10-Q
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10-Q
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(Mark One)
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended June 30, 2008
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission File Number 00051366
EAGLE BULK SHIPPING
INC.
(Exact name of Registrant as
specified in its charter)
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Republic of the Marshall Islands
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980453513
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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477 Madison Avenue
New York, New York 10022
Address of Principal Executive Offices
Registrants telephone number, including area code:
(212) 7852500
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15
(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes x No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large
accelerated
Filer x
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Accelerated
Filer o
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Non-accelerated
Filer o
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Smaller
reporting
company o
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No x
Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest
practicable date.
Common Stock, par value $0.01 per share, 46,770,486 shares
outstanding as of August 7, 2008.
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Part 1 :
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FINANCIAL
INFORMATION
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ITEM 1 :
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FINANCIAL
STATEMENTS
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June 30, 2008
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December 31, 2007
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(Unaudited)
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ASSETS:
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Current Assets:
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Cash
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$
|
62,996,613
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$
|
152,903,692
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Accounts Receivable
|
|
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4,298,844
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|
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|
3,392,461
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Prepaid Expenses
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|
2,119,223
|
|
|
|
1,158,113
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|
|
|
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|
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Total Current Assets
|
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69,414,680
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157,454,266
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Fixed Assets:
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Advances for Vessel Acquisition
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7,650,000
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Vessels and Vessel Improvements, at cost, net of Accumulated
Depreciation of $66,211,384 and $52,733,604, respectively
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717,738,187
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605,244,861
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Advances for Vessel Construction
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380,671,562
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344,854,962
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Restricted Cash
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10,276,056
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9,124,616
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Deferred Drydock Costs, net of Accumulated Amortization of
$3,702,494 and $2,453,253, respectively
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4,168,529
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3,918,006
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Deferred Financing Costs
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14,138,345
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14,479,024
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Other Assets
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4,333,556
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932,638
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|
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|
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Total Assets
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$
|
1,208,390,915
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$
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1,136,008,373
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LIABILITIES & STOCKHOLDERS EQUITY
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Current Liabilities:
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Accounts Payable
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$
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1,774,373
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$
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3,621,559
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Accrued Interest
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4,208,254
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|
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455,750
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Other Accrued Liabilities
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2,846,977
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1,863,272
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Unearned Charter Hire Revenue
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5,941,253
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4,322,024
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Total Current Liabilities
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14,770,857
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10,262,605
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Long-term Debt
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665,694,643
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597,242,890
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Deferred Revenue
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8,793,903
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Other Liabilities
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12,223,412
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13,531,883
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Total Liabilities
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701,482,815
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621,037,378
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Stockholders Equity:
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Preferred Stock, $.01 par value, 25,000,000 shares
authorized, none issued
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Common shares, $.01 par value, 100,000,000 shares
authorized, 46,770,486 and 46,727,153 shares issued and
outstanding, respectively
|
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467,704
|
|
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|
467,271
|
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Additional Paid-In Capital
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607,738,367
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602,929,530
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Retained Earnings (net of Dividends declared of $215,289,302 and
$168,525,482 respectively)
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(93,338,441
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)
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|
|
(75,826,561
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)
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Accumulated Other Comprehensive Loss
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|
(7,959,530
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)
|
|
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(12,599,245
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)
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|
|
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Total Stockholders Equity
|
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|
506,908,100
|
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514,970,995
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Total Liabilities and Stockholders Equity
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$
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1,208,390,915
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$
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1,136,008,373
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The accompanying notes are an integral part of these
Consolidated Financial Statements.
1
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Three Months Ended
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Six Months Ended
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June 30, 2008
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June 30, 2007
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June 30, 2008
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June 30, 2007
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Revenues, net of Commissions
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$
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37,223,200
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$
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28,338,047
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$
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73,909,216
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$
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55,246,579
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Vessel Expenses
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7,596,479
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6,856,581
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15,587,740
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|
|
13,102,479
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Depreciation and Amortization
|
|
|
7,390,982
|
|
|
|
6,046,953
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|
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|
14,727,021
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|
|
|
11,837,584
|
|
General and Administrative Expenses
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|
|
4,762,933
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|
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|
1,697,530
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|
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|
9,812,092
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|
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6,600,573
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Gain on Sale of Vessel
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|
|
|
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|
|
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(872,568
|
)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Total Operating Expenses
|
|
|
19,750,394
|
|
|
|
14,601,064
|
|
|
|
40,126,853
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|
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30,668,068
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|
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Operating Income
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|
17,472,806
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|
|
|
13,736,983
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|
|
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33,782,363
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|
|
|
24,578,511
|
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Interest Expense
|
|
|
3,449,217
|
|
|
|
3,160,439
|
|
|
|
6,799,470
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|
|
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6,312,564
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Interest Income
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|
(882,541
|
)
|
|
|
(1,348,151
|
)
|
|
|
(2,269,047
|
)
|
|
|
(2,146,536
|
)
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|
|
|
|
|
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|
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|
|
|
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|
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Net Interest Expense
|
|
|
2,566,676
|
|
|
|
1,812,288
|
|
|
|
4,530,423
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|
|
4,166,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net Income
|
|
$
|
14,906,130
|
|
|
$
|
11,924,695
|
|
|
$
|
29,251,940
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|
|
$
|
20,412,483
|
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|
|
|
|
|
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|
|
|
|
|
|
|
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|
Weighted Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic
|
|
|
46,763,160
|
|
|
|
41,713,820
|
|
|
|
46,757,849
|
|
|
|
39,593,975
|
|
Diluted
|
|
|
47,123,585
|
|
|
|
41,811,854
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|
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47,047,552
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|
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39,658,525
|
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|
|
|
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|
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Per Share Amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic Net Income
|
|
$
|
0.32
|
|
|
$
|
0.29
|
|
|
$
|
0.63
|
|
|
$
|
0.52
|
|
Diluted Net Income
|
|
$
|
0.32
|
|
|
$
|
0.29
|
|
|
$
|
0.62
|
|
|
$
|
0.51
|
|
Cash Dividends Declared and Paid
|
|
$
|
0.50
|
|
|
$
|
0.50
|
|
|
$
|
1.00
|
|
|
$
|
1.01
|
|
The accompanying notes are an integral part of these
Consolidated Financial Statements.
2
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Common
|
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|
Retained Earnings
|
|
|
Other
|
|
|
Total
|
|
|
|
Common
|
|
|
Shares
|
|
|
Additional
|
|
|
|
|
|
|
|
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Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
|
Shares
|
|
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Amount
|
|
|
Paid-In Capital
|
|
|
Net Income
|
|
|
Cash Dividends
|
|
|
Deficit
|
|
|
(Loss)
|
|
|
Equity
|
|
|
Balance at
December 31, 2007
|
|
|
46,727,153
|
|
|
$
|
467,271
|
|
|
$
|
602,929,530
|
|
|
|
|
|
|
|
|
|
|
$
|
(75,826,561
|
)
|
|
$
|
(12,599,245
|
)
|
|
$
|
514,970,995
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,251,940
|
|
|
|
|
|
|
|
29,251,940
|
|
|
|
|
|
|
|
29,251,940
|
|
Net change in unrealized losses in derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,639,715
|
|
|
|
4,639,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,891,655
|
|
Cash Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(46,763,820
|
)
|
|
|
(46,763,820
|
)
|
|
|
|
|
|
|
(46,763,820
|
)
|
Exercise of Stock Options
|
|
|
13,333
|
|
|
|
133
|
|
|
|
237,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
237,327
|
|
Non-cash Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Stock Grants
|
|
|
30,000
|
|
|
|
300
|
|
|
|
608,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
608,400
|
|
Restricted Stock Grants and Options
|
|
|
|
|
|
|
|
|
|
|
3,963,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,963,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
June 30, 2008
|
|
|
46,770,486
|
|
|
$
|
467,704
|
|
|
$
|
607,738,367
|
|
|
|
|
|
|
|
|
|
|
$
|
(93,338,441
|
)
|
|
$
|
(7,959,530
|
)
|
|
$
|
506,908,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
Consolidated Financial Statements.
3
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30, 2008
|
|
|
June 30, 2007
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
29,251,940
|
|
|
$
|
20,412,483
|
|
Adjustments to Reconcile Net Income to Net Cash provided by
Operating Activities:
|
|
|
|
|
|
|
|
|
Items included in net income not affecting cash flows:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
13,477,780
|
|
|
|
11,234,675
|
|
Amortization of Deferred Drydocking Costs
|
|
|
1,249,241
|
|
|
|
602,909
|
|
Amortization of Deferred Financing Costs
|
|
|
123,219
|
|
|
|
117,784
|
|
Amortization of Prepaid and Deferred Charter Revenue
|
|
|
|
|
|
|
2,160,000
|
|
Non-cash Compensation Expense
|
|
|
4,571,943
|
|
|
|
3,383,579
|
|
Gain on Sale of Vessel
|
|
|
|
|
|
|
(872,568
|
)
|
Changes in Operating Assets and Liabilities:
|
|
|
|
|
|
|
|
|
Accounts Receivable
|
|
|
(906,383
|
)
|
|
|
(791,595
|
)
|
Prepaid Expenses
|
|
|
(961,110
|
)
|
|
|
24,579
|
|
Accounts Payable
|
|
|
(1,847,186
|
)
|
|
|
1,481,907
|
|
Accrued Interest
|
|
|
3,752,504
|
|
|
|
94,759
|
|
Accrued Expenses
|
|
|
983,705
|
|
|
|
(350,612
|
)
|
Drydocking Expenditures
|
|
|
(1,499,764
|
)
|
|
|
(628,307
|
)
|
Unearned Charter Hire Revenue
|
|
|
1,619,229
|
|
|
|
737,176
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities
|
|
|
49,815,118
|
|
|
|
37,606,769
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Advances for Vessel Acquisition
|
|
|
(7,650,000
|
)
|
|
|
|
|
Purchase of Vessels and Vessel Improvements
|
|
|
(70,103,682
|
)
|
|
|
(138,803,974
|
)
|
Advances for Vessel Construction
|
|
|
(82,055,976
|
)
|
|
|
(39,522,428
|
)
|
Proceeds from Sale of Vessel
|
|
|
|
|
|
|
12,011,482
|
|
Advances for Leasehold Improvements
|
|
|
(69,674
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activities
|
|
|
(159,879,332
|
)
|
|
|
(166,314,920
|
)
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Issuance of Common Stock
|
|
|
237,327
|
|
|
|
110,171,870
|
|
Equity Issuance Costs
|
|
|
|
|
|
|
(3,186,989
|
)
|
Bank Borrowings
|
|
|
68,451,753
|
|
|
|
74,841,779
|
|
Repayment of Bank Debt
|
|
|
|
|
|
|
(12,440,000
|
)
|
Changes in Restricted Cash
|
|
|
(1,151,440
|
)
|
|
|
(800,000
|
)
|
Deferred Financing Costs
|
|
|
(616,685
|
)
|
|
|
(108,675
|
)
|
Cash Dividends
|
|
|
(46,763,820
|
)
|
|
|
(39,165,910
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
|
|
20,157,135
|
|
|
|
129,312,075
|
|
Net (Decrease)/Increase in Cash
|
|
|
(89,907,079
|
)
|
|
|
603,924
|
|
Cash at Beginning of Period
|
|
|
152,903,692
|
|
|
|
22,275,491
|
|
|
|
|
|
|
|
|
|
|
Cash at End of Period
|
|
$
|
62,996,613
|
|
|
$
|
22,879,415
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for Interest (including Capitalized
interest of $7,729,831 and $1,165,560 respectively and
Commitment Fees)
|
|
$
|
14,424,367
|
|
|
$
|
7,383,525
|
|
The accompanying notes are an integral part of these
Consolidated Financial Statements.
