NEWPORT, R.I. - 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 March 31, 2016. 1st Quarter Highlights
  • Net income attributable to Pangaea Logistics Solutions Ltd. was $1.2 million, compared to net income of $7.6 million in the first quarter of 2015
  • Pro forma adjusted earnings per common share1 of $0.03 for 2016 compared to pro forma adjusted earnings per common share of $0.22 in the first quarter of 2015
  • Adjusted EBITDA2 decreased to $7.0 million for 2016, compared with $12.9 million for the first quarter of 2015
  • Cash flow from operations was $4.1 million for 2016, compared with $11.2 million for the first quarter of 2015
  • At the end of the first quarter, Pangaea had $32.7 million in cash and cash equivalents
  • Gross margin percentage3 of 23%, up from 18% for the comparable period
  • General and administrative expenses decreased 30% to $3.0 million from $4.3 million in the first quarter of 2015.
Edward Coll, Chairman and Chief Executive Officer of Pangaea Logistics Solutions, commented, “We have been working very hard this year to stay ahead of a tumbling shipping market, which reached historic lows during our first fiscal quarter of 2016. We have done so successfully, and generated a profit during the first quarter, by cutting costs wherever possible and becoming increasingly efficient in utilizing chartered in ships from the market without penalty of ballast or delivery days. At the same time, we are working diligently to extend our market reach with industry leaders who know they can rely on our capabilities without question of our ability and willingness to perform.” Results for the three months ended March 31, 2016 and 2015 For the three months ended March 31, 2016, the Company reported net income of $1.2 million, or $0.03 per common share compared to net income of $7.6 million, or $0.22 per common share for the same period of 2015. Adjusted EBITDA was $7.0 million in the three months ended March 31, 2016 and $12.9 million for the three months ended March 31, 2015.  The change was primarily attributable to Pangaea’s strategy of relying on COAs and minimizing risks associated with falling market rates by chartering vessels into our fleet only as necessary to perform under the COAs and firm contracts. This flexible fleet strategy reduces the risk of idle time in an environment with limited profitable fronthaul employment. Total revenue for the three months ended March 31, 2016 declined 54% to $43.9 million from $95.1 million in 2015. This decline in total revenue was primarily attributable to the 30% decline in total shipping days. Total shipping days are the sum of voyage days, some of which are tied to COAs and charter days, which are subject to market rates. Voyage days decreased 33% from Q1 of 2015 to Q1 of 2016, while charter days remained flat over these two periods. This decline reflects the Company’s effective strategy of reducing its exposure to declining rates by chartering in vessels only to meet the demands of specific voyage contracts in order to maximize profitability and reduce risk. Pangaea’s ability to limit the impact of declining market rates on its operations by dynamically adjusting its fleet size is a function of its flexible, cargo-focused, business model that uses an optimized mix of owned and chartered-in tonnage. This is differentiated from many other dry bulk companies that have large owned fleets and may be forced to employ them at unprofitable rates under current market conditions. Instead, Pangaea can avoid low-margin or loss-making voyages and instead focus on performing voyages that fit its contract profile. Markets Mr. Coll noted, “The market has improved somewhat in the month since the fiscal quarter ended, though the longevity of this improvement cannot be assured. Time charter rates have improved, asset values have stopped dropping and market activity seems to be picking up but all are from historic lows.  We are poised to take advantage of any market improvement, with our fleet renewal process coming to an end in January 2017 and our proven strategy intact.  At the same time, we are conditioned to be conservative players in a market without direction and we will continue to conserve our resources and serve as responsible stewards of shareholder capital during the continued market weakness.” Cash Flows Cash and cash equivalents were $32.7 million as of March 31, 2016, compared with $37.5 million on December 31, 2015. For the three months ended March 31, 2016, the Company’s net cash provided by operating activities was $4.1 million, compared to $11.2 million for the three months ended March 31, 2015. Conference Call Details The Company’s management team will host a conference call to discuss the Company’s financial results tomorrow, May 11, 2016 at 8:00 a.m., Eastern Time (ET).  Following a recorded discussion of the quarterly results, Edward Coll, Chairman and Chief Executive Officer, and Anthony Laura, Chief Financial Officer, will be available to answer questions from attending participants. 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# 5418729. 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 one week and can be accessed by calling (800) 585-8367 (domestic) or (404) 537-3406 (international) and referencing ID# 5418729. 1 Earnings per share represents total earnings allocated to common stock divided by the weighted average number of common shares outstanding. Pro forma adjusted earnings per share represents adjusted total earnings allocated to common stock divided by the weighted average number of shares.  See Reconciliation of Adjusted EBITDA and Pro Forma Adjusted Earnings Per Share. 2 Adjusted EBITDA is a non-GAAP measure and represents operating earnings before interest expense, income taxes, depreciation and amortization, and other non-operating income and/or expense, if any.  See Reconciliation of Adjusted EBITDA and Pro Forma Adjusted Earnings Per Share. 3 Gross margin percentage is a non-GAAP measure representing the ratio of total revenue less voyage, charter hire and vessel operating expenses, to total revenue.    
Pangaea Logistics Solutions Ltd. Condensed Consolidated Statements of Income
Three Months Ended March 31,
2016 2015
Revenues:
Voyage revenue $ 41,974,319 $ 90,578,942
Charter revenue 1,963,200 4,536,846
43,937,519 95,115,788
Expenses:
Voyage expense 18,500,882 45,324,119
Charter hire expense 8,503,174 24,659,395
Vessel operating expense 6,889,082 7,785,328
General and administrative 3,036,371 4,318,692
Depreciation and amortization 3,515,456 2,990,594
Loss on sale of vessels — 88,868
Total expenses 40,444,965 85,166,996
Income from operations 3,492,554 9,948,792
Other (expense) income:
Interest expense, net (1,369,613) (1,410,771)
Interest expense on related party debt (80,490) (114,966)
Unrealized (loss) gain on derivative instruments (335,959) 823,455
Other (expense) income (102,318) 83,149
Total other expense, net (1,888,380) (619,133)
Net income 1,604,174 9,329,659
Income attributable to noncontrolling interests (407,070) (1,729,730)
Net income attributable to Pangaea Logistics Solutions Ltd. $ 1,197,104 $ 7,599,929
Earnings per common share:
Basic $ 0.03 $ 0.22
Diluted $ 0.03 $ 0.22
Weighted average shares used to compute earnings
per common share
Basic 35,130,211 34,756,980
Diluted 35,201,307 34,756,980
   
