Form 8-K Pangaea Logistics Soluti For: Aug 15
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 15, 2016
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.) |
c/o Phoenix Bulk Carriers (US) LLC
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 2.02 | Results of Operations and Financial Condition. |
On August 15, 2016, the registrant issued a press release announcing financial results for the three months ended June 30, 2016 and 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 exhibits 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 press release and slide presentation contain summary information regarding the Company and include financial results for the three and six months ended June 30, 2016 and 2015 and for the year ended December 31, 2015. 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 15, 2016 announcing financial results for the three and six months ended June 30, 2016 and 2015. |
99.2 | Investor Presentation of Pangaea Logistics Solutions Ltd. dated August 15, 2016 |
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 15, 2016
PANGAEA LOGISTICS SOLUTIONS LTD. | ||
By: | /s/ Anthony Laura | |
Name: Anthony Laura Title: Chief Financial Officer | ||
Pangaea Logistics Solutions Ltd. Reports Financial Results for the Quarter Ended June 30, 2016
Pangaea announces positive earnings and cash flow
NEWPORT, RI - August 15, 2016 - Pangaea Logistics Solutions Ltd. (“Pangaea” or the “Company”) (NASDAQ: PANL), a global provider of comprehensive maritime logistics solutions, announced today its results for the three months ended June 30, 2016.
Second Quarter Highlights
• | Net income attributable to Pangaea Logistics Solutions Ltd. was $0.1 million, compared to net income of $5.5 million in the second quarter of 2015 |
• | Pro forma adjusted earnings per common share1 of $0.004 for 2016 compared to pro forma adjusted earnings per common share of $0.15 in the second quarter of 2015 |
• | Adjusted EBITDA2 decreased to $4.3 million for 2016, compared with $10.3 million for the second quarter of 2015 |
• | Cash flow from operations was $10.0 million for the six months ended June 30, 2016, compared with $12.8 million for the six months ended June 30, 2015 |
• | At the end of the second quarter, Pangaea had $32.4 million in cash and cash equivalents |
• | General and administrative expenses decreased 25% to $2.9 million from $3.9 million in the second quarter of 2015. |
Edward Coll, Chairman and Chief Executive Officer of Pangaea Logistics Solutions, commented, “This quarter saw us continue to use our unique business model, coupled with rigorous expense management, to remain profitable in the face of a very difficult shipping market. Despite the ongoing challenges presented by the declining growth in demand for the cargoes we carry, combined with too many ships on the water, we have maintained a healthy balance sheet and generated positive cash flow from our operations. This is a testament to both our strategy and our world class team.”
Results for the Three Months Ended June 30, 2016 and 2015
For the three months ended June 30, 2016, the Company reported net income of $0.1 million, or $0.004 per common share compared to net income of $5.5 million, or $0.15 per common share for the same period of 2015.
Adjusted EBITDA was $4.3 million in the three months ended June 30, 2016 and $10.3 million for the three months ended June 30, 2015. The change was primarily attributable to the continued weakness in the drybulk shipping market and to the reduction in the TCE rate attributable to the amended COA that employs three of the Company's vessels on a continuous basis. Pangaea’s strategy of relying on COAs and minimizing risks associated with falling market rates by chartering vessels into our fleet only as necessary to perform under the COAs and firm contracts has continued to serve the Company well. This flexible fleet strategy reduces the risk of idle time in an environment with limited profitable fronthaul employment.
Total revenue for the three months ended June 30, 2016 declined 13% to $57.0 million from $65.1 million in 2015. This decline in total revenue was primarily attributable to the weak market.
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. 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.
