NewLead Holdings Ltd. Announces First Quarter 2010 Financial Results

PIRAEUS, Greece, May 20 /PRNewswire-FirstCall/ -- NewLead Holdings Ltd. (Nasdaq: NEWL) ("NewLead"), a vertically-integrated global shipping company specializing in the drybulk and products tanker shipping industry, today reported its financial results for the three months ended March 31, 2010.

Michael S. Zolotas, President and Chief Executive Officer stated, "We are pleased with the significant progress made towards implementing our strategy as reflected by the $5.1 million adjusted EBITDA generated by our core vessels during the first quarter of 2010. By creating a stable cash flow from our core business, we are building a scalable platform capable of supporting significant growth."  

RECENT DEVELOPMENTS

• Completion of first phase of turnaround
  • Dropdown of six vessels and ship management company
  • Newbuilding program: Agreed to purchase three newbuild vessels, with quality long-term charters
• Expansion of fleet by over 50% since the recapitalization of NewLead in October 2009
• Sale of non-core vessels, including all container vessels

Completion of First Phase of Turnaround

Since recapitalizing NewLead in October 2009, management has focused on disposing all non-core vessels, including both inefficient and container vessels, while simultaneously acquiring newer tonnage with quality time charters. Despite these dispositions, management has grown NewLead's fleet by over 50%.

Dropdown of Six Vessels and Ship Management Company

On April 1, 2010, NewLead completed the dropdown of six vessels (four drybulk vessels and two product tankers) and Newlead Shipping S.A. ("Newlead Shipping"), an integrated technical and commercial management company, from Grandunion Inc. In connection with this transaction, NewLead transferred to Grandunion 8,844,444 shares of NewLead's common stock and assumed existing liabilities.

Newlead Shipping is an integrated technical and commercial management company managing oil tankers, gas carriers, chemical carriers and bulkers. They provide a broad spectrum of technical and commercial management to all segments within the maritime shipping industry. Newlead Shipping holds the following accreditations:

• ISO 9001 from American Bureau of Shipping for a quality management system, by consistently providing a service that meets customer and applicable statutory and regulatory requirements, and by enhancing customer satisfaction through, among other things, processes for continual improvement
• ISO 14001 from American Bureau of Shipping for environmental management, including policy and objectives targeting legal and other requirements
• Certificate of Company Compliance from American Bureau of Shipping for safety, quality and environmental management

Newbuilding Program: Three New Vessels

In February 2010, NewLead agreed to purchase two 80,000 dwt geared Kamsarmaxes for an aggregate purchase price of $112.7 million. The vessels are expected to be delivered from COSCO Dalian Shipyard during the fourth quarter of 2010 and 2011 respectively, and will be chartered out immediately upon delivery to a first-class charterer.

The first vessel is chartered-out for a five-year initial term at $28,710 (net) per day plus a two year option ranging between $20,000 and $28,000. The second vessel is chartered-out for a seven-year term at $27,300 (net) per day. These time charters are projected to add approximately $16.1 million in annual EBITDA and $104.0 million in aggregate EBITDA over the term of the charters.

In March 2010, NewLead agreed to purchase a 92,000 dwt post-Panamax vessel for $37.0 million. Delivery is expected from a first-class Korean shipyard in the second quarter of 2011. NewLead anticipates financing the vessel with a combination of debt and cash from its balance sheet. The vessel will be chartered-out to a first-class charterer for approximately seven years at a floor rate of approximately $15,000 per day plus 50/50 profit sharing.  This time charter is projected to add approximately $3.2 million in annual EBITDA and $21.0 million in aggregate EBITDA, assuming zero profit sharing. Using rates as of May 17, 2010, and assuming an appropriate profit sharing, the annualized EBITDA would be $6.9 million and aggregate EBITDA over the term of the charter would be $46.9 million.

Sale of Non-Core Vessels

In April 2010, NewLead sold two vessels, the Chinook and the High Rider, and agreed to sell the Ostria and the Nordanvind for a total consideration of $30.2 million for these four vessels. The Chinook is a 2001 Romanian-built, 38,700 dwt, MR tanker. The High Rider is a 1991 Japanese-built, 41,502 dwt, MR tanker. The Ostria and the Nordanvind are 2000 and 2001, respectively, Romanian-built, 38,615 dwt, MR tankers. The sale of the Ostria and the Nordanvind is expected to be concluded during the second quarter of 2010. NewLead also intends to sell the High Land, a 1992 Japanese-built, 41,450 dwt, MR tanker during the third quarter of 2010. These five vessels were deemed by management to be non-core to continuing operations given the fact that they had been operating at sub-par rates on the spot market for an extended period. Divesting these inefficient vessels is expected to favorably impact adjusted EBITDA from continuing operations by approximately $7.8 million annually. NewLead plans to use the net proceeds from these sales to renew its fleet or reduce its outstanding indebtedness.

Furthermore, in January 2010, NewLead completed the sale of its container vessels, the MSC Seine and the Saronikos Bridge, for $13.0 million of gross cash proceeds. A portion of these proceeds was used to pay down outstanding debt. As a result of the sale and delivery of these vessels, NewLead exited the container market.

Accordingly, the results of operations related to the container market are reflected as discontinued operations.

FINANCIAL RESULTS

For the following results and the selected financial data presented herein, NewLead has compiled consolidated statement of operations for the three months ended March 31, 2010 and 2009. The information was derived from the unaudited consolidated financial statements of the successor and predecessor business (all financial results subsequent to October 13, 2009 are reflected in the SUCCESSOR business). EBITDA and adjusted EBITDA is a non-US GAAP financial measure and should not be used in isolation or substitution for the predecessor and successor results.  Furthermore, with the exit from the container market and the addition of drybulk vessels, NewLead will focus its operations and strategic initiatives on the tanker and drybulk shipping markets. As a result, NewLead reports its operations in two operating segments, the "Wet" and "Dry" which will include the results of operations for the product tankers and drybulk vessels, respectively.

For the quarter ended March 31, 2010, total revenues from continuing operations increased by 54.7% to $18.1 million compared to total revenues of $11.7 million recorded for the quarter ended March 31, 2009. This increase in revenue is primarily attributable to the 33% growth in NewLead's fleet relative to the first quarter of 2009.  As part of management initiatives, NewLead had twelve vessels in operation for the first quarter of 2010 as compared to nine vessels for the first quarter of 2009. The revenue growth was partially offset by an increase in direct voyage expenses of $3.1 million to $5.0 million, representing a 163.2% increase from the $1.9 million incurred during the first quarter of 2009 as a consequence of a 150.0% increase in the number of vessels operating on the spot market. For the quarters ended March 31, 2010 and March 31, 2009, NewLead's time charter equivalent (TCE) rates were $13,639 per day and $13,142 per day, respectively, reflecting the higher direct voyage costs during the first quarter of 2010.

Fleet utilization for the quarter ended March 31, 2010 was 82.4% compared to 82.2% for the first quarter of 2009. During the first quarter of 2010, 50% of NewLead's fleet was fixed on time charters compared to 67% in the same quarter of 2009. Excluding the non-core vessels, 71% of NewLead's fleet was fixed on time charters, which is in line with NewLead's chartering strategy to have 60% -80% of its fleet on period time charters. Fleet utilization for the quarter ended March 31, 2010 was suppressed by 175 unemployment days primarily attributable to the inefficient performance of many of NewLead's non-core vessels (High Rider, Chinook, Ostria and Nordanvind) which were operating on the spot tanker market. Furthermore, the temporary loss of oil major approvals due to a change in technical managers during the first quarter of 2010 for the NewLead Avra and the NewLead Fortune hindered their employment. While this hampers the vessels' employment in the near term, NewLead anticipates that in the longer term operating efficiencies will materially increase.

Adjusted EBITDA from continuing operations for the quarter ended March 31, 2010, was $1.7 million, compared to $2.8 million for the quarter ended March 31, 2009. This decrease was mainly attributable to the adjusted EBITDA loss of $3.4 million for the non-core vessels.  Excluding the non-core vessels, adjusted EBITDA for the core vessels was $5.1 million representing a 30.8% increase compared to $3.9 million for the relevant period of 2009.  

