Box Ships Inc. Reports Financial Results For The Second Quarter And Six Months Ended June 30, 2014

ATHENS, Greece, Sept. 2, 2014 /PRNewswire/ -- Box Ships Inc. (NYSE: TEU) (the "Company"), a global shipping company specializing in the seaborne transportation of containers, announced today its results for the second quarter and six months ended June 30, 2014.

Mr. Michael Bodouroglou, Chairman, President and Chief Executive Officer of Box Ships Inc., commented:

"During the second quarter, there were some slight signs of improvement in the containership market. We managed to extend the charter of the MSC Emma with MSC for a further period of nine months at a daily rate of $9,450, which even though it is significantly below the previous rate of $28,500 per day, it is still a marked improvement compared to our previous extensions for similar vessels at around $7,000 per day earlier in the year. In addition, more recently, we extended the charters of the CMA CGM Marlin and CMA CGM Kingfish for a further period of one year, commencing on September 1, 2014, at a daily rate of $9,500 and the charter of Box Trader until May 2015 or latest August 2015 at a daily rate of $8,500."

"The reduced charters on the Box Queen, CMA CGM Marlin and CMA CGM Kingfish were the contributing factors to the 24% decline in our adjusted time charter revenues year over year, which directly impacted our bottom line. We have two vessels that will come off charter during 2014 and we are monitoring the market for the best suitable opportunities. During these challenging times, we were able to keep our expenses stable and we will work on further strengthening our balance sheet and improving our liquidity. To that extent, in the third quarter of 2014, we reached an agreement with one of our lenders for the full repayment of our loan at a significant gain, the savings of which contribute directly to our net asset value, while giving us a debt-free vessel. The benefits from having a debt-free vessel are numerous and give the Company added fire power to negotiate better terms under its existing loan agreements to preserve its liquidity and improve its free cash flow."

Results of Operations

Three months ended June 30, 2014 compared to three months ended June 30, 2013

During the second quarter of 2014, we operated an average of 9 vessels. Our Net Income and Adjusted Net Income during the second quarter of 2014 was $0.7 million and $2.3 million, respectively, resulting in basic and diluted earnings per share of $0.01 and basic and diluted adjusted earnings per share of $0.06. EBITDA and Adjusted EBITDA for the second quarter of 2014 was $6.2 million and $7.9 million, respectively.

During the second quarter of 2013, we operated an average of 9 vessels. Our Net Income and Adjusted Net Income during the second quarter of 2013 was $3.4 million and $5.5 million, respectively, resulting in basic earnings per share of $0.12 and basic adjusted earnings per share of $0.20. EBITDA and Adjusted EBITDA for the second quarter of 2013 was $9.3 million and $11.4 million, respectively.

Net revenues

Net revenues represent charter hire earned, net of commissions. During the second quarter of 2014 and 2013, our vessels operated a total of 819 and 804 days, respectively, out of a total of 819 calendar days in both periods. Currently, all vessels in our fleet are employed under fixed rate time charters, having an average weighted remaining charter duration of 10 months (weighted by aggregate contracted charter hire). The Company reported net revenues for the second quarter of 2014 of $12.5 million, a decrease of 28% compared to $17.3 million in the second quarter of 2013. This decrease is mainly due to the re-chartering of the Box Queen in January 2014 at a daily rate of $6,100, compared to the previous time charter of $28,000 per day during the second quarter of 2013 and the re-chartering of each of the CMA CGM Kingfish and CMA CGM Marlin in March 2014 at a daily rate of $7,000, compared to $23,000 per day that each of these vessels was earning during the second quarter of 2013. Our net revenues are also net of the amortization of above/below market time charters, which decreased our revenues and net income for the second quarter of 2014 and 2013 by $1.5 million and $1.3 million, respectively, or $0.05 and $0.05 per common share, respectively. Our average time charter equivalent rate, or TCE rate, for the second quarter of 2014 was $15,010 per vessel per day, which was 28% below our average TCE rate of $20,872 per vessel per day during the second quarter of 2013, mainly due to the reasons outlined above. Our adjusted TCE rate was $16,843 per vessel per day in the second quarter of 2014, 25% lower than our adjusted TCE of $22,506 for the second quarter of 2013. TCE rate is not a recognized measurement under GAAP. Please see the table at the back of this release for a reconciliation of TCE rates to time charter revenues, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.

Voyage expenses

Voyage expenses for the second quarter of 2014 and 2013 amounted to $0.2 million and $0.6 million, respectively, and mainly relate to war risk insurance costs and bunkers consumed by our vessels travelling to and from the drydocks. Voyage expenses for the second quarter of 2014 related mainly to war risk insurance costs, whereas voyage expenses for the second quarter of 2013 included approximately $0.3 million, relating to war risk insurance costs and $0.2 million, relating to other crew costs reimbursable by the charterers.