4
|
|
Note 1.
|
Basis of
Presentation and General Information
|
The accompanying consolidated financial statements include the
accounts of Eagle Bulk Shipping Inc. and its wholly-owned
subsidiaries (collectively, the Company). The
Company is engaged in the ocean transportation of dry bulk
cargoes worldwide through the ownership and operation of dry
bulk vessels. The Companys fleet is comprised of Handymax
bulk carriers and the Company operates its business in one
business segment.
The Company is a holding company incorporated in 2005, under the
laws of the Republic of the Marshall Islands and is the sole
owner of all of the outstanding shares of the Republic of the
Marshall Islands incorporated wholly-owned subsidiaries. The
primary activity of each of the subsidiaries is the ownership of
a vessel. The operations of the vessels are managed by a
wholly-owned subsidiary of the Company, Eagle Shipping
International (USA) LLC, a Republic of the Marshall Islands
limited liability company.
As of June 30, 2008, the Companys operating fleet
consists of 20 vessels. The Company has a contract for the
purchase of a vessel to be delivered in September 2008. The
Company also has contracts for the construction of
34 vessels under its newbuilding program. The following
table presents certain information concerning the Companys
fleet as of June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel
|
|
|
|
|
No. of Vessels
|
|
Dwt
|
|
|
Type
|
|
Delivery
|
|
Employment
|
|
Vessels in Operation
|
|
|
|
|
|
|
|
|
|
|
20 Vessels
|
|
|
1,021,023
|
|
|
17 Supramax
|
|
2005 2008
|
|
Time Charter
|
|
|
|
|
|
|
3 Handymax
|
|
2005
|
|
Time Charter
|
Vessels to be delivered
|
|
|
|
|
|
|
|
|
|
|
1 Vessel
|
|
|
53,000
|
|
|
Supramax
|
|
September 2008
|
|
Charter Free
|
4 Vessels
|
|
|
212,400
|
|
|
53,100 dwt series Supramax
|
|
2008 2009
|
|
3 Vessels on Time Charter and 1 Vessel Charter Free
|
5 Vessels
|
|
|
280,000
|
|
|
56,000 dwt series Supramax
|
|
2008 2010
|
|
Charter Free
|
25 Vessels
|
|
|
1,450,000
|
|
|
58,000 dwt series Supramax
|
|
2009 2012
|
|
17 Vessels on Time Charter and 8 Vessels Charter Free
|
The following table represents certain information about the
Companys charterers which individually accounted for more
than 10% of the Companys gross time charter revenue during
the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Consolidated Time Charter Revenue
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
Charterer
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Charterer A
|
|
|
|
|
|
|
14.1
|
%
|
|
|
|
|
|
|
14.4
|
%
|
Charterer B
|
|
|
26
|
%
|
|
|
25.0
|
%
|
|
|
26
|
%
|
|
|
24.5
|
%
|
Charterer D
|
|
|
|
|
|
|
12.1
|
%
|
|
|
|
|
|
|
14.1
|
%
|
Charterer H
|
|
|
18
|
%
|
|
|
12.6
|
%
|
|
|
17
|
%
|
|
|
11.8
|
%
|
Charterer J
|
|
|
10
|
%
|
|
|
11.4
|
%
|
|
|
11
|
%
|
|
|
|
|
Charterer L
|
|
|
19
|
%
|
|
|
|
|
|
|
19
|
%
|
|
|
|
|
Charterer M
|
|
|
11
|
%
|
|
|
|
|
|
|
11
|
%
|
|
|
|
|
5
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles in the United States, and the rules and
regulations of the SEC (Securities and Exchange
Commission) which apply to interim financial statements.
Accordingly, they do not include all of the information and
footnotes normally included in consolidated financial statements
prepared in conformity with generally accepted accounting
principles in the United States. They should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Companys 2007 Annual Report on
Form 10-K.
The accompanying unaudited consolidated financial statements
include all adjustments (consisting of normal recurring
adjustments) that management considers necessary for a fair
presentation of its consolidated financial position and results
of operations for the interim periods presented. The results of
operations for the interim periods are not necessarily
indicative of the results that may be expected for the entire
year.
|
|
a.
|
Vessel
and Vessel Improvements
|
At June 30, 2008, the Companys operating fleet
consisted of 20 dry bulk vessels. The Company has placed a
deposit for the purchase of a Supramax vessel, Redwing, in the
amount of $7,650,000 and the vessel is expected to be delivered
in September 2008. In June 2008, the Company also took delivery
of the Wren, the first of its 35 newbuild vessels. The Wren has
been recorded at its fair market value in connection with the
acquisition of its construction contract from Kyrini Shipping
Inc. in 2007.
|
|
|
|
|
Vessel and vessel improvements consist of the following:
|
|
|
|
|
Vessels and Vessel Improvements, at December 31, 2007
|
|
$
|
605,244,861
|
|
Purchase of Vessel and vessel improvements
|
|
|
70,103,682
|
|
Delivery of Newbuild Vessel
|
|
|
55,867,424
|
|
Depreciation Expense
|
|
|
(13,477,780
|
)
|
|
|
|
|
|
Vessels and Vessel Improvements, at June 30, 2008
|
|
$
|
717,738,187
|
|
|
|
|
|
|
|
|
b.
|
Advances
for Vessel Construction
|
The Company had contracted for the construction of 35 Supramax
vessels, five in Japan and 30 in China. In June 2008, the first
of these vessels, Wren, was constructed in China and delivered
to the Company.
As of June 30, 2008, the Company had five Supramax vessels
under construction at a shipyard in Japan. These five vessels
construction contracts are Japanese yen based and the total cost
of these contracts in US dollars is $167,172,089. The Company
will incur additional associated costs relating to the
construction of these vessels. As of June 30, 2008, the
Company has advanced $62,912,091 in progress payments towards
these contracts. These vessels are expected to be delivered
between 2008 and 2010.
Following the delivery of the first Chinese built vessel, Wren,
in June 2008, the Company has 29 Supramax vessels under
construction at a shipyard in China. As of June 30, 2008,
the total remaining cost of the construction project in China is
approximately $1,235,000,000. As of June 30, 2008, the
Company has advanced $293,039,542 in progress payments towards
the construction of these vessels. These vessels are expected to
be delivered between 2008 and 2010. The Company will incur
additional costs relating to the construction of these vessels,
including capitalized interest, insurance, legal, and technical
supervision costs. The Company had acquired the rights to these
newbuilding vessels in 2007 from Kyrini Shipping Inc., an
unrelated privately held Greek shipping company for
consideration of $150,000,000. The acquisition comprised
purchase contracts for the construction of the 26 Supramax
vessels and time charter employment contracts for 21 of the
26 vessels. The assets and liabilities acquired are
required to be recorded at fair value. The Wren, the first of
the newbuild vessels which delivered in June 2008, has been
recorded at its fair market value. At June 30, 2008, the
Company has recorded deferred revenue of $8,793,903 in
connection with the
6
assumed time charter on the newbuild vessel and this amount will
be amortized to revenue over the life of the time charter
assumed on this vessel. The amounts recorded as of June 30,
2008 are preliminary and subject to the completion of a
valuation.
Further, the Company had acquired options for the construction
of 9 additional Supramax vessels from the shipyard. On
December 27, 2007, the Company exercised four of these
options and the options for the remaining five vessels expired
on March 31, 2008.
As of June 30, 2008, the Company has advanced a net of
$380,671,562 in progress payments towards the newbuilding
vessels including $24,719,929 in associated costs relating to
the construction of these vessels.
|
|
|
|
|
Advances for Vessel Construction consist of the following:
|
|
|
|
|
Advances for Vessel Construction, at December 31, 2007
|
|
$
|
344,854,962
|
|
Progress Payments
|
|
|
69,173,063
|
|
Capitalized Interest
|
|
|
12,337,530
|
|
Legal and Technical Supervision Costs
|
|
|
1,379,528
|
|
Delivery of Newbuild Vessel
|
|
|
(47,073,521
|
)
|
|
|
|
|
|
Advances for Vessel Construction, at June 30, 2008
|
|
$
|
380,671,562
|
|
|
|
|
|
|
At June 30, 2008, the Companys debt consisted of
$665,694,643 in net borrowings under the $1,600,000,000 amended
revolving credit facility. These borrowings consisted of
$283,343,310 for the 20 vessels currently in operation and
$382,351,333 to fund the Companys newbuilding program.
During the six months ended June 30, 2008, the Company
borrowed $68,451,753 to fund the progress payments for the
newbuilding vessels.
For the six months ended June 30, 2008, interest rates on
the outstanding debt ranged from 3.11% to 6.04%, including a
margin of 0.80% over LIBOR applicable under the terms of the
amended revolving credit facility. The weighted average
effective interest rate was 5.46%. The Company incurs a
commitment fee of 0.25% on the undrawn portion of the revolving
credit facility. Interest costs on borrowings used to fund the
Companys newbuilding program are capitalized until the
vessels are delivered.
Interest Expense, exclusive of capitalized interest, consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Loan Interest
|
|
$
|
3,377,560
|
|
|
$
|
2,957,413
|
|
|
$
|
6,650,973
|
|
|
$
|
5,906,167
|
|
Commitment Fees
|
|
|
10,345
|
|
|
|
143,254
|
|
|
|
25,278
|
|
|
|
288,613
|
|
Amortization of Deferred Financing Costs
|
|
|
61,312
|
|
|
|
59,772
|
|
|
|
123,219
|
|
|
|
117,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest Expense
|
|
$
|
3,449,217
|
|
|
$
|
3,160,439
|
|
|
$
|
6,799,470
|
|
|
$
|
6,312,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash interest paid, exclusive of capitalized interest, in the
six month periods ended June 30, 2008 and 2007 amounted to
$6,079,939 and $6,217,965, respectively.
Interest-Rate
Swaps
The Company has entered into interest rate swaps to effectively
convert a portion of its debt from a floating to a fixed-rate
basis. Under these swap contracts, exclusive of applicable
margins, the Company will pay fixed rate interest and receive
floating-rate interest amounts based on three-month LIBOR
settings.
