EX-99.1 2 q32016pressrelease.htm EXHIBIT 99.1 Exhibit



Pangaea Logistics Solutions Ltd. Reports Financial Results for the Quarter Ended September 30, 2016
Pangaea announces positive earnings and cash flow
NEWPORT, RI - November 10, 2016 - 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, 2016.
Third Quarter Highlights
•
Net income attributable to Pangaea Logistics Solutions Ltd. was $6.1 million, compared to net income of $3.0 million in the third quarter of 2015
•
Earnings per common share of $0.17 for the third quarter of 2016 compared to earnings per common share of $0.08 in the third quarter of 2015
•
Adjusted EBITDA1 increased to $11.3 million for the third quarter of 2016, compared with $8.1 million for the third quarter of 2015
•
Cash flow from operations was $18.3 million for the nine months ended September 30, 2016, compared with $17.4 million for the nine months ended September 30, 2015
•
At the end of the third quarter, Pangaea had $28.2 million in cash and cash equivalents

Edward Coll, Chairman and Chief Executive Officer of Pangaea Logistics Solutions, commented, “This quarter illustrated the impact that our proactive, asset-right business model can have during challenging market conditions. Net income for the quarter doubled year-over-year, as did earnings per share. We continue to find value in remaining nimble, operating efficiently, and being active while others remain stagnant. Our risk mitigation, prudent approach to cash management, and backhaul strategy will continue to drive our growth as we service our clients, including those in specialized trades such as ice-class, which generated impressive performance this quarter. This strategy, combined with a world-class, highly-experienced team of professionals, will drive our ultimate goal of consistently maximizing shareholder value."

Results for the Three Months Ended September 30, 2016 and 2015
For the three months ended September 30, 2016, the Company reported net income of $6.1 million, or $0.17 per common share compared to net income of $3.0 million, or $0.08 per common share for the same period of 2015.
Adjusted EBITDA was $11.3 million in the three months ended September 30, 2016 and $8.1 million for the three months ended September 30, 2015. The increase was attributable to the success of our business model, coupled with lower cost of bunkers consumed, lower charter hire expense, and a reduction in vessel operating expenses. 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 has continued to serve the Company well. This flexible fleet strategy reduces the risk of idle time in an environment with limited profitable fronthaul employment. In addition, the Company is able to charter-in tonnage at market rates available when contracts are negotiated and positive margins are assured.


1 Adjusted EBITDA is a non-GAAP measure and represents income from operations before depreciation, amortization, loss on impairment and non-recurring items, if applicable. See Reconciliation of Adjusted EBITDA.





Total revenue for the three months ended September 30, 2016 was $70.8 million as compared to $71.2 million in 2015. Demand for the Company's services increased in 2016 but, due to lower market rates, total revenues declined. Total shipping days increased 15% for the three months ended September 30, 2016 over the same period of 2015.
Markets
Mr. Coll noted, "There is no question we are still in a challenging market environment as our industry struggles with low rates, a disadvantageous supply-demand dynamic for vessels and volatility across a wide range of commodities. However, we are encouraged by the gradual easing we’re seeing for several of these headwinds. And while it would be premature to ascribe too much weight to the recent improvement in rates, we do believe the market is starting to behave more rationally. Irrespective of the day-to-day movement of the indexes, we will continue to operate our business prudently and focus on opportunities to secure above-market rates through our differentiated expertise and business model as we believe that firms who remain proactive during these conditions are well-positioned to benefit from future improvements in the operating environment."

Cash Flows
Cash and cash equivalents were $28.2 million as of September 30, 2016, compared with $37.5 million on December 31, 2015.
For the nine months ended September 30, 2016, the Company’s net cash provided by operating activities was $18.3 million, compared to $17.4 million for the nine months ended September 30, 2015.
Conference Call Details
The Company’s management team will host a conference call to discuss the Company’s financial results tomorrow, November 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# 15286049.
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# 15286049.





Pangaea Logistics Solutions Ltd.
Condensed Consolidated Statements of Income
(unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 

 

 

 

Revenues:
 

 
 

 


 


Voyage revenue
$
65,986,320

 
$
64,599,552

 
$
161,509,615

 
$
216,081,290

Charter revenue
4,797,572

 
6,588,613

 
10,173,501

 
15,325,435

 
70,783,892

 
71,188,165

 
171,683,116

 
231,406,725

Expenses:
 

 
 

 


 


Voyage expense
29,166,651

 
30,392,418

 
74,434,257

 
103,845,834

Charter hire expense
19,655,327

 
20,601,908

 
43,199,730

 
60,456,502

Vessel operating expense
7,483,507

 
8,462,370

 
22,277,417

 
23,364,200

General and administrative
3,179,287

 
3,595,398

 
9,151,608

 
11,830,209

Depreciation and amortization
3,532,171

 
3,195,437

 
10,576,223

 
9,457,269

Loss on sale of vessels
—

 
71,882

 
—

 
638,638

Total expenses
63,016,943

 
66,319,413

 
159,639,235

 
209,592,652




 