Vessels operating expenses 

Vessels operating expenses including the amortization of other intangible assets for the second quarter of 2014 were flat year over year at $4.5 million, or $4.2 million on an adjusted basis to exclude the amortization of other intangible assets. On average, our vessels' operating expenses for the second quarter of 2014 were relatively unchanged year over year at $5,444 per vessel per day, or $5,123 per vessel per day on an adjusted basis, compared to $5,455 per vessel per day, in the second quarter of 2013, or $5,134 per vessel per day on an adjusted basis. The amortization of other intangible assets for each of the second quarters of 2014 and 2013 amounted to $0.3 million.

Management fees charged by a related party

Management fees charged by Allseas Marine S.A. (our "Manager" or "Allseas") for each of the second quarters of 2014 and 2013 were $0.7 million, or $886 (€646.99) per vessel per day, and $830 (€643.77) per vessel per day, respectively. Management fees charged by a related party represent fees for management and technical services in accordance with our management agreements and are adjusted annually in accordance with the official Eurozone inflation rate. This fee is charged on a daily basis per vessel and is affected by the number of vessels in our fleet, the number of calendar days during the period, the official Eurozone inflation rate and the U.S. Dollar/Euro exchange rate at the beginning of each month.

Depreciation

Depreciation for our fleet for each of the second quarters of 2014 and 2013 was $3.8 million.

General and administrative expenses

General and administrative ("G&A") expenses for the each of the second quarters of 2014 and 2013 were $1.5 million, or $1,870 and $1,782 per vessel per day, respectively.

Interest and finance costs

Interest and finance costs amounted to $1.8 million and $2.1 million for the second quarter of 2014 and 2013, respectively. This decrease in interest and finance costs is due to the decrease in our average borrowings outstanding period over period.

Net cash from Operating Activities

Net cash from Operating Activities for the six months ended June 30, 2014 was $9.3 million. Our vessels generated positive cash flows from revenues, net of commissions, of $29.8 million, while we paid $20.5 million for expenses, of which $3.1 million relates to the payment of interest on our bank loans.

Net cash from Operating Activities for the six months ended June 30, 2013 was $20.0 million. Our vessels generated positive cash flows from revenues, net of commissions, of $37.8 million, while we paid $17.8 million for expenses, of which $3.5 million relates to the payment of interest on our bank loans and on our related party loan with Paragon Shipping Inc. ("Paragon Shipping").

Net cash used in Financing Activities

Net cash used in Financing Activities for the six months ended June 30, 2014, was $1.9 million. On April 15, 2014, we completed the public offering and concurrent private placement of 5,500,000 Units, each consisting of one common share and one warrant to purchase 0.40 common shares (the "Units") at a public offering price of $2.05 per unit, resulting in net proceeds of $10.6 million in the aggregate, net of underwriting discounts, commissions and other offering costs of $0.7 million in the aggregate. During the six months ended June 30, 2014, we repaid $11.4 million of our debt, paid financing costs of $0.1 million and made cash payments to our preferred shareholders of $1.0 million.

Net cash used in Financing Activities for the six months ended June 30, 2013, was $3.0 million. On March 18, 2013, we completed the public offering and issuance of 4,000,000 of our common shares, resulting in net proceeds of $19.9 million, net of underwriting discounts, commissions and other offering costs of $1.1 million in the aggregate. During the six months ended June 30, 2013, we repaid $13.4 million of our debt, paid financing costs of $0.1 million, made cash payments to our preferred shareholders of $0.9 million and paid dividends to common shareholders of $8.5 million.

Recent Developments:

Commerzbank Loan Repayment:

On July 22, 2014, we announced the full repayment of the outstanding amount under our loan agreement with Commerzbank AG ("Commerzbank"), dated July 29, 2011. The outstanding amount of the loan amounted to $21.5 million and we agreed with Commerzbank to the payment of $15.0 million plus accrued interest of $0.1 million, in full and final settlement of the loan. The gain from this transaction of approximately $6.4 million will be reflected in the third quarter of 2014.  

Liquidity:

As of June 30, 2014, our cash and restricted cash (current and non-current) amounted to $31.9 million in aggregate, of which $10.0 million is considered restricted for minimum liquidity purposes under our loan agreements. As of June 30, 2014, we had total outstanding indebtedness of $168.2 million, of which $21.5 million was settled in July 2014, as discussed above. $19.5 million is scheduled to be repaid in the forthcoming 12-month period, of which $4.9 million has already been repaid as of the date of this release. Furthermore, as of June 30, 2014, we were in compliance with the covenants contained in our loan agreements, with the exception of the Leverage Ratio and Market Value Adjusted Net Worth covenant contained in two of our loan agreements as a result of the expiration of waivers under certain of our loan agreements on January 1, 2014 and April 1, 2014. In accordance with U.S. GAAP, unless we receive waivers for a period of more than one year after the balance sheet date or the loans are refinanced prior to the issuance of the consolidated financial statements, our total debt will be required to be presented as current. Even though to date the lenders have not declared an event of default under the loan agreements for which we were not in compliance as of June 30, 2014, those breaches constitute an event of default and as a result of the cross default provisions included in our loan agreements, may result in the lenders accelerating or demanding immediate repayment of their loans. Following the Commerzbank loan repayment, discussed above, we are in negotiations with two of our remaining lenders to possibly obtain waivers, amend our loan covenants and/or seek alternative solutions to resolve any future covenant issues and preserve the Company's liquidity. We believe that the lenders will not demand payment of the loans before their scheduled maturity, provided that we remain current with our obligations of paying principal and interest when they become due. In addition, we have no borrowing capacity under our existing loan facilities and no capital commitments. We anticipate that our current financial resources, together with cash generated from operations will be sufficient to fund the operations of our current fleet, including our working capital requirements, for the next 12 months, assuming that the debt will not be accelerated by our lenders.

