Eagle Bulk Shipping Inc., one of the world’s largest owner-operators within the midsize drybulk vessel segment, reported financial results for the three months and year ended December 31, 2022.
Quarter Highlights:
- Generated Revenues, net of $151.4 million
- Achieved TCE(1) of $22,062/day based on TCE Revenues(1) of $102.5 million
- Realized net income of $23.3 million, or $1.79 per basic share
- Adjusted net income(1) of $35.9 million, or $2.76 per basic share
- Generated EBITDA(1) of $41.3 million
- Adjusted EBITDA(1) of $55.6 million
- Executed an agreement to purchase a 2015-built, high specification Ultramax for $24.3 million
- Vessel delivered to the Company in February 2023 and renamed the M/V Gibraltar Eagle
- Declared a quarterly dividend of $0.60 per share for the fourth quarter of 2022
- Dividend is payable on March 23, 2023 to shareholders of record at the close of business on March 15, 2023
Recent Developments:
- Completed transfer of listing to the New York Stock Exchange (NYSE) on January 4, 2023
- Appointed Kate Blankenship to the Board of Directors on January 18, 2023
- Executed agreements to purchase two 2020-built high specification scrubber-fitted Ultramaxes for $30.1 million each
- Vessels are expected to be delivered to the Company during the second quarter of 2023 and will be renamed the M/V Halifax Eagle and M/V Vancouver Eagle
- Executed an agreement to sell the M/V Jaeger (2004-built Supramax) for $9.0 million
- Transaction is expected to close in March 2023
- Fixed 92% of available days for the first quarter of 2023 at an average TCE of $13,335
Eagle’s CEO Gary Vogel commented, “Despite a weaker rate environment, our Q4 results cemented a record annual profit of roughly $250 million for 2022. These results are reflective of the many actions we have taken over the past years, including our comprehensive vessel sale and purchase strategy encompassing 55 transactions, our segment-leading focus on scrubbers, our differentiated active management approach to trading ships, and our efforts to optimize the balance sheet.
Based on this and consistent with the company’s stated capital allocation strategy of distributing a minimum of 30% of net income, the company declared its sixth consecutive quarterly dividend since adoption of the policy, bringing total shareholder distributions to $10.65 per share, or $139 million.
In recent months, we continued to enhance and grow our fleet. We purchased three modern high specification Ultramaxes, two of which are scrubber-fitted, and sold the oldest vessel in our fleet. It is noteworthy that this sale represents the 22nd, and last, vessel to be sold as part of the initial fleet renewal program which we initiated six years ago.
As we enter 2023, we remain positive on market fundamentals given a historically low orderbook with a rapidly aging fleet, as well as a number of demand catalysts including China’s reopening post Covid restrictions,” continued Mr. Vogel. “While uncertainty in the macro-economic environment has brought volatility, both rates and forward curves have moved up substantially in recent days. Further, with our modern fleet of 55, predominately scrubber-fitted vessels, and a robust balance sheet with investment capacity, the company remains uniquely positioned to deliver value to our stakeholders.”
Fleet Development
- Tokyo Eagle, a Japanese-built, scrubber-fitted Ultramax (61k DWT / 2015-built), acquired in the third quarter of 2022 for total consideration of $27.5 million, was delivered to the Company in the fourth quarter of 2022
- Gibraltar Eagle, a Chinese-built Ultramax (64k DWT / 2015-built), acquired in the fourth quarter of 2022 for total consideration of $24.3 million, was delivered to the Company in the first quarter of 2023
- Halifax Eagle, a Chinese-built, scrubber-fitted Ultramax (64k DWT / 2020-built), acquired in the first quarter of 2023 for total consideration of $30.1 million, is expected to be delivered to the Company in the second quarter of 2023
- Vancouver Eagle, a Chinese-built, scrubber-fitted Ultramax (64k DWT / 2020-built), acquired in the first quarter of 2023 for total consideration of $30.1 million, is expected to be delivered to the Company in the second quarter of 2023
- Jaeger, a Japanese-built Supramax (52k DWT / 2004-built), sold in the first quarter of 2023 for total consideration of $9.0 million, is expected to be delivered to the buyer in the first quarter of 2023
- Pro forma owned fleet totals 55 vessels with an average age of 9.1 years
Results of Operations for the three months and years ended December 31, 2022 and 2021
For the three months ended December 31, 2022, the Company reported net income of $23.3 million, or basic and diluted net income per share of $1.79 and $1.50, respectively. In the comparable quarter of 2021, the Company reported net income of $87.5 million, or basic and diluted net income per share of $6.79 and $5.40, respectively.
