Diamond S Shipping Inc. (NYSE: DSSI) (“Diamond S”, or the
“Company”), one of the largest publicly listed owners and operators
of crude oil and product tankers, today announced results for the
second quarter of 2020.
Highlights for the Second Quarter and Recent Events
-- Net income attributable to Diamond S of $45.7 million, or
$1.15 per basic share, and Adjusted EBITDA (see Non-GAAP Measures
section below) of $84.1 million.
-- Repaid $73.6 million of debt in the quarter, $40.0 million on
revolving credit facilities in addition to $33.6 million of
scheduled repayments. Net debt at June 30, 2020 was $640.0 million,
implying a net debt to asset value leverage ratio of 41% based on
broker valuations as of June 2020. At quarter end, total free
liquidity available to the Company was $128.4 million.
-- Entered into a strategic partnership with NORDEN A/S, DiaNor,
to facilitate the commercial consolidation of two of the world’s
largest owner/operators of product tankers. As of June 30, 2020,
five of the expected 28 vessels were delivered into the Norient
Product Pool. The remaining 23 vessels are expected to deliver in
the first half of Q3 2020.
-- Entered into floating-to-fixed LIBOR interest rate swaps on
approximately 25% of the Company’s total outstanding debt. The
average fixed LIBOR rate of 0.54% matures in December 2024.
-- As of August 12, 2020, fixed approximately 59% of Crude Fleet
revenue days operating in the spot market at an average rate of
approximately $25,700 per day and approximately 55% of Product
Fleet revenue days operating in the spot market at an average rate
of approximately $11,000 per day in the third quarter of 2020.
Craig H. Stevenson Jr., President and CEO of Diamond S,
commented: “We are pleased with our performance in the second
quarter, which is reflected in our strong financial results. Our
primary focus is on positioning Diamond S to deliver outstanding
cash flows in normalized market conditions. For this reason, we
continue to lower our leverage, thereby improving our already
competitive breakeven levels. We allocated excess capital in the
quarter to paying down our debt by reducing exposure on our
revolving credit facilities. These amounts may be redrawn in the
future to provide liquidity or capital for opportunistic strategic
moves. We remain positive in our long-term market outlook and we
strongly believe the current market price of our shares does not
reflect the underlying value of our vessels.”
Second Quarter 2020 Results
Net income attributable to Diamond S for the second quarter of
2020 was $45.7 million, or $1.15 basic and $1.14 diluted earnings
per share, compared to a net loss of $8.5 million, or $0.21 basic
and diluted loss per share, for the second quarter of 2019. The
increase is primarily related to improved tanker market conditions
in both the crude and product tanker segments.
The Company groups its business primarily by commodity
transported and segments its fleet into a 16-vessel crude oil
transportation fleet (the “Crude Fleet”) and a 50-vessel refined
petroleum product transportation fleet (the “Product Fleet”). The
Crude Fleet consists of 15 Suezmax vessels and one Aframax vessel.
The Product Fleet consists of 44 medium range (“MR2”) vessels and 6
Handysize (“MR1”) vessels.
Net revenues for the Company, which represents voyage revenues
less voyage expenses, were $134.2 million for the second quarter of
2020 compared to $83.4 million for the second quarter of 2019. Net
revenues from the Crude Fleet were $55.2 million in the second
quarter of 2020 compared to $24.4 million for the second quarter of
2019. Net revenues from the Product Fleet were $79.0 million in the
second quarter of 2020 compared to $59.0 million for the second
quarter of 2019. The increase in net revenues in both the Crude
Fleet and Product Fleet was principally driven by stronger market
conditions. Despite the demand destruction caused by the global
pandemic, tanker markets were firm because of the sharp contango
structure of the crude oil price curve, where the future price of
oil was expected to be substantially greater than current prices.
This led to a strong demand for the floating storage of oil and
petroleum products on tankers, which effectively decreased the
supply of ships for transport cargos and increased freight
rates.
