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Eagle Bulk Shipping Inc. Reports Second Quarter 2020 Results

Eagle Bulk Shipping Inc. (NASDAQ: EGLE) (“Eagle Bulk”, “Eagle” or the “Company”), one of the world’s largest owner-operators within the Supramax / Ultramax drybulk segment, today reported financial results for the three and six months ended June 30, 2020.

Highlights for the Quarter:

• Revenues, net of $57.4 million
o TCE Revenue (1) for the quarter equated to $36.0 million
o Achieved TCE (1) of $8,038/day for the quarter versus the Adjusted net BSI (2) at $5,158/day

• Realized a net loss of $20.5 million, or $0.28 per basic and diluted share

• Adjusted EBITDA(1) of $1.8 million

• Issued our first ever Environmental, Social, and Governance (ESG) Sustainability Report

• Fixed 66% of Q3 available days at an average TCE of $9,220 as of August 6, 2020

Subsequent Events

• Reached an agreement to sell M/V Goldeneye (an 18yr-old Supramax) ahead of her statutory drydock for gross proceeds of $5.0 million. The vessel is expected to be delivered to buyers in third quarter

Gary Vogel, Eagle Bulk’s CEO, commented, “The outbreak of COVID-19 created a global shock to drybulk cargo demand, pushing the Baltic Supramax Index down to its second lowest level ever recorded. While our operations and results were negatively impacted by the distress in the markets, we achieved a TCE of $8,038 per day, representing a significant outperformance of almost $3,000, or roughly 56%, compared to the index.

Going forward, we are optimistic that the market will continue on its recent recovery path and trade flows will continue to normalize as regional restrictions are lifted and the impact of various countries’ stimulus plans help to restart demand growth.”

Fleet Operating Data

Results of Operations for the three and six months ended June 30, 2020 and 2019

For the three months ended June 30, 2020, the Company reported a net loss of $20.5 million, or basic and diluted loss of $0.28 per share. In the comparable quarter of 2019, the Company reported a net loss of $6.0 million, or basic and diluted loss of $0.08 per share.

For the six months ended June 30, 2020, the Company reported a net loss of $24.0 million, or basic and diluted loss of $0.33 per share. In the comparable period of 2019, the Company reported a net loss of $6.0 million, or basic and diluted loss of $0.08 per share.

Revenues, net

Net time and voyage charter revenues for the three months ended June 30, 2020 were $57.4 million compared with $69.4 million recorded in the comparable quarter in 2019. The decrease in revenues was primarily attributable to lower charter rates and lower chartered-in activity offset by an increase in owned days due to the acquisition of six Ultramax vessels in the second half of 2019.

Net time and voyage charter revenues for the six months ended June 30, 2020 and 2019 were $131.8 million and $146.8 million, respectively. The decrease in revenues was primarily due to lower charter rates and a decrease in available days due to lower chartered-in days, which was offset in part by an increase in owned days.

Voyage expenses

Voyage expenses for the three months ended June 30, 2020 were $23.8 million compared to $20.9 million in the comparable quarter in 2019. The increase was mainly attributable to an increase in the number of freight voyages performed offset by a decrease in bunker consumption expense and an increase in loss on sale of bunkers on time charter voyages due to a decline in bunker prices.

Voyage expenses for the six months ended June 30, 2020 were $50.3 million compared to $46.8 million in the comparable period in 2019. The increase was primarily due to an increase in the number of freight voyages performed offset by a decrease in bunker consumption expense and an increase in loss on sale of bunkers on time charter voyages due to a decline in bunker prices.

Vessel expenses

Vessel expenses for the three months ended June 30, 2020 were $20.2 million compared to $20.0 million in the comparable quarter in 2019. Although the total vessel expenses remained flat, the vessel expenses per day decreased mainly because of savings on crew travel and crew management due to travel restrictions imposed by COVID-19 as well as vessel running costs such as stores and spares. The decrease in vessel expenses per day was offset by increase in ownership days. The ownership days for the three months ended June 30, 2020 and 2019 were 4,550 and 4,169, respectively.

Average daily vessel operating expenses for our fleet for the three months ended June 30, 2020 and 2019 were $4,447 and $4,787, respectively.

