At this time, I would like to welcome everyone to the Pangaea Logistics Solutions third quarter 2017 earnings teleconference. Our host for today's call are Mr. Ed Coll, Chairman and Chief Executive Officer, and Mr. Gianni Del Signore, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 11 AM Eastern Time. The recording can be accessed by dialing 800-585-8367 for domestic or 404-537-3406 for international and referencing ID number 3091109. All lines are currently muted. And after the prepared remarks, there will be a live question-and-answer session. [Operator Instructions]. It is now my pleasure to turn the floor over to Mr. Sean Silva with Prosek Partners.

Thank you, Maria. And thank you for joining us for this morning's third quarter 2017 earnings conference call for Pangaea Logistics Solutions. With us today from the company are Chairman and CEO, Mr. Ed Coll, and Chief Financial Officer, Mr. Gianni Del Signore. Before I turn the call over to Ed, I'd like to read the Safe Harbor statement. This conference could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Pangaea Logistics Solutions. Forward-looking statements are statements that are not based on historical fact. Such forward-looking statements are based upon the current beliefs and expectations of Pangaea Logistics Solutions' management and are subject to risks and uncertainties, which could cause the actual results to differ from the forward-looking statements. Such risks are more fully discussed in Pangaea Logistics Solutions' filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Pangaea Logistics Solutions does not assume any obligation to update the information contained in this conference call. Also, please recall that a supplemental slide presentation will accompany this call. Those slides can be found attached to the 8-K that was filed with last evening's release, which is available on the Investors section of www.pangaeals.com under company filings or on the SEC's website at sec.gov. Now, I would like to turn the call over the Pangaea Logistics Solutions' Chairman and CEO, Mr. Ed Coll. Ed?

Thanks, Sean. And good morning to all of you and thank you for joining us on the call. This morning, I'll provide an update of our operations and the market at large before turning the call over to Gianni, our CFO, to provide a more detailed overview of the third quarter financials. Then, we'll the open the line up for questions. We hope that you had time to review our press release and accompanying presentation, which were issued last evening. Over the past few calls, you've heard our continued optimism about improvement in the dry bulk market and that trend has continued as dry bulk market rates finished the third quarter at its highest level in nearly three years. The increase in freight rates is due to various factors, including the improving global economy and increasing base metal and industrial commodity prices. The Baltic Dry Index, a measure of dry bulk market performance, increased to an average of 1162 for the third quarter of 2017, up from an average of 744 for the third quarter of 2016. Having anticipated and positioned ourselves to capitalize on a market recovery, the third quarter continued to present opportunities for us to drive our strategy. During the quarter, we executed the memorandum of agreement to purchase the vessel Tenmyo Maru, which boasts 58,749 in deadweight tonnage. The ship was built in November 2008 at the Tsuneishi Group Shipyard and is expected to be delivered in December. This complements our broader strategy to expand our owned fleet, supported by our delivery of two additional Ultramax, ice-class 1C dry bulk carriers, from the Oshima Shipyard in January and Bulk Freedom this past June. We also completed our 100th voyage of the motor vessel Bulk Patriot in partnership with Noranda Bauxite and Alumina, the operating companies of…

Thank you, Ed. And thank you all for joining us on the call today. We were encouraged by our performance during the quarter across several metrics. Now, I'll be taking some time to talk through the significance behind some of these for the quarter in light of the progress we've made since last year's downturn. First, we almost doubled our adjusted EBITDA compared to last quarter at $14 million versus $7.4 million respectively. We also reported increases in net income from $6.1 million to $7.2 million, and operating income from $7.8 million to $10 million. These results were largely driven by strengthening balance sheet, increased demand from our customers, more ships operated, higher charter rates, and better volume. These factors, when combined with the improvements in the dry bulk market and a 34% increase in total shipping days, led to a 51% year-over-year increase in revenue from $7.8 million to $107 million. More importantly, we've been able to grow efficiently and responsibly, having significantly improved our working capital despite using cash in the growth of our operating fleet. This growth has supported our expansion strategy where we raised the necessary capital to facilitate the delivery of four new ships within the current year, all at excellent terms. And we're putting our own ships to work as we were operating an average of 58 vessels or 34% more during this past quarter than during the third quarter of 2016. But Pangaea is not a vessel tonnage provider or market timer. We've been in the business for too long and know how to maximize our differentiators. We do not invest heavily in a fleet to be used by others and wait for vessel values to increase. In addition, we continue to outperform market averages. During 2016, a major down cycle year for…

Thank you, Gianni. We continue to feel positively about the dry bulk markets [indiscernible] and are optimistic about our corresponding strategy. We've made several major strides as a company this year and we look forward to updating you on our progress.

[Operator Instructions] Our first question comes from the line of [indiscernible].

Hey, good morning, guys. And congratulations on what looks to be a record quarter in terms of the operating earnings. I guess, if I were to start with the operational, can you kind of walk us through the main events in the quarter in terms of cargo activity? And, I guess, as a follow-up, you're delivering, I would say, relatively flat TCE quarter-over-quarter, but you're not running in excess of 5,000 operating days. How should we kind of look on the chartering business developing going forward do you think?

