributable to noncontrolling interests | (569,227) | 491,748 | |||||
Net income attributable to Pangaea Logistics Solutions Ltd. | $5,460,637 | $1,229,925 | |||||
Earnings (loss) per common share: | |||||||
Basic | $0.15 | $(0.04) | |||||
Diluted | $0.15 | $(0.04) | |||||
Weighted average shares used to compute earnings | |||||||
per common share | |||||||
Basic and diluted | 35,240,373 | 13,421,955 | |||||
4
Pangaea Logistics Solutions Ltd.
Consolidated Balance Sheets
Consolidated Balance Sheets
June 30, | December 31, | ||||||
2015 | 2014 | ||||||
Assets | (unaudited) | ||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 34,154,575 | $ | 29,817,507 | |||
Restricted cash | 1,000,000 | 1,000,000 | |||||
Accounts receivable (net of allowance of $4,542,781 at | |||||||
June 30, 2015 and $4,029,669 at December 31, 2014) | 21,004,625 | 27,362,216 | |||||
Bunker inventory | 12,611,371 | 15,601,659 | |||||
Advance hire, prepaid expenses and other current assets | 5,382,050 | 6,568,234 | |||||
Vessels held for sale, net | 3,486,254 | 4,523,804 | |||||
Total current assets | 77,638,875 | 84,873,420 | |||||
Fixed assets, net | 265,713,887 | 207,667,613 | |||||
Investment in newbuildings in-process | 15,381,477 | 38,471,430 | |||||
Other noncurrent assets | 876,964 | 1,450,802 | |||||
Total assets | 359,611,203 | 332,463,265 | |||||
Liabilities and stockholders' equity | |||||||
Current liabilities | |||||||
Accounts payable, accrued expenses and other current liabilities | 24,918,504 | 40,201,794 | |||||
Related party debt | 60,618,225 | 59,102,077 | |||||
Deferred revenue | 5,857,640 | 11,748,926 | |||||
Current portion long-term debt | 22,204,172 | 17,807,674 | |||||
Line of credit | — | 3,000,000 | |||||
Dividend payable | 12,724,825 | 12,824,825 | |||||
Total current liabilities | 126,323,366 | 144,685,296 | |||||
Secured long-term debt, net | 118,047,085 | 87,430,416 | |||||
Commitments and contingencies | — | — | |||||
Stockholders' equity: | |||||||
Preferred stock, $0.0001 par value, 1,000,000 shares authorized and no shares issued or outstanding | — | — | |||||
Common stock, $0.0001 par value, 100,000,000 shares authorized 35,484,993 and 34,756,980 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively | 3,556 | 3,476 | |||||
Additional paid-in capital | 134,261,190 | 133,955,445 | |||||
Accumulated deficit | (24,483,234 | ) | (36,142,727 | ) | |||
Total Pangaea Logistics Solutions Ltd. equity | 109,781,512 | 97,816,194 | |||||
Non-controlling interests | 5,459,240 | 2,531,359 | |||||
Total stockholders' equity | 115,240,752 | 100,347,553 | |||||
Total liabilities and stockholders' equity | $ | 359,611,203 | $ | 332,463,265 | |||
5
Pangaea Logistics Solutions Ltd.