Net loss from continuing operations was $24.5 million for the quarter ended March 31, 2010, compared to a net loss from continuing operations of $4.7 million, recorded for the quarter ended March 31, 2009. The results for the first quarter of 2010 reflect higher net revenues of approximately $3.0 million due to the operation of 12 vessels in 2010 compared to only nine vessels in 2009, as well as a corresponding increase in operating expenses of approximately $2.0 million. As a result of the growth of NewLead's fleet, available and operating days during the quarter increased by 25% relative to the comparable period in 2009. Furthermore, the first quarter of 2010 reflected higher interest expenses of approximately $6.3 million as a result of NewLead's recapitalization, primarily attributable to the issuance of 7% senior convertible notes which included a $3.6 million non-cash charge from the amortization of the beneficial conversion feature embedded in the notes. In addition, the results for the period ended March 31, 2010 include a non-cash impairment loss on vessels of $12.4 million related to the sale and pending sales of non-core vessels. Depreciation and amortization increased by approximately 47.4% to $5.6 million during the three months ended March 31, 2010, compared to $3.8 million during the equivalent period in 2009 reflecting the increase in the numbers of vessels being operated. In addition, for the three months ended March 31, 2010, NewLead included an amount of $1.5 million for the amortization of the backlog asset due to the assumption of charters associated with the fair valuing of certain vessels related to the recapitalization in 2009, whereas for the first quarter of 2009, the backlog asset was nil. Moreover, the results for the first quarter of 2010 included a $2.5 million non-cash gain from the change in the fair value of derivatives, as well as transaction costs of $0.9 million relating to the dropdown of six

vessels and ship management company which closed on April 1, 2010.

Net loss for the quarters ended March 31, 2010 and 2009 was $22.3 million and $4.2 million, respectively. This loss includes income from discontinued operations of $2.3 million in 2010 and $0.5 million in 2009, which were primarily related to NewLead's exit from the container market.

For the three months ended March 31, 2010, the weighted average number of basic and diluted shares was 77.2 million, compared to 28.7 million for the relevant period of 2009. As such, the loss per share from continuing operations was $0.32 compared to $0.16 for the equivalent period of 2009.  This loss does not include the earnings per share from discontinued operations of $0.03 and $0.01 for the periods ended March 31, 2010 and 2009, respectively. For the first quarter of 2010, the loss per share (from both continuing and discontinued operations) was $0.29 for the first quarter of 2010 and $0.15 for the first quarter of 2009.

Balance Sheet

NewLead had a working capital position of approximately $56.5 million, reflecting $94.8 million cash and cash equivalents as of March 31, 2010, compared with the working capital position of approximately $67.2 million and $106.3 million in cash and cash equivalents as of December 31, 2009. Total debt as of March 31, 2010 and December 31, 2009, was $269.7 million and $278.7 million, respectively, reflecting the $125.0 million outstanding principal amount of our 7% convertible senior notes as $45.0 million and $41.4 million for the respective periods due to the netting impact of a beneficial conversion feature (discount). As of March 31, 2010, NewLead had 79.5 million of common shares issued and outstanding. As of May 20, 2010, NewLead had 88.3 million of common shares issued and outstanding, reflecting primarily the 8.8 million shares issued in connection with the recent dropdown of six vessels and the ship management company.

FLEET UPDATE

NewLead currently controls 19 vessels, including nine double-hull product tankers, seven drybulk vessels and three newbuilds, which reflect the six vessels acquired in the recent dropdown and the two non-core vessels NewLead has contracted to sell. Currently, 12 out of NewLead's 16 operating vessels are secured on period charters with established international charterers.

The following table details NewLead's fleet deployment as of May 20, 2010:

CONFERENCE CALL INFORMATION

NewLead will hold a conference call today, Thursday, May 20, 2010 at 8:30 am EDT to discuss highlights and details of the first quarter 2010 financial results.