Thank you for the question. I think our business model, as you know, is quite flexible. So, the chartered fleet got down – our total fleet got down in February 2016 to about 28 ships, including owned fleet that’s because the market was in a terrible place and we adjusted with our chartered fleet. Now, what we see going on in the markets and the world economy is an expansion. And as a result, we expanded our fleet. As Gianni said, there's 58 vessels during the quarter, but currently it's more like 68 vessels. So, we just see more demand, more things happening. And because of our focus on backhaul trading and contracts, this market improvement helps us. It allows us to keep ships on the water for a longer period and take advantage of the rising market. So, we're pretty optimistic about the coming year actually or longer.

All right. And then, I guess, on the owned fleet, you acquired the Supra after quarter-end, and you mentioned in the prepared remarks, you might look to take them further. How much leverage should we assume for the Supra? And adjusted for that, what kind of room do you have to expand further given the current balance sheet?

Gianni, do you want to get that one?

Sure, sure. Aspen [ph], thanks again for your question. We're out looking at different possibilities for the upcoming delivery. And as you are aware, the market is quite different. The banks are retreating. I hope this means that only quality credits are able to obtain debt financing at reasonable levels, but luckily we're expecting to move forward on something around 70% on her when we take delivery similar to what we did with the Bulk Endurance.

Okay. And, I guess, as a final one, it seems to be a relatively large movement in the working capital in the quarter on our numbers in the tune of $12 million, which is – it gives you a flat cash development after debt service despite the strong cash earnings. Is there anything particularly to comment on there?

As I've said, we've expanded our operating fleet. And when we go from 28 chartered into – now we're closer to a total fleet size upwards of 60 vessels, it does require working capital. So, in that sort of growth stage or expansion stage of our operated fleet, we do deploy our working capital, and we think we're deploying it effectively because our – we're earning premiums over the market and we can continue to be profitable.

All right. That's helpful. Thank you, guys.

Thank you.

[Operator Instructions]. Our next question comes from the line of Poe Fratt of Noble Capital. Joe, your line is open. Make sure you're not on mute.

Pardon me. It's Poe Fratt. Good morning. I wanted to talk about – I wouldn't mind hearing about the tenure of your chartered-in fleet. And it looks like you expanded it over – since the end of the quarter by about 10 or maybe the quarter-end number was higher than that average. But can you just talk about sort of how we should look at the – for 2018, your chartered-in fleet, if anything is firing, and how you're going to manage in a higher rate environment for new charter-in activity?

Well, thank you. I think, as we go forward, again, the nature of our business is a backhaul trading business. So, in our view, it's a low risk business. In a higher rising market, we actually do a little bit better because by the time the ships come off during the initial employment, they could be capturing the premiums of a higher market. So, we are actually seeing more opportunities going forward. We're working on a number of longer-term projects, which is the backbone of what we do to add value. And I think we're quite comfortable to raise the number ships as needed going into 2018 without a problem. We've had to add a couple of people here and there to the operation and that's a good thing, and we're constantly bringing in younger people and training them, which we also believe is the absolute best way to get quality, well-trained people if you do it yourself. So, we feel very, very confident and comfortable with the fleet. I can see if the market cooperates, it's endless. We could go to 100 ships, I'm sure. We need to add some people for that. On the technical side, we're very efficient with our operating costs for the owned fleet and all the ships are in very good condition, a great condition. So, we've been preparing for this since 2014, and now it's starting to come to fruition. And the good part for us is we've always paid our bills. We pay our banks. We pay our debt. We acclimatize our ships and no one else does that. So, I think their past mistakes are going to make it more difficult for them to take advantage of the rising markets.

Thank you. And then, Gianni, I think you mentioned that you're going to finance the dry bulk acquisition with about 70% financing.

You're absolutely right. But I just wanted to – before discussing that one further, just add a little more on our fundamental chartering strategy with our fleet. Ed recapped it very well. But I think to answer more of the term, fundamentally, our philosophy is the same. And when we charter-in vessels. it's basically to service a client or a commitment that we have. And the term of which that we do that is unchanged. We'll still do it under a short-term basis. Nothing really longer than six months or about there. So, I think from that perspective, as we go forward, we'll still view our chartering strategy with the operated fleet under that type of term. And as far as the financing, you're right, we're looking to move forward around 70% – just over 70% leverage on the Bulk Pride.

Yeah, okay. And I think – he might have been asking for a little color on the acquisition market. What's the outlook for expanding your owned fleet in 2018? Have you seen asking prices move up commensurate with rates? Or sort of what's the tone of the market right now? You talked about the financing. So, hopefully, all the quality credits with good financing, but can you talk about the sell side out there?

