Eagle Bulk Shipping Inc. Reports Fourth Quarter and Fiscal Year 2007 Results

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

28 Feb 2008

Eagle Bulk Shipping Inc. today announced its results for the fourth quarter and fiscal year ended December 31, 2007.Financial highlights included:For the Fourth Quarter: -- Net Income of $16.3 million or $0.35 per share (based on a    weighted average of 46,948,385 diluted shares outstanding for the    quarter) on net revenues of $35.6 million.      - Adjusting for non-cash compensation charge of $0.8 million,        net income was $17.1 million or $0.36 per share. -- Gross time charter revenue increased by $7.0 million, or 23%, to    $38.0 million for the fourth quarter of 2007, from $31.0 million    for the fourth quarter of 2006. -- EBITDA, as adjusted for exceptional items under the terms of the    Company's credit agreement, increased by 26% to $27.9 million for    the fourth quarter of 2007, from $22.1 million during the fourth    quarter of 2006. -- Declared a dividend of $0.50 per share, based on fourth quarter    results, to be paid on or about March 18, 2008, to shareholders of    record as of March 13, 2008.For Fiscal Year 2007: -- Net Income of $52.2 million, or $1.24 per share (based on a    weighted average of 42,220,160 diluted shares outstanding for the    period) on net revenues of $124.8 million.      - Adjusting for non-cash compensation of $1.1 million and non-        cash non-dilutive compensation charge of $3.1 million, net        income was $56.5 million or $1.34 per share. -- Gross time charter revenue increased by $21.5 million, or 19%, to    $135.4 million, compared to $113.9 million for the 2006 fiscal    year. -- EBITDA, as adjusted for exceptional items under the terms of the    Company's credit agreement, increased 20% to $99.4 million in 2007    from $82.7 million in 2006.Sophocles N. Zoullas, Chairman and Chief Executive Officer, commented, ``We are very pleased with Eagle Bulk's fourth quarter and year-end 2007 results, which reflect our success in balancing operational excellence with our significant growth trajectory. During this summer, we are scheduled to take delivery of the first of the 35 ships from our newbuilding program, with an accelerated delivery calendar thereafter, further increasing cash flow.''We believe that the investments made in 2007 offer our investors a unique combination of stability and market upside during 2008 and beyond due to several factors: (1) our high built-in growth rate provides chartering flexibility which generates significantly increased cashflows; (2) increasing open days on our fleet and 19 profit-sharing charters that provide additional cashflows in a strong drybulk market; and (3) approximately $1.1 billion of minimum contracted revenues which secure the cashflows that support our dividend.''Results for the three months ended December 31, 2007 and 2006For the fourth quarter of 2007, the Company reported net income of $16,329,603 or $0.35 per share, based on a weighted average of 46,948,385 diluted shares outstanding. Net income included a non-cash compensation expense of $752,584. Excluding this non-cash charge, net income for the quarter was $17,082,187 or $0.36 per share.In the comparable fourth quarter of 2006, the Company reported net income of $4,516,566 or $0.13 per share, based on a weighted average of 35,900,678 diluted shares outstanding. Net income included a non-cash, non-dilutive compensation charge of $7,302,118. Excluding this non-cash charge, net income for the quarter was $11,818,684 or $0.33 per share.All of the Company's revenues were earned from time charters. Gross revenues in the quarter ended December 31, 2007 were $37,990,223, an increase of 23% from the $30,981,339 recorded in the comparable quarter in 2006. Net revenues during the quarter ended December 31, 2007 were $35,612,521 compared to $28,393,932 in the quarter ended December 31, 2006, an increase of 25% primarily due to the operation of a larger fleet and an increase in daily time charter rates. Net revenues include the non-cash charge of amortization of prepaid revenues of $500,000 recorded in the 2007 quarter compared to $1,026,500 recorded in the 2006 quarter. Brokerage commissions incurred on revenues earned were $1,877,702 and $1,560,907 in the fourth quarters of 2007 and 2006, respectively.For the quarter ended December 31, 2007, total vessel expenses incurred amounted to $7,393,813. These expenses included $6,900,806 in vessel operating costs and $493,007 in technical management fees paid to the Company's third-party technical managers. For the corresponding quarter in 2006, total vessel expenses were $5,819,577 which included $5,407,577 in vessel operating