Markets
Mr. Coll noted, "Although rates have improved slightly from earlier this year the market continues to be very challenged. While we are optimistic that the market has bottomed and begun to rationalize, the timing of a recovery remains impossible to predict. Beyond the already difficult dry bulk market fundamentals, macroeconomic and geopolitical uncertainty and shocks such as Brexit continue to be headwinds. However, thanks to our financial strength, unique expertise in less-commoditized trades and deep relationships with customers, financial sponsors, and other stakeholders, we have been able to continue to selectively grow our business. We are confident these steps will not only produce results in the near-term, but will also be rewarded even more richly in the long-term when the cycle turns.”
Cash Flows
Cash and cash equivalents were $32.4 million as of June 30, 2016, compared with $37.5 million on December 31, 2015.
For the six months ended June 30, 2016, the Company’s net cash provided by operating activities was $10.0 million, compared to $12.8 million for the six months ended June 30, 2015.
Conference Call Details
The Company’s management team will host a conference call to discuss the Company’s financial results tomorrow, August 16, 2016 at 8:00 a.m., Eastern Time (ET). Following a recorded discussion of the quarterly results, Edward Coll, Chairman and Chief Executive Officer, and Anthony Laura, Chief Financial Officer, will be available to answer questions from attending participants. 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# 53702106.
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 (800) 585-8367 (domestic) or (404) 537-3406 (international) and referencing ID# 53702106.
Pangaea Logistics Solutions Ltd.
Condensed Consolidated Statements of Income
(unaudited)
Three Months Ended June 30, | |||||||
2016 | 2015 | ||||||
Revenues: | |||||||
Voyage revenue | $ | 53,548,976 | $ | 60,902,796 | |||
Charter revenue | 3,412,729 | 4,199,976 | |||||
56,961,705 | 65,102,772 | ||||||
Expenses: | |||||||
Voyage expense | 26,766,724 | 28,129,297 | |||||
Charter hire expense | 15,041,229 | 15,195,199 | |||||
Vessel operating expense | 7,904,828 | 7,116,502 | |||||
General and administrative | 2,935,950 | 3,916,119 | |||||
Depreciation and amortization | 3,528,596 | 3,271,238 | |||||
Loss on sale of vessels | — | 477,888 | |||||
Total expenses | 56,177,327 | 58,106,243 | |||||
Income from operations | 784,378 | 6,996,529 | |||||
Other (expense) income: | |||||||
Interest expense, net | (1,530,425 | ) | (1,279,933 | ) | |||
Interest expense on related party debt | (75,010 | ) | (110,763 | ) | |||
Unrealized gain on derivative instruments | 1,387,391 | 363,096 | |||||
Other income (expense) | 67,661 | 60,935 | |||||
Total other expense, net | (150,383 | ) | (966,665 | ) | |||
Net income | 633,995 | 6,029,864 | |||||
Income attributable to noncontrolling interests | (504,361 | ) | (569,227 | ) | |||
Net income attributable to Pangaea Logistics Solutions Ltd. | $ | 129,634 | $ | 5,460,637 | |||
Earnings per common share: | |||||||
Basic | $ | — | $ | 0.15 | |||
Diluted | $ | — | $ | 0.15 | |||
Weighted average shares used to compute earnings | |||||||
per common share | |||||||
Basic | 35,150,453 | 35,240,373 | |||||
Diluted | 35,337,290 | 35,240,373 | |||||
Pangaea Logistics Solutions Ltd.
