Star Bulk 3Q, 9 Mo Results

Wednesday, November 26, 2008

Star Bulk Carriers Corp. (Nasdaq: SBLK), a global shipping company focusing on transportation of dry bulk cargoes, announced its operating results for the third quarter and nine months ended September 30, 2008. Financial highlights include:

Third Quarter 2008
•    The Company reported net income of $35.24 million for the third quarter of 2008 compared to net income of $0.94 million for the third quarter of 2007.
•    Voyage and time charter revenues were $65.18 million for the third quarter of 2008. This figure includes revenues of $16.89 million attributable to the amortization of the fair value of below/above market acquired time charters.
•    Earnings per share, basic and diluted for the third quarter of 2008 were $0.63 and $0.62, respectively. These figures are based on a weighted average of 55,873,973 shares outstanding, basic and on a weighted average of 56,971,504 shares outstanding, diluted in the third quarter of 2008.

Nine Months ended September 30, 2008
•    The Company reported net income of $83.54 million for the nine months ended September 30, 2008 compared to net income of $1.80 million for the nine months ended September 30, 2007.
•    Voyage and time charter revenues were $166.10 million for the nine months ended September 30, 2008. This figure includes revenues of $51.81 million attributable to the amortization of the fair value of below/above market acquired time charters.
•    Earnings per share, basic and diluted for the nine months ended September 30, 2008 were $1.63 and $1.54, respectively. These figures are based on a weighted average of 51,201,845 shares outstanding, basic and on a weighted average of 54,200,802 shares outstanding, diluted in the nine months ended September 30, 2008.

We commenced operations on December 3, 2007. Included in this release are our unaudited interim consolidated condensed income statements for the three and nine month periods ended September 30, 2007 and 2008, unaudited condensed balance sheets as at December 31, 2007 and September 30, 2008 and unaudited interim consolidated condensed cash flow statements for the nine month periods ended September 30, 2007 and 2008. During the period from the company's inception (May 13, 2005) to the date it commenced operations (December 3, 2007), the company was a development stage enterprise.

The unaudited interim consolidated condensed income statements, balance sheets, and cash flow statements presented herein include the accounts of Star Bulk Carriers Corp. and its wholly owned subsidiaries and of its predecessor Star Maritime Acquisition Corp. ("Star Maritime").

Star Maritime was organized under the laws of the State of Delaware on May 13, 2005 as a blank check company formed to acquire, through a merger, capital stock exchange, asset acquisition or similar business combination, one or more assets or target businesses in the shipping industry.

On November 27, 2007, Star Maritime obtained shareholder approval for the acquisition of the initial fleet of eight drybulk carriers and for effecting the Redomiciliation Merger whereby Star Maritime merged with and into Star Bulk with Star Bulk as the surviving entity. The Redomiciliation Merger was completed on November 30, 2007 as a result of which each outstanding share of Star Maritime common stock was converted into the right to receive one share of Star Bulk common stock and each outstanding warrant of Star Maritime was assumed by Star Bulk with the same terms and restrictions except that each became exercisable for common stock of Star Bulk. Star Bulk's common stock and warrants are listed on the Nasdaq Global Market under the symbols "SBLK" and "SBLKW" respectively.

Akis Tsirigakis, President and CEO of Star Bulk commented: "I'm pleased to report a profitable third quarter 2008 in line with our expectations, the fourth consecutive profitable quarter since we commenced operations in December 2007. We have consistently implemented our business strategy in order to achieve our objective of generating stable revenues despite the volatility of charter rates in the drybulk sector. In this context, we expanded our fleet from 8 to 12 vessels without compromising our focus on maintaining moderate leverage and we have succeeded in securing what we believe are stable and predictable cash flows by entering our vessels into period employment. Our strong results for the third quarter and nine months of 2008 are the product of this strategy.”

“We believe we maintain a strong position in the current turbulent market environment. At this time, we have available liquidity of over $50 million in cash, a moderate debt level and have fixed our vessels on period employment. We face no issues with our loan covenants and enjoy an excellent working relationship with our lending institutions. We do not have commitments to purchase newbuilding vessels or similar capital expenditures that would require us to obtain additional financing. Therefore, we are confident in our ability to meet our financial commitments for the foreseeable future.”

“We have contracted for 100% of our operating days in 2008, 74% in 2009 and 64% in 2010 under time charters thereby reducing our exposure to the volatility of the shipping markets. We maintain a diversified charter portfolio with no more than two vessels committed to a single charterer, thereby limiting our exposure to counterparty risk. We aim to further manage counterparty risk by communicating with our charterers in an effort to be kept abreast of market developments.”

“Our approach to structuring our dividend in respect of the third quarter of 2008 in the form of cash and the remaining half in the form of newly issued shares conveys our continued belief in the financial health of our Company. This approach aims to continue to reward our shareholders while at the same time further reinforcing our financial position by conserving a significant amount of valuable cash which can be redeployed to enhance shareholder value for the longer term. As previously announced, management and our directors will reinvest all of their cash dividends into newly issued shares in a private placement, which further demonstrates our and their confidence in the Company."

The demand for core dry bulk commodities is linked to the need for infrastructure development of emerging economies and therefore we believe this trend will continue. At the same time, the credit crunch will affect vessel supply as significant cancellations of newbuildings are expected and vessel scrapping may increase as well. Such developments help towards a healthier balance between vessel supply and demand once world commerce resumes with renewed availability of credit.

George Syllantavos, CFO of Star Bulk commented: "On September 30, 2008, our net debt stood at $287 million, which we believe affords us significant flexibility in the current market environment. Since then, our liquidity has been further enhanced with the sale of the Star Iota for $18.3 million. We believe that our current liquidity of in excess of $50 million in cash and together with our expected cash flow generation will provide sufficient cushion over and above simply meeting our scheduled debt obligations and capital expenditures.”

“We have continued to implement our share and warrant repurchase program, repurchasing 700,000 shares of common stock in the third quarter 2008 and an additional 225,000 shares in the fourth quarter 2008 to date. