Aegean Marine Petroleum Network Inc. Announces Sec

NEW YORK, NY--(Marketwired - Aug 10, 2017) - Aegean Marine Petroleum Network Inc. ( NYSE : ANW ) ("Aegean" or the "Company") today announced financial and operating results for the second quarter ended June 30, 2017.

Second Quarter Financial Highlights

• Recorded sales volumes of 4,474,494 metric tons.
• Achieved gross profit of $82.2 million.
• Generated operating income of $16.2 million.
• Recorded net income attributable to Aegean shareholders of $1.7 million or $0.04 basic and diluted earnings per share.
• Generated EBITDA of $24.2 million.

Management Commentary

Jonathan Mcilroy, Aegean's President, commented, "During the second quarter of 2017, we continued to see challenging market conditions across the shipping and marine fuel space. While demand for marine fuel remains high, sales margins remain under pressure by a combination of low oil prices, depressed commercial shipping freight rates and fierce competition on the supply side.

"The new leadership team appointed in July 2017 focuses on four main objectives. To rationalize our global platform delivering on asset optimization; to execute on the cost saving initiative; to capitalize on key business development projects and to generate new revenue streams that leverage our global platform and built-in capacity.

"In this context, and within the challenging market conditions I described, Aegean achieved a solid performance in the second quarter of 2017. Compared to Q1 2017, the Company achieved higher sales volume with improved profit margins. Furthermore, we reduced operational expenses and improved our profitability. While more work remains to be done in the cost reduction area, we are on our way to executing on specific initiatives positioning us well to benefit from any market up turns.

"Executing on asset optimization, we are moving assets out of congested areas where they are underutilized and move them to other areas within our network where they can be better utilized and with higher margins. At the same time, we are selling or leasing assets to third parties. 

"In terms of new business development, in Q2 2017 we announced the launching of a new service center in Savannah, Georgia, the third largest container port in the United States. Furthermore, we established a bunker trading office in Dubai and presence in Taiwan. Also, the acquisition of OBAST Bunkering & Trading GmbH in Rostock, which we announced in Q1, is contributing to our business in Germany.

"We are further leveraging Aegean's global infrastructure and branding by pursuing a growth strategy that does not require intensive capital expenditures. We seek to enter new areas or to maintain our presence in key hubs by teaming with local operators."

Spyros Gianniotis, Aegean's Chief Financial Officer, stated, "Comparing Q2 2017 to Q1 2017, there was 0.5% increase in sales volumes, indicating the sustainability of cargo volumes and Aegean's marketing prowess from last quarter. During the quarter, we improved our profit margin and reduced our operating expenses. As a result, we achieved a 2.4% increase in Gross Profit, a 10.0% increase in adjusted EBITDA, a 16.6% increase in adjusted Operating Income and a 22.3% increase in adjusted Net Income.

"The higher volumes and improved gross spread contributed to higher gross profit by $1.9 million from previous quarter to $82.2 million. Despite higher expense by $2.6 million for the restricted shares granted to personnel, all other expenses were reduced by $3.0 million compared to the previous quarter resulting in an operating income of $16.2 million.

"Our interest expense has increased to $14.8 million as a result of a decrease in the mark to market of our 5 years interest rate swaps which however continue to be well in the money. The interest expense line contains $4.9 million of non-cash items like amortizing bank fees, notes discount and the MTM of the interest rate swaps. This number in the previous quarter was $2.7 million. Adjusting for the above-mentioned amounts results in $9.2 million non-US GAAP net income.

"On the cost cutting front we have already implemented measures that will result in annual savings of approximately $7 million as of Q3 2017. We are targeting another $13 million of cost reduction by reshuffling the older vessels and controlling other administrative expenses.

"We continue to have excellent relationship with our big number of banks participating in all our facilities. As of last week we renewed for another year the Aegean's USA facility of $250 million and we are currently working to renew the global facility for the rest of the business. Both facilities have been or will be extended at improved terms."

Financial Results

• Revenue - The Company reported total revenue of $1,440.7 million for the second quarter of 2017, an increase of 45.9% compared to the same period in 2016, primarily due to the increase in oil prices. Voyage and other revenues decreased to $18.9 million or by 4.3% compared to the same period in 2016.
• Gross Profit - Gross Profit, which equals total revenue less directly attributable cost of revenue decreased by 11.9% to $82.2 million in the second quarter of 2017 compared to $93.4 million in the same period in 2016.
• Operating Expense - The Company reported operating expense of $66.0 million for the second quarter of 2017, an increase of $1.5 million or 2.3% compared to the same period in prior year.
• Operating Income - Operating income for the second quarter of 2017 adjusted for the sale of non-core assets was $16.2 million, a decrease of 48.4% 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 $1.7 million, or $0.4 basic and diluted earnings per share, a decrease of $14.3 million or 89.6% compared to the same period in 2016.

Operational Metrics

• Sales Volume - For the three months ended June 30, 2017, the Company reported marine fuel sales volumes of 4,474,494 metric tons, an increase of 9.3% compared to the same period in 2016. 
• Adjusted EBITDA Per Metric Ton of Marine Fuel Sold - For the three months ended June 30, 2017, the Company reported adjusted EBITDA per metric ton of marine fuel sold of $5.39. Adjusted EBITDA per metric ton of marine fuel sold in the prior year period was $9.26 per metric ton.
• Gross Spread Per Metric Ton of Marine Fuel Sold - For the three months ended June 30, 2017, the Company reported gross spread per metric ton of marine fuel sold on an aggregate basis of $16.8. Gross spread per metric ton of marine fuel sold in the prior year period was $20.9.

Liquidity and Capital Resources

• Net cash provided by operating activities was $18.7 million for the three months ended June 30, 2017. Net income as adjusted for non-cash items (as defined in Note 9 below) was $18.4 million for the same period.Net cash provided by investing activities was $0.1 million for the three months ended June 30, 2017.
• Net cash provided by financing activities was $3.2 million for the three months ended June 30, 2017.
• As of June 30, 2017, the Company had cash and cash equivalents of $82.5 million and working capital of $442.6 million. Non-cash working capital, or working capital excluding cash and debt, was $709.7 million.
• As of June 30, 2017, the Company had $842.4 million of undrawn amounts under its working capital facilities and $82.5 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, 2017, was 38,217,254. The weighted average basic and diluted shares outstanding for the three months ended June 30, 2016 was 48,117,508.

Summary Consolidated Financial and Other Data (Unaudited)
		For the Three Months Ended June 30,								For the Six Months Ended June 30,
		2016				2017				2016				2017
		(in thousands of U.S. dollars, unless otherwise stated)
Income Statement Data:
Revenues - third parties		$	982,337			$	1,436,241			$	1,730,853			$	2,955,266
Revenues - related companies			5,219				4,418				9,635				9,651
Total revenues			987,556				1,440,659				1,740,488				2,964,917
Cost of revenues - third parties			876,495				1,336,306				1,538,121				2,760,586
Cost of revenues- related companies			17,682				22,107				28,120				41,752
Total cost of revenues			894,177				1,358,413				1,566,241				2,802,338
Gross profit			93,379				82,246				174,247				162,579
Operating expenses:
Selling and distribution			49,943				53,058				100,715				107,943
General and administrative			11,823				12,854				23,319				24,269
Amortization of intangible assets			297				168				597				335
Loss on sale of vessels			2,437				(67	)			2,437				(67	)
Operating income			28,879				16,233				47,179				30,099
Net financing cost			(12,477	)			(14,716	)			(21,838	)			(26,789	)
Foreign exchange (losses) / gains, net			(1,922	)			290				(1,683	)			597
Income tax (expense) / benefit			(947	)			(93	)			1,645				(822	)
Net income			13,533				1,714				25,303				3,085
Less income/(loss) attributable to non-controlling interest			8				(9	)			8				8
Net income attributable to AMPNI shareholders		$	13,525			$	1,723			$	25,295			$	3,077
Basic earnings per share (U.S. dollars)		$	0.27			$	0.04			$	0.51			$	0.08
Diluted earnings per share (U.S. dollars)		$	0.27			$	0.04			$	0.51			$	0.08
EBITDA (1)		$	35,459			$	24,206			$	62,606			$	46,144
Other Financial Data:
Gross spread on marine petroleum products (2)		$	86,504			$	75,907			$	161,572			$	149,058
Gross spread on lubricants (2)			1,031				725				1,765				1,351
Gross spread on marine fuel (2)			85,473				75,182				159,807				147,707
Gross spread per metric ton of marine fuel sold (U.S. dollars) (2)			20.9				16.8				19.2				16.6
Net cash (used in) / provided by operating activities		$	(60,441	)		$	18,742			$	(49,497	)		$	(48,348	)
Net cash provided by / (used in) investing activities			7,878				110				(877	)			(2,732	)
Net cash provided by financing activities			44,515				3,249				38,491				39,602
Sales Volume Data (Metric Tons): (3)
Total sales volumes			4,092,789				4,474,494				8,305,425				8,924,757
Other Operating Data:
Number of owned bunkering tankers, end of period (4)			47.0				45.0				47.0				45.0
Average number of owned bunkering tankers (4)(5)			48.4				45.0				48.7				45.0
Special Purpose Vessels, end of period (6)			1.0				1.0				1.0				1.0
Number of operating storage facilities, end of period (7)			14.0				12.0				14.0				12.0

Summary Consolidated Financial and Other Data (Unaudited)
		As of December 31, 2016			As of June 30, 2017
		(in thousands of U.S. dollars, unless otherwise stated)
Balance Sheet Data:
Cash and cash equivalents		93,836			82,481
Gross trade receivables		512,398			564,863
Allowance for doubtful accounts		(8,647	)		(10,559	)
Inventories		187,766			219,764
Current assets		909,252			960,718
Total assets		1,600,933			1,640,144
Trade payables		131,584			126,059
Current liabilities (including current portion of long-term debt)		497,712			518,118
Total debt		817,631			860,122
Total liabilities		1,011,342			1,039,554
Total stockholder's equity		589,591			600,590
Working Capital Data:
Working capital (8)		413,621			442,600
Working capital excluding cash and debt (8)		631,451			709,650

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,
		2016		2017			2016			2017
		(in thousands of U.S. dollars, unless otherwise stated)
Net income to AMPNI shareholders		13,525		1,723			25,295			3,077
Add: Net financing cost including amortization of financing costs		12,447		14,716			21,838			26,789
Add: Income tax expense / (benefit)		947		93			(1,645	)		822
Add: Depreciation and amortization excluding amortization of financing costs		8,510		7,674			17,118			15,456
EBITDA		35,459		24,206			62,606			46,144
Add: Loss / (gain) on sale of vessels		2,437		(67	)		2,437			(67	)
Adjusted EBITDA		37,896		24,139			65,043			46,077
Sales volume of marine fuel (metric tons)		4,092,789		4,474,494			8,305,425			8,924,757
Adjusted EBITDA per metric ton of marine fuel sold (U.S. dollars)		9.26		5.39			7.83			5.16

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,
			2016			2017			2016			2017
			(in thousands of U.S. dollars, unless otherwise stated)
Sales of marine petroleum products			967,808			1,421,769			1,702,623			2,926,010
	Less: Cost of marine petroleum products sold		(881,304	)		(1,345,862	)		(1,541,051	)		(2,776,952	)
Gross spread on marine petroleum products			86,504			75,907			161,572			149,058
	Less: Gross spread on lubricants		(1,031	)		(725	)		(1,765	)		(1,351	)
Gross spread on marine fuel			85,473			75,182			159,807			147,707
Sales volume of marine fuel (metric tons)			4,092,789			4,474,494			8,305,425			8,924,757
Gross spread per metric ton of marinefuel sold (U.S. dollars)			20.9			16.8			19.2			16.6

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, the U.S.A. and Hamburg.

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, share-based compensation, 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,
			2016			2017			2016			2017
			(in thousands of U.S. dollars, unless otherwise stated)
Net income			13,533			1,714			25,303			3,085
	Add: Depreciation		6,353			5,922			12,792			11,797
	Add: Provision for doubtful accounts		640			1,163			1,421			1,927
	Add: Share based compensation		2,179			3,733			4,588			5,617
	Add: Amortization		4,585			4,914			9,151			9,890
	Add: Net deferred tax expense / (benefit)		920			(217	)		(1,959	)		3,395
	Add: Unrealized loss / (gain) on derivatives		6,566			891			34,194			(13,715	)
	Add: Loss / (gain) on sale of vessels		2,437			(67	)		2,437			(67	)
	Add: Unrealized foreign exchange (gain) / loss		(118	)		299			89			369
Net income as adjusted for non-cash items			37,095			18,352			88,016			22,298

Second Quarter 2017 Dividend Announcement On August 10, 2017, the Company's Board of Directors declared a second quarter 2017 dividend of $0.02 per share payable on or about September 7, 2017 to shareholders of record as of August 24, 2017. 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 Friday, August 11, 2017 at 8:30 A.M. Eastern Time, to discuss its second quarter results. Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1 (866) 819-7111 (from the US), 0(800) 953-0329 (from the UK) or (+44) (0) 1452 542 301 (Standard International Dial In). Please quote "Aegean."

A telephonic replay of the conference call will be available until Friday, August 18th, 2017. The United States replay number is 1 (866) 247-4222; from the UK 0(800) 953-1533; the standard international replay number is (+44) (0) 1452 550 000 and the access code required for the replay is: 88442018#.

The webcast will also be archived on the Company's website: http://www.ampni.com .

About Aegean Marine Petroleum Network Inc. Aegean Marine Petroleum Network Inc. is an international marine fuel logistics company that markets and physically supplies refined marine fuel and lubricants to ships in port and at sea. The Company procures product from various sources (such as refineries, oil producers, and traders) and resells it to a diverse group of customers across all major commercial shipping sectors and leading cruise lines. Currently, Aegean has a global presence in more than 30 markets and a team of professionals ready to serve our customers wherever they are around the globe. For additional information please visit: www.ampni.com

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," "intend," "anticipate," "estimate," "project," "forecast," "plan," "potential," "may," "should," "expect" 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 our ability to manage growth, our ability to maintain our business in light of our proposed business and location expansion, our ability to obtain double hull secondhand bunkering tankers, the outcome of legal, tax or regulatory proceedings to which we may become a party, adverse conditions in the shipping or the marine fuel supply industries, our ability to retain our key suppliers and key customers, material disruptions in the availability or supply of crude oil or refined petroleum products, changes in the market price of petroleum, including the volatility of spot pricing, increased levels of competition, compliance or lack of compliance with various environmental and other applicable laws and regulations, our ability to collect accounts receivable, changes in the political, economic or regulatory conditions in the markets in which we operate, and the world in general, our failure to hedge certain financial risks associated with our business, our ability to maintain our current tax treatments and our failure to comply with restrictions in our credit agreements 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.