PANL 8-K
Pangaea Logistics Solutions Ltd. (PANL)
8-K
2020-11-12
For: 2020-11-11
View Original
Added on
April 09, 2026
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): November 11, 2020
(Exact Name of Registrant as Specified in Charter)
| (State or Other Jurisdiction | (Commission | (IRS Employer | ||||||
| of Incorporation) | File Number) | Identification No.) | ||||||
c/o Phoenix Bulk Carriers (US) LLC
(Address of Principal Executive Offices) (Zip Code)
(401 ) 846-7790
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(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)) | ||||||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. | ||||
On November 11, 2020 , Registrant issued a press release announcing financial results for the three months ended September 30, 2020. The press release is furnished as Exhibit 99.1, its Quarterly Investor Presentation is attached as Exhibit 99.2.
The information contained in, or incorporated into, this Current Report on Form 8-K is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities under that section, nor shall it be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in any such filing.
| Item 9.01 | Financial Statements and Exhibits. | ||||
(d)Exhibits
| Exhibit | Description | ||||
104 Cover Page Interactive Data File ( embedded within Inline XBRL document)
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: November 12, 2020
| PANGAEA LOGISTICS SOLUTIONS LTD. | ||||||||
| By: | /s/ Gianni Del Signore | |||||||
| Name: Gianni Del Signore Title: Chief Financial Officer | ||||||||
Pangaea Logistics Solutions Ltd. Reports Financial Results for the Quarter Ended September 30, 2020
NEWPORT, RI - November 11, 2020 - 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 September 30, 2020.
3rd Quarter Highlights
•Net income attributable to Pangaea Logistics Solutions Ltd. was $7.6 million for three months ended September 30, 2020 as compared to $8.3 million of net income for the same period of 2019.
◦Non-GAAP adjusted net income attributable to Pangaea Logistics Solutions Ltd. of $8.1 million as compared to $8.6 million for the three months ended September 30, 2019.
•Diluted net income per share was $0.17 for three months ended September 30, 2020 as compared to earnings per share of $0.19 for the same period of 2019.
•Pangaea's TCE rates were $13,316 for the three months ended September 30, 2020 and $15,915 for the three months ended September 30, 2019. The market average for the third quarter of 2020 was approximately $10,286, giving the Company an overall average premium over market rates of approximately $3,030 or 29%.
•Adjusted EBITDA of $15.1 million for the three months ended September 30, 2020, compared to $18.0 million for the same period of 2019.
•At the end of the quarter, Pangaea had $48.1 million in cash, restricted cash and cash equivalents.
•The Company acquired an additional one-third equity interest in its partially-owned consolidated subsidiary Nordic Bulk Holding Company Ltd. (NBHC), which owns six modern 1-A ice-class panamax bulk vessels, increasing its equity interest to 66.7%.
Ed Coll, Chief Executive Officer of Pangaea Logistics Solutions, commented:
"The third quarter was an active one for us from an operating and investing perspective. We deployed our industry leading ice class capabilities to meet our clients' needs during the summer arctic shipping season. Our operating fleet expanded from an average of 40 ships in the second quarter to 52 ships in the third quarter, which shows our unique chartering strategy in practice as we limited our exposure to turbulent markets by redelivering vessels earlier in the year and replacing them when needed to meet client demand. Our achieved TCE continued to outperform the market average by 29%. Furthermore, as we previously announced, we increased our ownership in our six ice-class 1A panamax vessels from 33% to 67%, solidifying our position in the strategically important ice class sector. We took additional steps to reduce the average age of our fleet as we completed the sale of the m/v Bulk Beothuk in the 3rd quarter."
Mr. Coll added, "Collectively we are encouraged by the steps we've taken as we focus on niches where we add value and in turn enhance shareholder value. Furthermore, as we look ahead, we continue to watch the rapidly changing conditions caused by COVID-19, from changes to our working environment to rotating crews aboard our vessels. We again extend our sincere gratitude to our people and their families for the hardships they are facing, ashore and aboard our vessels. Our results year over year remain strong. In the longer term we are encouraged by the decline in newbuilding orders and its impact on the dry bulk industry, however we expect, and have prepared for, continued uncertainty in our markets over the next few quarters."
