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Eagle Bulk Shipping – Q1 2018 Revenue Rose 73% To USD 79.4 Million

Eagle Bulk Shipping – Q1 2018 Revenue Rose 73% To USD 79.4 Million
Eagle Bulk Shipping Inc., one of the world’s largest owner-operators in the Supramax / Ultramax segment, reported financial results for the three months ended March 31, 2018.

Highlights for the Quarter

Generated net revenues of USD 79.4 million, representing an increase of 73% compared to the same period in 2017.

TCE Revenues (1) for the quarter equated to USD 46.6 million, an increase of 63% year-on-year.

Achieved a TCE (1) of USD 11,052 for the quarter, an increase of 41% year-on-year.

Realized a net income of USD 0.1 million or USD 0.00 per share, compared to a net loss of USD 11.1 million or USD 0.17 per share for the comparable quarter in 2017.

Generated operating cash flows of USD 14.9 million for the quarter.

Adjusted EBITDA(2) of USD 18.8 million, representing an increase of 314% compared to the first quarter of 2017.

Took delivery of the New London Eagle, a 2015-built CROWN-63 Ultramax, closed the sale of the Avocet, a 2010-built DIAMOND-53 Supramax, and signed a memorandum of agreement to sell the vessel Thrush for USD 10.9 million net of commissions and selling expenses.

Looking ahead into the second quarter of 2018, attained a TCE of USD 11,224 with approximately 70% of the days fixed for the period thus far.

Gary Vogel, Eagle Bulk’s CEO, commented, “We continued to execute on our active owner-operator strategy during the first quarter, achieving a TCE of USD 11,052 and outperforming the benchmark Baltic Supramax Index by over USD 1,100 per day. This represents the fifth consecutive quarter we have meaningfully outperformed the market, which I believe underscores the value of our unique business model and our team’s ability to execute.

With attractive supply/demand fundamentals in place, we expect the underlying dry bulk market to continue to improve. Against this backdrop, we believe the Company is well positioned to continue to generate strong cash flow with a proven business model, significant operational leverage and a healthy balance sheet.”

Results of Operations for the three months ended March 31, 2018 and 2017

For the three months ended March 31, 2018, the Company reported net income of USD 0.1 million, or basic and diluted earnings of USD 0.00 per share. In the comparable quarter of 2017, the Company reported a net loss of USD 11.1 million, or basic and diluted earnings of USD 0.17 per share.

We adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09” or “ASC 606”) as of January 1, 2018 utilizing the modified retrospective method of transition. The impact of adoption of ASC 606 was not material to our reported financial position or the results of operations for the three months ended March 31, 2018.

Net time and voyage charter revenues

Net time and voyage charter revenues for the three months ended March 31, 2018 were USD 79.4 million compared with USD 45.9 million recorded in the comparable quarter in 2017. The increase in revenue was primarily attributable to the improving dry bulk market resulting in higher charter rates as well as an increase in available days due to an increase in owned fleet and chartered in vessels.

Voyage expenses

Voyage expenses for the three months ended March 31, 2018 were USD 22.5 million compared to USD 13.4 million in the comparable quarter in 2017. 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

Vessel expenses for the three months ended March 31, 2018 were USD 21.1 million compared to USD 18.0 million in the comparable quarter in 2017. The increase in vessel expenses is attributable to the increase in the owned fleet after the acquisition of 11 Ultramax vessels during 2017 and first quarter of 2018 which was partially offset by vessel sales in 2017. The Company sold the vessel Redwing in the first quarter of 2017, the Sparrow in the second quarter of 2017, the Woodstar in the third quarter of 2017 and the Wren in the fourth quarter of 2017. The ownership days for the three months ended March 31, 2018 and March 31, 2017 were 4,312 and 3,686, respectively.

Average daily vessel operating expenses for our fleet for the three months ended March 31, 2018 and March 31, 2017 were USD 4,888 and USD 4,871, respectively.

Charter hire expenses

Charter hire expenses for the three months ended March 31, 2018 were USD 10.3 million compared to USD 3.9 million in the comparable quarter in 2017. The increase in charter hire expense was principally due to an increase in the number of chartered in vessels as we expand on our owner-operator platform as well as an increase in the average charter hire expense per day. The total chartered in days for the three months ended March 31, 2018 were 944 compared to 514 for the comparable quarter in the prior year.