Vessel expenses were $41.7 million for the second quarter of
2020 compared to $42.4 million for the second quarter of 2019.
Vessel expenses, which include crew costs, insurance, repairs and
maintenance, lubricants and spare parts, technical management fees
and other miscellaneous expenses, decreased by $0.7 million
primarily due to the sale of the two MR2 vessels in the third
quarter of 2019.
Depreciation and amortization expense was $28.8 million in the
second quarter of 2020 compared to $29.2 million for the second
quarter of 2019. The decrease in depreciation and amortization
expense was primarily due to the sale of two MR2 vessels in the
third quarter of 2019.
General and administrative expenses were $7.5 million in the
second quarter of 2020 compared to $7.3 million for the second
quarter of 2019.
Interest expense was $9.7 million in the second quarter of 2020
compared to $13.4 million for the second quarter of 2019. Interest
expense decreased in the second quarter of 2020 due to a lower
average debt balance as a result of mandatory debt repayments and a
decrease in the effective interest rate.
Other income, which consists primarily of interest income, was
less than $0.1 million in the second quarter of 2020, compared to
$0.3 million for the second quarter of 2019.
Liquidity
As of June 30, 2020, the Company had $124.1 million in cash and
restricted cash. Restricted cash and minimum cash required by debt
covenants was $55.7 million. In the second quarter of 2020, the
Company repaid $40.0 million drawn from its revolving credit
facilities, increasing available liquidity to $128.4 million net of
minimum cash requirements as of June 30, 2020.
Outlook
Tanker market conditions are expected to weaken in the third
quarter as the inventory storage cycle reverses during a seasonally
weak period for demand. Demand has not yet fully recovered from the
impact of COVID-19, although it has improved from low levels at the
start of the second quarter of 2020. In the near term, however,
effective fleet supply is expected to increase as the number of
vessels used for storage decreases, while tanker demand is expected
to be low due to drawdowns of inventory coupled with seasonal
market weakness.
As of August 12, 2020, approximately 59% of the Crude Fleet
revenue days operating in the spot market in the third quarter of
2020 have been fixed at an average rate of $25,700 per day.
Approximately 55% of the Product Fleet revenue days operating in
the spot market have been fixed at an average rate of $11,000 per
day in the third quarter of 2020.
Conference Call
The Company will hold a conference call on August 13, 2020 at
8:00 a.m. Eastern Time to discuss its results for the second
quarter of 2020.
To access the call, participants should dial +1 866 211-4137 for
domestic callers and +1 647 689-6723 for international callers.
Participants are encouraged to dial in ten minutes prior to the
call. Please enter passcode 3179296.
A live webcast of the conference call will be available from the
Company’s website at www.diamondsshipping.com.
An audio replay of the conference call will be available
starting at 11 a.m. ET on Thursday August 13, 2020 through
Thursday, August 20, 2020 by dialing in +1 800 585-8367 or +1 416
621-4642 and entering the passcode 3179296.
About Diamond S Shipping Inc.
Diamond S Shipping Inc. (NYSE:
DSSI) owns and operates 66 vessels on the water, including 15
Suezmax vessels, one Aframax and 50 medium-range (MR) product
tankers. Diamond S is one of the largest energy shipping companies
providing seaborne transportation of crude oil, refined petroleum
and other petroleum products. The Company is headquartered in
Greenwich, CT. More information about Diamond S can be found at
www.diamondsshipping.com.
