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(2) Adjusted to give effect to the 1 to 10 reverse stock split that became effective on November 5, 2012. 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 counterparties fully perform under the terms of the charters, based on the earliest redelivery dates and including our newbuilding vessels, the Company has secured employment for 79%, 55% and 7% of its fleet capacity for the remainder of 2012, 2013 and 2014, respectively. Management Commentary Commenting on the results, Michael Bodouroglou, Chairman and Chief Executive Officer of Paragon Shipping, stated, “For the third quarter of 2012, we reported Adjusted EBITDA of $6.4 million and Adjusted Net Loss of $0.1 million, or $0.02 per share. On average, we operated 12.0 vessels, with our utilization rate being more than 99%. Unfortunately, our results continue to be negatively impacted by the defaults of KLC and Deiulemar, along with the renewals of some of our legacy time charters at prevailing charter rates that are below breakeven levels, a situation that we expect to continue through 2014. However, in an effort to cushion ourselves from the full impact of this downturn, we have been proactive in fixing employment for our vessels and currently have 79% and 55% of our revenue days fixed for the remainder of 2012 and for 2013, respectively.” Mr. Bodouroglou continued, “In order to conserve cash and avoid taking delivery of our remaining four newbuilding vessels in the midst of this market downturn, we have agreed with the shipyard to reschedule the deliveries of the two remaining Handysize drybulk carriers and the two 4,800 TEU Containerships. As a result, we expect to take delivery of the two Handysize vessels in the first and fourth quarters of 2013, and the two Containerships in the second quarter of 2014. We are also in close discussions with our lenders to obtain waivers of certain covenants in our loan agreements and, in some cases, reduce our repayment profiles and ensure that we continue to remain current on all our obligations during the prevailing negative market conditions. ” Mr. Bodouroglou concluded, “We are optimistic that our proactive approach to addressing the consequences of this severe and protracted market downturn should allow us to address all actual and potential challenges and enable our Company to emerge stronger when the market turns, which it inevitably will.” Third Quarter 2012 Financial Results Gross time charter revenue for the third quarter of 2012 was $13.7 million, compared to $21.0 million for the third quarter of 2011. The Company reported net loss of $18.8 million, or $3.08 per basic and diluted share, for the third quarter of 2012, calculated on 5,960,610 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 third quarter of 2011, the Company reported net income of $0.3 million, or $0.05 per basic and diluted share, calculated on 5,851,268 weighted average number of basic and diluted shares. Excluding all non-cash items described below, adjusted net loss for the third quarter of 2012 was $0.1 million, or $0.02 per basic and diluted share, compared to adjusted net income of $2.9 million, or $0.48 per basic and diluted share, for the third quarter of 2011. EBITDA for the third quarter of 2012 was negative $12.3 million, compared to positive $11.2 million for the third quarter of 2011. EBITDA for the third quarter of 2012 was calculated by adding to net loss of $18.8 million, net interest expense and depreciation that, in the aggregate, amounted to $6.5 million. Adjusted EBITDA, excluding all non-cash items described below, was $6.4 million for the third quarter of 2012, compared to $13.1 million for the third quarter of 2011. The Company operated an average of 12.0 vessels during the third quarter of 2012, earning an average TCE rate of $11,574 per day, compared to an average of 11.0 vessels during the third quarter of 2011, earning an average TCE rate of $20,229 per day. Total adjusted operating expenses for the third quarter of 2012 equaled $7.5 million, or approximately $6,832 per day per vessel, including vessel operating expenses, management fees, general and administrative expenses and drydocking costs, but excluding $0.8 million of share-based compensation for the period. For the third quarter of 2011, total adjusted operating expenses were $7.3 million, or approximately $7,196 per day per vessel, including the same items as mentioned above, but excluding $1.1 million of share-based compensation. As of September 30, 2012, the Company owned approximately 16.7% of the outstanding common stock of Box Ships Inc. (NYSE:TEU) (“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 third quarter of 2012, the Company recorded income of $0.5 million, representing its share of Box Ships’ net income for the period, compared to $1.1 million for the third quarter of 2011. In the third quarter of 2012, we received a cash amount of $0.9 million, representing dividend distributions from Box Ships, compared to $0.5 million received in the third quarter of 2011. In the third quarter of 2012, the Company recorded a non-cash loss of $2.9 million relating to the dilution effect from the Company’s non-participation in the public offering by Box Ships of 4,285,715 of Box Ships’ common shares, which was completed on July 18, 2012. In addition, the difference between the fair