Eneti Inc. Announces Financial Results for the Third Quarter of 2021 and Declares a Quarterly Cash Dividend

·22 min read

MONACO, Dec. 08, 2021 (GLOBE NEWSWIRE) -- Eneti Inc. (NYSE: NETI) (“Eneti” or the “Company”), today reported its results for the three months ended September 30, 2021.

The Company also announced that on December 8, 2021 its Board of Directors declared a quarterly cash dividend of $0.01 per share on the Company’s common shares.

The Company’s results for the three and nine months ended September 30, 2021 include the impact of Seajacks International Limited’s (“Seajacks”) earnings during the period from August 12, 2021 (the date the acquisition was complete) through September 30, 2021. Since the completion of the acquisition, the operations of the Company are primarily those of Seajacks as the Company completed its exit from the dry bulk industry in July 2021.

The preliminary allocation of the purchase price used in the financial information is based upon a preliminary valuation. The estimated fair values of certain assets and liabilities have been determined with the assistance of a third-party valuation firm. Our estimates and assumptions are preliminary and accordingly are subject to change upon finalization of the valuation.

Results for the Three and Nine Months Ended September 30, 2021 and 2020

  • For the third quarter of 2021, the Company’s GAAP net loss was $0.9 million, or $0.06 per diluted share, including:

    • a gain on bargain purchase of Seajacks of $54.8 million, or $3.68 per diluted share, based upon the Company’s preliminary fair value estimates, which are subject to change upon finalization of the valuation;

    • transaction costs of approximately $48.1 million, or $3.23 per diluted share related to the acquisition of Seajacks. These include compensation, consulting, legal, accounting and auditing fees and are included in general and administrative expenses on the Statement of Operations;

    • a gain on vessels sold of approximately $0.8 million, or $0.06 per diluted share;

    • the write-off of $0.2 million, or $0.01 per diluted share, of deferred financing costs on repaid credit facilities related to certain vessels that have been sold; and

    • a loss of approximately $7.5 million and cash dividend income of $0.2 million, or $0.49 per diluted share, from the Company’s equity investment in Scorpio Tankers Inc.

  • Total vessel revenues for the third quarter of 2021 were $34.4 million, compared to $46.7 million for the same period in 2020. Third quarter 2021 revenues were primarily generated by the wind turbine installation vessels as the remaining drybulk vessels the Company owned or chartered in were delivered or redelivered to their buyers or owners. During the third quarter of 2021 the Seajacks Scylla provided transportation and installation services for an offshore wind farm project in China, the Seajacks Zaratan was fully utilized installing foundations at the Akita offshore wind farm, and the Seajacks Hydra provided offshore wind turbine maintenance, as well as maintenance on an offshore gas production platform in the Southern North Sea.

  • For the third quarter of 2020, the Company’s GAAP net loss was $36.6 million, or $3.12 per diluted share. These results include a non-cash loss of approximately $3.7 million and cash dividend income of $0.2 million, or $0.30 per diluted share, from the Company’s equity investment in Scorpio Tankers Inc. and a write-down of assets of approximately $19.6 million, or $1.67 per diluted share, related to the classification of the SBI Rock as held for sale and the agreement to sell the SBI Sousta, both of which are Kamsarmax drybulk vessels.

  • Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the third quarter of 2021 was $14.1 million and EBITDA for the third quarter of 2020 was a loss of $13.9 million (see Non-GAAP Financial Measures below).

  • For the third quarter of 2021, the Company’s adjusted net loss was $8.2 million, or $0.56 adjusted per diluted share, which includes the gain on bargain purchase of Seajacks of $54.8 million, or $3.68 per diluted share, transaction costs of approximately $48.1 million, or $3.23 per diluted share related to the acquisition of Seajacks, a gain on vessels sold of approximately $0.8 million, or $0.06 per diluted share, and the write-off of $0.2 million, or $0.01 per diluted share, of deferred financing costs on repaid credit facilities related to certain vessels that have been sold.

  • For the third quarter of 2020, the Company’s adjusted net loss was $17.0 million, or $1.45 adjusted per diluted share, which excludes the impact of the write-down of assets of approximately $19.6 million relating to the classification of one Kamsarmax drybulk vessel as held for sale and the agreement to sell another.

  • Adjusted EBITDA for the third quarter of 2021 was $0.7 million compared to $5.7 million in the prior year period (see Non-GAAP Financial Measures below).