Results for the three months ended September 30, 2020 and 2019
Total revenue was $103.8 million for the three months ended September 30, 2020, compared with $118.9 million for the three months ended September 30, 2019. The 13% decrease in revenues was mainly attributed to the decrease in the average time charter rates achieved by our vessels during the third quarter of 2020 compared to the same period in 2019.
Time Charter Equivalent rate (TCE) was $13,316 per day for the three months ended September 30, 2020, compared to an average of $15,915 per day for the same period in 2019. However, the achieved premium over the average market TCE rate increased by $3,030 per day or 29% for the three months ended September 30, 2020 compared to 16% in the same period in 2019. The total number of shipping days remained relatively consistent with a 2% increase to 4,734 days in the three months ended September 30, 2020, compared to 4,636 for the same period in 2019, predominantly due to the increase in voyage days.
Liquidity and Cash Flows
Cash, restricted cash and cash equivalents were $48.1 million as of September 30, 2020, compared with $53.1 million on December 31, 2019.
At September 30, 2020 and December 31, 2019, the Company had working capital of $17.3 million and $37.1 million, respectively. Net cash provided by operating activities during the nine months ended September 30, 2020 was $22.4 million compared to net cash provided by operating activities of $23.4 million for the nine months ended September 30, 2019.
Net cash used in investing activities during the nine months ended September 30, 2020 and 2019 was $6.0 million and $48.2 million, respectively. During the nine months ended September 30, 2020, the Company received sale proceeds of $11.7 million from the sale of three vessels and paid $15.0 million for the acquisition of an additional one-third interest in NBHC.
Net cash used in financing activities during the nine months ended September 30, 2020 was $21.4 million compared to net cash provided by financing activities of $5.3 million during the same period of 2019. The Company exercised an early buy-out of one of its finance leases for a purchase price of $5.5 million during the nine months ended September 30, 2020 compared to proceeds received of $14.0 million from a finance lease during the same period of 2019.
Subsequent Event
NBHC Loan Refinancing
On November 2, 2020, NBHC signed a nonbinding term sheet with a new lender pursuant to which the new lender has proposed to provide NBHC a loan for up to $18.0 million with a term of 84 months at an interest rate of 2.95% per annum. The borrower will make 28 quarterly payments in arrears followed by one final installment of $4.4 million payable on the 7th anniversary of the drawdown date, no later than December 31, 2020. The Loan would be secured by a first lien on m/v Nordic Odyssey and m/v Nordic Orion. The Company intends to use a portion of the proceeds of the loan to repay the outstanding balance of $10.6 million for the Nordic Odyssey and Nordic Orion loan facilities which matures on December 31, 2020.
Conference Call Details
The Company’s management team will host a conference call to discuss the Company’s financial results on November 12, 2020 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#5847439.
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 two weeks and can be accessed by calling (855) 859-2056 (domestic) or (404) 537-3406 (international) and referencing ID#5847439.
Pangaea Logistics Solutions Ltd.