Disclosure Regarding Forward-Looking Statements
Matters discussed in this press release may constitute
forward‐looking statements including statements concerning plans,
objectives, goals, strategies, future events or performance, and
underlying assumptions. Although management believes that these
assumptions were reasonable when made, because these assumptions
are inherently subject to significant uncertainties and
contingencies which are difficult or impossible to predict and are
beyond the Company’s control, there can be no assurance that the
Company will achieve or accomplish these expectations, beliefs or
projections. Some of the factors that could cause our actual
results or conditions to differ materially include unforeseen
liabilities; future capital expenditures, revenues, expenses,
earnings, synergies, economic performance, indebtedness, financial
condition, losses, future prospects, business and management
strategies for the management, expansion and growth of the
Company’s operations; risks relating to the integration of assets
or operations of entities that it has or may in the future acquire
and the possibility that the anticipated synergies and other
benefits of such acquisitions may not be realized within expected
timeframes or at all; the failure of counterparties to fully
perform their contracts with the Company; the strength of world
economies and currencies; the duration and impact of the COVID-19
(coronavirus) outbreak; general market conditions, including
fluctuations in charter rates and vessel values; changes in demand
for tanker vessel capacity; changes in the Company’s operating
expenses, including bunker prices; drydocking and insurance costs;
the market for the Company’s 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. Please see the Company's filings with
the SEC for a more complete discussion of certain of these and
other risks and uncertainties. The Company undertakes no
obligation, and specifically declines any obligation, except as
required by law, to publicly update or revise any forward‐looking
statements, whether as a result of new information, future events
or otherwise.
DIAMOND S SHIPPING INC. AND
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
as of June 30, 2020 and
December 31, 2019
(In Thousands, except for
share and per share data)
(Unaudited)
June 30,
2020
December 31,
2019
Assets
Current assets:
Cash and cash equivalents
$
118,392
$
83,609
Due from charterers – Net of provision for
doubtful accounts of $1,717 and $1,415, respectively
80,663
80,691
Inventories
21,730
32,071
Prepaid expenses and other current
assets
13,815
13,179
Total current assets
234,600
209,550
Noncurrent assets:
Vessels – Net of accumulated depreciation
of $605,350 and $553,483, respectively
1,821,428
1,865,738
Other property – Net of accumulated
depreciation of $737 and $584, respectively
508
642
Deferred drydocking costs – Net of
accumulated amortization of $21,505 and $17,975, respectively
35,720
37,256
Restricted cash
5,679
5,610
Advances to Norient pool
1,390
—
Time charter contracts acquired – Net of
accumulated amortization of $3,914 and $2,296, respectively
3,486
5,004
Other noncurrent assets
3,543
4,582
Total noncurrent assets
1,871,754
1,918,832
Total
$
2,106,354
$
2,128,382
Liabilities and Equity
Current liabilities:
Current portion of long-term debt
$
134,389
$
134,389
Accounts payable and accrued expenses
37,569
44,062
Deferred charter hire revenue
6,482
1,934
Derivative liability
456
—
Total current liabilities
178,896
180,385
Long-term debt – Net of deferred financing
costs of $14,258 and $15,866, respectively
633,468
744,055
Derivative liability
440
—
Total liabilities
812,804
924,440
Equity:
Common stock, par value $0.001;
100,000,000 shares authorized; issued and outstanding 39,912,877
and 39,890,699 shares at June 30, 2020 and December 31, 2019,
respectively
40
40
Treasury stock – at cost; 137,289 shares
at June 30, 2020
(1,418
)
—
Additional paid-in capital
1,239,408
1,237,658
Accumulated other comprehensive loss
(896
)
—
Retained earnings (accumulated
deficit)
22,189
(68,567
)
Total Diamond S Shipping Inc.