  • For the first nine months of 2021, the Company’s GAAP net income was $54.0 million, or $4.41 per diluted share, including:

    • a gain on bargain purchase of Seajacks of $54.8 million, or $4.47 per diluted share

    • transaction costs of approximately $48.1 million, or $3.93 per diluted share related to the acquisition of Seajacks;

    • a gain on vessels sold of approximately $22.8 million, or $1.86 per diluted share, which is primarily the result of an increase in the fair value of common shares of Star Bulk Carriers Corp. (NASDAQ: SBLK) (“Star Bulk”) and Eagle Bulk Shipping Inc. (NASDAQ: EGLE) (“Eagle”) received as a portion of the consideration for the sale of certain of our vessels to Star Bulk and Eagle;

    • the write-off of $7.2 million, or $0.59 per diluted share, of deferred financing costs on repaid credit facilities related to certain vessels that have been sold; and

    • a gain of approximately $21.3 million and cash dividend income of $0.6 million, or $1.79 per diluted share, from the Company’s equity investment in Scorpio Tankers Inc. and the sale of the Eagle and Star Bulk shares received as a portion of the consideration for the vessel sales to these counterparties.

  • For the first nine months of 2020, the Company’s GAAP net loss was $206.4 million, or $23.34 per diluted share, including a loss of approximately $106.7 million and cash dividend income of $0.9 million, or $11.97 per diluted share, from the Company’s equity investment in Scorpio Tankers Inc., a write-down of assets of approximately $36.6 million, or $4.14 per diluted share, related to the classification of four drybulk vessels as held for sale (SBI Taurus, SBI Bolero, SBI Jaguar and SBI Rock) and the agreement to sell the SBI Sousta, and a write-off of approximately $0.4 million, or $0.04 per diluted share, of deferred financing costs on the credit facilities related to the SBI Taurus, SBI Bolero and SBI Jaguar.

  • Total vessel revenues for the first nine months of 2021 were $131.8 million, compared to $113.7 million for the same period in 2020. EBITDA for the first nine months of 2021 was $85.8 million and EBITDA for the first nine months of 2020 was a loss of $134.6 million (see Non-GAAP Financial Measures below).

  • For the first nine months of 2021, the Company’s adjusted net income was $31.7 million, or $2.60 adjusted per diluted share, which excludes the impact of a gain on bargain purchase of Seajacks of $54.8 million, transaction costs of approximately $48.1 million related to the acquisition of Seajacks, a gain subsequent to an increase in fair value less costs to sell related to the assets held for sale of $22.8 million and the write-off of deferred financing costs on the related credit facilities of $7.2 million. Adjusted EBITDA for the first nine months of 2021 was $50.4 million (see Non-GAAP Financial Measures below).

  • For the first nine months of 2020, the Company’s adjusted net loss was $169.4 million, or $19.16 adjusted per diluted share, which excludes the impact of the write-down of assets of approximately $36.6 million and the write-off of deferred financing costs on credit facilities related to three sold vessels of approximately $0.4 million. Adjusted EBITDA for the first nine months of 2020 was a loss of $97.9 million (see Non-GAAP Financial Measures below).

Liquidity

As of December 3, 2021, the Company had approximately $185.0 million in cash and cash equivalents. The Company also continues to hold approximately 2.16 million common shares of Scorpio Tankers Inc. (NYSE: STNG).

Newbuilding Contract

On December 1, 2021, the Company exercised the option it held with Daewoo Shipbuilding and Marine Engineering for the construction of its second next-generation offshore wind turbine installation vessel (“WTIV”). The contract price is $326.0 million and the vessel will be delivered in the second quarter of 2025.

The vessel is an NG-16000X design by GustoMSC , and includes a 2,600 Ton Leg Encircling Crane from Huisman Equipment B.V. of the Netherlands. The vessel will be capable of installing up to 20 Megawatt turbines at depths of up to 65 meters of water, and it can be adapted to operate on the alternate fuels of LNG or Ammonia.

Debt Overview

The Company’s outstanding debt balances, gross of unamortized deferred financing costs as of September 30, 2021 and December 3, 2021, are as follows (dollars in thousands):

As of
September 30, 2021

As of
December 3, 2021

Credit Facility

Amount Outstanding

$60.0 Million ING Revolving Credit Facility

$

40,000

$

$87.7 Million Subordinated Debt

87,650

87,650

$70.7 Million Redeemable Notes

70,686

70,686

Total

$

198,336

$

158,336

In November 2021, the Company repaid $40.0 million outstanding under the $60.0 Million ING Revolving Credit Facility.