Condensed Consolidated Balance Sheets
June 30, 2016 | December 31, 2015 | ||||||
(unaudited) | |||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 32,423,408 | $ | 37,520,240 | |||
Restricted cash | 1,503,341 | 2,003,341 | |||||
Accounts receivable (net of allowance of $4,761,813 at | |||||||
June 30, 2016 and $5,067,194 at December 31, 2015) | 14,480,516 | 19,617,943 | |||||
Bunker inventory | 8,390,900 | 7,490,590 | |||||
Advance hire, prepaid expenses and other current assets | 3,761,628 | 2,679,292 | |||||
Total current assets | 60,559,793 | 69,311,406 | |||||
Fixed assets, net | 282,077,776 | 255,145,807 | |||||
Investments in newbuildings in-process | 8,848,000 | 42,505,783 | |||||
Total assets | $ | 351,485,569 | $ | 366,962,996 | |||
Liabilities and stockholders' equity | |||||||
Current liabilities | |||||||
Accounts payable, accrued expenses and other current liabilities | $ | 18,405,761 | $ | 22,156,202 | |||
Related party debt | 10,976,423 | 13,321,419 | |||||
Deferred revenue | 4,349,557 | 4,448,795 | |||||
Current portion long-term debt | 20,091,616 | 19,499,262 | |||||
Dividend payable | 12,624,825 | 12,724,825 | |||||
Total current liabilities | 66,448,182 | 72,150,503 | |||||
Secured long-term debt, net | 117,209,252 | 129,496,153 | |||||
Commitments and contingencies (Note 7) | |||||||
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; 36,525,053 shares issued and outstanding at June 30, 2016; 36,503,837 shares issued and outstanding and December 31, 2015 | 3,653 | 3,650 | |||||
Additional paid-in capital | 133,349,031 | 133,075,409 | |||||
Accumulated deficit | (23,539,795 | ) | (24,866,534 | ) | |||
Total Pangaea Logistics Solutions Ltd. equity | 109,812,889 | 108,212,525 | |||||
Non-controlling interests | 58,015,246 | 57,103,815 | |||||
Total stockholders' equity | 167,828,135 | 165,316,340 | |||||
Total liabilities and stockholders' equity | $ | 351,485,569 | $ | 366,962,996 | |||
Pangaea Logistics Solutions Ltd.
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, | |||||||
2016 | 2015 | ||||||
Operating activities | |||||||
Net income | $ | 2,238,169 | $ | 15,359,523 | |||
Adjustments to reconcile net income to net cash provided by operations: | |||||||
Depreciation and amortization expense | 7,044,052 | 6,261,832 | |||||
Amortization of deferred financing costs | 354,431 | 404,968 | |||||
Unrealized gain on derivative instruments | (1,051,432 | ) | (1,186,551 | ) | |||
Loss (gain) from equity method investee | 30,380 | (61,357 | ) | ||||
Provision for doubtful accounts | 931,962 | 513,112 | |||||
Loss on sales of vessels | — | 566,756 | |||||
Write off unamortized financing costs of repaid debt | — | 25,557 | |||||
Share-based compensation | 176,068 | 305,825 | |||||
Change in operating assets and liabilities: | |||||||
Decrease in restricted cash | 500,000 | — | |||||
Accounts receivable | 4,205,465 | 5,844,479 | |||||
Bunker inventory | (900,310 | ) | 2,990,288 | ||||
Advance hire, prepaid expenses and other current assets | (1,082,336 | ) | 1,821,996 | ||||
Drydocking costs | (42,478 | ) | — | ||||
Accounts payable, accrued expenses and other current liabilities | (2,319,659 | ) | (14,144,360 | ) | |||
Deferred revenue | (99,238 | ) | (5,891,286 | ) | |||
Net cash provided by operating activities | 9,985,074 | 12,810,782 | |||||
Investing activities | |||||||
Purchase of vessels | (319,432 | ) | (44,770,740 | ) | |||
Proceeds from sales of vessels | — | 4,523,804 | |||||
Deposits on newbuildings in-process | (83,000 | ) | (85,000 | ) | |||
Purchase of building and equipment | (30,000 | ) | (52,936 | ) | |||
Purchase of non-controlling interest | — | (250,000 | ) | ||||
Net cash used in investing activities | (432,432 | ) | (40,634,872 | ) | |||
Financing activities | |||||||
Proceeds of related party debt | — | 2,506,667 | |||||
Payments of related party debt | (2,500,496 | ) | (1,216,250 | ) | |||
Proceeds from long-term debt | 1,096,000 | 45,000,000 | |||||
Payments of financing and issuance costs | (34,425 | ) | (729,866 | ) | |||
Payments of long-term debt | (13,110,553 | ) | (9,777,473 | ) | |||
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 (used in) provided by financing activities | (14,649,474 | ) | 32,161,158 | ||||
Net (decrease) increase in cash and cash equivalents | (5,096,832 | ) | 4,337,068 | ||||
Cash and cash equivalents at beginning of period | 37,520,240 | 29,817,507 | |||||
Cash and cash equivalents at end of period | $ | 32,423,408 | $ | 34,154,575 | |||
Disclosure of noncash items | |||||||
Cash paid for interest | $ | 2,381,513 | $ | 2,407,348 | |||
Pangaea Logistics Solutions Ltd.