value and the book value of the Company’s investment in Box Ships was considered to be other than temporary and therefore, the investment was impaired and the Company recorded a non-cash loss of $14.4 million. Both items are included in “Loss on investment in affiliate” in the unaudited condensed consolidated statements of operations at the end of this release. The change in the fair value of the shares of Korea Line Corporation (“KLC”), which the Company received as part of the settlement agreement entered into with KLC in September 2011, in connection with the early termination of the time charter in respect of the M/V Pearl Seas, was considered as other than temporary, and therefore the Company recorded a non-cash loss of $1.0 million in the third quarter of 2012. Third Quarter 2012 Non-cash Items The Company’s results for the three months ended September 30, 2012 included the following non-cash items: • Loss on investment in affiliate of $17.3 million, or $2.84 per basic and diluted share. • Loss on marketable securities of $1.0 million, or $0.16 per basic and diluted share. • An unrealized gain from interest rate swaps of $0.4 million, or $0.07 per basic and diluted share. Page 3 of 15 • Non-cash expenses of $0.8 million, or $0.13 per basic and diluted share, relating to the amortization of the compensation cost recognized for non-vested share awards issued to the Company’s executive officers, directors and employees. In total, these non-cash items decreased net income by $18.6 million, or $3.06 per basic and diluted share, for the three months ended September 30, 2012. Nine months ended September 30, 2012 Financial Results: Gross time charter revenue for the nine months ended September 30, 2012, was $39.5 million, compared to $75.1 million for the nine months ended September 30, 2011. The Company reported net loss of $17.9 million, or $2.93 per basic and diluted share, for the nine months ended September 30, 2012, calculated on 5,929,115 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 nine months ended September 30, 2011, the Company reported net loss of $11.1 million, or $1.86 per basic and diluted share, calculated on 5,769,279 weighted average number of basic and diluted shares. Excluding all non-cash items described below, adjusted net income for the nine months ended September 30, 2012, was $1.5 million, or $0.24 per basic and diluted share. Adjusted net income for the nine months ended September 30, 2011 was $14.8 million, or $2.50 per basic and diluted share. EBITDA for the nine months ended September 30, 2012, was $0.7 million, compared to $24.0 million for the nine months ended September 30, 2011. This was calculated by adding to net loss of $17.9 million for the nine months ended September 30, 2012, net interest expense and depreciation, that in the aggregate, amounted to $18.6 million for the nine months ended September 30, 2012. Adjusted EBITDA, excluding all non-cash items described below, was $20.1 million for the nine months ended September 30, 2012, compared to $47.8 million for the nine months ended September 30, 2011. The Company operated an average of 10.9 vessels during the nine months ended September 30, 2012, earning an average TCE rate of $12,418 per day, compared to an average of 11.9 vessels during the nine months ended September 30, 2011, earning an average TCE rate of $22,316 per day. Total adjusted operating expenses for the nine months ended September 30, 2012, were $20.9 million, or approximately $6,982 per day per vessel, including vessel operating expenses, management fees, general and administrative expenses and dry-docking costs, but excluding $2.4 million of share-based compensation for the period. For the nine months ended September 30, 2011, total adjusted operating expenses were $24.3 million, or approximately $7,471 per day, including vessel operating expenses, management fees and general and administrative expenses and drydocking costs, but excluding $4.0 million of share-based compensation. For the nine months ended September 30, 2012, the Company recorded income of $1.9 million, representing its share of Box Ships’ net income for the period, compared to $1.6 million for the nine months ended September 30, 2011. In the nine months ended September 30, 2012, we received a cash amount of $3.0 million representing dividend distributions from Box Ships, compared to $0.5 million in the nine months ended September 30, 2011. In the nine months ended September 30, 2012, the Company recorded a non-cash loss of $2.9 million relating to the dilution effect from the Company’s non-participation in the public offering by Box Ships of 4,285,715 of Box Ships’ common shares, which was completed on July 18, 2012. In addition, the difference between the fair value and the book value of the Company’s investment in Box Ships was considered to be other than temporary and therefore, the investment was impaired and the Company recorded a non-cash loss of $14.4 million. Both items are included in “Loss on investment in affiliate” in the unaudited condensed consolidated statements of operations at the end of this release. The change in the fair value of the shares of KLC, which the Company received as part of the settlement agreement entered into with KLC in September 2011, in connection with the early termination of the time charter in respect of the M/V Pearl Seas, was