Paragon Shipping Q3 net income plunges 92% year-over-year to US$0.3M as revenues decline almost 27% to US$21M; results impacted mostly by non-cash items including depreciation expenses, impairment loss related to sale of unit
November 16, 2011
Paragon Shipping Inc. (NYSE: PRGN - News), or the Company, a global shipping transportation company specializing in drybulk cargoes, announced today its results for the third quarter and nine months ended September 30, 2011.
Commenting on the results, Michael Bodouroglou, Chairman and Chief Executive Officer of Paragon Shipping, stated, "We are pleased to announce that Paragon is now back to profitability after only one quarter of reported losses which was the result of several non-recurring non-cash items. After adjusting for non-cash items for the third quarter of 2011, the Company reported EBITDA of $12.1 million and Net Income of $2.9 million or $0.05 per share. We continue to take advantage of diversified operations with our investment in Box Ships Inc., which contributed a cash inflow of $0.5 million from dividend distributions. We expect this amount to increase substantially in the next quarter."
Mr. Bodouroglou continued, "Since last quarter, we have remained active with our fleet renewal and employment strategy. On October 13, 2011, we agreed to sell our 16 year old Handymax vessel, M/V Crystal Seas, the oldest vessel in our fleet. Following the sale of the vessel, our fleet average age improved from 8.4 years to 7.6 years, compared to the industry average of approximately 10 years. Subsequent to the third quarter, we improved our contracted charter coverage by entering into medium-term time charter contracts for three of our Panamax vessels. We have thus improved our fixed revenue coverage from 59% to 84% in 2012, and plan to enter into additional time charter employments for the vessels with expiring contracts."
Mr. Bodouroglou concluded, "Since inception, the Company is focused on a conservative approach to fleet growth and cost control. Our aim is to navigate the Company through the downturn of the shipping cycle, while maintaining our ability to exploit opportunities that may arise."
Third Quarter 2011 Financial Results:
Gross time charter revenue for the third quarter of 2011 was $21.0 million, compared to $28.7 million for the third quarter of 2010. The Company reported net income of $0.3 million, or $0.005 per basic and diluted share for the third quarter of 2011, calculated on 58,512,677 weighted average number of basic and diluted shares outstanding for the period and reflecting the impact of the non-cash items discussed below. For the third quarter of 2010, the Company reported net income of $4.1 million, or $0.081 per basic and diluted share, calculated on 49,482,858 weighted average number of basic and diluted shares.
Excluding all non-cash items described below, adjusted net income for the third quarter of 2011 was $2.9 million, or $0.048 per basic and diluted share, compared to adjusted net income of $8.8 million, or $0.173 per basic and diluted share for the third quarter of 2010. Please refer to the table at the back of this release for reconciliations of adjusted net income to net income and adjusted earnings per share to earnings per share, the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP.
EBITDA for the third quarter of 2011 was $10.3 million, compared to $15.5 million for the third quarter of 2010. EBITDA for the third quarter of 2011 was calculated by adding to net income of $0.3 million, net interest expense and depreciation that, in the aggregate, amounted to $10.0 million. Adjusted EBITDA, excluding all non-cash items described below, was $12.1 million for the third quarter of 2011, compared to $19.6 million for the third quarter of 2010. Please see the table at the back of this release for a reconciliation of EBITDA and Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.
The Company operated an average of 11.0 vessels during the third quarter of 2011, earning an average time charter equivalent rate, or TCE rate, of $20,651 per day, compared to an average of 13.1 vessels during the third quarter of 2010, earning an average TCE rate of $22,864 per day. Please see the table at the back of this release for a reconciliation of TCE rates to time charter revenue, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.
Total adjusted operating expenses for the third quarter of 2011 equaled $7.7 million, or approximately $7,592 per day, including vessel operating expenses, management fees, general and administrative expenses and drydocking costs, but excluding $1.1 million of share-based compensation for the period. For the third quarter of 2010, total adjusted operating expenses were $8.6 million, or approximately $7,150 per day, including the same items as mentioned above, but excluding $2.4 million of share-based compensation.
Currently, the Company owns approximately 21.3% of the outstanding common stock of Box Ships Inc. (NYSE: TEU - News), or Box Ships, a former wholly-owned subsidiary of the Company which successfully completed its initial public offering in April 2011. The investment in Box Ships, an affiliate, is accounted for under the equity method and is separately reflected on Company's condensed balance sheet. For the third quarter of 2011, the Company recorded income of $1.1 million, representing its share of Box Ships' net income for the period. We received a cash amount of $0.5 million representing dividend distributions from Box Ships relating to the previous quarterly results of Box Ships.
Third Quarter 2011 Non-cash Items
The Company's results for the three months ended September 30,
* Depreciation expense of $0.7 million, or $0.01 per basic and diluted share, associated with below market time charters attached to vessels acquired, which increased the Company's depreciation expense (amortized over the remaining useful life of the vessel).
* Impairment loss of $0.7 million, or $0.01 per basic and diluted share, related to the sale of M/V Crystal Seas.
* An unrealized loss from interest rate swaps of $0.1 million.
* Non-cash expenses of $1.1 million, or $0.02 per basic and diluted share, relating to the amortization of the compensation cost recognized for non-vested share awards issued to the Company's executive officers, directors and employees.
In total, these non-cash items decreased net income by $2.6 million, or $0.04 per basic and diluted share, for the three months ended September 30, 2011.
About Paragon Shipping Inc.
Paragon Shipping Inc. (the Company) is an Athens, Greece-based international shipping company specializing in the transportation of drybulk cargoes. The Company's current fleet consists of ten drybulk vessels with a total carrying capacity of 704,772 dwt. In addition, the Company entered into contracts for the construction of four Handysize drybulk carriers that are scheduled to be delivered in 2012 and as a result will increase the fleet size to fourteen drybulk vessels with a total carrying capacity of 853,572 dwt.