Consolidated Statements of Income
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Voyage revenue | $ | 98,120,344 | $ | 103,806,391 | $ | 251,501,401 | $ | 247,087,805 | |||||||||||||||
| Charter revenue | 5,646,214 | 15,079,005 | 18,541,264 | 34,632,391 | |||||||||||||||||||
| Total revenue | 103,766,558 | 118,885,396 | 270,042,665 | 281,720,196 | |||||||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Voyage expense | 40,729,271 | 45,102,602 | 120,283,093 | 114,501,121 | |||||||||||||||||||
| Charter hire expense | 34,969,551 | 41,980,065 | 82,498,729 | 85,244,779 | |||||||||||||||||||
| Vessel operating expense | 9,699,890 | 11,331,770 | 28,958,812 | 32,160,692 | |||||||||||||||||||
| General and administrative | 3,691,963 | 2,768,253 | 11,557,594 | 12,160,924 | |||||||||||||||||||
| Depreciation and amortization | 4,230,302 | 4,652,563 | 12,818,260 | 13,521,078 | |||||||||||||||||||
| Loss on impairment of vessels | — | — | 1,801,039 | — | |||||||||||||||||||
| Loss on sale of vessels | 485,580 | — | 705,065 | — | |||||||||||||||||||
| Total expenses | 93,806,557 | 105,835,253 | 258,622,592 | 257,588,594 | |||||||||||||||||||
| Income from operations | 9,960,001 | 13,050,143 | 11,420,073 | 24,131,602 | |||||||||||||||||||
| Other (expense) income: | |||||||||||||||||||||||
| Interest expense, net | (1,956,729) | (2,499,617) | (6,073,599) | (6,807,837) | |||||||||||||||||||
| Interest expense on related party debt | — | (10,902) | — | (48,938) | |||||||||||||||||||
| Unrealized gain (loss) on derivative instruments, net | (18,098) | (301,058) | (1,530,875) | 2,203,899 | |||||||||||||||||||
| Other income | 301,543 | 180,194 | 996,734 | 580,106 | |||||||||||||||||||
| Total other (expense), net | (1,673,284) | (2,631,383) | (6,607,740) | (4,072,770) | |||||||||||||||||||
| Net income | 8,286,717 | 10,418,760 | 4,812,333 | 20,058,832 | |||||||||||||||||||
| Income attributable to non-controlling interests | (734,472) | (2,097,200) | (1,050,287) | (4,002,217) | |||||||||||||||||||
| Net income attributable to Pangaea Logistics Solutions Ltd. | $ | 7,552,245 | $ | 8,321,560 | $ | 3,762,046 | $ | 16,056,615 | |||||||||||||||
| Earnings per common share: | |||||||||||||||||||||||
| Basic | $ | 0.17 | $ | 0.19 | $ | 0.09 | $ | 0.38 | |||||||||||||||
| Diluted | $ | 0.17 | $ | 0.19 | $ | 0.09 | $ | 0.37 | |||||||||||||||
| Weighted average shares used to compute earnings per common share: | |||||||||||||||||||||||
| Basic | 43,488,241 | 42,817,933 | 43,393,764 | 42,729,775 | |||||||||||||||||||
