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Mr. Bodouroglou continued, "Since the beginning of the year, we are facing many challenges that made us review our dividend strategy. The Korea Line's default earlier this year has a negative impact on the M/V Pearl Seas, which we drydocked during the quarter and then re-chartered at a lower rate to Cargill. Since then, the drybulk market has continued to decline and it appears that the oversupply of vessels has finally made an impact on charter rates, which has caused asset values to decline to more attractive levels. Taking into consideration these factors, the Board of Directors decided to suspend our quarterly dividend in order to retain cash, so that we are in a better position to explore investment opportunities during these weakened market conditions." Mr. Bodouroglou concluded, "This quarter was transformational for Paragon. We believe the increased liquidity from suspending the dividend is a crucial element for us to take advantage of the low asset value environment in the drybulk sector to grow our fleet. We remain confident that our strategy will have a positive impact in our financial results, which will be reflected in our stock price." First Quarter 2011 Financial Results: Time charter revenue for the first quarter of 2011 was $29.0 million, compared to $31.4 million for the first quarter of 2010. The Company reported net income of $5.4 million, or $0.09 per basic and diluted share for the first quarter of 2011, calculated on 56,282,522 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 first quarter of 2010, the Company reported net income of $9.2 million, or $0.18 per basic and diluted share, calculated on 49,481,525 weighted average number of basic and diluted shares. Excluding all non-cash items described below, adjusted net income for the first quarter of 2011 was $6.8 million, or $0.12 per basic and diluted share, compared to adjusted net income of $8.1 million, or $0.16 per basic and diluted share for the first quarter of 2010. Please refer to the table at the back of this release for reconciliations of GAAP net income to non-GAAP adjusted net income and GAAP earnings per share to non-GAAP adjusted earnings per share. EBITDA for the first quarter of 2011 was $16.5 million, compared to $19.6 million for the first quarter of 2010. EBITDA for the first quarter of 2011 was calculated by adding to net income of $5.4 million, net interest expense and depreciation that, in the aggregate, amounted to $11.1 million. Adjusted EBITDA, excluding all non-cash items described below, was $17.2 million for the first quarter of 2011, compared to $17.8 million for the first quarter of 2010. Please see the table at the back of this release for a reconciliation of EBITDA and Adjusted EBITDA to net income. The Company operated an average of 13.0 vessels during the first quarter of 2011, earning an average time charter equivalent rate, or TCE rate, of $24,109 per day, compared to an average of 11.2 vessels during the first quarter of 2010, earning an average TCE rate of $29,882 per day. Please see the table at the back of this release for a reconciliation of TCE rates to time charter revenue. Total adjusted operating expenses for the first quarter of 2011 equaled $8.9 million, or approximately $7,604 per day, including vessel operating expenses, management fees, general and administrative expenses and drydocking costs, but excluding $1.6 million of share-based compensation for the period. For the first quarter of 2010, total adjusted operating expenses were $6.9 million, or approximately $6,883 per day, including the same items as mentioned above, but excluding $2.4 million of share-based compensation. First Quarter 2011 Non-cash Items The Company's results for the three months ended March 31, 2011 included the following non-cash items: -- Depreciation expense of $0.7 million, or $0.01 per basic and diluted share, associated with below market time charters attached to vessels acquired, which increases depreciation expense (amortized over the remaining useful life of the vessel). -- An unrealized gain from interest rate swaps of $0.9 million, or $0.02 per basic and diluted share. -- Non-cash expenses of $1.6 million, or $0.03 per basic and diluted share, relating to the amortization of the compensation cost recognized for non-vested share awards issued to executive officers, directors and employees and related to share-based compensation to the management company. In total, these non-cash items decreased net income by $1.3 million, or $0.03 per basic and diluted share, for the three months ended March 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 options are exercised but excluding the newbuilding vessels which are under construction, the Company has secured under such contracts 95%, 43% and 21% of its fleet capacity in 2011, 2012 and 2013, respectively. Cash Flows For the three months ended March 31, 2011, the Company generated net cash from operating activities of $12.4 million, compared to $16.6 million for the three months ended March 31, 2010. For the three months ended March 31, 2011, net cash used in investing activities was $5.3 million and net cash from financing activities was $15,190. For the three months ended March 31, 2010, net cash from investing activities was $18.3 million and net cash used in financing activities was $38.1 million. Newbuilding Program On March 17, 2011, the Company agreed to substitute two 4,800 TEU containerships with scheduled deliveries in the fourth quarter of 2013, for two of its Kamsarmax newbuilding contracts that were scheduled for delivery in the third and fourth quarters of 2012, respectively. As a result of this substitution, the net aggregate increase in the contract price was $50.2 million, with the majority of the purchase price due upon delivery. On May 5, 2011, the Company entered into a secured loan facility with a syndicate of European banks led by Nordea Bank Finland Plc. for an amount of up to $89.5 million to finance 65% of the purchase price of its current drybulk newbuilding vessels (one Kamsarmax and four Handysize drybulk vessels), comprised of five advances, one for each newbuilding vessel, which will be available upon delivery of each vessel. Fleet Developments and Box Ships Inc. Initial Public Offering In April 2011, the Company's wholly-owned subsidiary, Box Ships Inc., or Box Ships, successfully completed an initial public offering of 11,000,000 shares of its common stock at an initial public offering price of $12.00 per share, or the IPO. Box Ships' common stock trades on the New York Stock Exchange under the symbol "TEU." Upon the closing of the IPO, the Company surrendered its 100 shares of Box Ships' common stock and entered into the below transactions with Box Ships. Following the delivery of all of the vessels that Box Ships agreed to acquire in connection with the IPO, the Company will own approximately 21.3% of the outstanding common stock of Box Ships. 1. On April 19, 2011, the Company entered into a Memoranda of Agreement for the sale of the containerships Box Voyager and Box Trader to Box Ships, in consideration for an aggregate of 2,266,600 shares of Box Ships' common stock and $69.2 million in cash. On April 29, 2011, the Company repaid the $46.4 million outstanding under the secured loan agreement relating to the Box Trader and the Box Voyager and completed the sale and delivery of the vessels to Box Ships. As a result of the consideration received by the Company, being partly based on the price of Box Ships' common stock on the delivery date of the vessels, the Company will record in the second quarter of 2011, a non-cash loss of approximately $8.7 million. 2. On April 19, 2011, the Company entered into a Memorandum of Agreement for the sale of the containership CMA CGM Kingfish to Box Ships, in consideration for 1,170,900 shares of Box Ships' common stock and approximately $35.8 million in cash. The Company completed the sale and delivery of the vessel to Box Ships on May 19, 2011. As a result of the consideration received by the Company, being partly based on the price of Box Ships' common stock on the delivery date of the vessel, the Company will record in the second quarter of 2011, a non-cash loss of approximately $5.9 million. 3. The Company agreed to make available to Box Ships an unsecured credit facility of up to $30.0 million for the purpose of partly financing Box Ships' initial fleet and minimum liquidity requirements. This facility will bear interest at LIBOR plus 4.0%, and any amounts drawn will be repayable in full by the second anniversary of the closing of the IPO. As of May 26, 2011, no amounts have been drawn under this facility. About Paragon Shipping Inc. Paragon Shipping Inc. is an Athens, Greece-based international shipping company specializing in the transportation of drybulk cargoes and containers. The Company's current fleet consists of eleven drybulk vessels with a total carrying capacity of 747,994 dwt. Paragon Shipping Inc. press release |
Paragon Shipping Inc. Reports First Quarter 2011 Results