Pangaea Logistics Solutions Ltd. Condensed Consolidated Balance Sheets
March 31, 2016 December 31, 2015
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 32,666,025 $ 37,520,240
Restricted cash 1,503,341 2,003,341
Accounts receivable (net of allowance of $5,707,976 at
March 31, 2016 and $5,067,194 at December 31, 2015) 13,542,900 19,617,943
Bunker inventory 7,811,933 7,490,590
Advance hire, prepaid expenses and other current assets 3,459,051 2,679,292
Total current assets 58,983,250 69,311,406
Fixed assets, net 285,528,833 255,145,807
Investments in newbuildings in-process 8,765,000 42,505,783
Total assets $ 353,277,083 $ 366,962,996
Liabilities and stockholders’ equity
Current liabilities
Accounts payable, accrued expenses and other current liabilities $ 15,961,058 $ 22,156,202
Related party debt 10,927,988 13,321,419
Deferred revenue 3,688,858 4,448,795
Current portion long-term debt 18,887,058 19,499,262
Dividend payable 12,624,825 12,724,825
Total current liabilities 62,089,787 72,150,503
Secured long-term debt, net 124,130,287 129,496,153
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; 36,500,387 shares issued and outstanding at March 31, 2016; 36,503,837 shares issued and outstanding and December 31, 2015 3,650 3,650
Additional paid-in capital 133,211,904 133,075,409
Accumulated deficit (23,669,430) (24,866,534)
Total Pangaea Logistics Solutions Ltd. equity 109,546,124 108,212,525
Non-controlling interests 57,510,885 57,103,815
Total stockholders’ equity 167,057,009 165,316,340
Total liabilities and stockholders’ equity $ 353,277,083 $ 366,962,996
   
Pangaea Logistics Solutions Ltd. Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31,
2016 2015
Operating activities
Net income $ 1,604,174 $ 9,329,659
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization expense 3,515,456 2,990,594
Amortization of deferred financing costs 182,810 225,182
Unrealized loss (gain) on derivative instruments 335,959 (823,455)
Loss (gain) from equity method investee 30,380 (53,201)
Provision for doubtful accounts 703,354 319,981
Loss on sales of vessels — 88,868
Write off unamortized financing costs of repaid debt — 25,557
Share-based compensation 136,496 166,558
Change in operating assets and liabilities:
Decrease in restricted cash 500,000 —
Accounts receivable 5,371,689 7,477,051
Bunker inventory (321,343) 1,808,888
Advance hire, prepaid expenses and other current assets (779,759) 3,863,659
Drydocking costs (42,478) —
Accounts payable, accrued expenses and other current liabilities (6,342,724) (10,771,168)
Deferred revenue (759,937) (3,464,750)
Net cash provided by operating activities 4,134,077 11,183,423
Investing activities
Purchase of vessels (253,492) (44,824,665)
Proceeds from sales of vessels — 4,523,804
Purchase of building and equipment — (5,399)
Net cash used in investing activities (253,492) (40,306,260)
Financing activities
Proceeds of related party debt — 2,506,667
Payments of related party debt (2,473,921) —
Proceeds from long-term debt — 45,000,000
Payments of financing and issuance costs (34,425) (664,722)
Payments of long-term debt (6,126,454) (4,837,799)
Common stock dividends paid (100,000) (100,000)
Net cash (used in) provided by financing activities (8,734,800) 41,904,146
Net (decrease) increase in cash and cash equivalents (4,854,215) 12,781,309
Cash and cash equivalents at beginning of period 37,520,240 29,817,507
Cash and cash equivalents at end of period $ 32,666,025 $ 42,598,816
Disclosure of noncash items
Cash paid for interest $ 1,191,405 $ 1,185,589
   
Pangaea Logistics Solutions Ltd. Reconciliation of Adjusted EBITDA and Pro Forma Adjusted Earnings Per Share
three months ended March 31,
2016 2015
Adjusted EBITDA (in millions)
Income from operations 3,492,554 9,948,792
Depreciation and amortization 3,515,456 2,990,594
Loss on impairment of vessels — —
Adjusted EBITDA $ 7,008,010.0 $ 12,939,386.0
Earnings Per Common Share
Net income attributable to Pangaea Logistics Solutions Ltd. $ 1,197,104 $ 7,599,929