Consolidated Statements of Cash Flows
Six months ended June 30, | |||||||
2015 | 2014 | ||||||
(unaudited) | (unaudited) | ||||||
Operating activities | |||||||
Net income | $ | 15,359,523 | $ | 8,395,469 | |||
Adjustments to reconcile net income to net cash provided by operations: | |||||||
Depreciation and amortization expense | 6,261,832 | 5,296,201 | |||||
Amortization of deferred financing costs | 404,968 | 469,767 | |||||
Unrealized (gain) loss on derivative instruments | (1,186,551 | ) | 1,571,892 | ||||
Loss from equity method investee | (61,357 | ) | — | ||||
Provision for doubtful accounts | 513,112 | (4,457 | ) | ||||
Loss on sales of vessels | 566,756 | (2,286,232 | ) | ||||
Write off unamortized financing costs of repaid debt | 25,557 | 241,522 | |||||
Amortization of discount on related party long-term debt | — | 322,947 | |||||
Share-based compensation | 305,825 | — | |||||
Change in operating assets and liabilities: | |||||||
Accounts receivable | 5,844,479 | 18,077,202 | |||||
Bunker inventory | 2,990,288 | (757,527 | ) | ||||
Advance hire, prepaid expenses and other current assets | 1,821,996 | 1,158,809 | |||||
Accounts payable, accrued expenses and other current liabilities | (14,144,360 | ) | (13,346,491 | ) | |||
Deferred revenue | (5,891,286 | ) | (9,389,418 | ) | |||
Net cash provided by operating activities | 12,810,782 | 9,749,684 | |||||
Investing activities | |||||||
Purchase of vessels | (44,770,740 | ) | (15,051,116 | ) | |||
Proceeds from sales of vessels | 4,523,804 | 12,400,609 | |||||
Deposits on newbuildings in-process | (85,000 | ) | (3,462,453 | ) | |||
Drydocking costs | — | (287,416 | ) | ||||
Purchase of building and equipment | (52,936 | ) | (228,754 | ) | |||
Purchase of non-controlling interest | (250,000 | ) | — | ||||
Net cash used in investing activities | (40,634,872 | ) | (6,629,130 | ) | |||
Financing activities | |||||||
Proceeds of related party debt | 2,506,667 | 2,375,000 | |||||
Payments on related party debt | (1,216,250 | ) | (162,928 | ) | |||
Proceeds from long-term debt | 45,000,000 | 13,000,000 | |||||
Payments of financing and issuance costs | (729,866 | ) | (137,579 | ) | |||
Payments on long-term debt | (9,777,473 | ) | (15,520,818 | ) | |||
Payments on line of credit | (3,000,000 | ) | — | ||||
Common stock dividends paid | (100,000 | ) | (100,000 | ) | |||
Distribution to non-controlling interest | (521,920 | ) | — | ||||
Net cash provided by (used in) financing activities | 32,161,158 | (546,325 | ) | ||||
Net increase in cash and cash equivalents | 4,337,068 | 2,574,229 | |||||
Cash and cash equivalents at beginning of period | 29,817,507 | 18,927,927 | |||||
Cash and cash equivalents at end of period | $ | 34,154,575 | $ | 21,502,156 | |||
Disclosure of noncash items | |||||||
Dividends declared, not paid | $ | — | $ | 3,564,554 | |||
Modification of shareholder loan to on demand | $ | — | $ | 16,433,108 | |||
Imputed interest on related party long-term debt | $ | — | $ | 322,947 | |||
Cash paid for interest | $ | 2,407,348 | $ | 2,434,973 | |||
6
Pangaea Logistics Solutions Ltd.