Reconciliation of Adjusted EBITDA and Pro Forma Adjusted Earnings Per Share
Three months ended June 30, | ||||||||
2016 | 2015 | |||||||
Adjusted EBITDA (in millions) | ||||||||
Income from operations | 784,378 | 6,996,529 | ||||||
Depreciation and amortization | 3,528,596 | 3,271,238 | ||||||
Adjusted EBITDA | $ | 4,312,974 | $ | 10,267,767 | ||||
Earnings Per Common Share | ||||||||
Net income attributable to Pangaea Logistics Solutions Ltd. | $ | 129,634 | $ | 5,460,637 | ||||
Weighted average number of common shares outstanding - basic | 35,150,453 | 35,240,373 | ||||||
Weighted average number of common shares outstanding - diluted | 35,337,290 | 35,240,373 | ||||||
Earnings per common share - basic | $ | 0.004 | $ | 0.155 | ||||
Earnings per common share - diluted | $ | 0.004 | $ | 0.155 | ||||
Pro Forma Adjusted EPS | ||||||||
Net income attributable to Pangaea Logistics Solutions Ltd. | $ | 129,634 | $ | 5,460,637 | ||||
Non-GAAP Adjustments: | ||||||||
Add: loss on impairment of vessels | — | — | ||||||
Add: non-recurring charges | — | — | ||||||
Non-GAAP pro forma adjusted total earnings allocated to common stock | $ | 129,634 | $ | 5,460,637 | ||||
Non-GAAP pro forma weighted average number of common shares | 35,150,453 | 35,240,373 | ||||||
Non-GAAP pro forma adjusted EPS | $ | 0.004 | $ | 0.15 | ||||
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 condensed 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.
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.
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.
Second Quarter
2016 Results
August 2016
2
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 not 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.
3
Second Quarter 2016 Highlights
• Net income attributable to Pangaea Logistics Solutions was $0.1 million,
compared to net income of $5.5 million in the second quarter of 2015
• Pro forma adjusted earnings per common share1 of $0.004 for 2016
compared to pro forma adjusted earnings per common share of $0.15 in
the second quarter of 2015
• Adjusted EBITDA2 decreased to $4.3 million for 2016, compared with
$10.3 million for the second quarter of 2015
• Cash flow from operations for the six months ended June 30, 2016 was
$10.0 million, compared with $12.8 million for the first half of 2015
• At the end of the second quarter, Pangaea had $32.4 million in cash and
cash equivalents
• General and administrative expenses decreased 25% to $2.9 million from
$3.9 million in the second quarter of 2015
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 mergers as if they 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.
3 Gross margin percentage is a non-GAAP measure representing the ratio of total revenue less voyage, charter hire and vessel operating expenses, to total revenue.
4
Financial Performance - Trailing Four Quarters
1) 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.
2) TCE is defined as total revenues less voyage expenses divided by the number of shipping days, which is consistent with industry standards. TCE rate is a common
shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels
on voyage charters, because charter hire rates for vessels on voyage charters are generally not expressed in per-day amounts while charter hire rates for vessels
on time charters generally are expressed in per-day amounts.