For the three months ended December 31, 2022, the Company reported adjusted net income of $35.9 million, which excludes unrealized losses on derivative instruments and impairment of operating lease right-of-use assets of $10.4 million and $2.2 million, respectively, or basic and diluted adjusted net income per share of $2.76 and $2.28, respectively. In the comparable quarter of 2021, the Company reported adjusted net income of $69.3 million, which excludes unrealized gains on derivative instruments and a loss on debt extinguishment of $24.1 million and $6.0 million, respectively, or basic and diluted adjusted net income per share of $5.38 and $4.28, respectively.
For the year ended December 31, 2022, the Company reported net income of $248.0 million, or basic and diluted net income per share of $19.09 and $15.57, respectively. For the year ended December 31, 2021, the Company reported net income of $184.9 million, or basic and diluted net income per share of $14.91 and $11.79, respectively.
For the year ended December 31, 2022, the Company reported adjusted net income of $256.3 million, which excludes a loss on debt extinguishment, impairment of operating lease right-of-use assets and unrealized losses on derivative instruments of $4.2 million, $2.2 million and $1.9 million, respectively, or basic and diluted adjusted net income per share of $19.73 and $16.08, respectively. For the year ended December 31, 2021, the Company reported adjusted net income of $191.1 million, which excludes a loss on debt extinguishment and unrealized losses on derivative instruments of $6.1 million and $0.1 million, respectively, or basic and diluted adjusted net income per share of $15.41 and $12.18, respectively.
Revenues, net
Revenues, net for the three months ended December 31, 2022 were $151.4 million, compared to $184.7 million for the comparable quarter in 2021. Revenues, net decreased $33.3 million primarily due to lower rates driven by declines in the underlying freight market, offset in part by an increase in operating days (5,614 for the three months ended December 31, 2022 compared to 5,131 for the three months ended December 31, 2021).
Revenues, net for the year ended December 31, 2022 were $719.8 million, compared to $594.5 million for the year ended December 31, 2021. Revenues, net increased $87.4 million due to an increase in total operating days (22,276 for the year ended December 31, 2022 compared to 19,439 for the year ended December 31, 2021) driven by increases in both owned days and chartered-in days and increased $37.9 million due to an increase in rates.
Voyage expenses
Voyage expenses for the three months ended December 31, 2022 were $42.7 million compared to $23.2 million for the comparable quarter in 2021. Voyage expenses increased primarily due to an increase in bunker consumption expense of $13.5 million due to an increase in bunker fuel prices, an increase in costs for contingent liabilities of $3.4 million driven by provisions for certain routine commercial claims and an increase in port expenses of $3.4 million primarily driven by an increase in fuel surcharges related to tugs along with cost inflation, partially offset by a decrease in broker commissions of $0.8 million driven by a decrease in related revenues.
Voyage expenses for the year ended December 31, 2022 were $163.4 million, compared to $104.6 million for the year ended December 31, 2021. Voyage expenses increased primarily due to an increase in bunker consumption expense of $43.9 million driven by an increase in bunker fuel prices, an increase in port expenses of $11.8 million driven by an increase in fuel surcharges related to tugs along with cost inflation and an increase in costs for contingent liabilities of $3.4 million driven by provisions for certain routine commercial claims.