Reconciliation of Adjusted EBITDA and Pro Forma Adjusted Earnings Per Share
Reconciliation of Adjusted EBITDA and Pro Forma Adjusted Earnings Per Share
(In thousands of U.S. Dollars except for share and per share data) | Three months ended June 30, | ||||||
2015 | 2014 | ||||||
Adjusted EBITDA | (unaudited) | (unaudited) | |||||
Income from operations | $ | 6,996 | $ | 3,359 | |||
Depreciation and amortization | 3,271 | 2,745 | |||||
Adjusted EBITDA | $ | 10,267 | $ | 6,104 | |||
Earnings Per Common Share | |||||||
Net Income attributable to Pangaea Logistics Solutions Ltd. | 5,461 | — | |||||
Net Income attributable to Bulk Partners (Bermuda) Ltd. | — | 1,229 | |||||
less adjustments related to pre-merger capital structure | — | (1,782 | ) | ||||
Total earnings allocated to common stock | $ | 5,461 | $ | (553 | ) | ||
Weighted average number of common shares outstanding | 35,240,373 | 13,421,955 | |||||
Earnings per common share | $ | 0.15 | $ | (0.04 | ) | ||
Pro Forma Adjusted EPS | |||||||
Total Income allocated to common stock | 5,461 | (553 | ) | ||||
Non-GAAP | |||||||
plus adjustments related to pre-merger capital structure | — | 1,782 | |||||
Non-GAAP Pro forma adjusted total earnings allocated to common stock | $ | 5,461 | $ | 1,229 | |||
Non-GAAP Pro forma weighted average number of common shares outstanding | 35,240,373 | 34,696,997 | |||||
Non-GAAP Pro forma Adjusted EPS | $ | 0.15 | $ | 0.04 | |||
INFORMATION ABOUT NON-GAAP FINANCIAL MEASURES. As used herein, “GAAP” refers to accounting principles generally accepted in the United States of America. To supplement our consolidated financial statements prepared and presented in accordance with GAAP, this earnings release discusses non-GAAP financial measures, including (1) non-GAAP adjusted EBITDA and (2) non-GAAP pro forma adjusted earnings per share (“EPS”). These are considered non-GAAP financial measures as defined in Rule 101 of Regulation G promulgated by the Securities and Exchange Commission. Generally, a non-GAAP financial measure is a numerical measure of a company’s historical or future performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
We use these non-GAAP financial measures for internal financial and operational decision making purposes and as a means to evaluate period-to-period comparisons of the performance and results of operations of our core business. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the performance of our core business by excluding non-cash losses on impairment of vessels and non-recurring charges that may not be indicative of our recurring core business operating results. These non-GAAP financial measures also facilitate management's internal planning and comparisons to our historical performance and liquidity. We believe these non-GAAP financial measures are useful to investors as they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and are used by our institutional investors and the analyst community to help them analyze the performance and operational results of our core business.
7
Non-GAAP adjusted net income attributable to Pangaea Logistics Solutions Ltd., Adjusted EBITDA, and pro forma adjusted EPS. Adjusted net income attributable to Pangaea Logistics Solutions Ltd. represents net income attributable to Pangaea Logistics Solutions Ltd. calculated in accordance with GAAP, plus non-cash losses on impairment of vessels and non-recurring charges. Adjusted EBITDA represents operating earnings before interest expense, income taxes, depreciation, amortization and loss on impairment of vessels. Earnings per share represents total earnings allocated to common stock divided by the weighted average number of common shares outstanding. Pro forma adjusted earnings per share represents adjusted total earnings allocated to common stock divided by the weighted average number of shares giving effect to the merger with Quartet Merger Corp. as if it had been consummated as of January 1, 2014.
There are limitations related to the use of non-GAAP adjusted net income attributable to Pangaea Logistics Solutions Ltd., adjusted EBITDA, and pro forma adjusted EPS versus net income, income from operations, and EPS calculated in accordance with GAAP. In particular, Pangaea’s definition of adjusted net income attributable to Pangaea Logistics Solutions Ltd., adjusted EBITDA, and pro forma adjusted EPS used here is not comparable to net income, EBITDA, and EPS. Management provides specific information in order to reconcile the GAAP or non-GAAP measure to adjusted net income attributable to Pangaea Logistics Solutions Ltd., adjusted EBITDA, and pro forma adjusted EPS.
The table set forth above provides a reconciliation of the non-GAAP financial measures presented to the most directly comparable financial measures prepared in accordance with GAAP.
About Pangaea Logistics Solutions Ltd.
Pangaea Logistics Solutions Ltd. (NASDAQ: PANL) provides logistics services to a broad base of industrial customers who require the transportation of a wide variety of dry bulk cargoes, including grains, pig iron, hot briquetted iron, bauxite, alumina, cement clinker, dolomite, and limestone. The Company addresses the transportation needs of its customers with a comprehensive set of services and activities, including cargo loading, cargo discharge, vessel chartering, and voyage planning. Learn more at www.pangaeals.com.
