Ed Coll
Analyst · Cable Car Capital. Hi, good morning Ed, and Tony
Thanks Tom, and good morning to all of you and thank you for joining us on the call. This morning I’ll provide an update of operations and the market at large before turning the call over to Tony, our CFO, to provide a more detailed overview of the third quarter financials. And then we’ll open up the line for questions. Last evening, and as you can see on slide three and four of the accompanying presentation, we were very pleased to report our third consecutive quarter of profitability with net income attributable to Pangaea Logistics Solutions of $3 million for the quarter or $0.08 a share on a pro forma basis compared to a loss of $2.09 million or $0.08 per share on pro forma adjusted basis in the third quarter of 2014. Our ability to generate profits in an environment where many others are operating at a loss is due to our flexible access like strategy and disciplined approach to generating revenues. This strategy allows us to minimize our exposure to the low rate environment and instead focus on profitable voyage revenue tied to our portfolio of long term contracts of affreightment or COAs. We are also focused on controlling expenses and improving efficiencies while selecting adding to our book of business. The dramatic improvement in our performance compared to the prior year period was largely attributable to our improved operating margin. As you will see on slide 5, our operating margin increased to 6.8% for the third quarter of 2015 from the negative 2.1% in the third quarter of 2014. The uptick in our operating margin in turn was driven by lower cost for chartering vessels from weak dry bulk shipping markets. Optimization of vessels based to minimize positioning cost and list of losses in a weak market decreased bunker costs and performing under fixed price COAs at average rates that are higher than the present market. Our revenues of $71.2 million declined 22% from $91.2 million in the third quarter of 2014 as we decreased total shipping days by 16% to reduce our exposure to a weak grade environment. As you are all aware, our revenue primarily falls into two categories, quarter revenue which is tied to market rate time charter days and voyage revenue which has survived from longer term COAs and other acquired loss. As the charter rate environment has remained challenged, we took advantage of our flexible business model and decreased our charter out days by 34% while decreasing our voyage days which are tied to COAs and it generally averages above where the market has been this year and reflect our proprietary backhaul positioning business at only 11%. This combination of improved margins and strategic pull back from market based business resulted in time charter prevalent rates of $11,849 per day for the quarter ending September 30, compared to $10,882 per day for the third quarter of 2014. As in previous quarters, our earnings increased despite lower revenues which are a function of this being a margin driven business and our business model is allowing us to drive margin improvement in the face of continued industry challenges. Now, I’ll take a few minutes to offer a bit more detail on that business model and our strategy. How they differ from our competitors and how they have allowed us to operate profitably in the current turbulent market. I will be -- here as we have discussed this on previous calls but I do think that if there is highlighting these differentiators which are also summarized on slide 6 and our positioning in the market. What sets our business model apart is that the majority of our fleet discharged in that market rates to move specific cargoes that we have agreed to carry for our clients, often pursuant to long term COAs which are in turn often lasting that late hirers [ph] than where the market has been in 2015. Roughly speaking, we expect our COAs to represent approximately one third of our revenue. Similarly, our own fleet is matched against the agreements that we have to carry fiber for our clients or owned with specialised trades, which is the case with our ice-class fleet. With regards to any expansion to the own fleet, we are constantly monitoring the second hand market and accessing the needs of our COA portfolio. We would only add to our fleet if we believe there is quality comments that can be market to an existing piece of business. As a result, in a low rate environment charter expenses, which were some of our key costs are reduced, and so we should be less impacted by lower rates than companies with largely fixed costs. This is a stark contrast to the majority of public dry bulk companies who are large asset owners, burdened by heavy fixed cost and must focus on finding employment for their vessels, a model that has been under pressure in the current environment. Backhaul is a principal component of our strategy, meaning we seek to position our vessels in traditional loading areas by working with our customers to deliver cargoes to these areas as opposed to the typical approach in our industry which is to travel to these areas unladen [ph]. We believe that our approach to manage key shipping risk by reducing the impact of low rates by reducing positioning cost and by maximising utilization. The inherent agility of our strategy allows us to focus on those sectors and [Indiscernible] comfortably while conserving cash enabling us to pursue attractive opportunities as they presented themselves. In short, we are nimble, have lasting contracts that generate revenue, can contract and expand at the market and can insulate ourselves in a broader rate environment as a result. We are further encouraged by our success in the ice-class trade. We have carefully organized and executed strategy that is showing great future potential and will continue to develop. So far in 2015 the ice-class 1A fleet has generated an 80% premium over the average comparable Baltic index vessel. We look forward to receiving our fourth and final new best-of-fleet [ph] ice-class 1A vessel in January of 2016, which could not have been matched by anything available on the second hand market. Reflecting our confidence in our ice-class strategy, during the quarter the company purchased portion of Nordic Bulk carriers or NBC or ice-class focused affiliate that we treat this [Indiscernible] making it a wholly owned subsidiary of Pangaea. We believe that our unmatched fleet and unique expertise in less commoditized trades such as ice-class increases our likelihood of securing higher rates and margins than those available to other drybulk companies. Speaking of our unique experience, I must also commend our employees who have enabled us to remain profitable to a challenging 2015, something few if any other companies in our space have been able to achieve. Their tireless commitment to best-in-class execution and operations while delivering value for our global base and helping them solve their most difficult logistic challenges is a core component of the strong results we have announced today. Looking at the board of markets, we do not see any near term catalyst that we think will likely change the rate environment, as demand for the commodities we move to our clients and remain skewed and a global dry bulk fleet are slowing continues rate remain for some time. Our rates -- remain muted and our differentiated business model allows us to operate in this market at lower risk than others. This is thanks to our unique combination of relatively low fixed cost and higher exposure to variable market based cost in the form of chartered and tonnage, and our book of profitable long term COAs. These attributes of our business model are further enhanced by our expertise in specialised areas such as ice-class and backhaul which allow us to command higher rates and increased utilization. As we have continually emphasized, we are positioned for strong performance in a multitude of rate environments including the currently depressed one. Moving forward we believe we are well positioned to capitalize on our recovery in the freight market, thanks to our flexible strategy. And eventually -- eventual recovery should allow us to grow the number of voyage days and shipping days in turn supporting revenue growth and increased profits. Our track record of profitability demonstrates the merits of our business model and approach to providing dry bulk logistics solutions. While we can’t know where precisely dates will go, we are confident that we’ve built the company that can successfully navigate a variety of market conditions. Thank you for your time and attention. I now like to turn the call over to Tony Laura, our CFO to provide additional details on the financials. Tony?