Vessel expenses for the six months ended June 30, 2020 were $43.9 million compared to $40.1 million in the comparable period in 2019. The increase in vessel expenses was primarily attributable to an increase in ownership days after the purchase of six Ultramax vessels offset by the sale of the vessels Thrasher and Kestrel in the second half of 2019. Additionally, the Company incurred $0.2 million in additional costs relating to COVID-19 for procurement of personal protective equipment, test kits and crew changes. The ownership days for the six months ended June 30, 2020 and 2019 were 9,100 and 8,329, respectively.

Average daily vessel operating expenses for our fleet for the six months ended June 30, 2020 and 2019 were $4,828 and $4,809 respectively.

Charter hire expenses

Charter hire expenses for the three months ended June 30, 2020 were $4.7 million compared to $11.2 million in the comparable quarter in 2019. The decrease in charter hire expenses was principally due to a decrease in the number of chartered-in days as well as a decrease in charter hire rates. The total chartered-in days for the three months ended June 30, 2020 were 525 compared to 970 for the comparable quarter in the prior year. The Company currently charters in three Ultramax vessels on a long term basis with remaining lease terms of approximately one year.

Charter hire expenses for the six months ended June 30, 2020 were $10.8 million compared to $22.7 million in the comparable period in 2019. The decrease in charter hire expenses was primarily due to a decrease in the number of chartered-in days as well as a decrease in charter hire rates. The total chartered-in days for the six months ended June 30, 2020 were 1,129 compared to 2,006 for the comparable period in the prior year.

Depreciation and amortization

Depreciation and amortization expense for the three months ended June 30, 2020 and 2019 was $12.5 million and $9.8 million, respectively. Total depreciation and amortization expense for the three months ended June 30, 2020 includes $10.7 million of vessel and other fixed asset depreciation and $1.8 million relating to the amortization of deferred drydocking costs. Comparable amounts for the three months ended June 30, 2019 were $8.3 million of vessel and other fixed asset depreciation and $1.5 million of amortization of deferred drydocking costs. The increase in depreciation expense is due to an increase in the cost base of our owned fleet due to the capitalization of scrubbers and BWTS on our vessels, and the purchase of six Ultramax vessels in the second half of 2019, marginally offset by the sale of two vessels. The increase in drydock amortization was due to the completion of eleven additional drydocks since the second quarter of 2019.

Depreciation and amortization expense for the six months ended June 30, 2020 and 2019 was $25.0 million and $19.2 million, respectively. Total depreciation and amortization expense for the six months ended June 30, 2020 includes $21.3 million of vessel and other fixed asset depreciation and $3.7 million relating to the amortization of deferred drydocking costs. Comparable amounts for the six months ended June 30, 2019 were $16.5 million of vessel and other fixed asset depreciation and $2.7 million of amortization of deferred drydocking costs.

General and administrative expenses

General and administrative expenses for the three months ended June 30, 2020 and 2019 were $6.8 million and $8.0 million, respectively. General and administrative expenses included stock-based compensation of $0.7 million and $1.2 million for the three months ended June 30, 2020 and 2019, respectively. The decrease in general and administrative expenses was mainly attributable to decreases in stock-based compensation expense, employee compensation and corporate travel expenses due to the ongoing COVID-19 pandemic.

General and administrative expenses for the six months ended June 30, 2020 and 2019 were $14.7 million and $16.5 million, respectively. General and administrative expenses included stock-based compensation of $1.6 million and $2.7 million for 2020 and 2019, respectively. The decrease in general and administrative expenses was mainly attributable to decreases in stock-based compensation expense, employee compensation and corporate travel expenses due to the ongoing COVID-19 pandemic.

Operating lease impairment

As of June 30, 2020, the Company determined that there were impairment indicators present for one of our chartered-in vessel contracts and, as a result, we recorded an operating lease impairment of $0.4 million. The operating lease impairment was included as a component of Operating (loss)/income in our Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2020.

Interest expense

Interest expense for the three months ended June 30, 2020 and 2019 was $8.7 million and $6.7 million, respectively. The increase in interest expense is primarily due to an increase in our outstanding debt under the Convertible Bond Debt and the New Ultraco Debt Facility offset by a decrease in interest rates.