| Diluted | 43,510,961 | 43,354,742 | 43,398,472 | 43,247,417 | |||||||||||||||||||
Pangaea Logistics Solutions Ltd.
Consolidated Balance Sheets
| September 30, 2020 | December 31, 2019 | ||||||||||
| (unaudited) | |||||||||||
| Assets | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 45,558,951 | $ | 50,555,091 | |||||||
| Restricted cash | 1,500,000 | 1,000,000 | |||||||||
Accounts receivable (net of allowance of $1,697,961 and $1,908,841 at September 30, 2020 and December 31, 2019, respectively) | 19,938,892 | 28,309,402 | |||||||||
| Bunker inventory | 16,232,580 | 21,001,010 | |||||||||
| Advance hire, prepaid expenses and other current assets | 22,422,135 | 18,770,825 | |||||||||
| Vessel held for sale | — | 8,319,152 | |||||||||
| Total current assets | 105,652,558 | 127,955,480 | |||||||||
| Restricted cash | 1,000,000 | 1,500,000 | |||||||||
| Fixed assets, net | 275,616,572 | 281,474,857 | |||||||||
| Investment in newbuildings in-process | 15,390,635 | 15,357,189 | |||||||||
| Finance lease right of use assets, net | 45,732,947 | 53,615,305 | |||||||||
| Total assets | $ | 443,392,712 | $ | 479,902,831 | |||||||
| Liabilities and stockholders' equity | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable, accrued expenses and other current liabilities | $ | 39,092,634 | $ | 39,973,635 | |||||||
| Related party debt | 242,852 | 332,987 | |||||||||
| Deferred revenue | 10,387,175 | 14,376,394 | |||||||||
| Current portion of secured long-term debt | 31,619,969 | 22,990,674 | |||||||||
| Current portion of finance lease liabilities | 6,952,635 | 12,549,208 | |||||||||
| Dividend payable | 99,127 | 631,961 | |||||||||
| Total current liabilities | 88,394,392 | 90,854,859 | |||||||||
| Secured long-term debt, net | 65,513,329 | 83,649,717 | |||||||||
| Finance lease liabilities, net | 52,277,654 | 57,498,217 | |||||||||
| Long-term liabilities - other | 10,062,268 | 4,828,364 | |||||||||
| 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; 45,065,662 shares issued and outstanding at September 30, 2020; 44,886,122 shares issued and outstanding at December 31, 2019 | 4,507 | 4,489 | |||||||||
| Additional paid-in capital | 159,265,939 | 157,504,895 | |||||||||
| Retained earnings | 16,498,626 | 12,736,580 | |||||||||
| Total Pangaea Logistics Solutions Ltd. equity | 175,769,072 | 170,245,964 | |||||||||
| Non-controlling interests | 51,375,997 | 72,825,710 | |||||||||
| Total stockholders' equity | 227,145,069 | 243,071,674 | |||||||||
| Total liabilities and stockholders' equity | $ | 443,392,712 | $ | 479,902,831 | |||||||
Pangaea Logistics Solutions Ltd.