 


 


Income from operations
7,766,949

 
4,868,752

 
12,043,881

 
21,814,073




 


 


 


Other (expense) income:
 

 
 

 


 


Interest expense, net
(1,258,105
)
 
(1,493,536
)
 
(4,158,143
)
 
(4,184,240
)
Interest expense on related party debt
(79,712
)
 
(110,764
)
 
(235,212
)
 
(336,493
)
Unrealized gain (loss) on derivative instruments
161,002

 
(513,678
)
 
1,212,434

 
672,873

Other (expense) income
(8,097
)
 
30,000

 
(42,754
)
 
174,084

Total other expense, net
(1,184,912
)
 
(2,087,978
)
 
(3,223,675
)
 
(3,673,776
)



 


 


 


Net income
6,582,037

 
2,780,774

 
8,820,206

 
18,140,297

(Income) loss attributable to noncontrolling interests
(517,701
)
 
221,895

 
(1,429,132
)
 
(2,077,062
)
Net income attributable to Pangaea Logistics Solutions Ltd.
$
6,064,336

 
$
3,002,669

 
$
7,391,074

 
$
16,063,235




 


 


 


Earnings per common share:
 

 
 

 


 


Basic
$
0.17

 
$
0.08

 
$
0.21

 
$
0.46

Diluted
$
0.17

 
$
0.08

 
$
0.21

 
$
0.46




 


 


 


Weighted average shares used to compute earnings
 

 
 

 


 


per common share
 

 
 

 


 


Basic
35,165,532

 
35,490,097

 
35,148,793

 
35,165,169

Diluted
35,347,403

 
35,490,097

 
35,299,839

 
35,165,169






Pangaea Logistics Solutions Ltd.
Condensed Consolidated Balance Sheets



September 30, 2016
 
December 31, 2015

(unaudited)
 
 
Assets
 
 
 
Current assets
 

 
 

Cash and cash equivalents
$
28,192,492

 
$
37,520,240

Restricted cash
6,504,072

 
2,003,341

Accounts receivable (net of allowance of $4,812,243 at
 

 
 

September 30, 2016 and $5,067,194 at December 31, 2015)
14,811,060

 
19,617,943

Bunker inventory
9,336,297

 
7,490,590

Advance hire, prepaid expenses and other current assets
5,150,593

 
2,679,292

Total current assets
63,994,514

 
69,311,406




 


Fixed assets, net
278,821,101

 
255,145,807

Investments in newbuildings in-process
11,818,000

 
42,505,783

Total assets
$
354,633,615

 
$
366,962,996




 


Liabilities and stockholders' equity
 

 
 

Current liabilities
 
 
 
Accounts payable, accrued expenses and other current liabilities
$
19,703,744

 
$
22,156,202

Related party debt
12,578,635

 
13,321,419

Deferred revenue
3,523,305

 
4,448,795

Current portion long-term debt
18,002,784

 
19,499,262

Dividend payable
12,624,825

 
12,724,825

Total current liabilities
66,433,293

 
72,150,503




 


Secured long-term debt, net
112,027,117

 
129,496,153




 


Commitments and contingencies (Note 7)


 





 


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; 36,575,171 shares issued and outstanding at September 30, 2016; 36,503,837 shares issued and outstanding and December 31, 2015
3,658

 
3,650

Additional paid-in capital
133,512,060

 
133,075,409

Accumulated deficit
(17,475,460
)
 
(24,866,534
)
Total Pangaea Logistics Solutions Ltd. equity
116,040,258

 
108,212,525

Non-controlling interests
60,132,947

 
57,103,815

Total stockholders' equity
176,173,205

 
165,316,340

Total liabilities and stockholders' equity
$
354,633,615

 
$
366,962,996






Pangaea Logistics Solutions Ltd.
Condensed Consolidated Statements of Cash Flows

 
Nine Months Ended September 30,
 
2016
 
2015
Operating activities
 

 
 

Net income
$
8,820,206

 
$
18,140,297

Adjustments to reconcile net income to net cash provided by operations:
 

 
 

Depreciation and amortization expense
10,576,223

 
9,457,269

Amortization of deferred financing costs
513,311

 
591,444

Unrealized gain on derivative instruments
(1,212,434
)
 
(672,873
)
Loss (gain) from equity method investee
68,477

 
(61,357
)
Provision for doubtful accounts
982,393

 
453,421

Loss on sales of vessels
—

 
638,638

Write off unamortized financing costs of repaid debt
—

 
25,557

Share-based compensation
274,286

 
372,595

Change in operating assets and liabilities:
 

 
 