Equity Raise

In November 2021, the Company raised net proceeds of approximately $166.6 million in an underwritten public offering of approximately 19.4 million shares of its common stock at $9.00 per share. As of December 3, 2021, 39,041,204 common shares and 700,000 preferred shares were outstanding.

Quarterly Cash Dividend

In the third quarter of 2021, the Company’s Board of Directors declared and the Company paid a quarterly cash dividend of $0.01 per share totaling approximately $0.2 million.

On December 8, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.01 per share, payable on or about December 29, 2021, to all shareholders of record as of December 20, 2021. As of December 3, 2021, 39,041,204 common shares and 700,000 preferred shares were outstanding.

Share Repurchase Program

As of December 3, 2021, the Company had $31.9 million remaining under the authorized share repurchase program. The Company did not repurchase any securities during the three months ended September 30, 2021.

COVID-19

Since the beginning of the calendar year 2020, the ongoing outbreak of the novel coronavirus (COVID-19) that originated in China in December 2019 and that has spread to most developed nations of the world has resulted in numerous actions taken by governments and governmental agencies in an attempt to mitigate the spread of the virus. These measures have resulted in a significant reduction in global economic activity and extreme volatility in the global financial and commodities markets. Future charter rates remain highly dependent on the duration and continuing impact of the COVID-19 pandemic, as evidenced by the recent resurgence of cases in India and other parts of the world and the uncertainty surrounding the spread of the recent Omicron variant of COVID-19. When these measures and the resulting economic impact will end and what the long-term impact of such measures on the global economy will be are not known at this time. As a result, the extent to which COVID-19 will impact the Company’s results of operations and financial condition, including its transition to marine-based renewable energy, will depend on future developments, which are highly uncertain and cannot be predicted.


Eneti Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Amounts in thousands, except per share data)

Unaudited

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Revenue:

Vessel revenue

$

34,358

$

46,690

$

131,838

$

113,679

Operating expenses:

Voyage expenses

2,880

1,697

17,461

4,517

Vessel operating costs

14,323

24,487

38,174

71,422

Charterhire expense

4,534

6,374

33,880

15,548

Vessel depreciation

4,163

14,090

4,163

39,113

General and administrative expenses

54,468

6,285

67,188

19,589

(Gain) loss / write-down on assets sold or held for sale

(830

)

19,598

(22,814

)

36,607

Total operating expenses

79,538

72,531

138,052

186,796

Operating (loss) income

(45,180

)

(25,841

)

(6,214

)

(73,117

)

Other income (expense):

Interest income

18

18

58

190

Gain on bargain purchase of Seajacks

54,761

54,761

(Loss) income from equity investments

(7,349

)

(3,534

)

21,868

(105,858

)

(Loss) on derivative financial instruments

(114

)

(114

)

Foreign exchange income (loss)

439

(113

)

442

(243

)

Financial expense, net

(2,476

)

(7,155

)

(15,826

)

(27,352

)

Total other income (expense)

45,279

(10,784

)

61,189

(133,263

)

Income (loss) before income taxes

99

(36,625

)

54,975

(206,380

)

Income tax provision

961

961

Net (loss) income

$

(862

)

$

(36,625

)

$

54,014

$

(206,380

)

Loss (Earnings) per share:

Basic

$

(0.06

)

$

(3.12

)

$

4.50

$

(23.34

)

Diluted

$

(0.06

)

$

(3.12

)

$

4.41

$

(23.34

)

Basic weighted average number of common shares outstanding

14,736

11,724

12,013

8,843

Diluted weighted average number of common shares outstanding

14,736

11,724

12,251

8,843

Comprehensive income:

Net (loss) income

(862

)

(36,625

)

54,014

(206,380

)

Other comprehensive income

Revaluation of derivative financial instruments, net of tax

70

70

Comprehensive (loss) income

$

(792

)

$

(36,625

)

$

54,084

$

(206,380

)


Eneti Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in thousands)