Consolidated Statements of Cash Flows
(unaudited)
| Nine Months Ended September 30, | |||||||||||
| 2020 | 2019 | ||||||||||
| Operating activities | |||||||||||
| Net income | $ | 4,812,333 | $ | 20,058,832 | |||||||
| Adjustments to reconcile net income to net cash (used in) provided by operations: | |||||||||||
| Depreciation and amortization expense | 12,818,260 | 13,521,078 | |||||||||
| Amortization of deferred financing costs | 513,092 | 538,427 | |||||||||
| Amortization of prepaid rent | 91,704 | 88,948 | |||||||||
| Unrealized loss (gain) on derivative instruments | 1,530,875 | (2,203,899) | |||||||||
| Income from equity method investee | (1,097,531) | (416,435) | |||||||||
| Earnings attributable to non-controlling interest recorded as interest expense | 104,662 | — | |||||||||
| Recovery for doubtful accounts | (45,661) | (47,351) | |||||||||
| Loss on impairment of vessels | 1,801,039 | — | |||||||||
| Loss on sale of vessel | 705,065 | — | |||||||||
| Drydocking costs | (3,112,910) | (1,561,689) | |||||||||
| Share-based compensation | 1,915,188 | 1,365,968 | |||||||||
| Change in operating assets and liabilities: | |||||||||||
| Accounts receivable | 8,416,171 | (692,306) | |||||||||
| Bunker inventory | 4,768,430 | 2,219,986 | |||||||||
| Advance hire, prepaid expenses and other current assets | (2,553,779) | (15,220,967) | |||||||||
| Accounts payable, accrued expenses and other current liabilities | (4,236,385) | 6,171,148 | |||||||||
| Deferred revenue | (3,989,219) | (419,835) | |||||||||
| Net cash provided by operating activities | 22,441,334 | 23,401,905 | |||||||||
| Investing activities | |||||||||||
| Purchase of vessels and vessel improvements | (2,072,496) | (40,201,356) | |||||||||
| Investment in newbuildings in-process | (33,446) | (7,691,522) | |||||||||
| Purchase of fixed assets and equipment | — | (293,385) | |||||||||
| Acquisition of non-controlling interest | (15,000,000) | — | |||||||||
| Proceeds from sale of vessels | 11,691,507 | — | |||||||||
| Purchase of derivative instrument | (628,000) | — | |||||||||
| Net cash provided by (used in) investing activities | (6,042,435) | (48,186,263) | |||||||||
| Financing activities | |||||||||||
| Proceeds from long-term debt | — | 14,000,000 | |||||||||
| Payments of related party debt | — | (1,681,063) | |||||||||
| Payments of financing fees and issuance costs | (167,984) | (646,538) | |||||||||
| Payments of long-term debt | (9,852,201) | (17,343,675) | |||||||||
| Proceeds from finance leases | — | 25,600,000 | |||||||||
| Dividends paid to non-controlling interests | — | (4,666,665) | |||||||||
| Payments of finance lease obligations | (10,817,136) | (4,678,761) | |||||||||
| Accrued common stock dividends paid | (532,834) | (5,242,613) | |||||||||
| Cash paid for incentive compensation shares relinquished | (154,126) | — | |||||||||
| Contributions from non-controlling interest recorded as long-term liability | 322,750 | — | |||||||||
| Payments to non-controlling interest recorded as long-term liability | (193,508) | — | |||||||||
| Net cash (used in) provided by financing activities | (21,395,039) | 5,340,685 | |||||||||
| Net decrease in cash, cash equivalents and restricted cash | (4,996,140) | (19,443,673) | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 53,055,091 | 56,114,735 | |||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 48,058,951 | $ | 36,671,062 | |||||||
| Supplemental cash flow information | |||||||||||
| Cash and cash equivalents | $ | 45,558,951 | $ | 34,171,062 | |||||||
| Restricted cash | 2,500,000 | 2,500,000 | |||||||||
| $ | 48,058,951 | $ | 36,671,062 | ||||||||
| Supplemental non-cash investing and financing Information: | |||||||||||
| Deferred consideration related to acquisition of non-controlling interest | $ | 7,500,000 | $ | — | |||||||
Pangaea Logistics Solutions Ltd.