Vessel operating expenses
Vessel operating expenses, which include non-recurring expenses related to vessel acquisitions and sales, for the three months ended December 31, 2022 were $35.7 million compared to $30.6 million for the comparable quarter in 2021. Vessel operating expenses increased primarily due to an increase in repair costs of $2.7 million driven by certain discretionary repairs and upgrades as well as unscheduled necessary repairs, an increase in the cost of lubes, stores and spares of $1.2 million driven by increased volumes and cost inflation and an increase in crew-related costs of $1.1 million driven by higher crew wages, increased crew changes and increased expenses related to COVID-19 and the conflict between Russia and Ukraine. Ownership days for the three months ended December 31, 2022 were 4,837, compared to 4,851 for the comparable quarter in 2021.
Average daily vessel operating expenses excluding one-time, non-recurring expenses related to vessel acquisitions and sales and termination charges relating to a change in crewing manager on some of our vessels for the three months ended December 31, 2022 was $6,996, compared to $6,028 for the comparable quarter in 2021.
Vessel operating expenses, which include non-recurring expenses related to vessel acquisitions and sales, for the year ended December 31, 2022 were $123.9 million, compared to $103.9 million for the year ended December 31, 2021, with the increase driven, in part, by an increase in ownership days (19,261 for the year ended December 31, 2022 compared to 18,258 for the year ended December 31, 2021).
The increase in vessel operating expenses was due to an increase in crew-related costs of $8.9 million driven by higher crew wages, increased crew changes and increased expenses related to COVID-19 and the conflict between Russia and Ukraine, an increase in repair costs of $5.6 million driven by certain discretionary repairs and upgrades as well as unscheduled necessary repairs and an increase in the cost of lubes, stores and spares of $5.0 million driven by increased volumes and cost inflation.
Average daily vessel operating expenses excluding one-time, non-recurring expenses related to vessel acquisitions and sales and termination charges relating to a change in crewing manager on some of our vessels for the year ended December 31, 2022 was $6,244, compared to $5,357 for the year ended December 31, 2021.
Charter hire expenses
Charter hire expenses for the three months ended December 31, 2022 were $17.3 million, compared to $11.7 million for the comparable quarter in 2021. Charter hire expenses increased $7.0 million due to an increase in chartered-in days (979 for the three months ended December 31, 2022 as compared to 613 for the comparable quarter in 2021) and was partially offset by a decrease of $1.4 million due to a decrease in charter hire rates primarily driven by declines in the underlying freight market.
Charter hire expenses for the year ended December 31, 2022 were $81.1 million, compared to $37.1 million for the year ended December 31, 2021. Charter hire expenses increased $27.9 million primarily due to an increase in chartered-in days (4,081 for the year ended December 31, 2022 as compared to 2,331 for the year ended December 31, 2021) and increased $16.1 million due to an increase in charter hire rates as well as the impact of exercised extension options on the Company’s long-term charter-in contracts.
Depreciation and amortization
Depreciation and amortization for the three months ended December 31, 2022 was $15.9 million, compared to $14.3 million for the comparable quarter in 2021. Total depreciation and amortization for the three months ended December 31, 2022 included $12.4 million of vessel and other fixed asset depreciation and $3.5 million of deferred drydocking cost amortization. Total depreciation and amortization for the three months ended December 31, 2021 included $11.9 million of vessel and other fixed asset depreciation and $2.4 million of deferred drydocking cost amortization. Depreciation and amortization increased $1.1 million due to the impact of drydocks completed during 2022 and increased $0.5 million due to an increase in the cost base of our owned fleet as well as ballast water treatment systems (“BWTS”) installed during 2022.
Depreciation and amortization for the year ended December 31, 2022 was $61.2 million, compared to $53.5 million for the year ended December 31, 2021. Total depreciation and amortization for the year ended December 31, 2022 included $47.9 million of vessel and other fixed asset depreciation and $13.2 million of deferred drydocking cost amortization. Total depreciation and amortization for the year ended December 31, 2021 included $44.9 million of vessel and other fixed asset depreciation and $8.7 million of deferred drydocking cost amortization. Depreciation and amortization increased $4.6 million primarily due to higher average drydocking expenditures and increased $3.1 million primarily due to the full year impact of vessels acquired during 2021.
General and administrative expenses
General and administrative expenses for each of the three months ended December 31, 2022 and 2021 were $11.6 million.