considered as other than temporary, and therefore the Company recorded a non-cash loss of $1.0 million in the nine months ended September 30, 2012. Nine months ended September 30, 2012 Non-cash Items The Company’s results for the nine months ended September 30, 2012, included the following non-cash items: • Loss on investment in affiliate of $17.3 million, or $2.84 per basic and diluted share. • Loss on marketable securities of $1.0 million, or $0.16 per basic and diluted share. • An unrealized gain from interest rate swaps of $1.3 million, or $0.22 per basic and diluted share. • ? Non-cash expenses of $2.4 million, or $0.39 per basic and diluted share, relating to the amortization of the compensation cost recognized for non-vested share awards issued to the Company’s executive officers, directors and employees. In the aggregate, these non-cash items decreased net income by $19.3 million, which represents a $3.17 decrease in earnings per basic and diluted share, for the nine months ended September 30, 2012. Cash Flows For the nine months ended September 30, 2012, the Company generated net cash from operating activities of $10.6 million, compared to $36.5 million for the nine months ended September 30, 2011. For the nine months ended September 30, 2012, net cash used in investing activities was $24.0 million and net cash from financing activities was $2.0 million. For the nine months ended September 30, 2011, net cash from investing activities was $30.7 million and net cash used in financing activities was $83.9 million. Newbuilding Update The Company has reached an agreement with Zhejiang Ouhua Shipbuilding Co., Ltd to postpone the delivery dates of the Company’s vessels under construction and to change the apportionment of the advances already paid among the vessels under construction. Under the amended shipbuilding contracts and based on the latest updates from the shipyard, the remaining two Handysize drybulk carriers (Hull 612 and Hull 625) are expected to be delivered in the first and fourth quarters of 2013, respectively, and the two 4,800 TEU Containerships (Hull 656 and Hull 657) are expected to be delivered in the second quarter of 2014. Financing Update As of September 30, 2012, we were not in compliance with several financial and security coverage ratio covenants in our loan agreements. As a result, the Company may be required to prepay indebtedness, provide additional collateral in the form of cash or other property, or obtain waivers and amendments to the respective terms of the facilities. Given the current market conditions, the Company has proactively taken a long-term view and is currently in discussions with its respective lenders in order to address the issues in a mutually beneficial way that may also include amended amortization schedules and extensions on some of its facilities. If the Company is not able to reach a mutually acceptable resolution with its lenders, our total indebtedness may be reclassified as current and our lenders may accelerate our indebtedness and foreclose their liens on our vessels, which would impair our ability to continue to conduct our business. Recent Developments Effective as of the close of trading on November 5, 2012, the Company effected a one-for-ten reverse stock split of its issued and outstanding common shares. The common shares commenced trading on the New York Stock Exchange on a split-adjusted basis upon the open of trading on November 6, 2012. The reverse stock split was approved by shareholders at the Company’s 2012 Annual General Meeting of Shareholders held on October 24, 2012 and by the Company’s Board of Directors on October 24, 2012. The reverse stock split reduced the number of the Company’s issued and outstanding common shares from approximately 61.0 million to approximately 6.1 million and affected all issued and outstanding common shares, as well as common shares underlying stock options outstanding immediately prior to the effectiveness of the reverse stock split. The number of the Company’s authorized common shares was not affected by the reverse split. No fractional shares were issued in connection with the reverse stock split. Shareholders who would have otherwise held a fractional share of the Company’s Common Stock as a result of the reverse stock split will receive a cash payment in lieu of such fractional share. The information in this press release has been adjusted to reflect the reverse stock split. About Paragon Shipping Inc. Paragon Shipping is a Marshall Islands-based international shipping company with executive offices in Athens, Greece, specializing in the transportation of drybulk cargoes. The Company’s current fleet consists of twelve drybulk vessels with a total carrying capacity of 779,270 dwt. In addition, the Company’s current newbuilding program consists of two Handysize drybulk carriers that are scheduled to be delivered in 2013 and two 4,800 TEU Containerships that are scheduled to be delivered in 2014. Paragon Shipping has granted Box Ships Inc., an affiliated company, the option to acquire its two Containerships under construction. For more information, visit: www.paragonship.com. The information contained on the Company’s website does not constitute part of this press release. Full report at: www.paragonship.com Paragon Shipping Inc. press release |
Paragon Shipping Inc. Reports Third Quarter and