Reconciliation of Non-GAAP Measures
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
| Net Transportation and Service Revenue | ||||||||||||||||||||||||||
| Gross Profit | 14,183,087 | 15,850,171 | 25,620,946 | 36,396,012 | ||||||||||||||||||||||
| Add: | ||||||||||||||||||||||||||
| Vessel Depreciation and Amortization | 4,184,759 | 4,620,788 | 12,681,085 | 13,417,592 | ||||||||||||||||||||||
| Net transportation and service revenue | $ | 18,367,846 | $ | 20,470,959 | $ | 38,302,031 | $ | 49,813,604 | ||||||||||||||||||
| Adjusted EBITDA | ||||||||||||||||||||||||||
| Income from operations | $ | 9,960,001 | $ | 13,050,143 | $ | 11,420,073 | $ | 24,131,602 | ||||||||||||||||||
| Depreciation and amortization | 4,230,302 | 4,652,563 | 12,818,260 | 13,521,078 | ||||||||||||||||||||||
| Loss on impairment of vessels | — | — | 1,801,039 | — | ||||||||||||||||||||||
| Loss on sale of vessel | 485,580 | — | 705,065 | — | ||||||||||||||||||||||
| Share-based compensation | 391,702 | 320,462 | 1,915,188 | 1,365,969 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 15,067,585 | $ | 18,023,168 | $ | 28,659,625 | $ | 39,018,649 | ||||||||||||||||||
| Earnings Per Common Share | ||||||||||||||||||||||||||
| Net income (loss) attributable to Pangaea Logistics Solutions Ltd. | $ | 7,552,245 | $ | 8,321,560 | $ | 3,762,046 | $ | 16,056,615 | ||||||||||||||||||
| Weighted average number of common shares outstanding - basic | 43,488,241 | 42,817,933 | 43,393,764 | 42,729,775 | ||||||||||||||||||||||
| Weighted average number of common shares outstanding - diluted | 43,510,961 | 43,354,742 | 43,398,472 | 43,247,417 | ||||||||||||||||||||||
| Earnings per common share - basic | $ | 0.17 | $ | 0.19 | $ | 0.09 | $ | 0.38 | ||||||||||||||||||
| Earnings per common share - diluted | $ | 0.17 | $ | 0.19 | $ | 0.09 | $ | 0.37 | ||||||||||||||||||
| Adjusted EPS | ||||||||||||||||||||||||||
| Net Income attributable to Pangaea Logistics Solutions Ltd. | $ | 7,552,245 | $ | 8,321,560 | $ | 3,762,046 | $ | 16,056,615 | ||||||||||||||||||
| Non-GAAP | ||||||||||||||||||||||||||
| Add: loss on sale of vessels | 485,580 | — | 705,065 | — | ||||||||||||||||||||||
| Loss on impairment of vessels | — | — | 1,801,039 | — | ||||||||||||||||||||||
| Unrealized (gain) loss on derivative instruments | 18,098 | 301,058 | 1,530,875 | (2,203,899) | ||||||||||||||||||||||
| Non-GAAP adjusted net income (loss) attributable to Pangaea Logistics Solutions Ltd. | $ | 8,055,923 | $ | 8,622,618 | $ | 7,799,025 | $ | 13,852,716 | ||||||||||||||||||
| Weighted average number of common shares - basic | 43,488,241 | 42,817,933 | 43,393,764 | 42,729,775 | ||||||||||||||||||||||
| Weighted average number of common shares - diluted | 43,510,961 | 43,354,742 | 43,398,472 | 43,247,417 | ||||||||||||||||||||||
| Adjusted EPS - basic | $ | 0.19 | $ | 0.20 | $ | 0.18 | $ | 0.32 | ||||||||||||||||||
| Adjusted EPS - diluted | $ | 0.19 | $ | 0.20 | $ | 0.18 | $ | 0.32 | ||||||||||||||||||
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 non-GAAP net revenue and non-GAAP adjusted EBITDA. This is considered a non-GAAP financial measure 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 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 non-GAAP financial measures provide meaningful supplemental information regarding the performance of our core business by excluding charges that are not incurred in the normal course of business. Non-GAAP financial measures also facilitate management's internal planning and comparisons to our historical performance and liquidity. We believe certain 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.
Gross Profit. Gross profit represents total revenue less net transportation and service revenue and less vessel depreciation and amortization.
Net transportation and service revenue. Net transportation and service revenue represents total revenue less the total direct costs of transportation and services, which includes charter hire, voyage and vessel operating expenses. Net transportation and service revenue is included because it is used by management and certain investors to measure performance by comparison to other logistic service providers. Net transportation and service revenue is not an item recognized by the generally accepted accounting principles in the United States of America, or U.S. GAAP, and should not be considered as an alternative to net income, operating income, or any other indicator of a company's operating performance required by U.S. GAAP. Pangaea’s definition of net transportation and service revenue used here may not be comparable to an operating measure used by other companies.
Adjusted EBITDA and adjusted EPS. Adjusted EBITDA represents income or loss from operations before depreciation, amortization and, when applicable, loss on sale and leaseback of vessel, loss on impairment of vessels, stock-based compensation and certain non-recurring charges. Earnings per share represents net income divided by the weighted average number of common shares outstanding. Adjusted earnings per share represents net income attributable to Pangaea Logistics Solutions Ltd. plus, when applicable, loss on sale of vessel, loss on sale and leaseback of vessel, loss on impairment of vessel, unrealized gains and losses on derivative instruments, and certain non-recurring charges, divided by the weighted average number of shares of common stock.
There are limitations related to the use of net revenue versus income from operations, adjusted EBITDA versus income from operations, and adjusted EPS versus EPS calculated in accordance with GAAP. In particular, Pangaea’s definition of adjusted EBITDA used here are not comparable to EBITDA.
The table set forth above provides a reconciliation of the non-GAAP financial measures presented during the period 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.
Investor Relations Contacts
| Gianni Del Signore | Tiya Gulanikar | |||||||
| Chief Financial Officer | Prosek Partners | |||||||
| 401-846-7790 | 646-818-9288 | |||||||
| [email protected] | [email protected] | |||||||
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.