Depreciation and amortization

Depreciation and amortization expense for the three months ended March 31, 2018 and 2017 was USD 9.3 million and USD 7.5 million, respectively. Total depreciation and amortization expense for the three months ended March 31, 2018 includes USD 8.1 million of vessel and other fixed asset depreciation and USD 1.2 million relating to the amortization of deferred drydocking costs. Comparable amounts for the three months ended March 31, 2017 were USD 6.5 million of vessel and other fixed asset depreciation and USD 1.0 million of amortization of deferred drydocking costs. The increase in depreciation was primarily due to the purchase of 10 Ultramax vessels during 2017 and one in January 2018 offset by the sale of two vessels during 2017 and one vessel classified as held for sale since the third quarter of 2017. The amortization of drydock expense increased in the current quarter compared to the comparable quarter in the prior year primarily due to the completion of three drydocks in 2017 and two in the first quarter of 2018.

General and administrative expenses

General and administrative expenses for the three months ended March 31, 2018 and 2017 were USD 9.9 million and USD 7.8 million, respectively. General and administrative expenses include stock-based compensation of USD 3.5 million and USD 2.2 million for 2018 and 2017, respectively. The increase in general and administrative expenses was mainly attributable to increases in compensation expense including stock-based compensation expense. The increase in compensation expense relates to incremental staff hired in connection with the increased fleet size under our owner-operator business model.

Interest expense

Interest expense for the three months ended March 31, 2018 and 2017 was USD 6.3 million and USD 6.4 million, respectively. The decrease in interest expense is mainly due to the decrease in amortization of debt discount and debt issuance costs by USD 1.0 million resulting from the debt refinancing in December 2017 where the high interest bearing Second Lien Facility was repaid in full which was offset by an increase in interest expense of USD 0.8 million on the Ultraco Debt Facility which was used for acquisition of ten Ultramax vessels.

Liquidity and Capital Resources

Net cash provided by operating activities for the three months ended March 31, 2018 was USD 14.9 million, compared with net cash used in operating activities of USD 2.0 million in the comparable quarter in 2017. The cash flows from operating activities improved over the prior year primarily due to an increase in charter hire rates driven by improvement in the dry bulk market and positive working capital change as compared to the corresponding period in the prior year, partially offset by higher drydocking expenditures of USD 1.1 million in 2018 compared to USD 0.02 million in the comparable quarter prior year.

Net cash used in investing activities for the three months ended March 31, 2018 was USD 15.3 million, compared to USD 21.9 million in the comparable quarter in the prior year. The Company purchased one Ultramax vessel in the first quarter of 2018 for USD 21.3 million out of which the Company paid a deposit of USD 2.2 million as of December 31, 2017. Additionally, the Company redeemed a USD 4.5 million of short-term certificate of deposit during the first quarter of 2018. During the first quarter of 2017, the Company purchased one Ultramax vessel for USD 17.3 million and paid a deposit of USD 10.3 million relating to acquisition of nine Ultramax vessels offset by proceeds from the sale of M/V Redwing for USD 5.8 million.

Net cash provided by financing activities for the three months ended March 31, 2018 was USD 2.1 million compared with USD 93.1 million in the comparable quarter in 2017. The Company drew down USD 8.6 million under the Ultraco Debt Facility in connection with the purchase of one Ultramax vessel, offset by repayment of USD 5.0 million of the Revolving Loan under the New First Lien Facility. The Company paid USD 1.2 million of debt issuance costs on the three existing debt facilities and USD 0.2 million towards shares withheld for taxes due to vesting of restricted shares. In the three months ended March 31, 2017, the Company received net proceeds of USD 96.0 million in a common stock private placement, that closed on January 20, 2017 and repaid USD 2.9 million of its Term Loan under the First Lien Facility from the proceeds of the sale of the vessel Redwing.

As of March 31, 2018, our cash and cash equivalents balance was USD 57.9 million compared to a cash and cash equivalents balance of USD 56.3 million as of December 31, 2017.

As of March 31, 2018, the total availability in the revolving credit facilities under the Super Senior Facility and the New First Lien Facility was USD 20.0 million.

As of March 31, 2018, the Company’s debt consisted of USD 200.0 million in outstanding bonds, USD 60.0 million in term loan under the New First Lien Facility and USD 69.8 million, under the Ultraco Debt Facility.

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 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, 2018 , two of our vessels were drydocked and we incurred USD 1.1 million in drydocking related costs. In the three months ended March 31, 2017, no vessels were drydocked.

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