Pangaea Logistics Solutions, Ltd.
Q4 2016 Earnings Call Transcript

Published: 23 Mar 2017

[Operator:]

Good morning. My name is Laurie, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Pangaea Logistics Solutions Fourth Quarter and Fiscal Year 2016 Earnings Teleconference. Our host for today’s call are Mr. Ed Coll, Chairman and Chief Executive Officer; Mr. Anthony Laura, Chief Financial Officer. Today’s call is being recorded and will be available for replay beginning at 11

[Sean Silva:]

Thank you Laurie and thank you all for joining us for today’s fourth quarter and fiscal 2016 earnings conference call for Pangaea Logistics Solutions. With us today from the company are Chairman and CEO, Mr. Ed Coll and Chief Financial Officer, Mr. Tony Laura. Before I turn the call over to Ed, I’d like to read the Safe Harbor statement. This conference call could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Pangaea Logistics Solutions. Forward-looking statements are statements that are not historical facts; such forward-looking statements are based upon current beliefs and expectations of Pangaea Logistics Solutions management and are subject to risks and uncertainties, which could cause actual results to differ from such forward-looking statements. Such risks are more fully discussed in Pangaea Logistics Solutions filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Pangaea Logistics Solutions does not assume any obligations to update the information contained in this conference call. Also, please recall that a supplemental slide presentation will accompany this call, those slides can be found on the investors section of our website at www.pangaeals.com under company filings or on the SEC’s website at sec.gov. I would now like to turn the call over to Pangaea Logistics Solutions’ Chairman and CEO, Mr. Ed Coll. Ed?

[Ed Coll:]

Thanks Sean, and good morning to all of you and thank you for joining us on the call. This morning I'll provide an update of our operations and the market at large before turning the call over to Tony our CFO to provide a more detailed overview of the fourth quarter and full year financials and then we'll open the line up for questions. We hope you had time to review our press release and accompanying presentation which were issued last evening. I'll start by reviewing our fiscal year performance which is listed on Slides 8 and 9 of the presentation. In 2016 during what was arguably the most difficult year in our industry's history we reported net income of 7.5 million or $0.21 per share compared to net income of 11.3 million or $0.32 per share for the previous year. We attribute this positive performance to our ability to diversify our revenue streams during market downturns. In large part, thanks to our strategy to charter in vessels to serve only contracted business. Income from operations for the year was 12.9 million and the reflecting efficiencies derived from short-term charter and commitments. Revenue for the year was $238 million, compared to $287 million last year due to continued weakness in market rates standing from weak demand and the ongoing over supply of dry bulk tonnage. The Baltic Dry Index, a measure of dry bulk market performance was at its historic lowest point in February of 2016, and made some improvement in the following months. However, over capacity of tonnage continue to put downward pressure on time charter rates. The average time charter rate was $9,636 per day for the year ended December 31, 2016 compared with $11,473 per day in 2015. Let me now turn to our fourth quarter highlights. For the quarter, we reported net income of 0.1 million compared to a net loss of 4.8 million for the fourth quarter of 2015, reflecting improving market conditions have been into 2017. Income from operations also improved from a loss of 1.3 million during the fourth quarter of 2015 to a gain of 0.8 million during this past quarter. Total revenue increased year-over-year from 55.9 million to 66.3 million as it totaled shipping days by 18%. Toward the end of the fourth quarter and heading into 2017, we've also finalized several of key business milestones. First, we took delivery of two Ultramax ice-class 1C dry bulk vessels from Oshima Shipyard in Japan, which we now fully control. Second, we announced in Noranda, which as you know filed for bankruptcy in 2016. Acquired by a new entity and is assumed to seaway under its existing terms. This contract employees three of the companies vessels and a shuttle service and it extends to 2025. Third, we appointed Mark Filanowski as our Chief Operating Officer. Mark has been on our Board since we 2014 and will focus on facilitating projects essential to our corporate strategy, including exploring strategic opportunities within the capital markets which will guide us to our next growth stage. Turning now to our market outlook. 2016 was a difficult year for our industry but we've performed well despite the circumstances. Our asset rate business model helped insulate us from the market headwinds, a traditional asset owned business model as we're exposed to, allowing us to post profits where many others incurred losses. We've seen forward momentum to our industry thus for in 2017, and we believe our business model is well positioned to capitalize on these market conditions. Commodity prices have been rising, certain minor bulks suffice shortages which is creating opportunities for us in the marketplace. When you combine that with improving charter rates and a broader recovery in the BDI we are optimistic about the road ahead. Thank you for your time and attention. I’d now like to turn the call over to Tony Laura, our CFO to provide additional details on the financials. Tony?