Forward-Looking Statements
Certain statements in this press release are “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. These forward-looking statements are based on our current expectations and beliefs and are subject to a number of risk factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The Company disclaims any obligation to publicly update or revise these statements whether as a result of new information, future events or otherwise, except as required by law. Such risks and uncertainties include, without limitation, the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand for dry bulk shipping capacity, changes in our operating expenses, including bunker prices, dry-docking and insurance costs, the market for our vessels, availability of financing and refinancing, charter counterparty performance, ability to obtain financing and comply with covenants in such financing arrangements, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, vessels breakdowns and instances of off-hires and other factors, as well as other risks that have been included in filings with the Securities and Exchange Commission, all of which are available at www.sec.gov.
8
Second Quarter 2015 Results August 2015
Safe Harbor This presentation includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding future financial performance, future growth and future acquisitions. These statements are based on Pangaea’s and managements’ current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein due to changes in economic, business, competitive and/or regulatory factors, and other risks and uncertainties affecting the operation of Pangaea’s business. These risks, uncertainties and contingencies include: business conditions; weather and natural disasters; changing interpretations of GAAP; outcomes of government reviews; inquiries and investigations and related litigation; continued compliance with government regulations; legislation or regulatory environments; requirements or changes adversely affecting the business in which Pangaea is engaged; fluctuations in customer demand; management of rapid growth; intensity of competition from other providers of logistics and shipping services; general economic conditions; geopolitical events and regulatory changes; and other factors set forth in Pangaea’s filings with the Securities and Exchange Commission and the filings of its predecessors. The information set forth herein should be read in light of such risks. Further, investors should keep in mind that certain of Pangaea’s financial results are unaudited and do not conform to SEC Regulation S-X and as a result such information may fluctuate materially depending on many factors. Accordingly, Pangaea’s financial results in any particular period may not be indicative of future results. Pangaea is under any obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise.
Second Quarter 2015 Highlights • Net income attributable to Pangaea Logistics Solutions Ltd. was $5.5 million in the second quarter of 2015, compared to $1.2 million in the second quarter of 2014 • Pro forma adjusted earnings per common share1 increased to $0.15 in the second quarter of 2015, compared to $0.04 pro forma adjusted earnings per common share in the second quarter of 2014 • Adjusted EBITDA2 increased 68% to $10.3 million in the second quarter of 2015, compared with $6.1 million in the second quarter of 2014, illustrating the Company's continued execution on its strategy in a difficult environment • Cash flow from operations was $12.8 million in the first half of 2015, compared with $9.7 million in the first half of 2014 • At the end of the quarter, Pangaea had $34.2 million in cash and cash equivalents • Announced a 3-5 year Contract of Affreightment ("COA") utilizing the Company's ice- class tonnage with the potential to produce up to $135 million in revenue over 5 years • Secured extensions to two COAs with the potential to generate up to $22 million in revenue over the next three years 1 Earnings per share represents total earnings allocated to common stock divided by the weighted average number of common shares outstanding. Pro Forma adjusted earnings per share represents adjusted total earnings allocated to common stock divided by the weighted average number of shares giving effect to the merger with Quarter Merger Corp. as if it had been consummated as of January 1, 2014. See Reconciliation of Adjusted EBITDA and Pro Forma Adjusted Earnings Per Share. 2 Adjusted EBITDA is a non-GAAP measure and represents operating earnings before interest expense, income taxes, depreciation and amortization, and other non- operating income and/or expense, if any. See Reconciliation of Adjusted EBITDA and Pro Forma Adjusted Earnings Per Share.