equity
1,259,323
1,169,131
Noncontrolling interests
34,227
34,811
Total equity
1,293,550
1,203,942
Total
$
2,106,354
$
2,128,382
DIAMOND S SHIPPING INC. AND
SUBSIDIARIES
Condensed Consolidated
Statements of Operations
for the Three and Six Months
Ended June 30, 2020 and 2019
(In Thousands, except for
share and per share data)
(Unaudited)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2020
2019
2020
2019
Revenue:
Spot revenue
$
162,419
$
129,344
$
350,071
$
227,793
Time charter revenue
20,815
19,951
42,888
24,158
Pool revenue
319
—
319
—
Total revenue
183,553
149,295
393,278
251,951
Operating expenses:
Voyage expenses
49,349
65,895
124,030
107,473
Vessel expenses
41,738
42,376
83,274
67,177
Depreciation and amortization expense
28,771
29,243
57,531
51,199
General and administrative expenses
7,485
7,320
15,609
13,608
Total operating expenses
127,343
144,834
280,444
239,457
Operating income
56,210
4,461
112,834
12,494
Other (expense) income:
Interest expense
(9,711
)
(13,422
)
(21,087
)
(22,792
)
Other income
3
384
336
901
Total other expense – Net
(9,708
)
(13,038
)
(20,751
)
(21,891
)
Net income (loss)
46,502
(8,577
)
92,083
(9,397
)
Less: Net income (loss) attributable to
noncontrolling interest
790
(74
)
1,327
132
Net income (loss) attributable to
Diamond S Shipping Inc.
$
45,712
$
(8,503
)
$
90,756
$
(9,529
)
Net earnings (loss) per share – basic
$
1.15
$
(0.21
)
$
2.28
$
(0.28
)
Net earnings (loss) per share –
diluted
$
1.14
$
(0.21
)
$
2.26
$
(0.28
)
Weighted average common shares outstanding
– basic
39,920,559
39,890,698
39,861,943
33,774,260
Weighted average common shares outstanding
– diluted
40,111,348
39,890,698
40,091,647
33,774,260
(1)
The Company is a 51% owner in NT Suez
Holdco LLC (“NT Suez”), a joint venture that owns two Suezmax
vessels. The Company also performs commercial, technical and
administrative services for this joint venture.
DIAMOND S SHIPPING INC. AND
SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flows
for the Six Months Ended June
30, 2020 and 2019
(In Thousands)
(Unaudited)
For the Six Months Ended June
30,
2020
2019
Cash flows from Operating
Activities:
Net income (loss)
$
92,083
$
(9,397
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization expense
57,531
51,199
Amortization of deferred financing
costs
1,771
1,892
Amortization of time charter hire
contracts acquired
1,518
872
Amortization of the realized gain from
recouponing swaps
—
(1,377
)
Stock-based compensation expense
2,443
861
Changes in assets and liabilities
6,802
(24,313
)
Cash paid for drydocking
(3,014
)
(7,691
)
Net cash provided by operating
activities
159,134
12,046
Cash flows from Investing
Activities:
Acquisition costs, net of cash acquired of
$16,568
—
(292,683
)
Transaction costs
—
(18,804
)
Payments for vessel additions and other
property
(7,481
)
(7,388
)
Net cash used in investing
activities
(7,481
)
(318,875
)
Cash flows from Financing
Activities:
Borrowings on long-term debt
—
300,000
Principal payments on long-term debt
(67,195
)
(35,496
)
Borrowings on revolving credit
facilities
—
56,000
Repayments on revolving credit
facilities
(45,000
)
(26,323
)
NT Suez Holdco LLC distribution
(1,911
)
—
Shares repurchased
(1,418
)
—
Cash paid to net settle employee
withholding taxes on equity awards
(693
)
—
Proceeds from partners’ contributions in
subsidiaries
—
980
Payments for deferred financing costs
(584
)
(6,959
)
Net cash (used in) provided by
financing activities
(116,801
)
288,202
Net increase (decrease) in cash, cash
equivalents and restricted cash
34,852
(18,627
)
Cash, cash equivalents and restricted
cash – Beginning of period
89,219
88,158
Cash, cash equivalents and restricted
cash – End of period
$
124,071
$
69,531
Supplemental disclosures:
Cash paid for interest
$
20,538
$
22,075
Unpaid transaction costs in Accounts
payable and
accrued expenses at the end of the
period
$
—
$
280
Unpaid vessel additions in Accounts
