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Paragon Shipping Inc. Reports Fourth Quarter and Year Ended December 31, 2011 Results

Friday, 17 February 2012 | 00:00
Paragon Shipping Inc., a global shipping transportation company specializing in drybulk cargoes, announced yesterday its results for the fourth quarter and year ended December 31, 2011.Time Charter Coverage Update
Pursuant to its time chartering strategy, the Company mainly employs vessels under fixed rate time charters for periods ranging from one to five years.Assuming all charter counter parties fully perform under the terms of the charters, all exercisable optional periods under the charter parties are exercised and including our newbuilding vessels, the Company has secured under such contracts 94%, 73% and 35% of its fleet capacity in 2012, 2013 and 2014, respectively.
Management Commentary
Commenting on the results, Michael Bodouroglou, Chairman and Chief Executive Officer of Paragon Shipping, stated, "We are pleased to announce our results for the full year 2011, which turned out to be a challenging one for the shipping industry. For 2011, our EBITDA was negative $242.0 million, while we reported net loss of $283.3 million. The main item that impacted our results was a non-cash impairment loss of $277.3 million, related to the write down to market value of the carrying amounts of seven of the Company's vessels. After adjusting for non-cash items, the Company reported adjusted EBITDA for the fiscal year of 2011 of $54.1 million, while our adjusted net income was $15.6 million, or 26 cents per share. For the fourth quarter of 2011, the Company reported adjusted EBITDA of $9.3 million and adjusted net income of $0.8 million, or 1 cent per share.
Mr. Bodouroglou continued, "Despite the continued decline in the chartering market, we managed to successfully re-charter our vessels that were redelivered, for sufficient durations in order to enhance our cash flow visibility during this challenging period. Currently we have fixed the majority of our revenue days in 2012 and 2013 and we believe we are sufficiently protected from any further deterioration in the market. Moreover, in the second quarter of 2011, Box Ships Inc., a former subsidiary of Paragon, successfully completed its IPO. Paragon currently owns 21.1% of Box Ship's shares, and therefore continues to benefit from diversified income. In addition, we utilized part of the cash received from the sale of four vessels during 2011 to repay debt and took the opportunity to amend several of our loan agreements, reducing our repayments for the coming quarters and softening the respective covenants."
Mr. Bodouroglou concluded, "Overall, during 2011, we exploited every opportunity to prepare ourselves for the deteriorating market conditions while at the same time preserving the Company's liquidity to the extent possible. That way we not only safeguard the Company, but also ensure that we remain in a strong position to take advantage of any opportunity that may develop."
Fourth Quarter 2011 Financial Results:
Gross time charter revenue for the fourth quarter of 2011 was $17.0 million, compared to $28.7 million for the fourth quarter of 2010. The Company reported net loss of $272.2 million, or $4.52 per basic and diluted share for the fourth quarter of 2011, calculated on 58,665,317 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 fourth quarter of 2010, the Company reported net income of $2.3 million, or $0.04 per basic and diluted share, calculated on 50,796,008 weighted average number of basic and diluted shares.
Excluding all non-cash items described below, adjusted net income for the fourth quarter of 2011 was $0.8 million, or $0.01 per basic and diluted share, compared to adjusted net income of $4.1 million, or $0.08 per basic and diluted share for the fourth quarter of 2010.
EBITDA for the fourth quarter of 2011 was negative $262.9 million, compared to positive $13.9 million for the fourth quarter of 2010. EBITDA for the fourth quarter of 2011 was calculated by adding to net loss of $272.2 million, net interest expense and depreciation that, in the aggregate, amounted to $9.3 million. Adjusted EBITDA, excluding all non-cash items described below, was $9.3 million for the fourth quarter of 2011, compared to $15.0 million for the fourth quarter of 2010.
The Company operated an average of 10.3 vessels during the fourth quarter of 2011, earning a TCE rate of $16,965 per day, compared to an average of 13.1 vessels during the fourth quarter of 2010, earning an average TCE rate of $23,053 per day.
Total adjusted operating expenses for the fourth quarter of 2011 equaled $7.6 million, or approximately $8,036 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 fourth quarter of 2010, total adjusted operating expenses were $10.8 million, or approximately $8,921 per day, including the same items as mentioned above, but excluding $3.4 million of share-based compensation.
Currently, the Company owns approximately 21.1% of the outstanding common stock of Box Ships Inc., 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 unaudited condensed consolidated balance sheet. For the fourth quarter of 2011, the Company recorded income of $1.2 million, representing its share of Box Ships' net income for the period. In the fourth quarter of 2011, we received a cash amount of $1.0 million representing dividend distributions from Box Ships.
Discussion with Bank Lender
We are currently in discussion with one of our bank lenders since, as of December 31, 2011, we were not in compliance with the security cover ratio and the working capital requirement covenant, which requires $1.0 million working capital, contained in the respective agreement. As a result, we may be required to prepay indebtedness in the amount of $2.5 million or provide additional collateral to our lender in the form of cash or other property in the total amount of $2.8 million in order to eliminate the shortfall and comply with the security cover ratio covenant. A similar breach as at September 30, 2011 had been cured by the Company depositing $3.75 million as additional security. We are currently in discussions with our lender regarding our request to waive the respective covenants, including the working capital covenant, and amend the credit facility in order to be in a position to secure alternative refinancing before the loan becomes due in the fourth quarter of 2012.
Year ended December 31, 2011 Financial Results:
Gross time charter revenue for the year ended December 31, 2011, was $92.1 million, compared to $118.4 million for the year ended December 31, 2010. The Company reported net loss of $283.3 million, or $4.76 per basic and diluted share, for the year ended December 31, 2011, calculated on 57,937,918 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 year ended December 31, 2010, the Company reported net income of $22.9 million, or $0.44 per basic and diluted share, calculated on 49,812,716 weighted average number of basic and diluted shares.
Excluding all non-cash items described below, adjusted net income for the year ended December 31, 2011, was $15.6 million, or $0.26 per basic and diluted share. Adjusted net income for the year ended December 31, 2010 was $27.7 million, or $0.54 per basic and diluted share.
EBITDA was negative $242.0 million for the year ended December 31, 2011, compared to positive $66.5 million for the year ended December 31, 2010. This was calculated by adding to net loss of $283.3 million for the year ended December 31, 2011, net interest expense and depreciation, that in the aggregate, amounted to $41.3 million for the year ended December 31, 2011. Adjusted EBITDA, excluding all non-cash items described below, was $54.1 million for the year ended December 31, 2011, compared to $68.6 million for the year ended December 31, 2010.
The Company operated an average of 11.5 vessels during the year ended December 31, 2011, earning an average TCE rate of $21,250 per day, compared to an average of 12.1 vessels during the year ended December 31, 2010, earning an average TCE rate of $25,911 per day.
Total adjusted operating expenses for the year ended December 31, 2011, were $32.9 million, or approximately $7,824 per day, including vessel operating expenses, management fees, general and administrative expenses and dry-docking costs, but excluding $5.1 million of share-based compensation for the period. For the year ended December 31, 2010, total adjusted operating expenses were $33.9 million, or approximately $7,680 per day, including vessel operating expenses, management fees and general and administrative expenses and drydocking costs, but excluding $10.7 million of share-based compensation.
For the year ended December 31, 2011, the Company recorded $2.7 million income, representing its share of Box Ships' net income for the period. In 2011, we received a cash amount of $1.5 million representing dividend distributions from Box Ships.
Source: Paragon Shipping Inc.
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