7
The swaps are designated and qualify as cash flow hedges. As of
June 30, 2008, the Company has the following swap contracts
outstanding:
|
|
|
|
−
|
Notional amount of $84,800,000 with a fixed interest rate of
5.24% and maturity in September 2009.
|
Upon maturity, this amount will commence a new swap with a fixed
interest rate of 3.90% and matures in September 2013.
|
|
|
|
−
|
Notional amount of $25,776,443 with a fixed interest rate of
4.90% and maturity in March 2010
|
|
|
−
|
Notional amount of $10,995,000 with a fixed interest rate of
4.98% and maturity in August 2010
|
|
|
−
|
Notional amount of $202,340,000 with a fixed interest rate of
5.04% and maturity in August 2010
|
|
|
−
|
Notional amount of $100,000,000 with a fixed interest rate of
4.22% and maturity in September 2010
|
|
|
−
|
Notional amount of $30,000,000 with a fixed interest rate of
4.54% and maturity in September 2010
|
|
|
−
|
Notional amount of $25,048,118 with a fixed interest rate of
4.74% and maturity in December 2011
|
|
|
−
|
Notional amount of $36,752,038 with a fixed interest rate of
5.22% and maturity in August 2012
|
|
|
−
|
Notional amount of $81,500,000 with a fixed interest rate of
3.895% and maturity in January 2013
|
The Company records the fair value of the interest rate swaps as
an asset or liability on its balance sheet. The effective
portion of the swap is recorded in accumulated other
comprehensive income. Accordingly, a liability of $12,223,412
and $13,531,883 has been recorded in Other Liabilities in the
Companys balance sheets as of June 30, 2008 and
December 31, 2007, respectively.
Foreign
Currency Swaps
The Company has entered into foreign exchange swap transactions
to hedge foreign currency risks on its capital asset
transactions (vessel newbuildings). The swaps are designated and
qualify as cash flow hedges.
At June 30, 2008 and December 31, 2007, the Company
had outstanding foreign currency swap contracts for notional
amounts aggregating 11.28 billion Japanese yen swapped into
the equivalent of $104,259,998.
The Company records the fair value of the currency swaps as an
asset or liability in its financial statements. The effective
portion of the swap is recorded in accumulated other
comprehensive income. Accordingly, an amount of $4,263,882 and
$932,638 have been recorded in Other Assets in the accompanying
balance sheets as of June 30, 2008 and December 31,
2007, respectively.
|
|
Note 4.
|
Commitments
and Contingencies
|
Vessel
Technical Management Contracts
The Company has technical management agreements for each of its
vessels with independent technical managers. The Company paid
average monthly technical management fees of $9,537 and $8,895
per vessel during the six months ended June 30, 2008 and
2007, respectively.
Operating
Lease
In December 2005, the Company entered into a lease for office
space. The lease is secured by a Letter of Credit backed by cash
collateral of $124,616 which amount is recorded as Restricted
Cash in the accompanying balance sheets. In March 2008, the
Company amended the lease to incorporate additional office
space. The amended lease expires in 2018. The cash collateral
securing the lease has been increased
8
by $151,440. The Company has recorded the total Cash collateral
of $276,056 as Restricted Cash. The future minimum commitments
under the leases for office space as of June 30, 2008 are
as follows:
|
|
|
|
|
2008
|
|
$
|
324,276
|
|
2009
|
|
|
648,552
|
|
2010
|
|
|
648,552
|
|
2011
|
|
|
788,519
|
|
2012
|
|
|
835,175
|
|
2013-18
|
|
|
4,523,865
|
|
|
|
|
|
|
Total
|
|
$
|
7,768,939
|
|
|
|
|
|
|
As of June 30, 2008, the Company has incurred an amount of
$69,674 in leasehold improvements which has been recorded in
Other Assets in the accompanying balance sheets. Leasehold
improvements will be amortized over the remaining life of the
lease.
|
|
Note 5.
|
Earnings
Per Common Share
|
The computation of basic earnings per share is based on the
weighted average number of common shares outstanding during the
period. Diluted net income per share gives effect to the assumed
exercise of stock options and restricted stock units using the
treasury stock method, unless the impact is anti-dilutive.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Net Income
|
|
$
|
14,906,130
|
|
|
$
|
11,924,695
|
|
|
$
|
29,251,940
|
|
|
$
|
20,412,483
|
|
Weighted Average Shares Basic
|
|
|
46,763,160
|
|
|
|
41,713,820
|
|
|
|
46,757,849
|
|
|
|
39,593,975
|
|
Dilutive effect of stock options and restricted stock units
|
|
|
360,425
|
|
|
|
98,034
|
|
|
|
289,703
|
|
|
|
64,550
|
|
Weighted Average Shares Diluted
|
|
|
47,123,585
|
|
|
|
41,811,854
|
|
|
|
47,047,552
|
|
|
|
39,658,525
|
|
Basic Earnings Per Share
|
|
$
|
0.32
|
|
|
$
|
0.29
|
|
|
$
|
0.63
|
|
|
$
|
0.52
|
|
Diluted Earnings Per Share
|
|
$
|
0.32
|
|
|
$
|
0.29
|
|
|
$
|
0.62
|
|
|
$
|
0.51
|
|
Dividends
The Companys current policy is to declare quarterly
dividends to shareholders in March, May, August and November.
Payment of dividends is limited by the terms of certain
agreements which the Company and its subsidiaries are party to.
The Companys revolving credit facility permits it to pay
quarterly dividends in amounts up to its cumulative free cash
flows which is our earnings before extraordinary or exceptional
items, interest, taxes, depreciation and amortization (Credit
Agreement EBITDA), less the aggregate amount of interest
incurred and net amounts payable under interest rate hedging
agreements during the relevant period and an agreed upon reserve
for dry-docking for the period, provided that there is not a
default or breach of loan covenant under the credit facility and
the payment of the dividends would not result in a default or
breach of a loan covenant. Depending on market conditions in the
dry bulk shipping industry and acquisition opportunities that
may arise, the Company may be required to obtain additional debt
or equity financing which could affect its dividend policy.
However, any determination to pay dividends in the future will
be at the discretion of the Board of Directors and will depend
upon the Companys results of operations, financial
condition, capital restrictions, covenants and other factors
deemed relevant by the Board of Directors.
On February 27, 2008, the Companys Board of Directors
declared a cash dividend for the fourth quarter of 2007 of $0.50
per share. The aggregate amount of this cash dividend was
$23,378,577 and was paid on March 18, 2008 to all
shareholders of record as of March 13, 2008.
9
On May 6, 2008, the Companys Board of Directors
declared a cash dividend for the first quarter of 2008 of $0.50
per share. The aggregate amount of this cash dividend was
$23,385,243 and was paid on May 23, 2008 to all
shareholders of record as of May 20, 2008.
|
|
Note 7.
|
2005
Stock Incentive Plan
|
The Company adopted the 2005 Stock Incentive Plan for the
purpose of affording an incentive to eligible persons. The 2005
Stock Incentive Plan provides for the grant of equity-based
awards, including stock options, stock appreciation rights,
restricted stock, restricted stock units, stock bonuses,
dividend equivalents and other awards based on or relating to
the Companys common shares to eligible non-employee
directors, selected officers and other employees and independent
contractors. The plan is administered by a committee of the
Companys Board of Directors. An aggregate of
2.6 million shares of the Companys common stock has
been authorized for issuance under the plan.
In 2006 and 2007, the Company awarded stock options to members
of its management and its independent non-employee directors. As
of June 30, 2008, options covering 617,334 of the
Companys common shares are outstanding with exercise
prices ranging from $13.23 to $21.88 per share (the market
prices at dates of grant). The options granted to the directors
vested and became exercisable on the grant dates. The options
granted to members of its management vest and become exercisable
over three years. All options expire ten years from the date of
grant. For purposes of determining the non-cash compensation
cost for the Companys stock option plans using the fair
value method of FAS 123(R), the fair value of the options
granted was estimated on the date of grant using the
Black-Scholes option pricing model.
In 2007, the Company granted restricted stock units
(RSUs) to members of its management which vest
ratably over three years. In June 2008, the Company granted
833,333 RSUs, vesting ratably over five years, to its Chief
Executive Officer as part of an employment agreement. As of
June 30, 2008, RSUs covering a total of 1,627,046 of the
Companys shares are outstanding. These RSUs also entitle
the participant to receive a dividend equivalent payment on the
unvested portion of the underlying shares granted under the
award, each time the Company pays a dividend to the
Companys shareholders. The Company is amortizing to
non-cash compensation expense the fair value of the non-vested
restricted stock at the grant date. For the three and six months
ended June 30, 2008, the amortization charge was $1,974,240
and $3,800,286, respectively. The remaining expense for each of
the years ending 2008, 2009, and 2010 will be $6,077,090,
$12,154,180 and $11,483,253, respectively, and $11,976,801
thereafter.
On January 15, 2008, the Company granted 30,000 shares
of its common stock to its independent non-employee directors.
The fair value of the stock at the grant date is equal to the
closing stock price on that date and a total amount of $608,400
has been recorded in non-cash compensation expense for the six
months ended June 30, 2008.
Non-cash compensation expenses include profits interests awarded
to members of the Companys management by the
Companys former principal shareholder, Eagle Ventures LLC.
These profits interests diluted only the interests of owners of
Eagle Ventures LLC, and did not dilute direct holders of the
Companys common stock. However, the Companys
statement of operations reflects non-cash charges for
compensation related to the profits interests. The non-cash
compensation charges were being recorded as an expense over the
estimated service period in accordance with
SFAS No. 123(R). As Eagle Ventures has sold
substantially all of its holdings in the Company, the non-cash,
non-dilutive charges relating to profits interests ended in the
first quarter of 2007 and there are no charges in future
periods. Accordingly, the expense for the six-month period ended
June 30, 2007 included $3,137,812 in non-cash, non-dilutive
charges relating to the profits interests.
10
The non-cash compensation expenses recorded by the Company and
included in General and Administrative Expenses are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Stock Option Plans
|
|
$
|
82,000
|
|
|
$
|
124,356
|
|
|
$
|
163,257
|
|
|
$
|
245,767
|
|
Restricted Stock Grants
|
|
|
1,974,240
|
|
|
|
|
|
|
|
3,800,286
|
|
|
|
|
|
Stock Grants
|
|
|
|
|
|
|
|
|
|
|
608,400
|
|
|
|
|
|
Non-dilutive Profits Interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,137,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-cash compensation expense
|
|
$
|
2,056,240
|
|
|
$
|
124,356
|
|
|
$
|
4,571,943
|
|
|
$
|
3,383,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2006 and 2007, the Company granted Dividend Equivalent Rights
Award (DERs) to its independent non-employee
directors and members of its management. These DERs entitle the
participant to receive a dividend equivalent payment each time
the Company pays a dividend to the Companys shareholders.
As of June 30, 2008, DERs equivalent to 632,334 of the
Companys common shares are outstanding. For the three and
six months ended June 30, 2008, the Company has also
recorded in General and Administrative Expense cash compensation
expenses of $713,023 and $1,426,046.
|
|
Note 9.
|
Subsequent
Events
|
Dividend
On August 5, 2008, the Companys Board of Directors
declared a cash dividend for the second quarter of 2008 of $0.50
per share, based on 46,770,486 of the Companys common
shares outstanding, payable to all shareholders of record as of
August 20, 2008. The aggregate amount of this cash dividend
payable to the Companys shareholders on August 26,
2008 is $23,385,243.