General and administrative expenses for the year ended December 31, 2022 were $41.2 million, compared to $35.2 million for the year ended December 31, 2021. General and administrative expenses increased $2.6 million due to higher stock-based compensation expense, increased $0.9 million due to an increase in compensation and benefits, increased $0.8 million due to higher professional fees and increased $0.8 million due to higher other corporate costs, including travel and office-related costs.
Other operating expense
Other operating expense for the three months ended December 31, 2022 was $1.2 million, compared to $0.5 million for the comparable quarter of 2021. Other operating expense for each of the three months ended December 31, 2022 and 2021 were primarily comprised of costs related to a 2021 U.S. government investigation into an allegation that one of our vessels may have improperly disposed of ballast water that entered the engine room bilges during a repair. The Company posted a surety bond as security for any potential fines, penalties or other associated costs.
Other operating expense for the year ended December 31, 2022 was $3.8 million, compared to $2.8 million for the year ended December 31, 2021. Other operating expense for the year ended December 31, 2022 was primarily comprised of $2.4 million of costs associated with a corporate transaction that did not materialize and $1.4 million of costs related to the aforementioned investigation. Other operating expense for the year ended December 31, 2021 was primarily comprised of costs related to the aforementioned investigation.
Interest expense
Interest expense for the three months ended December 31, 2022 was $4.0 million, compared to $6.7 million for the comparable quarter of 2021. Interest expense decreased $1.1 million due to lower amortization of debt discounts and deferred financing costs primarily as a result of the Company’s adoption of ASU 2020-06, decreased $1.0 million due to lower outstanding principal balances and decreased $0.6 million due to lower effective interest rates. The decrease in outstanding principal balances and effective interest rates were as a result of the refinancing of the Company’s debt in the fourth quarter of 2021.
Interest expense for the year ended December 31, 2022 was $17.0 million, compared to $32.3 million for the year ended December 31, 2021. Interest expense decreased $5.4 million due to lower effective interest rates and decreased $5.3 million due to lower outstanding principal balances, each as a result of the refinancing of the Company’s debt in the fourth quarter of 2021 and decreased $5.0 million due to lower amortization of debt discounts and deferred financing costs primarily as a result of the Company’s adoption of ASU 2020-06.
Realized and unrealized (gain)/loss on derivative instruments, net
For the three months ended December 31, 2022, the Company recorded a net realized and unrealized gain on derivatives of $0.6 million, compared to a net realized and unrealized gain on derivatives of $7.3 million for the comparable quarter in 2021. Net realized and unrealized gains decreased primarily due to $10.8 million of unrealized losses on FFAs for the three months ended December 31, 2022 compared to $24.9 million in unrealized gains on FFAs for the three months ended December 31, 2021, partially offset by $11.4 million of realized gains on FFAs for the three months ended December 31, 2022 compared to $17.6 million of realized losses on FFAs for the three months ended December 31, 2021, collectively driven by changes in market freight rates and the timing of positions taken.
For the year ended December 31, 2022, the Company recorded a net realized and unrealized gain on derivatives of $13.9 million, compared to a net realized and unrealized loss on derivatives of $38.2 million for the year ended December 31, 2021. The change was primarily due to $11.4 million of realized gains on FFAs for the year ended December 31, 2022 compared to $41.1 million of realized losses on FFAs for the year ended December 31, 2021 driven by changes in market freight rates and the timing of positions taken.
For the years ended December 31, 2022 and December 31, 2021, the Company recorded a loss on debt extinguishment of $4.2 million and $6.1 million, respectively. During the year ended December 31, 2022, the Company repurchased $10.0 million in aggregate principal amount of Convertible Bond Debt (as defined herein) for $14.2 million in cash and cancelled the repurchased debt. During the three months and year ended December 31, 2021, the Company repaid the then outstanding Norwegian Bond Debt (as defined herein) and accrued interest and discharged the debt in full from the proceeds of the Global Ultraco Debt Facility (as defined herein) and cash on hand. As a result, the loss on debt extinguishment comprised $1.6 million of unamortized debt discount and debt issuance costs, as well as $4.4 million of call premium.