Preferred Stock Payments:

On July 1, 2014, we made a cash payment of $0.5 million with respect to our Series C Preferred Shares, for the period from April 1, 2014 through June 30, 2014. As of June 30, 2014, 916,333 Series C Preferred Shares were outstanding.

Cash payments on our Series C Preferred Shares accrue cumulatively at a rate of 9.00% per annum per $25.00 stated liquidation preference per Series C Preferred Share and are payable, when, as and if declared by the Board of Directors, on January 1, April 1, July 1 and October 1 of each year. Our ability to make cash payments will be subject, among other things, to the restrictions in our loan agreements, the provisions of Marshall Islands law and other factors to be considered by our Board of Directors.

Chartering Update and Strategy:

In June 2014, the MSC Emma extended its time charter with Mediterranean Shipping Company ("MSC") for a period of nine months, commencing on July 3, 2014, at a daily gross charter rate of $9,450.

In July 2014, the CMA CGM Kingfish and CMA CGM Marlin extended their time charters with CMA CGM for a period of twelve months, commencing on September 1, 2014, at a daily gross charter rate of $9,500.

In September 2014, the Box Trader extended its time charter with Hapag Lloyd for a further period until earliest May 15, 2015 or latest August 1, 2015, commencing on October 1, 2014, at a daily gross charter rate of $8,500.

Pursuant to our chartering strategy, we focus on containerships with carrying capacities ranging from 1,700 TEU to 7,000 TEU employed on short- to medium-term time charters of one to five years with staggered maturities, which provide us with the benefit of stable cash flows from a diversified portfolio of charterers, while preserving the flexibility to capitalize on potentially rising rates when the current time charters expire. We may also, under certain circumstances, opportunistically employ our vessels on shorter-term charters or our vessels may operate on the spot market. Based on the earliest redelivery dates, and following the extension of charters discussed above, the Company has secured under such contracts 83% and 39% of its fleet capacity for the remainder of 2014 and 2015, respectively. For future updates on the employment of our vessels, please visit the employment section of our website at www.box-ships.com/fleet-employment.php. The information contained on the Company's website does not constitute part of this press release.   

Fleet List:

The following table provides additional information about our fleet as of September 2, 2014:

Conference Call and Webcast details:

The Company's management will host a conference call to discuss its second quarter and six months ended June 30, 2014 results on September 3, 2014 at 8:00 am ET.

Participants should dial into the call 10 minutes before the scheduled time using the following numbers: +1-877-300-8521 (USA) or +1-412-317-6026 (international).

A replay of the conference call will be available for seven days and can be accessed by dialing +1-877-870-5176 (domestic) and +1-858-384-5517 (international) and using passcode 10051163.

There will also be a simultaneous live webcast over the Internet, through the Company's website (www.box-ships.com). Participants in the live webcast should register on the website approximately 15 minutes prior to the start of the webcast.

About Box Ships Inc.:

Box Ships Inc. is an Athens, Greece-based international shipping company specializing in the transportation of containers. The Company's current fleet consists of nine containerships with a total carrying capacity of 43,925 TEU and a TEU weighted average age of 9.6 years. The Company's common shares and Series C Preferred Shares trade on the New York Stock Exchange under the symbols "TEU" and "TEUPRC", respectively.

Cautionary Statement Regarding Forward-Looking Statements

Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.

The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words "believe," "anticipate," "intends," "estimate," "forecast," "project," "plan," "potential," "may," "should," "expect," "pending" and similar expressions identify forward-looking statements.

The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, our management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe 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 our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.

In addition to these important factors, other important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand for container 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. Please see our filings with the Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties.

Contacts:

Box Ships Inc.
Robert Perri, CFA
Chief Financial Officer
Tel. +30 (210) 8914600
E-mail: [email protected]

Investor Relations / Media
Allen & Caron Inc.
Michael Mason (Investors)
Tel. +1 (212) 691-8087
E-mail: [email protected]

Len Hall (Media)
Tel. +1 (949) 474-4300
E-mail: [email protected]

- Tables Follow –

SOURCE Box Ships Inc.

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