Long-Term
Debt
On July 3, 2008, the Company entered into an Amendatory
Agreement to its $1,600,000,000 revolving credit facility. Among
other things, the amended facility provides us with an
additional incremental commitment of up to $200,000,000 under
the same terms and conditions as the existing facility, subject
to satisfaction of certain additional conditions. The Company
now also has the ability to purchase additional drybulk vessels
in excess of 85,000dwt and over 10 years of age, but no
more than 20 years of age, with certain limitations. The
agreement also provides for the purchase or acquisition of more
than one additional vessel en bloc or the acquisition of
beneficial ownership in one or more additional vessel(s). The
agreement amends the margin applicable over the Libor interest
rate on borrowings to 0.95% for the next two years. Thereafter,
if the advance ratio is less than 35%, the margin will be 0.80%
per year; if the advance ratio is equal to or greater than 35%
but less than 60%, the margin will be 0.95%; if the advance
ratio is equal to or greater than 60%, the margin will be 1.05%.
The agreement also amends the commitment fee on the undrawn
portion of the revolving credit facility to 0.30%. In connection
with this latest amendment, applicable arrangement fees will be
incurred and these fees will be in proportion to the arrangement
fees previously incurred when the revolving facility was
increased to $1,600,000,000 in 2007. All other terms and
conditions remain unchanged.
11
|
|
ITEM 2.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
|
The following is a discussion of the Companys financial
condition and results of operation for the three-month and
six-month periods ended June 30, 2008 and 2007. This
section should be read in conjunction with the consolidated
financial statements included elsewhere in this report and the
notes to those financial statements.
This discussion contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of
1934, as amended and the Private Securities Litigation Reform
Act of 1995 and are intended to be covered by the safe harbor
provided for under these sections. These statements may include
words such as believe, estimate,
project, intend, expect,
plan, anticipate, and similar
expressions in connection with any discussion of the timing or
nature of future operating or financial performance or other
events. Forward looking statements reflect managements
current expectations and observations with respect to future
events and financial performance. Where we express an
expectation or belief as to future events or results, such
expectation or belief is expressed in good faith and believed to
have a reasonable basis. However, our forward-looking statements
are subject to risks, uncertainties, and other factors, which
could cause actual results to differ materially from future
results expressed, projected, or implied by those
forward-looking statements. The principal factors that affect
our financial position, results of operations and cash flows
include, charter market rates, which have recently increased to
historic highs, and periods of charter hire, vessel operating
expenses and voyage costs, which are incurred primarily in
U.S. dollars, depreciation expenses, which are a function
of the cost of our vessels, significant vessel improvement costs
and our vessels estimated useful lives, and financing
costs related to our indebtedness. Our actual results may differ
materially from those anticipated in these forward looking
statements as a result of certain factors which could include
the following: (i) changes in demand in the dry bulk
market, including, without limitation, changes in production of,
or demand for, commodities and bulk cargoes, generally or in
particular regions; (ii) greater than anticipated levels of
dry bulk vessel new building orders or lower than anticipated
rates of dry bulk vessel scrapping; (iii) changes in rules
and regulations applicable to the dry bulk industry, including,
without limitation, legislation adopted by international bodies
or organizations such as the International Maritime Organization
and the European Union or by individual countries;
(iv) actions taken by regulatory authorities;
(v) changes in trading patterns significantly impacting
overall dry bulk tonnage requirements; (vi) changes in the
typical seasonal variations in dry bulk charter rates;
(vii) changes in the cost of other modes of bulk commodity
transportation; (viii) changes in general domestic and
international political conditions; (ix) changes in the
condition of the Companys vessels or applicable
maintenance or regulatory standards (which may affect, among
other things, our anticipated dry docking costs); (x) and
other factors listed from time to time in our filings with the
Securities and Exchange Commission. This discussion also
includes statistical data regarding world dry bulk fleet and
orderbook and fleet age. We generated some of this data
internally, and some were obtained from independent industry
publications and reports that we believe to be reliable sources.
We have not independently verified this data nor sought the
consent of any organizations to refer to their reports in this
quarterly report. We disclaim any intent or obligation to update
publicly any forward-looking statements, whether as a result of
new information, future events or otherwise, except as may be
required under applicable securities laws.
Overview
We are Eagle Bulk Shipping Inc., a Republic of Marshall Islands
corporation headquartered in New York City. We own one of the
largest fleets of Supramax dry bulk vessels in the world.
Supramax dry bulk vessels range in size from 50,000 to 60,000
dwt. We transport a broad range of major and minor bulk cargoes,
including iron ore, coal, grain, cement and fertilizer, along
worldwide shipping routes. As of June 30, 2008, we owned
and operated a modern fleet of 20 Handymax dry bulk vessels, 17
of which are of the Supramax class. In addition to our operating
fleet of 20 vessels, we have contracted for the purchase of
a second-hand Supramax vessel which will be delivered in
September 2008. We also have a Supramax newbuilding program for
the construction of 35 newbuilding vessels in Japan and China.
The first of these
12
vessels was delivered to us in June 2008. Upon delivery of all
newbuilding vessels by early 2012, our total fleet will consist
of 55 vessels with a combined carrying capacity of
3 million dwt.
We are focused on maintaining a high quality fleet that is
concentrated primarily in one vessel type Handymax
dry bulk carriers and its sub-category of Supramax vessels which
are Handymax vessels ranging in size from 50,000 to 60,000 dwt.
These vessels have the cargo loading and unloading flexibility
of on-board cranes while offering cargo carrying capacities
approaching that of Panamax dry bulk vessels, which range in
size from 60,000 to 100,000 dwt and rely on port facilities to
load and offload their cargoes. We believe that the cargo
handling flexibility and cargo carrying capacity of the Supramax
class vessels make them attractive to cargo interests and vessel
charterers. The 20 vessels in our operating fleet, with an
aggregate carrying capacity of 1,021,023 deadweight tons, have
an average age of only 6 years compared to an average age
for the world Handymax dry dulk fleet of over 15 years.
Each of our vessels is owned by us through a separate wholly
owned Republic of the Marshall Islands limited liability company.
We maintain our principal executive offices at 477 Madison
Avenue, New York, New York 10022. Our telephone number at that
address is
(212) 785-2500.
Our website address is www.eagleships.com. Information contained
on our website does not constitute part of this quarterly report.
Our financial performance since inception is based on the
following key elements of our business strategy:
|
|
|
|
(1)
|
concentration in one vessel category: Supramax class of Handymax
dry bulk vessels, which we believe offer size, operational and
geographical advantages (over Panamax and Capesize vessels),
|
|
|
(2)
|
our strategy is to charter our vessels primarily pursuant to
one- to three-year time charters to allow us to take advantage
of the stable cash flow and high utilization rates that are
associated with medium to long-term time charters. Reliance on
the spot market contributes to fluctuations in revenue, cash
flow, and net income. On the other hand, time charters provide a
shipping company with a predictable level of revenues. We have
entered into time charters for all of our vessels which range in
length from one to three years and provide for fixed
semi-monthly payments in advance. This strategy is effective in
strong and weak dry bulk markets, giving us security and
predictability of cashflows when we look at the volatility of
the shipping markets,
|
|
|
(3)
|
maintain high quality vessels and improve standards of operation
through improved environmental procedures, crew training and
maintenance and repair procedures, and
|
|
|
(4)
|
maintain a balance between purchasing vessels as market
conditions and opportunities arise and maintaining prudent
financial ratios (e.g. leverage ratio).
|
13
We have employed all of our vessels in our operating fleet on
time charters for periods ranging from one to three years. The
following table represents certain information about the
Companys revenue earning charters on its operating fleet
as of June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily Time
|
|
|
|
|
|
|
|
|
|
|
|
Charter
|
|
Vessel
|
|
Year Built
|
|
|
Dwt
|
|
|
Time Charter
Expiration(1)
|
|
Hire Rate
|
|
|
Cardinal
|
|
|
2004
|
|
|
|
55,408
|
|
|
May 2008 to August 2008
|
|
$
|
28,000
|
|
|
|
|
|
|
|
|
|
|
|
August 2008 to Jun/Sep 2009
|
|
$
|
62,000
|
|
Condor(2)
|
|
|
2001
|
|
|
|
50,296
|
|
|
May 2009 to August 2009
|
|
$
|
20,500
|
|
Falcon(3)
|
|
|
2001
|
|
|
|
50,296
|
|
|
April 2008 to July 2008
|
|
$
|
20,950
|
|
|
|
|
|
|
|
|
|
|
|
August 2008 to Apr/Jun 2010
|
|
$
|
39,500
|
|
Griffon
|
|
|
1995
|
|
|
|
46,635
|
|
|
March 2009 to June 2009
|
|
$
|
20,075
|
|
Harrier(4)
|
|
|
2001
|
|
|
|
50,296
|
|
|
June 2009 to September 2009
|
|
$
|
24,000
|
|
Hawk I
|
|
|
2001
|
|
|
|
50,296
|
|
|
April 2009 to June 2009
|
|
$
|
22,000
|
|
Heron(5)
|
|
|
2001
|
|
|
|
52,827
|
|
|
January 2011 to March 2011
|
|
$
|
26,375
|
|
Jaeger(6)
|
|
|
2004
|
|
|
|
52,248
|
|
|
July 2008 to September 2008
|
|
$
|
27,500
|
|
Kestrel
I(7)
|
|
|
2004
|
|
|
|
50,326
|
|
|
April 2008 to June 2008
|
|
$
|
18,750
|
|
|
|
|
|
|
|
|
|
|
|
June 2008 to April 2009
|
|
$
|
20,000
|
|
Kite
|
|
|
1997
|
|
|
|
47,195
|
|
|
September 2009 to January 2010
|
|
$
|
21,000
|
|
Merlin(8)
|
|
|
2001
|
|
|
|
50,296
|
|
|
December 2010 to March 2011
|
|
$
|
25,000
|
|
Osprey
I(9)
|
|
|
2002
|
|
|
|
50,206
|
|
|
July 2008 to November 2008
|
|
$
|
21,000
|
|
|
|
|
|
|
|
|
|
|
|
November 2008 to December 2009
|
|
$
|
25,000
|
|
Peregrine
|
|
|
2001
|
|
|
|
50,913
|
|
|
December 2008 to February 2009
|
|
$
|
20,500
|
|
Sparrow(10)
|
|
|
2000
|
|
|
|
48,225
|
|
|
February 2010 to April 2010
|
|
$
|
34,500
|
|
Tern(11)
|
|
|
2003
|
|
|
|
50,200
|
|
|
February 2009 to April 2009
|
|
$
|
20,500
|
|
Shrike(12)
|
|
|
2003
|
|
|
|
53,343
|
|
|
April 2009 to June 2009
|
|
$
|
24,600
|
|
|
|
|
|
|
|
|
|
|
|
June 2009 to Aug 2010
|
|
$
|
25,600
|
|
Skua(13)
|
|
|
2003
|
|
|
|
53,350
|
|
|
May 2009 to August 2009
|
|
$
|
24,200
|
|
|
|
|
|
|
|
|
|
|
|
August 2009 to September 2010
|
|
$
|
25,200
|
|
Kittiwake(14)
|
|
|
2002
|
|
|
|
53,146
|
|
|
May 2008 to August 2008
|
|
$
|
30,400
|
|
|
|
|
|
|
|
|
|
|
|
August 2008 to July/Sep 2009
|
|
$
|
56,250
|
|
Goldeneye
|
|
|
2002
|
|
|
|
52,421
|
|
|
May 2009 to August 2009
|
|
$
|
61,000
|
|
|
|
|
|
|
|
|
|
|
|
Feb 2012
|
|
$
|
24,750
|
|
Wren(15)
|
|
|
2008
|
|
|
|
53,100
|
|
|
Feb 2012 to Dec 2018/Apr 2019
|
|
$
|
18,000 (with
profit share
|
)
|
|
|
|
(1) |
|
The date range provided represents the earliest and latest date
on which the charterer may redeliver the vessel to the Company
upon the termination of the charter. The time charter hire rates
presented are gross daily charter rates before brokerage
commissions, ranging from 2.25% to 6.25%, to third party ship
brokers. |
|
(2) |
|
The charterer of the CONDOR has exercised its option to extend
the charter period by 11 to 13 months at a time charter
rate of $22,000 per day. |
|
(3) |
|
Upon the conclusion of the current charter in July 2008, the
FALCON commenced a new time charter with a rate of $39,500 per
day for 21 to 23 months. The charterer has an option to
extend the charter period by 11 to 13 months at a daily
time charter rate of $41,000. |
|
(4) |
|
The daily rate for the HARRIER is $27,000 for the first year and
$21,000 for the second year. Revenue recognition is based on an
average daily rate of $24,000. |
14
|
|
|
(5) |
|
The previous time charter on the HERON at a daily rate of
$24,000 ended in January 2008. The vessel commenced a new time
charter with a rate of $26,375 per day for 36 to 39 months.
