Safe Bulkers Q3 Results

Wednesday, November 04, 2009

Safe Bulkers, Inc. (NYSE: SB), an international provider of marine drybulk transportation services, announced its unaudited financial results for the three- and nine-month periods ended September 30, 2009.

Summary of Third Quarter 2009 Results
Net revenue for the third quarter of 2009 decreased by 31% to $36.9 million from $53.4 million during the same period in 2008. The company operated 13.2 vessels on average during the third quarter of 2009, earning a Time Charter Equivalent ("TCE")(1) rate of $30,113, compared to 11 vessels and a TCE rate of $52,724 during the third quarter of 2008.  The decrease in the TCE rate resulted mainly from lower period time charter rates contracted during the second quarter of 2009 or during previous periods.

Net income was $22.2 million, or earnings per share of $0.41, in the third quarter of 2009, a decrease of 43% from net income of $39.2 million, or earnings per share of $0.72, in the third quarter of 2008. The decrease in net income of $17.0 million is mainly due to the decrease of net revenue as described above.

EBITDA(2) was $26.5 million for the third quarter of 2009, a decrease of 42% from $45.7 million in the third quarter of 2008, mainly due to lower net income as described above.

A dividend of $0.15 per share was declared for the third quarter of 2009.
 
Summary of Results for the First Nine Months of 2009
Net revenue for the first nine months of 2009 decreased by 17% to $128.0 million from $154.1 million during the same period in 2008.  The company operated 12.9 vessels on average during the first nine months of 2009, earning a TCE rate of $36,241, compared to 11 vessels and a TCE rate of $51,511 during the first nine months of 2008. Net income was $142.2 million, or earnings per share of $2.61, in the first nine months of 2009, an increase of 33% from net income of $107.3 million, or earnings per share of $1.97, in the first nine months of 2008.

The increase in net income of $34.9 million reflects mainly: (i) net revenue of $128.0 million, compared to $154.1 million, (ii) early redelivery income of $75.0 million, compared to early redelivery cost of $0.6 million, (iii) loss on asset cancellations of $20.7 million, compared to none, (iv) foreign exchange gain of $0.9 million, compared to foreign exchange loss of $9.0 million and (v) loss from derivatives of $3.2 million, compared to gain from derivatives of $1.5 million for the corresponding periods of 2009 and 2008, respectively.

EBITDA was $159.2 million for the first nine months of 2009, an increase of 26% from $126.6 million in the first nine months of 2008, mainly due to higher net income as described above.

Dividend Declaration
The company declared a cash dividend on its common stock of $0.15 per share payable on or about November 27, 2009 to shareholders of record at the close of trading of the Company's common stock on the New York Stock Exchange (the "NYSE") on November 20, 2009.

The company had 54,512,931 shares of common stock outstanding as of October 31, 2009.

The Board of Directors of the Company is continuing a policy of paying out a portion of the company's free cash flow at a level it considers prudent in light of the current economic and financial environment. The declaration and payment of dividends, if any, will always be subject to the discretion of the Board of Directors of the Company. The timing and amount of any dividends declared will depend on, among other things: (i) our earnings, financial condition and cash requirements and availability, (ii) our ability to obtain debt and equity financing on acceptable terms as contemplated by our growth strategy, (iii) provisions of Marshall Islands and Liberian law governing the payment of dividends, (iv) restrictive covenants in our existing and future debt instruments and (v) global financial conditions. We can give no assurance that dividends will be paid in the future.

Fleet and Employment Profile
The company's operational fleet was comprised of 14 drybulk vessels with an average age of 3.54 years as of September 30, 2009.

We have entered into a 12- to 14-month period time charter for the Andreas K, a 92,000 dwt Post-Panamax class vessel with a delivery date in November 2009, at a gross daily rate of $20,500 less 3.75% total commissions. Our subsidiary Maxdodeka Shipping Corporation took delivery of the newbuild Andreas K on September 8, 2009.

As of October 30, 2009, the contracted employment of the company's fleet under period time charters was as follows: 92% of fleet ownership days for the remaining days of 2009, 86% for 2010 and 59% for 2011. This includes all vessels which will be delivered to us through 2011.
   