costs and $412,000 in technical management fees.General and administrative expenses for the quarter ended December 31, 2007 amounted to $2,731,760 compared to $1,856,467 in the corresponding quarter in 2006, an increase attributed to costs associated with operating a larger fleet.EBITDA, as adjusted for exceptional items under the terms of the Company's credit agreement, increased by 26% to $27.9 million for the fourth quarter of 2007, from $22.1 million for the fourth quarter of 2006. (Please see below for a reconciliation of EBITDA to net income).Based on the fourth quarter results, the Company declared a 4Q 2007 dividend of $0.50 per share and this cash dividend will be paid on or about March 18, 2008 to its shareholders of record as of March 13, 2008.Results for the years ended December 31, 2007 and 2006For the year ended December 31, 2007, the Company reported net income of $52,243,980 or $1.24 per share, based on a weighted average of 42,220,160 diluted shares outstanding. Net income included a non-cash compensation charge of $1,118,965 and a non-cash, non-dilutive compensation charge of $3,137,812. Excluding these non-cash charges of $4,256,777, net income for the year was $56,500,757 or $1.34 per share.For the year ended December 31, 2006, the Company reported a net income of $33,801,540 or $0.98 per share, based on a weighted average of 34,543,862 diluted shares outstanding. Net income included a non-cash compensation charge of $47,033 and non-cash, non-dilutive compensation charge of $13,023,440. Excluding these non-cash charges, net income for the year was $46,872,013 or $1.36 per share.All of the Company's revenues were earned from Time Charters. Gross revenues for the year ended December 31, 2007 were $135,412,594, an increase of 19% from the $113,900,922 recorded in 2006. Net revenues include the non-cash charge of amortization of net prepaid and deferred revenues of $3,740,000 recorded in 2007 compared to $3,462,000 recorded in 2006. Brokerage commissions incurred on revenues earned were $6,857,790 and $5,790,725 in 2007 and 2006, respectively. Net revenues for the year ended December 31, 2006 were $124,814,804 compared to $104,648,197 for 2006. Net revenues for 2007 were significantly higher than 2006 due to the operation of a larger fleet and an increase in daily time charter rates.Vessel expenses for the year ended December 31, 2007 were $27,143,515 compared to $21,562,034 for 2006. The increase in vessel expenses is attributable to a larger fleet size in operation for 2007 which increased ownership days to 6,166 days in 2007 from 5,288 days in 2006. Vessel expenses for the year ended December 31, 2007 included $25,338,098 in vessel operating costs and $1,805,417 in technical management fees. For the year ended December 31, 2006, vessel expenses included $20,070,181 in vessel operating costs and $1,491,853 in technical management fees.General and administrative expenses for the years ended December 31, 2007 and 2006 were $7,519,734 and $5,222,875, respectively, an increase attributed to costs associated with operating a larger fleet.The Company records non cash compensation charges relating to its stock incentive plan. For 2007 and 2006, such amounts recorded were $1,118,965 and $47,033 respectively. The Company had also recorded non-cash, non-dilutive, compensation charges relating to profits interests awarded to members of the Company's management by the Company's former principal shareholder Eagle Ventures LLC. The profits interests diluted only the interests of the owners of Eagle Ventures LLC, and not holders of the Company's common stock. However, Generally Accepted Accounting Principles require that share-based awards to an employee of the Company by a shareholder (such as Eagle Ventures LLC) be accounted for as compensation for services provided to the Company. Consequently, the Company's statement of operations reflects non-cash non-dilutive compensation charges related to the profits interests in Eagle Ventures LLC. For 2007 and 2006, such amounts recorded were $3,137,812 and $13,023,440, respectively.The 2007 EBITDA, as adjusted for exceptional items under the terms of the Company's credit agreement, increased by 20% to $99.4 million from $82.7 million in 2006. (Please see below for a reconciliation of EBITDA to net income).The Company has entered into interest rate swaps to effectively convert a significant portion of its outstanding debt from a floating to a fixed-rate basis. The swaps are designated and qualify as cash flow hedges. As of December 31, 2007, the Company had outstanding swap contracts totaling $515,711,599. These contracts mature between September 2009 and August 2012. The fixed rates of interest range between 