Pangaea Logistics Solutions Ltd. Reports Financial Results for the Quarter Ended March 31, 2016 - Pangaea Logistics Solns (NASDAQ:PANL)

Delivers profitable first quarter backed by cash flow and margin growth

NEWPORT, R.I., May 10, 2016 /PRNewswire/ -- Pangaea Logistics Solutions Ltd. ("Pangaea" or the "Company") PANL, a global provider of comprehensive maritime logistics solutions, announced today its results for the three months ended March 31, 2016.

1st Quarter Highlights

Net income attributable to Pangaea Logistics Solutions Ltd. was $1.2 million, compared to net income of $7.6 million in the first quarter of 2015
Pro forma adjusted earnings per common share¹ of $0.03 for 2016 compared to pro forma adjusted earnings per common share of $0.22 in the first quarter of 2015
Adjusted EBITDA² decreased to $7.0 million for 2016, compared with $12.9 million for the first quarter of 2015
Cash flow from operations was $4.1 million for 2016, compared with $11.2 million for the first quarter of 2015
At the end of the first quarter, Pangaea had $32.7 million in cash and cash equivalents
Gross margin percentage³ of 23%, up from 18% for the comparable period
General and administrative expenses decreased 30% to $3.0 million from $4.3 million in the first quarter of 2015.

Edward Coll, Chairman and Chief Executive Officer of Pangaea Logistics Solutions, commented, "We have been working very hard this year to stay ahead of a tumbling shipping market, which reached historic lows during our first fiscal quarter of 2016. We have done so successfully, and generated a profit during the first quarter, by cutting costs wherever possible and becoming increasingly efficient in utilizing chartered in ships from the market without penalty of ballast or delivery days. At the same time, we are working diligently to extend our market reach with industry leaders who know they can rely on our capabilities without question of our ability and willingness to perform."

Results for the three months ended March 31, 2016 and 2015

For the three months ended March 31, 2016, the Company reported net income of $1.2 million, or $0.03 per common share compared to net income of $7.6 million, or $0.22 per common share for the same period of 2015.

Adjusted EBITDA was $7.0 million in the three months ended March 31, 2016 and $12.9 million for the three months ended March 31, 2015. The change was primarily attributable to 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. This flexible fleet strategy reduces the risk of idle time in an environment with limited profitable fronthaul employment.

Total revenue for the three months ended March 31, 2016 declined 54% to $43.9 million from $95.1 million in 2015. This decline in total revenue was primarily attributable to the 30% decline in total shipping days.

Total shipping days are the sum of voyage days, some of which are tied to COAs and charter days, which are subject to market rates. Voyage days decreased 33% from Q1 of 2015 to Q1 of 2016, while charter days remained flat over these two periods. This decline reflects the Company's effective strategy of reducing its exposure to declining rates by chartering in vessels only to meet the demands of specific voyage contracts in order to maximize profitability and reduce risk. Pangaea's ability to limit the impact of declining market rates on its operations by dynamically adjusting its fleet size is a function of its flexible, cargo-focused, business model that uses an optimized mix of owned and chartered-in tonnage. This is differentiated from many other dry bulk companies that have large owned fleets and may be forced to employ them at unprofitable rates under current market conditions. Instead, Pangaea can avoid low-margin or loss-making voyages and instead focus on performing voyages that fit its contract profile.

Markets

Mr. Coll noted, "The market has improved somewhat in the month since the fiscal quarter ended, though the longevity of this improvement cannot be assured. Time charter rates have improved, asset values have stopped dropping and market activity seems to be picking up but all are from historic lows. We are poised to take advantage of any market improvement, with our fleet renewal process coming to an end in January 2017 and our proven strategy intact. At the same time, we are conditioned to be conservative players in a market without direction and we will continue to conserve our resources and serve as responsible stewards of shareholder capital during the continued market weakness."

Cash Flows

Cash and cash equivalents were $32.7 million as of March 31, 2016, compared with $37.5 million on December 31, 2015.

For the three months ended March 31, 2016, the Company's net cash provided by operating activities was $4.1 million, compared to $11.2 million for the three months ended March 31, 2015.

Conference Call Details

The Company's management team will host a conference call to discuss the Company's financial results tomorrow, May 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# 5418729.

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# 5418729.