The charterer has an option for a further 11 to 13 months
at a time charter rate of $27,375 per day. The charterer has a
second option for a further 11 to 13 months at a time
charter rate of $28,375 per day. |
|
(6) |
|
The charter rate for the JAEGER may reset at the beginning of
each month based on the average time charter rate for the Baltic
Supramax Index, but in no case be greater than $27,500 per day
or less than $22,500 per day. |
|
(7) |
|
The charterer of the KESTREL I has exercised its option to
extend the charter period by 11 to 13 months at a daily
time charter rate of $20,000 per day. |
|
(8) |
|
The daily rate for the MERLIN is $27,000 for the first year,
$25,000 for the second year and $23,000 for the third year.
Revenue recognition is based on an average daily rate of $25,000. |
|
(9) |
|
The charterer of the OSPREY I has exercised its option to extend
the charter period by up to 11 to 13 months at a time
charter rate of $25,000 per day. The charterer has an additional
option to extend for a further 11 to 13 months at a time
charter rate of $25,000 per day. |
|
(10) |
|
The SPARROW was previously on a time charter at a base rate of
$24,000 per day for 11 to 13 months with a profit share of
30% of up to the first $3,000 per day over the base rate. This
charter ended in February 2008. |
|
(11) |
|
The TERN previously was on a time charter at a daily rate of
$19,000. This charter ended in March 2008 and the charterer has
exercised its option to extend the charter period by 11 to
13 months at a time charter rate of $20,500 per day. |
|
(12) |
|
The charterer of the SHRIKE has exercised their option to extend
the charter period by 12 to 14 months at a daily time
charter rate of $25,600. |
|
(13) |
|
The charterer of the SKUA has exercised an option to extend the
charter period by 11 to 13 months at a daily time charter
rate of $25,200. |
|
(14) |
|
The KITTIWAKE is employed on a time charter for 11 to
13 months. The charter rate may reset at the beginning of
each month based on the average time charter rate for the Baltic
Supramax Index, but in no case be greater than $30,400 per day
or less than $24,400 per day. Upon conclusion of this charter in
August 2008, the KITTIWAKE will commence a new time charter with
a rate of $56,250 per day for 11 to 13 months. |
|
(15) |
|
The WREN has entered into a long-term charter. The charter rate
until February 2012 is $24,750 per day. Subsequently, the
charter until redelivery in December 2018 to April 2019 will be
profit share based. The base charter rate will be $18,000 with a
50% profit share for earned rates over $22,000 per day. Revenue
recognition for the base rate from commencement of the charter
is based on an average daily base rate of $20,306. |
15
The Company has entered into a 35 vessel construction
program. The first of these vessels, the Wren, was constructed
in China and delivered to the Company in June 2008. As of
June 30, 2008, the Company has contracts for
34 vessels to be constructed in China and Japan. The
following table represents certain information about the
Companys newbuilding vessels and their employment upon
delivery:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Built-
|
|
|
|
|
Daily Time
|
|
|
|
|
|
|
|
|
Expected
|
|
|
Time Charter
|
|
Charter Hire
|
|
|
|
Vessel
|
|
Dwt
|
|
|
Delivery(1)
|
|
|
Expiration(2)
|
|
Rate(3)
|
|
|
Profit Share
|
|
Woodstar
|
|
|
53,100
|
|
|
|
Oct 2008
|
|
|
Jan 2014
|
|
$
|
18,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan 2014 to Dec 2018/Apr 2019
|
|
$
|
18,000
|
|
|
50% over $22,000
|
Crowned Eagle
|
|
|
56,000
|
|
|
|
Nov 2008
|
|
|
Charter Free
|
|
|
|
|
|
|
Crested Eagle
|
|
|
56,000
|
|
|
|
Feb 2009
|
|
|
Charter Free
|
|
|
|
|
|
|
Stellar Eagle
|
|
|
56,000
|
|
|
|
Apr 2009
|
|
|
Charter Free
|
|
|
|
|
|
|
Thrush
|
|
|
53,100
|
|
|
|
Sep 2009
|
|
|
Charter Free
|
|
|
|
|
|
|
Bittern
|
|
|
58,000
|
|
|
|
Sep 2009
|
|
|
Dec 2014
|
|
$
|
18,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec 2014 to Dec 2018/Apr 2019
|
|
$
|
18,000
|
|
|
50% over $22,000
|
Canary
|
|
|
58,000
|
|
|
|
Oct 2009
|
|
|
Jan 2015
|
|
$
|
18,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan 2015 to Dec 2018/Apr 2019
|
|
$
|
18,000
|
|
|
50% over $22,000
|
Thrasher
|
|
|
53,100
|
|
|
|
Nov 2009
|
|
|
Feb 2016
|
|
$
|
18,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Feb 2016 to Dec 2018/Apr 2019
|
|
$
|
18,000
|
|
|
50% over $22,000
|
Crane
|
|
|
58,000
|
|
|
|
Nov 2009
|
|
|
Feb 2015
|
|
$
|
18,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Feb 2015 to Dec 2018/Apr 2019
|
|
$
|
18,000
|
|
|
50% over $22,000
|
Avocet
|
|
|
53,100
|
|
|
|
Dec 2009
|
|
|
Mar 2016
|
|
$
|
18,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mar 2016 to Dec 2018/Apr 2019
|
|
$
|
18,000
|
|
|
50% over $22,000
|
Egret(4)
|
|
|
58,000
|
|
|
|
Dec 2009
|
|
|
Sep 2012 to Jan 2013
|
|
$
|
17,650
|
|
|
50% over $20,000
|
Golden Eagle
|
|
|
56,000
|
|
|
|
Jan 2010
|
|
|
Charter Free
|
|
|
|
|
|
|
Gannet(4)
|
|
|
58,000
|
|
|
|
Jan 2010
|
|
|
Oct 2012 to Feb 2013
|
|
$
|
17,650
|
|
|
50% over $20,000
|
Imperial Eagle
|
|
|
56,000
|
|
|
|
Feb 2010
|
|
|
Charter Free
|
|
|
|
|
|
|
Grebe(4)
|
|
|
58,000
|
|
|
|
Feb 2010
|
|
|
Nov 2012 to Mar 2013
|
|
$
|
17,650
|
|
|
50% over $20,000
|
Ibis(4)
|
|
|
58,000
|
|
|
|
Mar 2010
|
|
|
Dec 2012 to Apr 2013
|
|
$
|
17,650
|
|
|
50% over $20,000
|
Jay
|
|
|
58,000
|
|
|
|
Apr 2010
|
|
|
Sep 2015
|
|
$
|
18,500
|
|
|
50% over $21,500
|
|
|
|
|
|
|
|
|
|
|
Sep 2015 to Dec 2018/Apr 2019
|
|
$
|
18,000
|
|
|
50% over $22,000
|
Kingfisher
|
|
|
58,000
|
|
|
|
May 2010
|
|
|
Oct 2015
|
|
$
|
18,500
|
|
|
50% over $21,500
|
|
|
|
|
|
|
|
|
|
|
Oct 2015 to Dec 2018/Apr 2019
|
|
$
|
18,000
|
|
|
50% over $22,000
|
Martin
|
|
|
58,000
|
|
|
|
Jun 2010
|
|
|
Dec 2016 to Dec 2017
|
|
$
|
18,400
|
|
|
|
Besra(5)
|
|
|
58,000
|
|
|
|
Oct 2010
|
|
|
Charter Free
|
|
|
|
|
|
|
Cernicalo(5)
|
|
|
58,000
|
|
|
|
Jan 2011
|
|
|
Charter Free
|
|
|
|
|
|
|
Nighthawk
|
|
|
58,000
|
|
|
|
Mar 2011
|
|
|
Sep 2017 to Sep 2018
|
|
$
|
18,400
|
|
|
|
Oriole
|
|
|
58,000
|
|
|
|
Jul 2011
|
|
|
Jan 2018 to Jan 2019
|
|
$
|
18,400
|
|
|
|
Fulmar(5)
|
|
|
58,000
|
|
|
|
Jul 2011
|
|
|
Charter Free
|
|
|
|
|
|
|
Owl
|
|
|
58,000
|
|
|
|
Aug 2011
|
|
|
Feb 2018 to Feb 2019
|
|
$
|
18,400
|
|
|
|
Petrel(4)
|
|
|
58,000
|
|
|
|
Sep 2011
|
|
|
Jun 2014 to Oct 2014
|
|
$
|
17,650
|
|
|
50% over $20,000
|
Goshawk(5)
|
|
|
58,000
|
|
|
|
Sep 2011
|
|
|
Charter Free
|
|
|
|
|
|
|
Puffin
(4)
|
|
|
58,000
|
|
|
|
Oct 2011
|
|
|
Jul 2014 to Nov 2014
|
|
$
|
17,650
|
|
|
50% over $20,000
|
Roadrunner
(4)
|
|
|
58,000
|
|
|
|
Nov 2011
|
|
|
Aug 2014 to Dec 2014
|
|
$
|
17,650
|
|
|
50% over $20,000
|
Sandpiper
(4)
|
|
|
58,000
|
|
|
|
Dec 2011
|
|
|
Sep 2014 to Jan 2015
|
|
$
|
17,650
|
|
|
50% over $20,000
|
Snipe(5)
|
|
|
58,000
|
|
|
|
Jan 2012
|
|
|
Charter Free
|
|
|
|
|
|
|
Swift
(5)
|
|
|
58,000
|
|
|
|
Feb 2012
|
|
|
Charter Free
|
|
|
|
|
|
|
Raptor
(5)
|
|
|
58,000
|
|
|
|
Mar 2012
|
|
|
Charter Free
|
|
|
|
|
|
|
Saker
(5)
|
|
|
58,000
|
|
|
|
Apr 2012
|
|
|
Charter Free
|
|
|
|
|
|
|
16
|
|
|
(1) |
|
Vessel build and delivery dates are estimates based on guidance
received from shipyard. |
|
(2) |
|
The date range represents the earliest and latest date on which
the charterer may redeliver the vessel to the Company upon the
termination of the charter. |
|
(3) |
|
The time charter hire rates presented are gross daily charter
rates before brokerage commissions, ranging from 2.25% to 6.25%,
to third party ship brokers. Revenue recognition for the long
term charters with base rates will be based on an average daily
base rate over the life of the charter from commencement of the
charter. |
|
(4) |
|
The charterer has an option to extend the charter by two periods
of 11 to 13 months each. |
|
(5) |
|
Options for construction exercised on December 27, 2007. |
Fleet Management
The management of our fleet includes the following functions:
|
|
|
|
|
Strategic management. We locate, obtain
financing and insurance for, purchase and sell vessels.