payable and
accrued expenses at the end of the
period
$
—
$
2,485
DIAMOND S SHIPPING INC. AND
SUBSIDIARIES
Other Operating Data
(Unaudited)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2020
2019
2020
2019
Crude Fleet
Product Fleet
Crude Fleet
Product Fleet
Crude Fleet
Product Fleet
Crude Fleet
Product Fleet
Time Charter TCE per day(1)
$
26,372
$
14,558
$
26,105
$
13,953
$
26,380
$
14,352
$
26,117
$
14,335
Spot TCE per day (1),(2)
44,214
18,956
15,528
12,815
45,510
17,686
17,862
13,463
Total TCE per day(1),(2)
$
40,626
$
18,073
$
16,200
$
13,118
$
41,769
$
16,999
$
18,174
$
13,639
Vessel operating expenses per day(3)
$
7,030
$
6,407
$
7,195
$
6,677
$
7,367
$
6,535
$
6,745
$
6,590
Revenue days(4)
1,357
4,422
1,433
4,617
2,786
8,937
2,516
7,399
Operating days(4)
1,456
4,550
1,456
4,732
2,912
9,100
2,552
7,606
(1)
Time charter equivalent (“TCE”) revenue
represents voyage revenues, which commence at the time a vessel
departs its last discharge port and end at the time the discharge
of cargo at the next discharge port is complete, less voyage
expenses incurred over such time. TCE rates are a non-GAAP measure,
generally used in the shipping industry, used to compare revenue
generated from voyage charters to revenue generated from time
charters. TCE rates assist the Company’s management in making
decisions regarding the deployment and use of its vessels and in
evaluating the financial performance of vessels under commercial
management. See Non-GAAP Measures below.
(2)
Revenues are derived on a
discharge-to-discharge basis less voyage expenses which primarily
consist of fuel costs and port charges incurred over the same
period. Voyage revenues, as presented in the income statement, are
reported under a load-to-discharge basis under U.S. GAAP. A
reconciliation is provided in the Non-GAAP Measures section of the
press release.
(3)
The vessel operating expenses primarily
consist of crew wages and associated costs, insurance premiums,
lubricants and spare parts, technical management fees and repair
and maintenance costs and excludes nonrecurring items.
(4)
Operating days include the calendar days
in the period of owned vessels. Revenue days represent operating
days less technical off-hire and drydocking.
Non-GAAP Measures
To supplement the Company’s financial information presented in
accordance with accounting principles generally accepted in the
U.S. (“GAAP”), management uses certain “non-GAAP financial
measures” as such term is defined in Regulation G promulgated by
the Securities and Exchange Commission (the “SEC”). Generally, a
non-GAAP financial measure is a numerical measure of a company’s
operating performance, financial position or cash flows that
excludes or includes amounts that are included in, or excluded
from, the most directly comparable measure calculated and presented
in accordance with GAAP. Management believes the presentation of
these measures provides investors with greater transparency and
supplemental data relating to the Company’s financial condition and
results of operations, and therefore a more complete understanding
of factors affecting its business than GAAP measures alone.
TCE revenue, TCE per day, earnings before interest, taxes,
depreciation and amortization (“EBITDA”), and EBITDA adjusted for
the impact of certain items that we do not consider indicative of
our ongoing operating performance (“Adjusted EBITDA”) are non-GAAP
financial measures that are presented in this press release and
that the Company believes provide investors with a means of
evaluating and understanding how the Company’s management evaluates
the Company’s operating performance. These non-GAAP financial
measures should not be considered in isolation from, as substitutes
for, nor superior to financial measures prepared in accordance with
GAAP. Please see below for reconciliations of TCE revenue, TCE per
day, EBITDA and Adjusted EBITDA.