¹ Earnings per share represents total earnings allocated to common stock divided by the weighted average number of common shares outstanding. Pro forma adjusted earnings per share represents adjusted total earnings allocated to common stock divided by the weighted average number of shares. See Reconciliation of Adjusted EBITDA and Pro Forma Adjusted Earnings Per Share.
² Adjusted EBITDA is a non-GAAP measure and represents operating earnings before interest expense, income taxes, depreciation and amortization, and other non-operating income and/or expense, if any. See Reconciliation of Adjusted EBITDA and Pro Forma Adjusted Earnings Per Share.
³Gross margin percentage is a non-GAAP measure representing the ratio of total revenue less voyage, charter hire and vessel operating expenses, to total revenue.

Pangaea Logistics Solutions Ltd. Condensed Consolidated Statements of Income

	Three Months Ended March 31,
	2016		2015

Revenues:
Voyage revenue	$	41,974,319	$	90,578,942
Charter revenue	1,963,200		4,536,846
	43,937,519		95,115,788
Expenses:
Voyage expense	18,500,882		45,324,119
Charter hire expense	8,503,174		24,659,395
Vessel operating expense	6,889,082		7,785,328
General and administrative	3,036,371		4,318,692
Depreciation and amortization	3,515,456		2,990,594
Loss on sale of vessels	—		88,868
Total expenses	40,444,965		85,166,996

Income from operations	3,492,554		9,948,792

Other (expense) income:
Interest expense, net	(1,369,613)		(1,410,771)
Interest expense on related party debt	(80,490)		(114,966)
Unrealized (loss) gain on derivative instruments	(335,959)		823,455
Other (expense) income	(102,318)		83,149
Total other expense, net	(1,888,380)		(619,133)

Net income	1,604,174		9,329,659
Income attributable to noncontrolling interests	(407,070)		(1,729,730)
Net income attributable to Pangaea Logistics Solutions Ltd.	$	1,197,104	$	7,599,929

Earnings per common share:
Basic	$	0.03	$	0.22
Diluted	$	0.03	$	0.22

Weighted average shares used to compute earnings
per common share
Basic	35,130,211		34,756,980
Diluted	35,201,307		34,756,980

Pangaea Logistics Solutions Ltd. Condensed Consolidated Balance Sheets

	March 31, 2016		December 31, 2015
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	32,666,025	$	37,520,240
Restricted cash	1,503,341		2,003,341
Accounts receivable (net of allowance of $5,707,976 at
March 31, 2016 and $5,067,194 at December 31, 2015)	13,542,900		19,617,943
Bunker inventory	7,811,933		7,490,590
Advance hire, prepaid expenses and other current assets	3,459,051		2,679,292
Total current assets	58,983,250		69,311,406

Fixed assets, net	285,528,833		255,145,807
Investments in newbuildings in-process	8,765,000		42,505,783
Total assets	$	353,277,083	$	366,962,996

Liabilities and stockholders' equity
Current liabilities
Accounts payable, accrued expenses and other current liabilities	$	15,961,058	$	22,156,202
Related party debt	10,927,988		13,321,419
Deferred revenue	3,688,858		4,448,795
Current portion long-term debt	18,887,058		19,499,262
Dividend payable	12,624,825		12,724,825
Total current liabilities	62,089,787		72,150,503

Secured long-term debt, net	124,130,287		129,496,153

Commitments and contingencies

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; 36,500,387 shares issued and outstanding at March 31, 2016; 36,503,837 shares issued and outstanding and December 31, 2015	3,650		3,650
Additional paid-in capital	133,211,904		133,075,409
Accumulated deficit	(23,669,430)		(24,866,534)
Total Pangaea Logistics Solutions Ltd. equity	109,546,124		108,212,525
Non-controlling interests	57,510,885		57,103,815
Total stockholders' equity	167,057,009		165,316,340
Total liabilities and stockholders' equity	$	353,277,083	$	366,962,996

Pangaea Logistics Solutions Ltd. Condensed Consolidated Statements of Cash Flows

	Three Months Ended March 31,
	2016		2015
Operating activities
Net income	$	1,604,174	$	9,329,659
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization expense	3,515,456		2,990,594
Amortization of deferred financing costs	182,810		225,182
Unrealized loss (gain) on derivative instruments	335,959		(823,455)
Loss (gain) from equity method investee	30,380		(53,201)
Provision for doubtful accounts	703,354		319,981
Loss on sales of vessels	—		88,868
Write off unamortized financing costs of repaid debt	—		25,557
Share-based compensation	136,496		166,558
Change in operating assets and liabilities:
Decrease in restricted cash	500,000		—
Accounts receivable	5,371,689		7,477,051
Bunker inventory	(321,343)		1,808,888
Advance hire, prepaid expenses and other current assets	(779,759)		3,863,659
Drydocking costs	(42,478)		—
Accounts payable, accrued expenses and other current liabilities	(6,342,724)		(10,771,168)
Deferred revenue	(759,937)		(3,464,750)
Net cash provided by operating activities	4,134,077		11,183,423