|
|
|
|
Commercial management. We obtain employment
for our vessels and manage our relationships with charterers.
|
|
|
|
Technical management. The technical manager
performs day-to-day operations and maintenance of our vessels.
|
Commercial and Strategic Management
We carry out the commercial and strategic management of our
fleet through our wholly owned subsidiary, Eagle Shipping
International (USA) LLC, a Republic of the Marshall Islands
limited liability company that maintains its principal executive
offices in New York City. We currently have a total of nineteen
shore based personnel, including our senior management team and
our office staff, who either directly or through this
subsidiary, provides the following services:
|
|
|
|
|
commercial operations and technical supervision;
|
|
|
|
safety monitoring;
|
|
|
|
vessel acquisition; and
|
|
|
|
financial, accounting and information technology services.
|
Technical Management
The technical management of our fleet is provided by
unaffiliated third party technical managers V.Ships, whom we
believe is the worlds largest provider of independent ship
management and related services and Wilhelmsen Ship Management
(formerly Barber Ship Management, Barber), a leading
internationally recognized ship manager. In conjunction with our
management, V. Ships and Barber have established an operating
expense budget for each vessel. All deviations from the budgeted
amounts are for our account. We review the performance of our
ship managers on an ongoing basis and may add or change
technical managers.
Our technical managers are paid a fixed management fee for each
vessel in our operating fleet for the technical management
services provided. For the three-month periods ended
June 30, 2008 and 2007, the technical management fee
averaged $9,015 and $8,875 per vessel per month, respectively.
For the six-month periods ended June 30, 2008 and 2007, the
technical management fee averaged $9,537 and $8,895 per vessel
per month, respectively. Management fees paid to our technical
managers are recorded under Vessel Expenses.
Value
of Assets and Cash Requirements
The replacement costs of comparable new vessels may be above or
below the book value of our fleet. The market value of our fleet
may be below book value when market conditions are weak and
exceed book
17
value when markets conditions are strong. Customary with
industry practice, we may consider asset redeployment which at
times may include the sale of vessels at less than their book
value.
The Companys results of operations and cash flow may be
significantly affected by future charter markets.
Critical
Accounting Policies
The discussion and analysis of our financial condition and
results of operations is based upon our interim, unaudited,
consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States, and the rules and regulations of the SEC which
apply to interim financial statements. The preparation of those
financial statements requires us to make estimates and judgments
that affect the reported amounts of assets and liabilities,
revenues and expenses and related disclosure of contingent
assets and liabilities at the date of our financial statements.
Actual results may differ from these estimates under different
assumptions and conditions.
Critical accounting policies are those that reflect significant
judgments of uncertainties and potentially result in materially
different results under different assumptions and conditions. As
the discussion and analysis of our financial condition and
results of operations is based upon our interim, unaudited,
consolidated financial statements, they do not include all of
the information on critical accounting policies normally
included in consolidated financial statements. Accordingly, a
detailed description of these critical accounting policies
should be read in conjunction with the consolidated financial
statements and notes thereto included in the Companys
Annual Reports on
Form 10-K.
There have been no material changes from the Critical
Accounting Policies previously disclosed in our
Form 10-K
for the year ended December 31, 2007.
Results
of Operations for the three month periods ended June 30,
2008 and 2007:
Fleet
Data
We believe that the measures for analyzing future trends in our
results of operations consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30, 2008
|
|
|
June 30, 2007
|
|
|
June 30, 2008
|
|
|
June 30, 2007
|
|
|
Ownership Days
|
|
|
1,656
|
|
|
|
1,447
|
|
|
|
3,294
|
|
|
|
2,854
|
|
Available Days
|
|
|
1,617
|
|
|
|
1,438
|
|
|
|
3,255
|
|
|
|
2,833
|
|
Operating Days
|
|
|
1,616
|
|
|
|
1,435
|
|
|
|
3,249
|
|
|
|
2,822
|
|
Fleet Utilization
|
|
|
99.9
|
%
|
|
|
99.8
|
%
|
|
|
99.8
|
%
|
|
|
99.6
|
%
|
|
|
|
|
|
Ownership days: We define ownership
days as the aggregate number of days in a period during which
each vessel in our fleet has been owned by us. Ownership days
are an indicator of the size of our fleet over a period and
affect both the amount of revenues and the amount of expenses
that we record during a period. Ownership days for the three
month period ended June 30, 2008 increased 14.4% from the
corresponding period in 2007 as we operated 20 vessels in
the second quarter of 2008 compared to 18 vessels in the
corresponding period in 2007. Ownership days for the six month
period ended June 30, 2008 increased 15.4% from the
corresponding period in 2007 as we operated 20 vessels in
the second quarter of 2008 compared to 18 vessels in the
corresponding period in 2007, net of the sale of a vessel in the
first quarter of 2007.
|
|
|
|
Available days: We define available
days as the number of our ownership days less the aggregate
number of days that our vessels are off-hire due to vessel
familiarization upon acquisition, scheduled repairs or repairs
under guarantee, vessel upgrades or special surveys and the
aggregate amount of time that we spend positioning our vessels.
The shipping industry uses available days to measure the number
of days in a period during which vessels should be capable of
generating revenues. During the three-month period ended
June 30, 2008, the Company incurred a total of 39 days
for drydocking
|
18
|
|
|
|
|
two vessels and vessel familiarization upon delivery of Wren and
Goldeneye which joined the fleet in June 2008. The Company did
not incur any drydock or vessel familiarization days in the
first quarter of 2008. During the same periods in 2007, the
Company incurred a total of 21 days in drydocking one
vessel and positioning a vessel for sale.
|
|
|
|
|
|
Operating days: We define operating
days as the number of our available days in a period less the
aggregate number of days that our vessels are off-hire due to
any reason, including unforeseen circumstances. The shipping
industry uses operating days to measure the aggregate number of
days in a period during which vessels actually generate revenues.
|
|
|
|
Fleet utilization: We calculate fleet
utilization by dividing the number of our operating days during
a period by the number of our available days during the period.
The shipping industry uses fleet utilization to measure a
companys efficiency in finding suitable employment for its
vessels and minimizing the amount of days that its vessels are
off-hire for reasons other than scheduled repairs or repairs
under guarantee, vessel upgrades, special surveys or vessel
positioning. Our fleet continues to perform at high utilization
rates.
|
Revenues
All our vessels are employed on time charters. Our time charter
equivalent (TCE) rate is equal to the time charter
rate. As is common in the shipping industry, we pay commissions
ranging from 1.25% to 6.25% of the total daily charter hire rate
of each charter to unaffiliated ship brokers and in-house
brokers associated with the charterers, depending on the number
of brokers involved with arranging the charter.
Net revenues for the three-month period ended June 30, 2008
of $37,223,200 included billed time charter revenues of
$39,170,513 and deductions for brokerage commissions of
$1,947,313. These net revenues were 31% greater than net
revenues for the comparable three-month period ended
June 30, 2007, primarily due to a larger fleet size as
reflected by increased operating days and an increase in daily
time charter rates. Net revenues for the three-month period
ended June 30, 2007 of $28,338,047 included billed time
charter revenues of $31,011,901, deductions for brokerage
commissions of $1,593,854 and amortization of net prepaid
charter revenue of $1,080,000.
Net revenues for the six-month period ended June 30, 2008
of $73,909,216 included billed time charter revenues of
$77,781,434 and deductions for brokerage commissions of
$3,872,218. Net revenues for the six-month period ended
June 30, 2008 were 34% greater than the net revenues in the
comparable period in 2007 primarily due to a larger fleet size
as reflected by increased operating days, and an increase in
daily time charter rates. Net revenues for the comparable
six-month period ended June 30, 2007 of $55,246,579
included billed time charter revenues of $60,488,275, deductions
for brokerage commissions of $3,081,696 and amortization of net
prepaid charter revenue of $2,160,000.
Vessel
Expenses
Vessel operating expenses include crew wages and related costs,
the cost of insurance, expenses relating to repairs and
maintenance, the cost of spares and consumable stores and
related inventory, tonnage taxes, pre-operating costs associated
with the delivery of acquired vessels including providing the
newly acquired vessels with initial provisions and stores, and
other miscellaneous expenses.
Vessel expenses for the three-month period ended June 30,
2008 were $7,596,479 compared to $6,856,581 in the comparable
three-month period ended June 30, 2007. The increase in
vessel expense is attributable to a larger fleet size in
operation for the second quarter of 2008 and increases in vessel
crew and lubricants costs. Vessel expenses for the three-month
period ended June 30, 2008 included $7,110,980 in vessel
operating costs and $485,499 in technical management fees.
Vessel expenses for the comparable period in 2007 included
$6,435,504 in vessel operating costs and $421,077 in technical
management fees.
Vessel expenses for the six-month period ended June 30,
2008 were $15,587,740 compared to $13,102,479 in the comparable
six-month period ended June 30, 2007. The increase in
vessel expense is attributable to a larger fleet size in
operation for the six-month period of 2008 and increases in
vessel crew
19
and lubricants costs. Vessel expenses for the six-month period
ended June 30, 2008 included $14,550,939 in vessel
operating costs and $1,036,801 in technical management fees.
Vessel expenses for the six-month period ended June 30,
2007 included $12,271,965 in vessel operating costs and $830,514
in technical management fees.
Our vessel expenses will increase with the enlargement of our
fleet. Other factors beyond our control, some of which may
affect the shipping industry in general, may also cause these
expenses to increase, including, for instance, developments
relating to market prices for crew, insurance and
petroleum-based lubricants and supplies.
Depreciation
and Amortization
The cost of our vessels is depreciated on a straight-line basis
over the expected useful life of each vessel. Depreciation is
based on the cost of the vessel less its estimated residual
value. We estimate the useful life of our vessels to be
28 years from the date of initial delivery from the
shipyard to the original owner. Furthermore, we estimate the
residual values of our vessels to be $150 per lightweight ton,
which we believe is common in the dry bulk shipping industry.
Our depreciation charges will increase as our fleet is enlarged.
For the three-month periods ended June 30, 2008 and 2007,
total depreciation and amortization expense were $7,390,982 and
$6,046,953, respectively. Total depreciation and amortization
expense for the three-month period ended June 30, 2008
includes $6,769,365 of vessel depreciation and $621,617 relating
to the amortization of deferred drydocking costs. Comparable
amounts for the three-month period ended June 30, 2007 were
$5,719,027 of vessel depreciation and $327,926 of amortization
of deferred drydocking costs.