THIRD QUARTER 2020 EARNINGS CONFERENCE CALL PRESENTATION 1
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. 2
BUSINESS HIGHLIGHTS Q3‐2020 Results •Adjusted EBITDA of $15.1 million Consistent •Net income of $7.6 million •$48.1 million cash, restricted cash and cash Performance equivalents Fleet Working Fleet •17 drybulk ships and one barge in owned and controlled fleet at September 30, 2020 Operations Extensive and varied •Operating 52 vessels on average during Q3 2020 •7.4 million tons carried; 123 voyages performed experience for 46 clients 1) Adjusted EBITDA is a non‐GAAP measure and represents income or loss from operations before depreciation and amortization, loss on sale and leaseback of vessel, share‐based compensation, and when applicable, loss on impairment of vessels and certain non‐recurring items. 3
DRIVERS OF PERFORMANCE Customer Focus:Long‐term, fixed contract employment and recurring business with new and longstanding customers Targeted Business: Specialty tonnage provides superior returns – 29% premium over average market rates in Q3 – 2020 Rate Environment: The Baltic Dry Index average decreased in the third quarter compared to prior year. Baltic Dry Index (1) 2500 2000 1500 1000 500 0 (1) Per reported indices 4
FINANCIAL HIGHLIGHTS 3rd Quarter Highlights • Net income attributable to Pangaea Logistics Solutions Ltd. was $7.6 million for three months ended September 30, 2020 as compared to $8.3 million of net income for the same period of 2019. o Non‐GAAP adjusted net income attributable to Pangaea Logistics Solutions Ltd. of $8.1 million as compared to $8.6 million for the three months ended September 30, 2019. • Diluted net income per share was $0.17 for three months ended September 30, 2020 as compared to earnings per share of $0.19 for the same period of 2019. • Pangaea's TCE rates were $13,316 for the three months ended September 30, 2020 and $15,915 for the three months ended September 30, 2019. The market average for the third quarter of 2020 was approximately $10,286, giving the Company an overall average premium over market rates of approximately $3,030 or 29%. • Adjusted EBITDA of $15.1 million for the three months ended September 30, 2020, compared to $18.0 million for the same period of 2019. • At the end of the quarter, Pangaea had $48.1 million in cash, restricted cash and cash equivalents. • The Company acquired an additional one‐third equity interest in its partially‐owned consolidated subsidiary Nordic Bulk Holding Company Ltd. (NBHC), which owns six modern 1‐A ice‐class panamax bulk vessels, increasing its equity interest to 66.7%. 5
SELECTED INCOME STATEMENT DATA (in thousands,may not foot due to rounding) Three months ended September 30, Nine months ended September 30, 2020 2019 2020 2019 (unaudited) (unaudited) (unaudited) (unaudited) Revenues: Voyage revenue $ 98,120 $ 103,806 $ 251,501 $ 247,088 Charter revenue 5,646 15,079 18,541 34,632 Total revenue 103,767 118,885 270,043 281,720 Expenses: Voyage expense 40,729 45,103 120,283 114,501 Charter hire expense 34,970 41,980 82,499 85,245 Vessel operating expenses 9,700 11,332 28,959 32,161 General and administrative 3,692 2,768 11,558 12,161 Depreciation and amortization 4,230 4,653 12,818 13,521 Loss on impairment of vessels ‐ ‐ 1,801 ‐ Loss on sale of vessels 486 ‐ 705 ‐ Loss on sale and leaseback of vessels ‐ ‐ ‐ ‐ Total expenses 93,807 105,835 258,623 257,589 Income from operations 9,960 13,050 11,420 24,132 Total other expense, net (1,673) (2,631) (6,608) (4,073) Net income 8,287 10,419 4,812 20,059 Income attributable to noncontrolling interests (734) (2,097) (1,050) (4,002) Net income attributable to Pangaea Logistics Solutions Ltd. $ 7,552 $ 8,322 $ 3,762 $ 16,057 Adjusted EBITDA (1) $ 15,068 $ 18,023 $ 28,660 $ 39,019 1) Adjusted EBITDA is a non‐GAAP measure and represents income or loss from operations before depreciation and amortization, loss on sale and leaseback of vessel, share‐based compensation, and when applicable, loss on impairment of vessels and certain non‐recurring items. 6