Investing activities
Purchase of vessels	(253,492)		(44,824,665)
Proceeds from sales of vessels	—		4,523,804
Purchase of building and equipment	—		(5,399)
Net cash used in investing activities	(253,492)		(40,306,260)

Financing activities
Proceeds of related party debt	—		2,506,667
Payments of related party debt	(2,473,921)		—
Proceeds from long-term debt	—		45,000,000
Payments of financing and issuance costs	(34,425)		(664,722)
Payments of long-term debt	(6,126,454)		(4,837,799)
Common stock dividends paid	(100,000)		(100,000)
Net cash (used in) provided by financing activities	(8,734,800)		41,904,146

Net (decrease) increase in cash and cash equivalents	(4,854,215)		12,781,309
Cash and cash equivalents at beginning of period	37,520,240		29,817,507
Cash and cash equivalents at end of period	$	32,666,025	$	42,598,816

Disclosure of noncash items
Cash paid for interest	$	1,191,405	$	1,185,589

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

	three months ended March 31,
	2016		2015
*Adjusted EBITDA (in millions)*
Income from operations	3,492,554		9,948,792
Depreciation and amortization	3,515,456		2,990,594
Loss on impairment of vessels	—		—
Adjusted EBITDA	$	7,008,010.0	$	12,939,386.0

*Earnings Per Common Share*
Net income attributable to Pangaea Logistics Solutions Ltd.	$	1,197,104	$	7,599,929

Weighted average number of common shares outstanding - basic	35,130,211		34,756,980
Weighted average number of common shares outstanding - diluted	35,201,307		34,756,980

Earnings per common share - basic	$	0.03	$	0.22
Earnings per common share - diluted	$	0.03	$	0.22

*Pro Forma Adjusted EPS*
Total income allocated to common stock	$	1,197,104	$	7,599,929
Non-GAAP Adjustments:
Add: loss on impairment of vessels	—		—
Add: non-recurring charges	—		—
Non-GAAP pro forma adjusted total earnings allocated to common stock	$	1,197,104	$	7,599,929

Non-GAAP pro forma weighted average number of common shares	35,130,211		34,756,980
Non-GAAP pro forma adjusted EPS	$	0.03	$	0.22

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) non-GAAP adjusted EBITDA and (2) non-GAAP pro forma 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 by excluding non-cash losses on impairment of vessels and non-recurring charges that may not be indicative of our recurring core business operating results. 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.

Non-GAAP adjusted net income attributable to Pangaea Logistics Solutions Ltd., Adjusted EBITDA, and pro forma adjusted EPS. Adjusted net income attributable to Pangaea Logistics Solutions Ltd. represents net income attributable to Pangaea Logistics Solutions Ltd. calculated in accordance with GAAP, plus non-cash losses on impairment of vessels and non-recurring charges. Adjusted EBITDA represents operating earnings before interest expense, income taxes, depreciation, amortization and loss on impairment of vessels. Earnings per share represents total earnings allocated to common stock divided by the weighted average number of common shares outstanding.

There are limitations related to the use of non-GAAP adjusted net income attributable to Pangaea Logistics Solutions Ltd., adjusted EBITDA, and pro forma adjusted EPS versus net income, income from operations, and EPS calculated in accordance with GAAP. In particular, Pangaea's definition of adjusted net income attributable to Pangaea Logistics Solutions Ltd., adjusted EBITDA, and pro forma adjusted EPS used here is not comparable to net income, EBITDA, and EPS. Management provides specific information in order to reconcile the GAAP or non-GAAP measure to adjusted net income attributable to Pangaea Logistics Solutions Ltd., adjusted EBITDA, and pro forma adjusted EPS.

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. 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.

Investor Relations Contacts
Thomas Rozycki
Prosek Partners
212-279-3115 ext. 208
trozycki@prosek.com

Josh Clarkson
Prosek Partners
212-279-3115 ext. 259
jclarkson@prosek.com

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SOURCE Pangaea Logistics Solutions Ltd.

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