Well, I think what you've seen is a strong increase in vessel values. We basically bought earlier this year in June the Supermax and we paid 8.7. That ship probably is worth 11.5 right now. We're paying 13.8 for a ship that's three years that's going to deliver the Bulk Pride. I think at the moment, you're going to see things flatten a little bit, but there's a lot of demand for quality ships. And what we end up doing, we don't buy other people's junk, right? So, we only are buying ships of quality, Japanese built ships. And that's a submarket in and of itself. So, we'd rather buy a Mercedes than buy a Hugo, right? And that's our view of it. So, that market can defend. As Gianni said, we don't need to go out and try to buy a fleet of Chinese ships. It's not what we do, but we can selectively find really good ships. And so, when we look at it, we look at what does it cost us to charter a ship versus what does it cost us to own a ship. And these days, it's still much better, given the most recent purchase, much better to be owning that ship. Because in the nature of our business, we've always owned about 25% of our business activity, perhaps now it's up to 30%. I think with a rising market – and what that does is it – if we're running 60 ships and we own 18, or pick the number, these 60 ships are what we need, but we'll lean a little bit more that way. We'll own a little bit more annual charter a little bit less. So, it's just adjusting the model. And, no, I anticipate that we will continue to look for opportunities to buy ships and also several of the projects that we are working on will require that to happen. And we're not buying ships just in the hope the market goes up. We try to be thoughtful about the process. I hope that can answer your question.

No, that's helpful color. And over the last week or so, your stock has been on a tear. And I was just sort of trying to get some color on what you can do near-term to capitalize on that, the stock appreciation. And the one thing I was looking at is, in August it looked like, you equitized some of the dividend payable. You still have a dividend payable of $7.2 million. And is that something that you might be considering as far as equitizing the remaining portion of the dividend payable?

I think it's a continuing discussion. We're grateful that the stock has been on a tear, but to us we don't understand it any more than why it's at such a low price to begin with. And it still I think well undervalued. And I think for the people that made those conversions, including myself, we probably are open to doing that again as needed. I think by doing that, it shows investors that you're hand-in-hand with them. And you continue to have skin in the game and also it improves the balance sheet quite a bit. So, this is an evolving strategy, also based on what stock price has been doing.

Yeah, that's helpful. And then, just a couple of nitpicky ones, on your owned fleet, can talk about just any near-term drydocks that you're going to have to do? And then, also on the G&A, G&A for the quarter went up. I think part of that was comp expense was close to $800,000 or $900,000. What's a reasonable run rate for the fourth quarter and then looking at 2018 on cash G&A?

Gianni.

Sure. So then, as part of the G&A question, I think, looking forward, we expect the first and second quarter to be a more reflective indication for fourth-quarter. You're absolutely right that there was some incentive compensation in the third quarter. Our non-cash G&A for this year, I believe, was around $800,000. So, I think going forward, like I said, the first and second quarter will probably be a better indication for the fourth. And your question on drydocks, we do have some near-term drydocks that I think Ed may speak to in a little bit more detail. We have two drydocks on our Nordic Barents and Nordic Bothnia vessels. And then, we have one in the first quarter of 2018.

Speak to the Nordic Barents and Bothnia, they're older ships, but they're ice class vessels. We decided to spend some of the drydock money on them because they are going into at least a three-year COA. Trading in the ice, that probably will have a very strong return, maybe $14,000, $15,000 a day. And so, it makes sense to put the investment in them and those are ships with pretty low – specifically ships with pretty low debt. I think they're about $3.2 million each and we have good financing from Nordea. So, I think those ships should throw off a lot of cash. Even older ships, now we get approached and those ships specifically approached by a lot of Russian people who want to use them in the ice and we consider ourselves, I would say, the premier ice trading company in the world. And it wouldn't be helpful for us to be selling assets to someone who's going to compete with us. And then those are those two ships. And then, we have another in the – coming in the first quarter. It's a 2003 built Supermax. Again, the ship has very low debt. Something a little over $2 million. The asset value for that ship is now probably somewhere between $10 million, $10.5 million. And so, it makes sense to – and we have to put a ballast water treatment system in, which we've avoided so far. So, it makes sense to invest the drydock money in order to get at least two-and-a-half years out of the ship. That certainly is going to be way cheaper than the chartering a ship.

That's great. It looks like that's the Newport, Ed, as far as the first quarter drydocks?

Yes, yes.

And then, can you just maybe get a little color on sort of what we should expect for drydocking expense both in the fourth quarter and the first quarter of next year?

Gianni?

Yeah. We're looking, as far as the fourth quarter, just over $2 million on the two, Barents and Bothnia. And then, in the first quarter, it's close to – just under a million.

And even with the ballast water treatment, Gianni?

Yes. Even with the ballast water treatment.

Great. Thanks for the color. And really appreciate your time. Nice quarter.

Thank you.

Thanks, Poe.

[Operator Instructions]. At this time, I'm showing no further questions. I'd like to turn the floor back over to management for any additional or closing remarks.

Well, thank you all for taking the time to join us this morning and have a great day.