[Anthony Laura:]

Thank you, Ed. Turning now to our financials for 2016, which begin on Slide 8 of the presentation. As you can see, total revenue for the year was $238 million, compared to $287.3 million for the same period in 2015. Further breakdown of our revenue shows that voyage revenue, which is derived from our COA and other cargo business decreased by 17% to $221.1 million, compared to 266.7 million for the same period in 2015. The decrease in voyage revenues was driven by the weak market for dry bulk transportation, predominantly in the first quarter of 2016 when voyage revenue was down 48.6 million from the same period of 2015 and the BBI was at an all time low. Meanwhile charter revenue which is tied to market rates decreased to 15.9 million from 20.7 million or 23% compared to 2015. The decrease in charter revenues was driven by the 16.1% decrease in time charter days and to the decline in market rates. The number of time charter days decreased to 2,033 days for the fiscal year ended December 31, 2016 compared to 2,423 days for the same period in 2015. Turning to expenses, voyage expenses for 2016 were 103.6 million compared to 125.6 million at the end of 2015. A decrease of approximately 17.5%. Charter high expenses decreased to 63.7 million compared to 75.9 million for the fiscal year 2015. Adjusted EBITDA for 2016 was 27 million compared to 38.6 million at the end of 2015 and net income attributable to Pangaea Logistics Solutions for 2016 was 7.5 million. Moving on to the balance sheet and cash flows which you'll find on slide 9, cash and cash equivalents were 22.3 million for 2016 compared to 37.5 million in 2015. In summarizing our fourth quarter results we recorded net income of 0.1 million compared to a loss of 4.8 million during the fourth quarter of 2015. Income from operations was 0.8 million compared to a loss of 1.3 million over the same period in 2015. Total revenue increased from 55.9 million to 66.3 million and total shipping days increased by 18%. Vessel operating expenses per date decreased 14% to $5,860 per day from $6,852 a day in the fourth quarter of 2015. I would now like to turn the call back over to Ed for any additional remarks before we get to the Q&A portion of the call. Ed?

[Ed Coll:]

Thank you Tony. As we navigate through 2017 we will stay the course as it pertains to our strategy with the focus on efficiency, risk management, cost control, accessing capital markets where appropriate and selective business expansion opportunities. Together these tactics advance our ultimate goal of maximizing shareholder value. With that we'll open the call to your questions.

[Operator:]

[Operator Instructions] Our first question comes from the line of [John Ralph] of Argent Capital.

[Unidentified Analyst:]

Hey, good morning guys. You said that Mark Filinowski would -- part of what he's been charged with is finding strategic opportunities in the capital markets. Could you maybe provide a little bit of additional color in terms of what exactly you mean by that and what sorts of opportunities we might be talking about. I mean are we talking about capital raising opportunities or are you talking about looking at the possibility of making investments or JVs with other publically listed companies? What sorts of alternatives might that include?

[Ed Coll:]

I think first that Mark has been a really great addition to the company and I think that his professionalism has been very helpful for us in sorting out things we need to do financially on chip finance and looking for a new opportunities as we have said. We're looking at everything, really, what are the opportunities to grow the business and Mark is leading that charge and I'm not sure I can say more about that, really, except that we need to go forward and build this company and grow it. And he's [indiscernible] I don’t know, with the rest of the management.

[Unidentified Analyst:]

Okay, I guess my only additional question or a follow-on would be -- I mean given the need to grow the company, the need to access financing, can you talk a little bit about sort of what your view of your stocks, sort of trading value versus the transit value is, I mean I guess when we hear things with respect to its capital raising options, I think people or your shareholders would want to hear some assurance that you are going to be particularly stingy with equity issuance given where you are trading currently. Can you provide any sort of comfort or thoughts in that regard?

[Ed Coll:]

Well, again I'm not really quite sure what I can say. The stock is not particularly liquid which is what everyone is aware of. The asset values overall of the tonnage has probably going up 25% or 30% in the last couple of months based on the sale and purchase markets, we continue to grow our operating business and look for new opportunities. I can say honestly I'm particularly not a person who is focused on the stock price because the liquidity makes it not realistic to the value of the company. So I think we are in that situation and but we spend our time mostly on is making the company more valuable and more profitable, that's about all what I can say with that.

[Unidentified Analyst:]

Okay, thanks very much.

[Operator:]

At this time there are no further questions. I'll now return the call to Mr. Ed Coll, CEO for any additional or closing remarks.

[Ed Coll:]

Well, thank you very much for all taking the time to join us this morning and have a good day.

[Operator:]

Thank you. That does conclude today's conference call. You may now disconnect.