To access the conference call, dial 1 (888) 694-4702 from the US or Canada, or 1 (973) 582-2741 from all other locations. The conference ID is 7556 1004.

Following the teleconference, a replay of the call may be accessed by dialing 1 (800) 642-1687 from the US or Canada, or 1 (706) 645-9291 from all other locations. The conference ID is 7556 1004. The replay will be available through June 3, 2010.

The conference call will also be broadcast live over the Internet. To access the live webcast, please go to the Investor Information tab on the Company's website: http://www.newleadholdings.com.

NewLead will be publishing a supplemental slide presentation which will also be available on the Company's website on the morning of the call.

About NewLead Holdings Ltd.

NewLead Holdings Ltd. is an international shipping company that owns and operates product tankers, and drybulk vessels. NewLead's common stock is listed on the NASDAQ Global Select Market where it trades under the symbol "NEWL". To learn more about NewLead Holdings Ltd., please visit the new website at www.newleadholdings.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995

This press release includes assumptions, expectations, projections, intentions and beliefs about future events.  These statements are intended as ''forward-looking statements.''  We caution that assumptions, expectations, projections, intentions and beliefs about future events may and often do vary from actual results and the differences can be material. All statements in this document that are not statements of historical fact are forward-looking statements.  Forward-looking statements include, but are not limited to, such matters as future operating or financial results; statements about planned, pending or recent acquisitions, business strategy, future dividend payments and expected capital spending or operating expenses, including dry-docking and insurance costs; statements about trends in the drybulk vessel and products tanker shipping markets, including charter rates and factors affecting supply and demand; our ability to obtain additional financing; expectations regarding the availability of vessel acquisitions; and anticipated developments with respect to pending litigation. 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, management's examination of historical operating trends, data contained in our records and other data available from third parties.  Although NewLead Holdings Ltd. believes 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, NewLead Holdings Ltd. cannot assure you that it will achieve or accomplish these expectations, beliefs or projections described in the forward looking statements contained in this press release. Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including changes in charter rates and vessel values, failure of a seller to deliver one or more vessels, failure of a buyer to accept delivery of a vessel, default by one or more charterers of our ships, changes in demand for oil and oil products, the effect of changes in OPEC's petroleum production levels, worldwide oil consumption and storage, changes in demand that may affect attitudes of time charterers, scheduled and unscheduled dry-docking, changes in NewLead Holdings Ltd.'s voyage and operating expenses, including bunker prices, dry-docking and insurance costs, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents, international hostilities and political events or acts by terrorists and other factors discussed in NewLead Holdings Ltd.'s filings with the U.S. Securities and Exchange Commission from time to time. When used in this document, the words ''anticipate,'' ''estimate,'' ''project,'' 'forecast,'' ''plan,'' ''potential,'' ''may,'' ''should,'' and ''expect'' reflect forward-looking statements.  

NEWLEAD HOLDINGS LTD.

DISCLOSURE OF NON-GAAP FINANCIAL MEASURES (unaudited)

(All amounts expressed in thousands of U.S. dollars unless otherwise stated)

DISCLOSURE OF NON-GAAP FINANCIAL MEASURES

EBITDA represents net income from continuing operations, before net interest, taxes, depreciation and amortization. NewLead uses EBITDA because it believes that EBITDA is a basis upon which liquidity can be assessed and because it believes that EBITDA presents useful information to investors regarding NewLead's ability to service and/or incur indebtedness. NewLead also believes that EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Adjusted EBITDA represents EBITDA before other non-cash items such as gains on sales of assets, stock-based compensation expense, claim provisions, doubtful receivables, impairment loss and the effect of the amortization of the back log asset and / or deferred revenue due to the assumption of charters associated with certain vessel acquisitions. EBITDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of NewLead's results as reported under U.S. GAAP Some of these limitations are: (i) EBITDA does not reflect changes in, or cash requirements for, working capital needs; and (ii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and EBITDA does not reflect any cash requirements for such capital expenditures.

SOURCE NewLead Holdings Ltd.