Increase in restricted cash
499,269

 
—

Accounts receivable
3,824,491

 
2,437,783

Bunker inventory
(1,845,707
)
 
5,587,153

Advance hire, prepaid expenses and other current assets
(2,471,301
)
 
3,006,412

Drydocking costs
(42,478
)
 
(643,000
)
Accounts payable, accrued expenses and other current liabilities
(743,918
)
 
(15,671,505
)
Deferred revenue
(925,490
)
 
(6,279,262
)
Net cash provided by operating activities
18,317,328

 
17,382,572

 
 
 
 
Investing activities
 

 
 

Purchase of vessels
(319,433
)
 
(44,795,804
)
Proceeds from sale of vessels
—

 
8,265,179

Deposits on newbuildings in-process
(3,053,000
)
 
(3,470,000
)
Purchase of building and equipment
(315,818
)
 
(59,380
)
Purchase of non-controlling interest
—

 
(250,000
)
Net cash used in investing activities
(3,688,251
)
 
(40,310,005
)
 
 
 
 
Financing activities
 

 
 

Proceeds of related party debt
1,522,500

 
4,680,001

Payments of related party debt
(2,500,497
)
 
(1,216,250
)
Proceeds from long-term debt
1,375,971

 
46,000,000

Payments of financing and issuance costs
(45,755
)
 
(928,201
)
Payments of long-term debt
(20,809,044
)
 
(17,602,405
)
Payments on line of credit
—

 
(3,000,000
)
Common stock dividends paid
(100,000
)
 
(100,000
)
Increase in restricted cash
(5,000,000
)
 
—

Proceeds from non-controlling interests
1,600,000

 
—

Distribution to non-controlling interest
—

 
(521,920
)
Net cash (used in) provided by financing activities
(23,956,825
)
 
27,311,225

 
 
 
 
Net (decrease) increase in cash and cash equivalents
(9,327,748
)
 
4,383,792

Cash and cash equivalents at beginning of period
37,520,240

 
29,817,507

Cash and cash equivalents at end of period
$
28,192,492

 
$
34,201,299

 
 
 
 
Disclosure of noncash items
 

 
 

Cash paid for interest
$
3,520,635

 
$
3,882,603





Pangaea Logistics Solutions Ltd.
Reconciliation of Adjusted EBITDA and Adjusted Earnings Per Share


 
Three Months Ended September 30,

 
2016
 
2015
Adjusted EBITDA (in millions)
 

 

Income from operations
 
7,766,949

 
4,868,752

Depreciation and amortization
 
3,532,171

 
3,195,437

Adjusted EBITDA
 
$
11,299,120

 
$
8,064,189


 

 

Earnings Per Common Share - basic
 

 

Net income attributable to Pangaea Logistics Solutions Ltd.
 
$
6,064,336

 
$
3,002,669


 

 

Weighted average number of common shares outstanding - basic
 
35,165,532

 
35,490,097

Weighted average number of common shares outstanding - diluted
 
35,347,403

 
35,490,097


 

 

Earnings per common share - basic
 
$
0.17

 
$
0.08

Earnings per common share - diluted
 
$
0.17

 
$
0.08


 

 

Adjusted EPS
 

 

Net income attributable to Pangaea Logistics Solutions Ltd.
 
$
6,064,336

 
$
3,002,669

Non-GAAP Adjustments:
 

 

Add: loss on impairment of vessels
 
—

 
—

Add: non-recurring charges
 
—

 
—

Non-GAAP adjusted net income attributable to Pangaea Logistics Solutions Ltd.
 
$
6,064,336

 
$
3,002,669


 

 

Weighted average number of common shares - basic
 
35,165,532

 
35,490,097

Adjusted EPS
 
$
0.17

 
$
0.08






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 condensed consolidated financial statements prepared and presented in accordance with GAAP, this earnings release discusses non-GAAP financial measures, including (1) adjusted EBITDA and (2) adjusted earnings per share (“EPS”). These are considered non-GAAP financial measures 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 these 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 these non-GAAP financial measures provide meaningful supplemental information regarding the performance of our core business. These non-GAAP financial measures also facilitate management's internal planning and comparisons to our historical performance and liquidity. We believe these 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.

Adjusted EBITDA and Adjusted EPS. Adjusted EBITDA represents income from operations before depreciation, amortization, loss on impairment of vessels and non-recurring charges, if applicable. Adjusted Earnings Per Share represents total earnings attributable to Pangaea Logistics Solutions Ltd. before loss on impairment of vessels and non-recurring charges, divided by the weighted average number of common shares outstanding - basic. There are limitations related to the use of Adjusted EBITDA and Adjusted EPS versus net income, income from operations, and EPS calculated in accordance with GAAP. The table set forth above provides a reconciliation of the non-GAAP financial measures presented 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.

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.