Reconciliation of Voyage Revenue to TCE per Day
(in thousands of U.S. dollars, except
fleet data)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2020
2019
2020
2019
Crude Fleet
Product Fleet
Crude Fleet
Product Fleet
Crude Fleet
Product Fleet
Crude Fleet
Product Fleet
Voyage revenue
$
69,873
$
113,680
$
51,474
$
97,821
$
160,502
$
232,776
$
86,883
$
165,068
Voyage expense
(14,660
)
(34,689
)
(27,094
)
(38,801
)
(43,009
)
(81,021
)
(41,464
)
(66,009
)
Amortization of time charter contracts
acquired
581
197
581
215
1,162
356
600
272
Off-hire bunkers in voyage expenses
147
227
211
230
281
301
211
603
Commercial management pool fees
-
9
-
-
-
9
-
-
Load-to-discharge/Discharge-to-discharge
(793
)
481
(1,955
)
1,096
(2,562
)
(495
)
(501
)
943
Revenue from sold vessels
-
4
-
-
-
(11
)
-
30
TCE Revenue
$
55,148
$
79,909
$
23,217
$
60,561
$
116,374
$
151,915
$
45,729
$
100,907
Operating days
1,456
4,550
1,456
4,732
2,912
9,100
2,552
7,606
Off-hire/Dry Docking days
99
128
23
115
126
163
36
207
Revenue days
1,357
4,422
1,433
4,617
2,786
8,937
2,516
7,399
TCE per day
$
40,626
$
18,073
$
16,200
$
13,118
$
41,769
$
16,999
$
18,174
$
13,639
Reconciliation of Net Income/(Loss) to EBITDA and Adjusted
EBITDA
EBITDA represents net income (loss) before interest expense,
income taxes and depreciation and amortization expense. Adjusted
EBITDA consists of EBITDA adjusted for the impact of certain items
that we do not consider indicative of our ongoing operating
performance. EBITDA and Adjusted EBITDA are presented to provide
investors with meaningful additional information that management
uses to monitor ongoing operating results and evaluate trends over
comparative periods. EBITDA and Adjusted EBITDA do not represent,
and should not be considered a substitute for, net income (loss) or
cash flows from operations determined in accordance with GAAP.
EBITDA and Adjusted EBITDA have limitations as analytical tools,
and should not be considered in isolation, or as a substitute for
analysis of our results reported under GAAP. Some limitations
are:
- EBITDA and Adjusted EBITDA do not reflect our cash
expenditures, or future requirements for capital expenditures or
contractual commitments;
- EBITDA and Adjusted EBITDA do not reflect changes in, or cash
requirements for, our working capital needs; and
- EBITDA and Adjusted EBITDA do not reflect the significant
interest expense, or the cash requirements necessary to service
interest or principal payments, on our debt.
While EBITDA and Adjusted EBITDA are frequently used by
companies as a measure of operating results and performance,
neither of those items as prepared by the Company is necessarily
comparable to other similarly titled captions of other companies
due to differences in methods of calculation. The following table
reconciles net income/(loss), as reflected in the consolidated
statements of operations, to EBITDA and Adjusted EBITDA:
(in thousands of U.S. dollars)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2020
2019
2020
2019
Net income (loss)
$
46,502
$
(8,577
)
$
92,083
$
(9,397
)
Total other expense, net
9,708
13,038
20,751
21,891
Operating income
56,210
4,461
112,834
12,494
Depreciation and amortization
28,771
29,243
57,531
51,199
Noncontrolling interest
(1,695
)
(869
)
(3,137
)
(2,026
)
EBITDA
83,286
32,835
167,228
61,667
Fair value of TC amortization
778
796
1,518
872
Nonrecurring corporate expenses
-
-
-
1,392
Adjusted EBITDA
$
84,064
$
33,631
$
168,746
$
63,931
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200813005185/en/
Investor Relations Inquiries: Robert Brinberg Tel:
+1-212-517-0810 E-mail: IR@diamondsshipping.com
Diamond S Shipping (NYSE:DSSI)
Historical Stock Chart
From Jun 2024 to Jul 2024
Diamond S Shipping (NYSE:DSSI)
Historical Stock Chart
From Jul 2023 to Jul 2024