Unaudited

September 30, 2021

December 31, 2020

Assets

Current assets

Cash and cash equivalents

$

65,430

$

84,002

Accounts receivable

44,467

21,086

Prepaid expenses and other current assets

4,733

16,515

Contract fulfillment costs

458

Total current assets

115,088

121,603

Non-current assets

Vessels, net

536,185

Vessels under construction

17,962

Assets held for sale

708,097

Equity investments

39,956

24,116

Intangible assets

4,518

Contract fulfillment costs

1,034

Deferred tax asset

27,518

Deferred financing costs, net

1,143

Other assets

6,438

13,236

Total non-current assets

633,611

746,592

Total assets

$

748,699

$

868,195

Liabilities and shareholders’ equity

Current liabilities

Bank loans, net

$

127,650

$

13,226

Capital lease obligations

32,677

Redeemable notes

17,672

Contract liabilities

8,656

Corporate income tax payable

2,690

Accounts payable and accrued expenses

49,986

41,113

Total current liabilities

206,654

87,016

Non-current liabilities

Bank loans, net

157,511

Capital lease obligations

351,070

Redeemable notes

53,014

Other liabilities

1,886

Total non-current liabilities

54,900

508,581

Total liabilities

261,554

595,597

Shareholders’ equity

Preferred shares, $0.01 par value per share; 50,000,000 shares authorized; 700,000 shares issued and outstanding at September 30, 2021 and no shares issued or outstanding at December 31, 2020

7

Common shares, $0.01 par value per share; authorized 81,875,000 shares and 31,875,000 shares as of September 30, 2021 and December 31, 2020; outstanding 18,233,604 shares as of September 30, 2021 and 11,310,073 as of December 31, 2020

909

859

Paid-in capital

1,891,110

1,803,431

Common shares held in treasury, at cost; 35,869 shares and 1,934,092 shares at September 30, 2021 and December 31, 2020, respectively

(717

)

(73,444

)

Accumulated deficit

(1,404,234

)

(1,458,248

)

Other comprehensive income

70

Total shareholders’ equity

487,145

272,598

Total liabilities and shareholders’ equity

$

748,699

$

868,195


Eneti Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
(Amounts in thousands)

Nine Months Ended September 30,

2021

2020

Operating activities

Net income (loss)

$

54,014

$

(206,380

)

Adjustment to reconcile net income (loss) to net cash provided by

operating activities:

Restricted share amortization

10,896

5,552

Negative goodwill

(54,761

)

Vessel depreciation

4,163

39,113

Amortization of deferred financing costs

658

2,880

Write-off of deferred financing costs

7,196

366

(Gain) loss / write-down on assets held for sale

(19,598

)

33,894

Net unrealized (gains) losses on investments

(22,000

)

106,730

Dividend income on equity investment

(647

)

(872

)

Drydocking expenditure

(3,443

)

(16,606

)

Deferred tax asset

(1,585

)

Gain (loss) on derivatives

70

Changes in operating assets and liabilities:

Decrease (increase) in accounts receivable

36,516

(7,933

)

Decrease in prepaid expenses and other assets

28,733

23,421

Decrease in accounts payable and accrued expenses

(32,563

)

(27,817

)

Decrease in taxes payable

1,994

Net cash provided by (used in) operating activities

9,643

(47,652

)

Investing activities

Sale of equity investment

64,155

42,711

Cash acquired in Seajacks acquisition

25,719

Dividend income on equity investment

647

872

Proceeds from sale of assets held for sale

496,107

52,518

Payments on vessels under construction

(18,372

)

(42,495

)

Net cash provided by (used in) investing activities

568,256

53,606

Financing activities

Proceeds from issuance of common stock

82,254

Proceeds from issuance of long-term debt

132,708

Repayments of long-term debt

(593,750

)

(220,620

)

Common shares repurchased

(1,407

)

Dividends paid

(1,314

)

(2,606

)

Net cash (used in) provided by financing activities

(596,471

)

(8,264

)

Increase (decrease) in cash and cash equivalents

(18,572

)

(2,310

)

Cash and cash equivalents, beginning of period

84,002

42,530

Cash and cash equivalents, end of period

$

65,430

$

40,220

Conference Call on Results:

A conference call to discuss the Company’s results will be held at 10:00 AM Eastern Standard Time / 4:00 PM Central European Time on December 8, 2021. Those wishing to listen to the call should dial 1 (866) 219-5268 (U.S.) or 1 (703) 736-7424 (International) at least 10 minutes prior to the start of the call to ensure connection. The conference participant passcode is 2709819. The information provided on the teleconference is only accurate at the time of the conference call, and the Company will take no responsibility for providing updated information.

There will also be a simultaneous live webcast over the internet, through the Eneti Inc. website www.eneti-inc.com. Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.