For the six-month periods ended June 30, 2008 and 2007,
total depreciation and amortization expense were $14,727,021 and
$11,837,584, respectively. Total depreciation and amortization
expense for the six-month period ended June 30, 2008
includes $13,477,780 of vessel depreciation and $1,249,241
relating to the amortization of deferred drydocking costs.
Comparable amounts for the six-month period ended June 30,
2007 were $11,234,675 of vessel depreciation and $602,909 of
amortization of deferred drydocking costs.
Amortization of deferred financing costs is included in interest
expense. These financing costs relate to costs associated with
our revolving credit facility and these are amortized over the
life of the facility. For the three-month periods ended
June 30, 2008 and 2007, the amortization of deferred
financing costs was $61,312 and $59,772, respectively. For the
six-month periods ended June 30, 2008 and 2007, the
amortization of deferred financing costs was $123,219 and
$117,784, respectively.
General
and Administrative Expenses
Our general and administrative expenses include onshore vessel
administration related expenses such as legal and professional
expenses and administrative and other expenses including payroll
and expenses relating to our executive officers and office
staff, office rent and expenses, directors fees, and directors
and officers insurance. General and administrative expenses also
include non-cash compensation expenses.
General and administrative expenses for the three-month periods
ended June 30, 2008 and 2007 were $4,762,933 and
$1,697,530, respectively. These general and administrative
expenses include a non-cash compensation component of $2,056,240
and $124,356, respectively. The increase in general and
administrative expenses for the three-month period ended
June 30, 2008 was attributable to expenses, including
non-cash compensation expenses, associated with a larger fleet.
General and administrative expenses for the six-month periods
ended June 30, 2008 and 2007 were $9,812,092 and
$6,600,573, respectively. These general and administrative
expenses include a non-cash compensation component of $4,571,943
and $3,383,579, respectively. The increase in general and
administrative expenses for the six-month period ended
June 30, 2008 was attributable to expenses associated with
a larger fleet. We expect general and administrative expenses to
increase as we expand our fleet.
20
Capitalized
Interest
Interest costs on borrowings used to fund the Companys
newbuilding program are capitalized as part of the cost of the
newbuilding vessels until the vessels are delivered.
For the three-month period ended June 30, 2008,
capitalized interest amounted to $6,214,415 and this amount has
been recorded and included in Advances for Vessel Construction
in the financial statements. For the corresponding three months
period in 2007, capitalized interest amounted to $847,623.
For the six-month period ended June 30, 2008, capitalized
interest amounted to $12,337,530 and this amount has been
recorded and included in Advances for Vessel Construction in the
financial statements. For the corresponding six-month period in
2007, capitalized interest amounted to $1,356,674.
EBITDA
EBITDA represents operating earnings before extraordinary items,
depreciation and amortization, interest expense, and income
taxes, if any. EBITDA is included because it is used by certain
investors to measure a companys financial performance.
EBITDA is not an item recognized by GAAP and should not be
considered a substitute for net income, cash flow from operating
activities and other operations or cash flow statement data
prepared in accordance with accounting principles generally
accepted in the United States or as a measure of
profitability or liquidity. EBITDA is presented to provide
additional information with respect to the Companys
ability to satisfy its obligations including debt service,
capital expenditures, and working capital requirements. While
EBITDA is frequently used as a measure of operating results and
the ability to meet debt service requirements, the definition of
EBITDA used here may not be comparable to that used by other
companies due to differences in methods of calculation.
Our revolving credit facility permits us to pay dividends in
amounts up to our cumulative free cash flows which is our
earnings before extraordinary or exceptional items, interest,
taxes, depreciation and amortization (Credit Agreement EBITDA),
less the aggregate amount of interest incurred and net amounts
payable under interest rate hedging agreements during the
relevant period and an agreed upon reserve for dry-docking.
Therefore, we believe that this non-GAAP measure is important
for our investors as it reflects our ability to pay dividends.
The following table is a reconciliation of net income, as
reflected in the consolidated statements of operations, to the
Credit Agreement EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30, 2008
|
|
|
June 30, 2007
|
|
|
June 30, 2008
|
|
|
June 30, 2007
|
|
|
Net Income
|
|
$
|
14,906,130
|
|
|
$
|
11,924,695
|
|
|
$
|
29,251,940
|
|
|
$
|
20,412,483
|
|
Interest Expense
|
|
|
3,449,217
|
|
|
|
3,160,439
|
|
|
|
6,799,470
|
|
|
|
6,312,564
|
|
Depreciation and Amortization
|
|
|
7,390,982
|
|
|
|
6,046,953
|
|
|
|
14,727,021
|
|
|
|
11,837,584
|
|
Amortization of Prepaid and Deferred Revenue
|
|
|
|
|
|
|
1,080,000
|
|
|
|
|
|
|
|
2,160,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
25,746,329
|
|
|
|
22,212,087
|
|
|
|
50,778,431
|
|
|
|
40,722,631
|
|
Adjustments for Exceptional Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash Compensation
Expense(1)
|
|
|
2,056,240
|
|
|
|
124,356
|
|
|
|
4,571,943
|
|
|
|
3,383,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Agreement EBITDA
|
|
$
|
27,802,569
|
|
|
$
|
22,336,443
|
|
|
$
|
55,350,374
|
|
|
$
|
44,106,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Stock based compensation related to stock options, restricted
stock units, and managements participation in profits
interests in Eagle Ventures LLC (see Notes to our financial
statements). |
Effects
of Inflation
We do not believe that inflation has had or is likely, in the
foreseeable future, to have a significant impact on vessel
operating expenses, drydocking expenses or general and
administrative expenses.
21
Liquidity
and Capital Resources
Net cash provided by operating activities during the six month
periods ended June 30, 2008 and 2007 was $49,815,118 and
$37,606,769, respectively. The increase was primarily due to
cash generated from the operation of the fleet for
3,294 days in the six month period ended June 30, 2008
compared to 2,854 days during the same period in 2007.
Net cash used in investing activities during the six month
period ended June 30, 2008, was $159,879,332 compared to
$166,314,920 during the corresponding period in 2007. Investing
activities during the current six month period included an
amount of $70,103,682 spent for the acquisition of GOLDENEYE,
placing a deposit of $7,650,000 for a vessel, REDWING, which is
to be delivered in September 2008, and advancing a total of
$82,055,976 for the newbuilding vessel construction program.
Investing activities during the comparable six month period in
2007 primarily related to the expenditure of $138,803,974 for
the acquisition of three Supramax vessels, SHRIKE, SKUA and
KITTIWAKE, advances of $39,522,428 for the newbuilding vessel
construction program, and net proceeds of $12,011,482 from the
sale of SHIKRA, a 1984-built Handymax vessel, to an unrelated
third party.
Net cash provided by financing activities during the six month
period ended June 30, 2008 was $20,157,135, compared to net
cash provided by financing activities of $129,312,075 during the
corresponding six month period in 2007. Financing activities
during the current six month period included borrowings of
$68,451,753 from our revolving credit facility to fund the
newbuilding program, and paying $46,763,820 in dividends.
Financing activities during the comparable six month period in
2007 primarily relates to gross proceeds of $110,171,870 from
the sale of common shares of the Companys stock, incurring
costs of $3,186,989 associated with the share sale, borrowings
of $74,841,779 from our revolving credit facility, debt
repayments of $12,440,000 from the gross proceeds of the sale of
the SHIKRA, and payment $39,165,910 in dividends.
As of June 30, 2008, our cash balance was $62,996,613
compared to a cash balance of $22,879,415 at June 30, 2007.
In addition, $10,000,000 in cash deposits are maintained with
our lender for loan compliance purposes and this amount is
recorded in Restricted Cash in our financial statements as of
June 30, 2008. Also recorded in Restricted Cash is an
amount of $276,056 which is collateralizing a letter of credit
relating to our office leases.
As of June 30, 2008, total availability under our
$1,600,000,000 revolving credit facility is $934,305,357. The
facility also provides us with the ability to borrow up to
$20,000,000 for working capital purposes. We anticipate that our
current financial resources, together with cash generated from
operations and, if necessary, borrowings under our revolving
credit facility will be sufficient to fund the operations of our
fleet, including our working capital requirements, for the
foreseeable future. We will rely on operating cash flows as well
as our revolving credit facility and possible additional equity
and debt financing alternatives to fund our long term capital
requirements for vessel construction and implement future growth
plans. We were in compliance with all of the covenants contained
in our debt agreements as of June 30, 2008.
Revolving
Credit Facility
On July 3, 2008, the Company entered into an amended
agreement to its $1,600,000,000 revolving credit facility. Among
other things, the amended facility provides us with an
additional incremental commitment of up to $200,000,000 under
the same terms and conditions as the existing facility, subject
to satisfaction of certain additional conditions. The Company
now also has the ability to purchase additional drybulk vessels
in excess of 85,000dwt and over 10 years of age, but no
more than 20 years of age, with certain limitations. The
Agreement also provides for the purchase or acquisition of more
than one additional vessel en bloc or the acquisition of
beneficial ownership in one or more additional vessel(s). The
agreement amends the margin applicable over the Libor interest
rate on borrowings to 0.95% for the next two years. Thereafter,
if the advance ratio is less than 35%, the margin will be 0.80%
per year; if the advance ratio is equal to or greater than 35%
but less than 60%, the margin will be 0.95%; if the advance
ratio is equal to or greater than 60%, the margin will be 1.05%.
The agreement also amends the commitment fee on the undrawn
portion of the revolving credit facility to 0.30%. In connection
with this
22
latest amendment, applicable arrangement fees will be incurred
and these fees will be in proportion to the arrangement fees
previously incurred when the revolving facility was increased to
$1,600,000,000 in 2007. All other terms and conditions remain
unchanged.
Dividends
Our current policy is to declare quarterly dividends to
stockholders in March, May, August and November in amounts that
are substantially equal to our cumulative available cash from
operations during the previous quarters less any cash reserves
for drydocking and working capital. Our revolving credit
facility permits us to pay quarterly dividends in amounts up to
cumulative free cash flows which is our quarterly earnings
before extraordinary or exceptional items, interest, taxes,
depreciation and amortization (Credit Agreement EBITDA), less
the aggregate amount of interest incurred and net amounts
payable under interest rate hedging agreements during the
relevant period and an agreed upon reserve for drydocking for
the period, provided that there is not a default or breach of
loan covenant under the credit facility and the payment of the
dividends would not result in a default or breach of a loan
covenant. Depending on market conditions in the dry bulk
shipping industry and acquisition opportunities that may arise,
we may be required to obtain additional debt or equity financing
which could affect our dividend policy.
On February 27, 2008 the Companys Board of Directors
declared a cash dividend for the fourth quarter of 2007 of $0.50
per share. The aggregate amount of this cash dividend was
$23,378,577 and was paid on March 18, 2008 to all
shareholders of record as of March 13, 2008.
On May 6, 2008 the Companys Board of Directors
declared a cash dividend for the first quarter of 2008 of $0.50
per share. The aggregate amount of this cash dividend was
$23,385,243 and was paid on May 23, 2008 to all
shareholders of record as of May 20, 2008.