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
Q3-15 Q4-15 Q1-16 Q2-16
Adjusted EBITDA (1)
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
Q3-15 Q4-15 Q1-16 Q2-16
TCE (2)
$(6,000,000)
$(5,000,000)
$(4,000,000)
$(3,000,000)
$(2,000,000)
$(1,000,000)
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
Q3-15 Q4-15 Q1-16 Q2-16
Net Income
5
• The Company’s unique ability to limit the impact of weak market rates on its
operations by dynamically adjusting its fleet size. This a function of its
flexible, cargo-focused, business model, which uses a mix of owned and
chartered-in vessels.
• Reduction in cost of bunkers consumed on voyages. Bunker prices were on
average 19% lower in the second quarter of 2016 than in the second quarter
of 2015.
• General and administrative costs decreased 25% to $2.9 million from $3.9
million in 2015 as the Company continued its expense management
measures while weakness in the overall shipping market continues.
Drivers of Second Quarter 2016 Performance
6
Defensible Pillars of Profitability
• Execution specialization:
- Material cost savings & enhanced profit through granular operating knowledge & risk
sensitive approach
- Secured & defended by 200+ years of expertise & embedded relationships; key
managers average 20 years in the industry
• Backhaul specialization:
- Generating profit from a cost center
- Secured & defended by reputation, long-term contracts & repeat customers
- Minimal ballast time
• Ice-class specialization:
- Capturing profit from limited supply of tonnage & lower costs
- Secured & defended by expertise & ownership of specialized fleet
- Own & operate a significant portion of the world’s 1A ice-class dry tonnage
• Broader logistics solutions:
- Design & implement loading & discharge efficiencies in critical ports
- Expand markets & improve business terms for customers
7
Selected Income Statement Data
2016 2015
(unaudited) (unaudited)
Revenues:
Voyage revenue 53,548,976$ 60,902,796$
Charter revenue 3,412,729 4,199,976
56,961,705 65,102,772
Expenses:
Voyage expense 26,766,724 28,129,297
Charter hire expense 15,041,229 15,195,199
Vessel operating expenses 7,904,828 7,116,502
General and administrative 2,935,950 3,916,119
Depreciation and amortization 3,528,596 3,271,238
Total expenses 56,177,327 58,106,243
Income from operations 784,378 6,996,529
Total other expense, net (150,383) (966,665)
Net income 633,995 6,029,864
Income attributable to noncontrolling interests (504,361) (569,227)
Net income attributable to Pangaea Logistics Solutions Ltd. 129,634$ 5,460,637$
Three months ended June 30,
8
Selected Balance Sheet and Cash Flow Data
Net cash provided by operating activities 9,985,074$ 12,810,782$
used in investing ctivities (432,432) (40,634,87 )
et cash provided by financing activities (14,649, 74$ 32,161,158$
June 30, 2016 December 31, 2015
Current Assets
Cash and cash equivalents 32,423,408$ 37,520,240$
Accounts receivable, net 14,480,516 19,617,943
Other current assets 13,655,869 12,173,223
Total current assets 60,559,793 69,311,406
Fixed assets, net 282,077,776 255,145,807
Investment in newbuildings in-process 8,848,000 42,505,783
Total assets 351,485,569$ 366,962,996$
Current liabilities
Accounts payable, accrued expenses and other current liabilities 18,405,761$ 22,156,202$
Related party debt 10,976,423 13,321,419
Current portion long-term debt 20,091,616 19,499,262
Other current liabilities 16,974,382 17,173,620
Total current liabilties 66,448,182 72,150,503
Secured long-term debt, net 117,209,252 129,496,153
Total Pangaea Logistics Solutions Ltd. equity 109,812,889 108,212,525
Non-controlling interests 58,015,246 57,103,815
Total stockholders' equity 167,828,135 165,316,340
Total liabilities and stockholders' equity 351,485,569$ 366,962,996$