4.22% and 5.24%. The Company records the fair value of the interest rate swap as an asset or liability on the balance sheet. The effective portion of the swap is recorded in accumulated other comprehensive income. Accordingly, $13,531,883 and $2,936,804 have been recorded in Other Liabilities and Other Assets in the Company's financial statements as of December 31, 2007 and December 31, 2006, respectively.The Company has entered into foreign exchange swaps to hedge foreign currency risks to its vessel newbuilding contracts in Japan. In 2007, the Company swapped a total of 11.5 billion in Japanese yen currency exposure into the equivalent of $100,063,305. At December 31, 2007, the Company had outstanding foreign currency swap contracts for notional amounts aggregating 11.28 billion Japanese yen swapped into equivalent $104,259,998. The fair value of the currency swaps is recorded as an asset or liability in the financial statements. The effective portion of the swap is recorded in accumulated other comprehensive income. Accordingly, an amount of $932,638 and $359,180 has been recorded in Other Assets and Other Liabilities in the Company's financial statements as of December 31, 2007 and December 31, 2006, respectively.Newbuilding ProgramAs of December 31, 2007, the Company had entered into contracts with shipyards in Japan and China for the construction of a total of 35 Supramax vessels. The first of these vessels is expected to deliver to the Company in the third quarter of 2008. The Company is expecting to take delivery of three vessels in 2008 and the remainder will deliver between 2009 and 2012.During 2007, the Company entered into contracts for the construction of three Supramax vessels at IHI Marine United, a shipyard in Japan. The Company now has entered into contracts for the construction of a total of five Supramax vessels at IHI. These five vessel 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 December 31, 2007, the Company has advanced $62,912,091 in progress payments towards these contracts. These vessels are expected to be delivered between 2008 and 2010.The Company is also constructing 30 Supramax newbuilding vessels at the Sinopacific Shipbuilding Group's shipyard in China. The total cost of the newbuilding vessel construction project in China is approximately $1,269,000,000 and associated capitalized financing, legal and technical supervision costs. The Company also has options to build five additional Supramax vessels at the shipyard and these options expire on March 31, 2008. These vessels are expected to be delivered between 2008 and 2012. The Company will periodically advance construction payments to the shipyard and incur additional associated costs relating to the construction of these vessels. As of December 31, 2007, the Company has advanced $270,940,000 in progress payments towards this newbuilding project.The Company has incurred an additional $11,002,871 in capitalized interest costs and costs associated with the technical supervision and legal and other costs relating to the construction of these newbuilding vessels. At December 31, 2007, total advances for vessel construction was $344,854,962.Liquidity and Capital ResourcesNet cash provided by operating activities during the years ended December 31, 2007 and 2006 was $82,889,373 and $70,535,078, respectively. The increase was primarily due to cash generated from the operation of the fleet for 6,166 operating days in 2007 compared to 5,288 operating days in 2006.Net cash used in investing activities during 2007, was $446,250,566 compared to $130,759,211 during 2006. For the year ended December 31, 2007, net cash used by investing activities primarily related to the purchase of three modern second-hand Supramax vessels and fleet improvements for $139,033,326, payment on the newbuilding program of $319,228,722 (including advances, capitalized interest, legal and supervision fees) offset by the proceeds of $12,011,782 from the sale of one vessel. For the year ended December 31, 2006, net cash used by investing activities primarily related to the purchase of three modern second-hand Supramax vessels and fleet improvements for $105,591,698, and payments for the newbuilding program of $25,167,513 (including advances, capitalized interest, legal and supervision).Net cash provided by financing activities during 2007 was $493,989,394. During 2007, the Company received $234,206,147 in net proceeds from the sale of shares of its common stock. We borrowed $369,708,070 from our revolving credit facility, of which an amount of $36,344,000 was used to partly fund the purchase of the three vessels, and $333,364,070 was used to fund the advances for the construction of newbuilding vessels and pay $12,000,000 in financing costs associated with the amended credit facility. We used $12,440,000 from the proceeds of the sale of the SHIKRA to repay borrowings from the revolving credit facility. We also paid $82,134,982 in dividends. Net cash provided by financing activities during 2006, was $57,973,096 which primarily consisted of $33,000,000 in gross proceeds from the issue of shares of the Company's common stock, borrowings of $99,974,820 from the Company's revolving credit facility, net of $71,729,500 paid in dividends.As of December 31, 2007, our cash balance was $152,903,692 compared to a cash balance of $ 22,275,491 at December 31, 2006. In addition, $9,000,000 in cash deposits are maintained with our lender for loan compliance purposes and this amount is recorded in Restricted Cash on our balance sheet as of December 31, 2007. Also recorded in Restricted Cash is an amount of $124,616 which is collateralizing a letter of credit relating to our office lease.On October 19, 2007, the Company amended its revolving credit facility to a $1,600,000,000 senior secured revolving credit facility underwritten by its sole lender. The revolving credit facility will be available to pay the remaining installments and associated costs relating to the construction of the Company's newbuilding vessels. The facility also provides working capital of up to $20,000,000; and provides funds for the acquisition of additional drybulk vessels. At December 31, 2007, $1,002,757,110 is available for additional borrowings under the credit facility.The facility has a term of 10 years and is available in full until July 2012 when availability will begin to reduce in 10 semi-annual reductions of $75,000,000 with a full repayment in July 2017. The facility bears interest at the rate of 0.80% to 0.90% over LIBOR, depending upon the amount of debt drawn as a percentage of the value of the Company's vessels. The Company will also pay on a quarterly basis a commitment fee of 0.25% per annum on the undrawn portion of the facility.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 at least the next 12 months. Our amended and enhanced credit facility also provides us with the funds required to meet our newbuilding commitments. We were in compliance with all of the covenants contained in our debt agreements as of December 31, 2007.It is our intention to fund our future acquisition related capital requirements initially through borrowings under the amended and increased revolving credit facility and to repay all or a portion of such borrowings from time to time with the net proceeds of equity issuances. On December 31, 2007, the Company filed an S-3 shelf registration which would enable the Company to issue such securities. We believe that funds will be available to support our growth strategy, which involves the acquisition of additional vessels, and will allow us to pay dividends to our stockholders as contemplated by our dividend policy.Disclosure of Non-GAAP Financial MeasuresEBITDA 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 company's 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 Company's 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.The Company's revolving credit facility permits it to pay dividends in amounts up to cumulative cash flows which is its 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, 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. Therefore, the Company believes that this non-GAAP measure is important for its investors as it reflects its 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 for the three-month periods ended December 31, 2007 and 2006 and for the years ended December 31, 2007 and 2006.Capital Expenditures and DrydockingThe Company's capital expenditures relate to the purchase of vessels and capital improvements to acquired vessels, which are expected to enhance the revenue earning capabilities and safety of these vessels. In addition to the capital expenditures on newbuilding vessels as described above, major capital expenditures include funding the Company's 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 drydocking, the costs are relatively predictable. 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. The Company anticipates that this process of recertification will require it to reposition these vessels from a discharge port to shipyard facilities, which will reduce available days and operating days during that period.In the years ended December 31, 2007 and December 31, 2006, the Company has spent $3,624,851 and $2,324,726, respectively, on vessel drydockings. These amounts are amortized to expense on a straight-line basis over the period through the date the next drydockings are scheduled to become due.