Management Commentary
Polys Hajioannou, Chairman of the Board of Directors and Chief Executive Officer of the company, said: "Our Board has declared a dividend of $0.15 per share, which is the sixth consecutive quarterly cash dividend of the Company since its initial public offering and at the same level as that of the previous quarter. We continue to pay out a portion of our free cash flows, while we further strengthen our balance sheet, which will provide to us additional flexibility."

Management Discussion of Third Quarter 2009 Results
Net income decreased by 43% to $22.2 million for the third quarter of 2009 from $39.2 million for the third quarter of 2008. This decrease is attributable to the following factors:

Net revenues: Net revenues were $36.9 million for the third quarter of 2009, a 31% decrease compared to $53.4 million for the third quarter in 2008. Net revenues decreased due to lower time charter rates prevailing in the charter market.

Vessel operating expenses: Vessel operating expenses increased to $5.0 million for the third quarter of 2009, a 32% increase compared to $3.8 million for the same period in 2008. This increase is attributed mainly to the following factors: (i) an increase in the average number of vessels being operated, from 11 vessels during the third quarter 2008 to 13.2 vessels during the same period in 2009, (ii) the expense associated with obtaining initial supplies for the delivery of the newbuild vessel Andreas K, (iii) the expense associated with the partial completion of one dry-docking during the third quarter of 2009, compared to none during the same period of 2008 and (iv) the increase in crew expenses. Daily vessel operating expenses increased by 11% to $4,130 for the third quarter 2009, compared to $3,733 for the third quarter of 2008.

Early redelivery income/(cost): During the third quarter of 2009, we recorded $2.9 million of early redelivery income relating to the early termination of period time charters of our vessels Pedhoulas Leader and Stalo, versus none for the same period in 2008. Pedhoulas Leader was redelivered early on July 19, 2009 instead of November 22, 2009, which was the contracted earliest redelivery date. In connection with the early redelivery of Pedhoulas Leader, we received cash compensation of $2.7 million from the relevant charterer. Stalo was redelivered early on July 20, 2009 instead of July 29, 2009, which was the contracted earliest redelivery date. In connection with the early redelivery of Stalo, we received cash compensation of $0.2 million from the relevant charterer. Pedhoulas Leader is currently employed in the period time charter market and Stalo in the spot charter market.

Interest expense: Interest expense decreased to $1.9 million in the third quarter of 2009 from $4.1 million for the same period in 2008, notwithstanding the increase in weighted average indebtedness. The decrease in interest expense is attributable to the declining USD LIBOR levels as reflected in the decrease of weighted average interest rate from 3.758% in the third quarter of 2008, to 1.600% in the third quarter of 2009. The weighted average of loans outstanding during the third quarter of 2008 was $427.7 million, compared to $474.5 million during the third quarter of 2009. The higher weighted average indebtedness reflects additional indebtedness to finance vessel acquisitions and indebtedness used for general corporate purposes.

(Loss)/Gain on derivatives: Loss on derivatives increased to $6.0 million in the third quarter of 2009, compared to $3.1 million for the same period in 2008, as a result of the mark-to-market valuation of the Company's interest rate swap transactions which were transacted to manage the risk and interest rate exposure of our loan and credit facilities. At the end of the third quarter of 2009 there were 12 interest rate swap transactions outstanding, while 7 such transactions were outstanding at the end of the third quarter of 2008. The valuation of these interest rate swap transactions at the end of each quarter is affected by the prevailing interest rates at that time.

Cash, time deposits & restricted cash: Cash, time deposits & restricted cash as of September 30, 2009 increased by $45.9 million to $127.5 million from $81.6 million as of December 31, 2008. Cash, time deposits & restricted cash as of September 30, 2009 include cash and cash equivalents and short-term bank deposits amounting to $26.7 million, and the current portion of restricted cash of $100.8 million. The restricted cash represents collateral pledged in favor of our banks in connection with performance guarantees issued on our behalf for payments to shipyards totaling $32.6 million, and cash pledged in favor of our lenders of $68.2 million pursuant to our loan agreements, as amended.

(www.safebulkers.com)
 

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