SELECTED BALANCE SHEET & CASH FLOW DATA (in thousands) September 30, 2020 December 31, 2019 Current Assets Cash and cash equivalents $ 45,559 $ 50,555 Restricted cash $ 1,500 $ 1,000 Accounts receivable, net 19,939 28,309 Other current assets 40,155 48,091 Total current assets 107,153 127,955 Restricted cash 1,000 1,500 Fixed assets, including finance lease right of use assets, net 321,350 335,090 Investment in newbuildings in‐process 15,391 15,357 Total assets $ 444,893 $ 479,903 Current liabilities Accounts payable, accrued expenses and other current liabilities $ 39,093 $ 39,974 Related party debt 243 333 Current portion long‐term debt and finance lease liabilities 38,573 35,540 Other current liabilities 10,486 15,008 Total current liabilties 88,394 90,855 Secured long‐term debt and finance lease liabilities, net 117,791 141,148 Other long‐term liabilities 10,062 4,828 Total Pangaea Logistics Solutions Ltd. equity 175,769 170,246 Non‐controlling interests 51,376 72,826 Total stockholders' equity 227,145 243,072 Total liabilities and stockholders' equity$ 443,393 $ 479,903 Cash flows for the years ended: September 30, 2020 September 30, 2019 Net cash provided by operating activities $ 22,441 $ 23,402 Net cash used in investing activities $ (6,042) $ (48,186) Net cash used in financing activities $ (21,395) $ 5,341 The amounts in the table above have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding. 7
TOTAL SHIPPING DAYS 6,000 5,000 4,000 3,365 2,750 3,168 3,000 2,556 3,003 Days 2,220 1,742 1,977 2,000 1,000 1,820 1,886 1,875 1,731 1,718 1,573 1,623 1,566 ‐ Q4‐18 Q1‐19 Q2‐19 Q3‐19 Q4‐19 Q1‐20 Q2‐20 Q3‐20 Owned Days Charter‐in Days Capital Efficiency: Leveraged owned fleet by chartering‐in market vessels Flexibility: Short‐term charters allow us to react quickly and take advantage of arbitrage opportunities 8
PANGAEA TCE v. AVERAGE MARKET TCE Market Avg TCE** Market Premium over Market $18,000 16% $16,000 40% 24% $2,187 $14,000 29% 49% $2,801 68% $4,353 $12,000 $3,030 78% 93% $4,268 $10,000 $4,869 $8,000 $4,588 $5,185 $13,728 $6,000 $11,559 $10,819 $10,286 $4,000 $8,665 $7,160 $5,920 $5,548 $2,000 $‐ Q4 ‐ 2018 Q1‐2019 Q2‐2019 Q3‐2019 Q4‐2019 Q1‐2020 Q2‐2020 Q3‐2020 Pangaea TCE $14,360 $12,029 $12,933 $15,915 $15,172 $10,508 $10,733 $13,316 Consistently outperforming against average Panamax and Supramax index **Average of the published Panamax and Supramax index net of commission 9
FINANCIAL PERFORMANCE Q4‐2018 THROUGH Q3‐2020 (1) (2) 20,000 ADJUSTED EBITDA TCE $18,000 18,000 16,000 $16,000 14,000 $14,000 12,000 $12,000 10,000 $10,000 8,000 $8,000 6,000 $6,000 4,000 $4,000 2,000 $2,000 ‐ Q4‐18 Q1‐19 Q2‐19 Q3‐19 Q4‐19 Q1‐20 Q2‐20 Q3‐20 $‐ Q4‐18 Q1‐19 Q2‐19 Q3‐19 Q4‐19 Q1‐20 Q2‐20 Q3‐20 1) Adjusted EBITDA is a non‐GAAP measure and represents operating earnings before interest expense, income taxes, depreciation and amortization, share‐based compensation, loss on sale and leaseback of vessels 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. 10
ADJUSTED EARNINGS PER COMMON SHARE Adjusted EPS total of $0.19 for Q3‐2020 Historical Adjusted EPS (1) 0.25 $0.53 $0.41 $0.29 0.20 0.20 0.19 0.18 0.15 0.14 0.10 0.11 0.10 0.10 0.09 0.09 0.09 0.05 0.03 ‐ Q4‐17 Q1‐18 Q2‐18 Q3‐18 Q4‐18 Q1‐19 Q2‐19 Q3‐19 Q4‐19 Q1‐20 Q2‐20 Q3‐20 (0.05) (0.09) (0.10) (0.15) (1) Adjusted earnings per share represents net income attributable to Pangaea Logistics Solutions Ltd. plus, when applicable, loss on sale and leaseback of vessel, loss on impairment of vessel, gains and losses on derivative instruments, and certain non‐recurring charges, divided by the weighted average number of shares of common stock. 11