Interest expense for the six months ended June 30, 2020 and 2019 was $17.9 million and $13.5 million, respectively. The increase in interest expense is primarily due to an increase in our outstanding debt under the Convertible Bond Debt and the New Ultraco Debt Facility offset by a decrease in interest rates.

Liquidity and Capital Resources

Net cash used in operating activities for the six months ended June 30, 2020 was $15.2 million, compared with net cash provided by operating activities of $8.5 million in the comparable period in 2019. The cash flows from operating activities decreased as compared to the same period in the prior year primarily due to the decrease in charter hire rates, the negative impact of working capital changes and the increase in drydock expenditures.

Net cash used in investing activities for the six months ended June 30, 2020 was $19.3 million, compared to $18.6 million in the comparable period in the prior year. During the six months ended June 30, 2020, the Company paid $22.4 million for the purchase and installation of scrubbers and ballast water treatment systems on our fleet. The Company also received insurance proceeds of $3.7 million for hull and machinery claims. Additionally, the Company paid $0.5 million towards vessel improvements. During the six months ended June 30, 2019, the Company purchased one Ultramax vessel for $20.4 million, of which $2.0 million was paid as an advance as of December 31, 2018. The proceeds from the sale of three vessels were $22.6 million. The Company received $1.3 million for hull and machinery claims. Additionally, the Company paid $23.9 million for the purchase and installation of scrubbers and ballast water treatment systems on our fleet.

Net cash provided by financing activities for the six months ended June 30, 2020 was $73.9 million compared with net cash used in financing activities of $2.5 million in the comparable period in 2019. During the six months ended June 30, 2020, the Company received $55.0 million in proceeds from the revolver loan under the New Ultraco Debt Facility, $22.6 million in proceeds from the New Ultraco Debt Facility, and $15.0 million from the Super Senior Facility. The Company repaid $13.1 million of the New Ultraco Debt Facility and $4.0 million of the Norwegian Bond Debt. Additionally, the Company paid $1.2 million to settle net share equity awards. Additionally, the Company paid $0.4 million to the lenders of the New Ultraco Debt Facility. During the six months ended June 30, 2019, the Company completed a debt refinancing transaction and received net proceeds of $153.4 million, by entering into new term and revolver loan facilities under the New Ultraco Debt Facility and repaid all outstanding debt under the Original Ultraco Debt Facility and New First Lien Facility of $82.6 million and $65.0 million, respectively. The Company paid $3.2 million as debt issuance costs to the lenders under the New Ultraco Debt Facility. Additionally, the Company paid $0.9 million to settle net share equity awards.

As of June 30, 2020, our cash and cash equivalents including restricted cash was $98.6 million compared to $59.1 million as of December 31, 2019.

As of June 30, 2020, the Company’s outstanding debt consisted of the $184.0 million Norwegian Bond, the $237.1 million under the New Ultraco Debt Facility including $55.0 million of an outstanding revolver loan, $15.0 million under the Super Senior Facility and the $114.1 million Convertible Bond Debt.

Capital Expenditures and Drydocking

Our capital expenditures relate to the purchase of vessels and capital improvements to our vessels, which are expected to enhance the revenue earning capabilities and safety of the 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 necessary to comply with international shipping standards and environmental laws and regulations. Although the Company has some flexibility regarding the timing of its drydocking, the costs are relatively predictable. Management anticipates that vessels are to be drydocked every two and a half years for vessels older than 15 years and five years for vessels younger than 15 years. Funding of these requirements is anticipated to be met with cash from operations. We anticipate that this process of recertification will require us to reposition these vessels from a discharge port to shipyard facilities, which will reduce our available days and operating days during that period.

Drydocking costs incurred are deferred and amortized to expense on a straight-line basis over the period through the date of the next scheduled drydocking for those vessels. In the six months ended June 30, 2020, four of our vessels completed drydocking and two of our vessels were still in drydock as of June 30, 2020, and we incurred drydocking expenditures of $6.6 million. In the six months ended June 30, 2019, four of our vessels completed drydock, and we incurred drydocking expenditures of $4.5 million.
Source: Eagle Bulk Shipping Inc.

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