Subsequent to the end of the second quarter, on August 5,
2008, the Companys Board of Directors declared a cash
dividend for the second quarter of 2008 of $0.50 per share,
based on 46,770,486 of the Companys common shares
outstanding, payable to all shareholders of record as of
August 20, 2008. The aggregate amount of this cash dividend
payable to the Companys shareholders on August 26,
2008 is $23,385,243.
Contractual
Obligations
The following table sets forth our expected contractual
obligations and their maturity dates as of June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within
|
|
|
One to
|
|
|
Three to
|
|
|
More than
|
|
|
|
|
(in thousands of U.S. dollars)
|
|
One Year
|
|
|
Three Years
|
|
|
Five Years
|
|
|
Five years
|
|
|
Total
|
|
|
Vessels(1)
|
|
$
|
315,035
|
|
|
$
|
553,545
|
|
|
$
|
231,185
|
|
|
|
|
|
|
$
|
1,099,765
|
|
Bank Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
665,695
|
|
|
|
665,695
|
|
Interest and borrowing
fees(2)
|
|
|
39,977
|
|
|
|
79,954
|
|
|
|
80,064
|
|
|
|
160,019
|
|
|
|
360,014
|
|
Office
lease(3)
|
|
|
649
|
|
|
|
1,344
|
|
|
|
1,670
|
|
|
|
4,106
|
|
|
|
7,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
355,661
|
|
|
$
|
634,843
|
|
|
$
|
312,919
|
|
|
$
|
829,820
|
|
|
$
|
2,133,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The balance of the contract price in US dollars for the 34
newbuilding vessels which are to be constructed and delivered
between October 2008 and April 2012 and the balance of the
contract price on the REDWING, which is to be delivered in
September 2008. |
|
(2) |
|
The Company is a party to floating-to-fixed interest rate swaps
covering an aggregate notional amount of $597,211,599 as of
June 30, 2008 that effectively convert the Companys
interest rate exposure from floating rates based on LIBOR to a
fixed rates ranging from 3.895% to 5.24%, plus applicable
margins. Interest and borrowing fees includes capitalized
interest for the newbuilding vessels. |
|
(3) |
|
Remainder of the
63-month
lease on the office space which we occupy. |
23
Capital
Expenditures
Our capital expenditures relate to the purchase of vessels and
capital improvements to our vessels which are expected to
enhance the revenue earning capabilities and safety of these
vessels.
We make capital expenditures from time to time in connection
with our vessel acquisitions. As of June 30, 2008, our
fleet consists of 20 vessels which are currently
operational. In addition to our operating fleet, we have
contracted for the purchase of a second-hand Supramax vessel
which will be delivered in September 2008. We also have a
Supramax newbuilding program for the construction of 34
newbuilding vessels which will be delivered to us between 2008
and 2012.
In addition to acquisitions that we may undertake in future
periods, the Companys other major capital expenditures
include funding the Companys maintenance program of
regularly scheduled drydocking necessary to preserve the quality
of our vessels as well as to comply with international shipping
standards and environmental laws and regulations. Although the
Company has some flexibility regarding the timing of its dry
docking, the costs are relatively predictable, even though the
trend of these costs have been higher due to higher cost of
steel, paints and other input variables. In addition, ship
repair capacity constraint at shipyards and adverse weather has
an impact on the number of days a vessel is in drydock.
Management anticipates that vessels are to be drydocked every
two and a half years. Funding of these requirements is
anticipated to be met with cash from operations. We anticipate
that this process of recertification will require us to
reposition these vessels from a discharge port to shipyard
facilities, which will reduce our available days and operating
days during that period.
Drydocking costs incurred are amortized to expense on a
straight-line basis over the period through the date the next
drydocking for those vessels are scheduled to occur. We
drydocked two vessels in the six-months ended June 30,
2008. The following table represents certain information about
the estimated costs for anticipated vessel drydockings in the
next four quarters, along with the anticipated off-hire days:
|
|
|
|
|
|
|
|
|
Quarter Ending
|
|
Off-hire
Days(1)
|
|
|
Projected
Costs(2)
|
|
|
September 30, 2008
|
|
|
88
|
|
|
$
|
2.00 million
|
|
December 31, 2008
|
|
|
22
|
|
|
$
|
0.50 million
|
|
March 31, 2009
|
|
|
22
|
|
|
$
|
0.50 million
|
|
June 30, 2009
|
|
|
22
|
|
|
$
|
0.50 million
|
|
|
|
|
(1) |
|
While we estimate 22 days per vessel, actual duration of
drydocking a vessel will vary based on the condition of the
vessel, yard schedules and other factors. |
|
(2) |
|
Actual costs will vary based on various factors, including
where the drydockings are actually performed. |
Off-balance
Sheet Arrangements
We do not have any off-balance sheet arrangements.
|
|
ITEM 3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Interest
Rate Risk
There have been no material changes from the Interest Rate
Risk previously disclosed in our
Form 10-K
for the year ended December 31, 2007.
In addition to the interest rate swaps outstanding as of
December 31, 2007, during the six months ended
June 30, 2008, the Company entered into the following
interest rate swap contracts:
|
|
|
|
-
|
Notional amount of $81,500,000 with a fixed interest rate of
3.895% and maturity in January 2013
|
|
|
-
|
A forward interest rate swap contract for a notional amount of
$84,800,000 of its outstanding debt which will commence upon the
maturity in September 2009 of the existing swap for the notional
amount of $84,800,000 of its outstanding debt. Under the forward
swap, the Company will pay fixed
|
24
|
|
|
|
|
rate interest of 3.90% and receive floating rate interest
amounts based on three-month Libor settings, exclusive of
applicable margin. The forward swap matures in September 2013.
|
The Company records the fair value of the interest rate swaps as
an asset or liability on its balance sheet. The effective
portion of the swap is recorded in Accumulated Other
Comprehensive Income. Accordingly, a liability of $12,223,412
and $13,531,883 has been recorded in Other Liabilities in the
Companys financial statements as of June 30, 2008 and
December 31, 2007, respectively.
Currency
and Exchange Rates
There have been no material changes from the Currency and
Exchange Rates risk previously disclosed in our
Form 10-K
for the year ended December 31, 2007.
|
|
ITEM 4.
|
CONTROLS
AND PROCEDURES
|
Disclosure
Controls and Procedures
Our management, including our Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of our
disclosure controls and procedures (as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934, as amended, (the
Exchange Act)) as of the end of the period covered
by this report. Based upon that evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that, as of
the end of such period, our disclosure controls and procedures
are effective.
Internal
Control Over Financial Reporting
There have been no changes in our internal control over
financial reporting during the period covered by this report
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
25
PART II:
OTHER INFORMATION
|
|
ITEM 1
|
LEGAL
PROCEEDINGS
|
We are not aware of any legal proceedings or claims to which we
or our subsidiaries are party or of which our property is
subject. From time to time in the future, we may be subject to
legal proceedings and claims in the ordinary course of business,
principally personal injury and property casualty claims. Those
claims, even if lacking merit, could result in the expenditure
by us of significant financial and managerial resources.
There have been no material changes from the Risk
Factors previously disclosed in our
Form 10-K
for the year ended December 31, 2007.
|
|
ITEM 2
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
None.
|
|
ITEM 3
|
DEFAULTS
UPON SENIOR SECURITIES
|
None.
|
|
ITEM 4
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
The Annual Meeting of Shareholders of the Company was held on
May 22, 2008. There were 46,757,153 shares of common
stock outstanding and entitled to vote at the meeting. A
majority of the outstanding shares of common stock entitled to
vote were present by proxy at the meeting. At the meeting the
matters described below were approved by the shareholders.
1. The following persons were elected Class III
directors of the Company to serve until the Annual Meeting of
Shareholders in 2011 or until their successors are duly elected
and qualified, by the following number of votes:
|
|
|
|
|
|
|
|
|
|
|
Votes For
|
|
|
Votes Against
|
|
|
Douglas P. Haensel
|
|
|
39,331,665
|
|
|
|
1,955,799
|
|
Alexis P. Zoullas
|
|
|
39,326,725
|
|
|
|
1,960,739
|
|
The following persons continue as Class I directors of the
Company: Jon Tomasson and Sophocles N. Zoullas, and
the following persons continue as Class II directors of the
Company: Joseph M. Cianciolo, David B. Hiley and Forrest E. Wylie
2. The ratification of the appointment of Ernst &
Young LLP as the independent registered public accounting firm
to audit the financial statements of the Company and its
subsidiaries for the fiscal year ending December 31, 2008,
was approved by the following number of votes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broker
|
|
|
|
Votes For
|
|
|
Votes Against
|
|
|
Abstentions
|
|
|
Non-Votes
|
|
|
Ratification of Ernst & Young LLP
|
|
|
41,053,842
|
|
|
|
186,430
|
|
|
|
47,192
|
|
|
|
|
|
There were no broker non-votes.
|
|
ITEM 5
|
OTHER
INFORMATION
|
None.
26
EXHIBIT INDEX
|
|
|
|
|
|
3
|
.1
|
|
Amended and Restated Articles of Incorporation of the Company
1
|
|
3
|
.2
|
|
Amended and Restated Bylaws of the Company
1
|
|
3
|
.3
|
|
Certificate of Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock
2
|
|
4
|
.1
|
|
Form of Share Certificate of the Company
1
|
|
4
|
.2
|
|
Form of Senior Indenture
3
|
|
4
|
.3
|
|
Form of Subordinated Indenture
3
|
|
4
|
.4
|
|
Rights Agreement
2
|
|
10
|
.1
|
|
Amended and Restated Employment Agreement of Mr. Sophocles
N. Zoullas, dated as of June 19, 2008
4,6
|
|
10
|
.2
|
|
Amendatory Agreement, dated as of July 3, 2008, among the
Company and certain of its subsidiaries and the banks and
financial institutions party thereto and the Royal Bank of
Scotland plc, as mandated lead arranger
5
|
|
31
|
.1
|
|
Rule 13a-14(d)
/ 15d-14(a) Certification of CEO
|
|
31
|
.2
|
|
Rule 13a-14(d)
/ 15d-14(a) Certification of CFO
|
|
32
|
.1
|
|
Section 1350 Certification of CEO
|
|
32
|
.2
|
|
Section 1350 Certification of CFO
|
|
|
|
1 |
|
Incorporated by reference to Amendment No. 4 to the
Companys Registration Statement on
Form S-1,
Registration
No. 333-123817,
filed on June 22, 2005. |
|
2 |
|
Incorporated by reference to the Companys Registration
Statement on
Form 8-A
filed on November 13, 2007. |
|
3 |
|
Incorporated by reference to the Companys Registration
Statement on
Form S-3,
Registration
No. 333-139745,
filed on December 29, 2007. |
|
4 |
|
Incorporated by reference to the Companys Current Report
on
Form 8-K
filed on June 20, 2008. |
|
5 |
|
Incorporated by reference to the Companys Current Report
on
Form 8-K
filed on July 7, 2008. |
|
6 |
|
Management contract or compensating plan. |
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
EAGLE BULK SHIPPING INC.
|
|
|
|
By:
|
/s/ Sophocles
N. Zoullas
|
Sophocles N. Zoullas
Chairman of the Board and
Chief Executive Officer
Date: August 7, 2008
Alan S. Ginsberg
Chief Financial Officer
and Treasurer
Date: August 7, 2008
28