Webcast URL: https://edge.media-server.com/mmc/p/vy8x4ah4

About Eneti Inc.

Eneti Inc. is focused on the offshore wind and marine-based renewable energy industry and has invested in the next generation of wind turbine installation vessels. Additional information about the Company is available on the Company’s website www.eneti-inc.com, which is not a part of this press release.

Non-GAAP Financial 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 U.S. 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. In addition, management believes the presentation of these matters is useful to investors for period-to-period comparison of results as the items may reflect certain unique and/or non-operating items such as asset sales, write-offs, contract termination costs or items outside of management’s control.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted net income (loss) and related per share amounts, as well as adjusted EBITDA are non-GAAP financial measures 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 EBITDA, adjusted net income (loss) and related per share amounts, and adjusted EBITDA.

EBITDA (unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

In thousands

2021

2020

2021

2020

Net income (loss)

$

(862

)

$

(36,625

)

$

54,014

$

(206,380

)

Add Back:

Net interest expense

2,283

6,279

7,914

23,915

Depreciation and amortization (1)

11,708

16,482

22,914

47,912

Income tax (benefit) expense

961

961

EBITDA

$

14,090

$

(13,864

)

$

85,803

$

(134,553

)

(1) Includes depreciation, amortization of deferred financing costs and restricted share amortization.

Adjusted net income (loss) (unaudited)

Three Months Ended September 30,

In thousands, except per share data

2021

2020

Amount

Per share

Amount

Per share

Net income (loss)

$

(862

)

$

(0.06

)

$

(36,625

)

$

(3.12

)

Adjustments:

Gain on bargain purchase of Seajacks

(54,761

)

(3.68

)

Transaction costs

48,103

3.23

(Gain) loss / write-down on assets

(830

)

(0.06

)

19,598

1.67

Write-off of deferred financing cost

168

0.01

Total adjustments

$

(7,320

)

$

(0.50

)

$

19,598

$

1.67

Adjusted net income (loss)

$

(8,182

)

$

(0.56

)

$

(17,027

)

$

(1.45

)


Nine Months Ended September 30,

In thousands, except per share data

2021

2020

Amount

Per share

Amount

Per share

Net income (loss)

$

54,014

$

4.41

$

(206,380

)

$

(23.34

)

Adjustments:

Gain on bargain purchase of Seajacks

(54,761

)

(4.47

)

Transaction costs

48,103

3.93

(Gain) loss / write-down on assets

(22,814

)

(1.86

)

36,607

4.14

Write-off of deferred financing cost

7,196

0.59

366

0.04

Total adjustments

$

(22,276

)

$

(1.81

)

$

36,973

$

4.18

Adjusted net income (loss)

$

31,738

$

2.60

$

(169,407

)

$

(19.16

)

Adjusted EBITDA (unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

In thousands

2021

2020

2021

2020

Net income (loss)

$

(862

)

$

(36,625

)

$

54,014

$

(206,380

)

Impact of adjustments

(7,320

)

19,598

(22,276

)

36,973

Adjusted net (loss) income

(8,182

)

(17,027

)

31,738

(169,407

)

Add Back:

Net interest expense

2,283

6,279

7,914

23,915

Depreciation and amortization (1)

5,612

16,482

9,790

47,546

Income tax (benefit) expense

961

961

Adjusted EBITDA

$

674

$

5,734

$

50,403

$

(97,946

)

(1) Includes depreciation, amortization of deferred financing costs and restricted share amortization.


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,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect,” “pending” and similar expressions identify forward-looking statements. We undertake no obligation, and specifically decline 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.

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 failure of counterparties to fully perform their contracts with us, the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and asset values, changes in demand for Wind Turbine Installation Vessel (“WTIV”) capacity, the length and severity of the ongoing novel coronavirus (COVID-19) outbreak, including its effects on demand for WTIVs and the installation of offshore windfarms, changes in our operating expenses, including fuel costs, drydocking and insurance costs, the market for our WTIVs, availability of financing and refinancing, counterparty performance, ability to obtain financing and the availability of capital resources (including for capital expenditures) and comply with covenants in such financing arrangements, planned capital expenditures, our ability to successfully identify, consummate, integrate and realize the expected benefits from acquisitions and changes to our business strategy, fluctuations in the value of our investments, 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 due to accidents or political events, vessel 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.

CONTACT: Contact: Eneti Inc. +377-9798-5715 (Monaco) +1-646-432-1675 (New York)


Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting