Aegean Marine Petroleum Network Inc. Announces Second Quarter 2016 Financial Results

Source Press Release
Company Aegean Marine Petroleum Network Inc 
Tags Capital Spending, Financial & Operating Data, Strategy - Corporate
Date August 10, 2016

Aegean Marine Petroleum Network Inc. (NYSE: ANW) ("Aegean" or the "Company") today announced financial and operating results for the second quarter ended June 30, 2016.

Second Quarter Financial Highlights

Compared to prior year period:

  • Increased sales volumes by 29.9% to 4,092,789 metric tons.
  • Increased gross profit by 19.0% to $93.4 million compared to prior year.
  • Increased operating income by 95.3% to $28.9 million.
    • Increased operating income adjusted for a loss on sale of non-core vessels by 111.5% to $31.3 million.
  • Recorded GAAP net income attributable to Aegean shareholders of $13.5 million or $0.27 basic and diluted earnings per share.
    • Net income adjusted for a loss on sale of non-core vessels was $16.0 million or $0.32 basic and diluted earnings per share.
  • Generated record adjusted EBITDA of $37.9 million.
  • Sold two non-core vessels, enabling $5 million in debt pay down, which is expected to result in operating cost reductions of approximately $6.4 million on an annual basis.

Second Quarter Operational Highlights

  • Ramped-up operations in Algoa Bay, South Africa, further expanding global platform.
  • Further optimized operations through the sale of two non-core vessels.
  • Strategically relocated certain vessels from lower-activity markets to higher-growth regions.

E. Nikolas Tavlarios, Aegean's President, commented, "We generated strong operational and financial results in the quarter and are pleased with the momentum we have going into the second half of the year. During the second quarter we increased sales volumes and improved performance in many key markets, including our new operations in South Africa and Brazil. Our top- and bottom-line results benefitted from our initiatives to strengthen our global platform and optimize our geographic footprint. Our decisions to sell non-core vessels will result in cost reductions and align with our focus on strategically allocating our resources to swiftly respond to fluctuations in demand and capitalize on opportunities in markets where we see the most potential."

Mr. Tavlarios concluded, "We are seeing strong indications of continued growth for the full year 2016 and remain confident in our ability to drive profitability and increase volumes across our platform to deliver enhanced shareholder value."  

Generating Solid Financial Results

  • Revenue – The Company reported total revenue of $987.6 million for the second quarter of 2016, a decrease of 18.2% compared to the same period in 2015, primarily due to the drop in oil prices. Voyage and other revenues decreased to $19.8 million or by 8.8% compared to the same period in 2015.
  • Gross Profit – Gross Profit, which equals total revenue less directly attributable cost of revenue increased by 19.0% to$93.4 million in the second quarter of 2016 compared to $78.5 million in the same period in 2015.
  • Operating Expense – The Company reported operating expense of $64.5 million for the second quarter of 2016, an increase of $0.8 million or 1.3% compared to the same period in prior year.  Adjusting for the sale of non-core assets, operating expense was $62.1 million, a decrease of 2.5% compared to the same period in the prior year.
  • Operating Income – Operating income for the second quarter of 2016 adjusted for the sale of non-core assets was $31.3 million, an increase of 111.5% compared to the same period in the prior year.
  • Net Income – Net income attributable to Aegean shareholders adjusted for the sale of non-core vessels was $16.0 million, or $0.32 basic and diluted earnings per share, an increase of $8.9 million or 125.4% compared to the same period in 2015.

Operational Metrics 

  • Sales Volume – For the three months ended June 30, 2016, the Company reported marine fuel sales volumes of 4,092,789 metric tons, an increase of 29.9% compared to the same period in 2015.
  • Adjusted EBITDA Per Metric Ton of Marine Fuel Sold – For the three months ended June 30, 2016, the Company reported adjusted EBITDA per metric ton of marine fuel sold of $9.26. Adjusted EBITDA per metric ton of marine fuel sold in the prior year period was $7.63 per metric ton.
  • Gross Spread Per Metric Ton of Marine Fuel Sold – For the three months ended June 30, 2016, the Company reported gross spread per metric ton of marine fuel sold on an aggregate basis of $20.9. Gross spread per metric ton of marine fuel sold in the prior year period was $22.5.

Liquidity and Capital Resources

  • Net cash used in operating activities was $60.4 million for the three months ended June 30, 2016. Net income as adjusted for non-cash items (as defined in Note 9 below) was $37.1 million for the same period.
  • Net cash provided by investing activities was $7.9 million for the three months ended June 30, 2016, primarily due to the sale of two non-core vessels.
  • Net cash provided by financing activities was $44.5 million for the three months ended June 30, 2016, mainly due to the drawdown of short-term debt.
  • As of June 30, 2016, the Company had cash and cash equivalents of $127.8 million and working capital of $387.6 million. Non-cash working capital, or working capital excluding cash and debt, was $581.6 million.
  • As of June 30, 2016, the Company had $867.8 million of undrawn amounts under its working capital facilities and $127.8 million of unrestricted cash and cash equivalents to finance working capital requirements.
  • The weighted average basic and diluted shares outstanding for the three months ended June 30, 2016, was 48,117,508. The weighted average basic and diluted shares outstanding for the three months ended June 30, 2015 was 47,366,134.

Spyros Gianniotis, Aegean's Chief Financial Officer, stated, "During the quarter, we achieved strong adjusted EBITDA per metric ton of marine fuel sold of $9.26, a 43.8% increase quarter over quarter. While we achieved strong results across the board, we believe adjusted EBITDA per metric ton of marine fuel sold best reflects our operational improvements.  In the second quarter we also reported a 29.9% year over year increase in volumes and improved performance without increase in operating expenses. Financial flexibility and a strong balance sheet remain important differentiators for our business. The two vessel sales during the quarter enabled us to pay down $5 million of debt and is expected to help eliminate approximately $6.4 million in operating costs on an annual basis. We have and intend to continue to actively manage our business while de-levering and strengthening our balance sheet to drive results for all Aegean shareholders."

Summary Consolidated Financial and Other Data (Unaudited)

    For the Three Months Ended June 30,  For the Six Months Ended June 30, 
    2015    2016      2015    2016 
    (in thousands of U.S. dollars, unless otherwise stated) 
Income Statement Data:                   
Revenues - third parties  1,203,100  982,337    2,214,056  1,730,853 
Revenues - related companies    4,607    5,219      8,754    9,635 
Total revenues    1,207,707    987,556      2,222,810    1,740,488 
Cost of revenues  - third parties    1,078,112    876,495      1,970,384    1,538,121 
Cost of revenues– related companies    51,114    17,682      93,323    28,120 
Total cost of revenues    1,129,226    894,177      2,063,707    1,566,241 
Gross profit    78,481    93,379      159,103    174,247 
Operating expenses:                   
Selling and distribution    52,744    49,943      102,561    100,715 
General and administrative    10,602    11,823      20,908    23,319 
Amortization of intangible assets    375    297      749    597 
Loss on sale of vessels      2,437      130    2,437 
Operating income    14,760    28,879      34,755    47,179 
Net financing cost    (8,813)    (12,477)      (18,139)    (21,838) 
Foreign exchange gains / (losses), net    658    (1,922)      692    (1,683) 
Income tax benefit / (expense)    543    (947)      2,064    1,645 
Net income    7,148    13,533      19,372    25,303 
Less income attributable to non-controlling interest           
Net income attributable to AMPNI shareholders  7,148  13,525    19,372  25,295 
Basic earnings per share (U.S. dollars)  0.15  0.27    0.40  0.51 
Diluted earnings per share (U.S. dollars)  0.15  0.27     0.40  0.51 
                   
EBITDA(1)  24,052  35,459    51,859  62,606 
                   
Other Financial Data:                   
Gross spread on marine petroleum products(2)  71,773  86,504    143,383  161,572 
Gross spread on lubricants(2)    949    1,031      2,188    1,765 
Gross spread on marine fuel(2)    70,824    85,473      141,195    159,807 
Gross spread per metric ton of marine fuel sold (U.S. dollars) (2)    22.5    20.9      23.3    19.2 
Net cash used in operating activities  (59,301)  (60,441)    (83,052)  (49,497) 
Net cash (used in) / provided by investing activities    (4,784)    7,878      (7,628)    (877) 
Net cash provided by financing activities    11,822    44,515      6,671    38,491 
                   
Sales Volume Data (Metric Tons): (3)                   
Total sales volumes    3,150,950    4,092,789      6,066,400    8,305,425 
                   
Other Operating Data:                   
Number of owned bunkering tankers, end of period(4)    49.0    47.0      49.0    47.0 
Average number of owned bunkering tankers(4)(5)    49.0    48.4      48.5    48.7 
Special Purpose Vessels, end of period(6)    1.0    1.0      1.0    1.0 
Number of operating storage facilities, end of period(7)    15.0    14.0      15.0    14.0 

Summary Consolidated Financial and Other Data (Unaudited)

    As of December 31, 2015  As of June 30, 2016 
       
    (in thousands of U.S. dollars, unless otherwise stated) 
Balance Sheet Data:     
Cash and cash equivalents    139,314  127,751 
Gross trade receivables    317,152  405,399 
Allowance for doubtful accounts    (7,278)  (8,604) 
Inventories    114,531  168,170 
Current assets    730,950  857,570 
Total assets    1,450,011  1,558,961 
Trade payables    72,417  108,572 
Current liabilities (including current portion of long-term debt)    389,109  469,928 
Total debt    710,015  758,596 
Total liabilities    828,485  909,546 
Total stockholder's equity    621,526  649,415 
       
Working Capital Data:       
Working capital(8)    341,841  387,642 
Working capital excluding cash and debt(8)    477,594  581,642 
       

Notes:

1. EBITDA represents net income before interest, taxes, depreciation and amortization. EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations, as determined by United States generally accepted accounting principles, or U.S. GAAP, and our calculation of EBITDA may not be comparable to that recorded by other companies. Adjusted EBITDA represents net income before interest, taxes, depreciation and amortization, vessel and investment impairments, gains/losses on vessel disposals and other non-recurring exceptional items. EBITDA and adjusted EBITDA are included herein because they are a basis upon which the Company assesses its operating performance.

Adjusted EBITDA per metric ton of marine fuel sold represents the net income before interest, taxes, depreciation and amortization, vessel and investment impairments, gains/losses on vessel disposals and other non-recurring exceptional items the Company generates per metric ton of marine fuel sold. The Company calculates adjusted EBITDA per metric ton of marine fuel sold by dividing the EBITDA by the sales volume of marine fuel. Marine fuel sales do not include sales of lubricants.

The following table reconciles net income attributable to AMPNI to EBITDA, adjusted EBITDA and adjusted EBITDA per metric ton of marine fuel sold for the periods presented:

  For the Three Months Ended June 30,  For the Six Months Ended June 30, 
  2015  2016  2015  2016 
  (in thousands of U.S. dollars, unless otherwise stated) 
Net income to AMPNI shareholders  7,148  13,525  19,372  25,295 
         
Add: Net financing cost including amortization of financing costs  8,813  12,447  18,139  21,838 
  Add: Income tax (benefit) / expense  (543)  947  (2,064)  (1,645) 
  Add: Depreciation and amortization excluding amortization of financing costs  8,634  8,510  16,412  17,118 
         
EBITDA  24,052  35,459  51,859  62,606 
         
Add: Loss on sale of vessels  2,437  130  2,437 
Adjusted EBITDA  24,052  37,896  51,989  65,043 
         
Sales volume of marine fuel (metric tons)  3,150,950  4,092,789  6,066,400  8,305,425 
Adjusted EBITDA per metric ton of marine fuel sold (U.S. dollars)  7.63  9.26  8.57  7.83 

2. Gross spread on marine petroleum products represents the margin the Company generates on sales of marine fuel and lubricants. Gross spread on marine fuel represents the margin that the Company generates on sales of various classifications of marine fuel oil ("MFO") or marine gas oil ("MGO"). Gross spread on lubricants represents the margin that the Company generates on sales of lubricants. Gross spread on marine petroleum products, gross spread of MFO and gross spread on lubricants are not items recognized by U.S. GAAP and should not be considered as an alternative to gross profit or any other indicator of a Company's operating performance required by U.S. GAAP. The Company's definition of gross spread may not be the same as that used by other companies in the same or other industries. The Company calculates the above-mentioned gross spreads by subtracting from the sales of the respective marine petroleum product the cost of the respective marine petroleum product sold and cargo transportation costs. For arrangements in which the Company physically supplies the respective marine petroleum product using its bunkering tankers, costs of the respective marine petroleum products sold represents amounts paid by the Company for the respective marine petroleum product sold in the relevant reporting period. For arrangements in which the respective marine petroleum product is purchased from the Company's related company, Aegean Oil S.A., or Aegean Oil, cost of the respective marine petroleum products sold represents the total amount paid by the Company to the physical supplier for the respective marine petroleum product and its delivery to the custom arrangements, in which the Company purchases cargos of marine fuel for its floating storage facilities. Transportation costs may be included in the purchase price of marine fuels from the supplier or may be incurred separately from a transportation provider. Gross spread per metric ton of marine fuel sold represents the margin the Company generates per metric ton of marine fuel sold. The Company calculates gross spread per metric ton of marine fuel sold by dividing the gross spread on marine fuel by the sales volume of marine fuel. Marine fuel sales do not include sales of lubricants. The following table reflects the calculation of gross spread per metric ton of marine fuel sold for the periods presented:

  For the Three Months Ended
June 30, 
  For the Six Months Ended June 30, 
  2015    2016    2015    2016 
  (in thousands of U.S. dollars, unless otherwise stated) 
Sales of marine petroleum products  1,189,488    967,808    2,184,033    1,702,623 
Less: Cost of marine petroleum products sold  (1,117,715)    (881,304)    (2,040,650)    (1,541,051) 
Gross spread on marine petroleum products  71,773    86,504    143,383    161,572 
Less: Gross spread on lubricants  (949)    (1,031)    (2,188)    (1,765) 
Gross spread on marine fuel  70,824    85,473    141,195    159,507 
               
Sales volume of marine fuel (metric tons)  3,150,950    4,092,789    6,066,400    8,305,425 
               
Gross spread per metric ton of marine fuel sold (U.S. dollars)  22.5    20.9    23.3    19.2 

3. Sales volume of marine fuel is the volume of sales of various classifications of MFO and MGO for the relevant period and is denominated in metric tons. The Company does not include the sales volume of lubricants in the calculation of gross spread per metric ton of marine fuel sold.

4. Bunkering fleet comprises both bunkering vessels and barges.

5. Figure represents average bunkering fleet number for the relevant period, as measured by the sum of the number of days each bunkering tanker or barge was used as part of the fleet during the period divided by the cumulative number of calendar days in the period multiplied by the number of bunkering tankers at the end of the period. This figure does not take into account non-operating days due to either scheduled or unscheduled maintenance.

6. Special Purpose Vessels consists of the Orion, a 550 dwt tanker which is based in our Greek market.

7. The Company owns two barges, the Mediterranean and Umnenga, as floating storage facilities in Greece and South Africa. The Company also operates on-land storage facilities in Las Palmas, Fujairah, Tangiers, Panama, the U.S.A., Hamburg and Barcelona.

The ownership of storage facilities allows the Company to mitigate its risk of supply shortages. Generally, storage costs are included in the price of refined marine fuel quoted by local suppliers. The Company expects that the ownership of storage facilities will allow it to convert the variable costs of this storage fee mark-up per metric ton quoted by suppliers into fixed costs of operating its owned storage facilities, thus enabling the Company to spread larger sales volumes over a fixed cost base and to decrease its refined fuel costs.

8. Working capital is defined as current assets minus current liabilities. Working capital excluding cash and debt is defined as current assets minus cash and cash equivalents minus restricted cash minus current liabilities plus short-term borrowings plus current portion of long-term debt.

9. Net income as adjusted for non-cash items, such as depreciation, provision for doubtful accounts, restricted stock, amortization, deferred income taxes, gain/loss on sale of vessels, impairment losses, unrealized loss/(gain) on derivatives and unrealized foreign exchange loss/(gain), net, is used to assist in evaluating our ability to make quarterly cash distributions. Net income as adjusted for non-cash items is not recognized by accounting principles generally accepted in the United States and should not be considered as an alternative to net income or any other indicator of the Company's performance required by accounting principles generally accepted in the United States. The following table reflects the calculation of net income as adjusted for non-cash items for the periods presented:

  For the Three Months Ended
June 30, 
  For the Six Months Ended 
June 30, 
  2015    2016    2015    2016 
  (in thousands of U.S. dollars, unless otherwise stated) 
Net income  7,148    13,533    19,372    25,303 
Add: Depreciation  6,375    6,353    12,636    12,792 
Add: Provision for doubtful accounts  765    640    1,409    1,421 
Add: Share based compensation  2,304    2,179    4,965    4,588 
Add: Amortization  4,530    4,585    9,014    9,151 
Add: Net deferred tax expense / (benefit)  (531)    920    (2,548)    (1,959) 
Add: Unrealized loss on derivatives  8,230    6,566    17,239    34,194 
Add: Loss on sale of vessels    2,437    130    2,437 
Add: Unrealized foreign exchange loss / (gain)  146    (118)    (539)    89 
Net income as adjusted for non-cash items  28,967    37,095    61,678    88,016 

Second Quarter 2016 Dividend Announcement 
On August 10, 2016, the Company's Board of Directors declared a second quarter 2016 dividend of $0.02 per share payable on or about September 9, 2016 to shareholders of record as of August 24, 2016. The dividend amount was determined in accordance with the Company's dividend policy of paying cash dividends on a quarterly basis subject to factors including the requirements of Marshall Islands law, future earnings, capital requirements, financial condition, future prospects and such other factors as are determined by the Company's Board of Directors. The Company anticipates retaining most of its future earnings, if any, for use in operations and business expansion.

Conference Call and Webcast Information 
Aegean Marine Petroleum Network Inc. will conduct a conference call and simultaneous Internet webcast on Wednesday, August 10, 2016 at 4:30 P.M. Eastern Time, to discuss its second quarter results. Investors may access the webcast and related slide presentation, by visiting the Company's website at , and clicking on the webcast link. The conference call also may be accessed via telephone by dialing (800) 524-8850 (for U.S.-based callers) or 416-204-9702 (for international callers) and enter the passcode: 2586478.

If you are unable to participate at this time, a replay of the call will be available for two weeks at 888-203-1112 or 719-457-0820. Enter the code 2586478 to access the audio replay. The webcast will also be archived on the Company's website:
.

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