The increase in net cash provided by operating activities was primarily driven by a $63.1 million increase in net income due to higher freight rates as well as a $29.3 million net decrease in collateral on derivatives, primarily due to a decrease in the number and size of outstanding positions.
Net cash used in investing activities for the year ended December 31, 2022 was $23.7 million, compared to $125.5 million for the year ended December 31, 2021. During the year ended December 31, 2022, the Company paid $27.7 million to purchase one vessel and other vessel improvements, paid $7.3 million for the purchase of BWTS and paid $3.6 million as an advance on the purchase of one vessel. This use of cash was partially offset by $14.9 million in proceeds from the sale of one vessel and $0.3 million in proceeds received on hull and machinery claims. During the year ended December 31, 2021, the Company paid $128.3 million to purchase nine vessels and other vessel improvements and paid $6.7 million for the purchase of BWTS. This use of cash was partially offset by $9.2 million in proceeds from the sale of one vessel and $0.4 million of insurance proceeds received on hull and machinery claims.
Net cash used in financing activities for the year ended December 31, 2022 was $171.1 million, compared to $86.3 million for the year ended December 31, 2021. During the year ended December 31, 2022, the Company (i) paid $105.0 million in dividends, (ii) repaid $49.8 million of term loan under the Global Ultraco Debt Facility, (iii) paid $14.2 million to repurchase $10.0 million in aggregate principal amount of Convertible Bond Debt and (iv) paid $2.4 million for taxes related to net share settlement of equity awards. During the year ended December 31, 2021, the Company repaid (i) $184.4 million of the Norwegian Bond Debt, (ii) $182.9 million of term loan under the New Ultraco Debt Facility (as defined herein), (iii) $55.0 million of revolver loan under the New Ultraco Debt Facility, (iv) $50.0 million of revolver loan under the Global Ultraco Debt Facility, (v) $24.0 million of the Holdco Revolving Credit Facility (as defined herein), (vi) $15.0 million of revolver loan under the Super Senior Facility and (vii) $12.5 million of term loan under the Global Ultraco Debt Facility. In addition, the Company paid (i) $25.8 million in dividends, (ii) $6.4 million in financing costs to lenders, (iii) $1.9 million for taxes related to net share settlement of equity awards, (iv) $0.7 million in other financing costs, and (v) $0.5 million of issuance costs related to equity offerings. These uses of cash were partially offset by (i) $300.0 million in proceeds from the term loan under the Global Ultraco Debt Facility, (ii) $55.0 million in proceeds from the revolver loan under the New Ultraco Debt Facility, (iii) $50.0 million in proceeds from the revolver loan under the Global Ultraco Debt Facility, (iv) $27.1 million in net proceeds from the ATM Offering (as defined herein), (v) $24.0 million in proceeds from the Holdco Revolving Credit Facility and (vi) $16.5 million in proceeds from the New Ultraco Debt Facility.
As of December 31, 2022, our cash and cash equivalents including noncurrent restricted cash was $189.8 million compared to $86.2 million as of December 31, 2021.
As of December 31, 2022, the Company’s debt, excluding $7.4 million of debt discount and debt issuance costs, was $341.9 million, the current portion of which was $49.8 million, and was comprised of $237.8 million outstanding under the Global Ultraco Debt Facility and $104.1 million of Convertible Bond Debt. In addition, as of December 31, 2022, the undrawn revolving facility under the Global Ultraco Debt Facility was $100.0 million.
Capital Expenditures and Drydocking
Our capital expenditures relate to the purchase of vessels and capital improvements to our vessels, which are required and/or expected to enhance the efficiency and/or safety of our 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 and vessel improvements necessary to comply with international shipping standards and environmental laws and regulations. Although the Company has some flexibility regarding the timing of its drydockings, the costs are relatively predictable. In accordance with statutory requirements, management anticipates that vessels are to be drydocked every five years for vessels less than 15 years and every two and a half years for vessels older than 15 years. Funding of drydocking costs is anticipated to be satisfied with cash from operations. Generally, drydocking requires us to reposition vessels from a discharge port to shipyard facilities, which will reduce our available days and operating days during that period.
Source: Hellenic Shipping News