Drivers of Second Quarter 2015 Performance • Operating margin improved nearly threefold to 10.8% from 3.7%, this reflected an increased share of revenues coming from COAs as opposed to charter business and decreased expenses, specifically: - Voyage revenue per day decreased 3.4% to $11,401/day from 2014, despite significant decline of dry bulk charter indices, demonstrating the benefit of COAs in limiting volatility - Voyage expense decreased to $28.1 million for the second quarter of 2015 from $41.9 million in the second quarter of 2014, thanks in part to decreased bunker costs - Charter hire expense decreased to $15.2 million from $34.0 million - Vessel operating expenses dropped to $5,586/day in the second quarter of 2015 from $6,440/day in the second quarter of 2014 • Total shipping days decreased by 533 days, as Pangaea limited its exposure to a weak spot market • An unrealized gain of $1.2 million on fuel swaps for first half of 2015
Defensible Pillars of Profitability • Execution specialization: - Material cost savings & enhanced profit through granular operating knowledge & unique approach - Secured & defended by 200+ years of expertise & embedded relationships; key managers average 20 years in the industry • Backhaul specialization: - Generating profit from a cost center - Secured & defended by reputation, long-term contracts & repeat customers - Minimal ballast time • Ice-class specialization: - Capturing profit from limited supply of tonnage & lower costs - Secured & defended by technical expertise & ownership of specialized fleet - Own & operate a significant portion of the world’s 1A ice-class dry tonnage • Broader logistics solutions: - Design & implement loading & discharge efficiencies in critical ports - Expand markets & improve business terms for customers
Selected Income Statement Data Three months ended June 30, 2015 2014 (unaudited) (unaudited) Revenues: Voyage revenue $60,902,796 $79,921,090 Charter revenue 4,199,976 9,858,151 65,102,772 89,779,241 Expenses: Voyage expense 28,129,297 41,891,955 Charter hire expense 15,195,199 33,984,808 Vessel operating expenses 7,116,502 7,732,252 General and administrative 3,916,119 2,352,591 Depreciation and amortization 3,271,238 2,744,576 Loss (gain) on sale of vessels 477,888 (2,286,232) Total expenses 58,106,243 86,419,950 Income from operations 6,996,529 3,359,291 Other income (expense): Interest expense, net (1,279,933) (1,474,773) Interest expense related party debt (110,763) (20,234) Imputed interest on related party long-term debt 0 0 Unrealized gain (loss) gain on derivative instruments 363,096 (1,200,334) Other income 60,935 74,227 Total other expense, net (966,665) (2,621,114) Net income 6,029,864 738,177 (Income) loss attributable to noncontrolling interests (569,227) 491,748 Net income attributable to Pangaea Logistics Solutions Ltd. $5,460,637 $1,229,925
Selected Balance Sheet and Cash Flow Data Balance Sheet Data June 30, 2015 December 31, 2014 Assets (unaudited) Current Assets Cash and cash equivalents $34,154,575 $29,817,507 Accounts receivable 21,004,625 27,362,216 Other current assets 22,479,675 27,693,697 Total current assets 77,638,875 84,873,420 Fixed assets, net 265,713,887 207,667,613 Investment in newbuildings in-process 15,381,477 38,471,430 Other noncurrent assets 876,964 1,450,802 Total Assets 359,611,203 332,463,265 Liabilities and stockholders' equity Current liabilities Accounts payable, accrued expenses and other current liabilities 24,918,504 40,201,794 Related party debt 60,618,225 59,102,077 Current portion long-term debt 22,204,172 17,807,674 Other current liabilities 18,582,465 27,753,751 Total current liabilities 126,323,366 144,685,296 Secured long-term debt, net 118,047,085 87,430,416 Total Pangaea Logistics Solutions Ltd. equity 109,781,512 97,816,194 Non-controlling interests 5,459,240 2,531,359 Total stockholders' equity 115,240,752 100,347,553 Total liabilities and stockholders' equity $359,611,203 $332,463,265 Statements of Cash Flows Data Six months ended June 30, 2015 2014 Net cash provided by operating activities 12,810,782 9,749,684 Net cash used in investing activities (40,634,872) (6,629,130) Net cash provided by (used in) financing activities 32,161,158 (546,325)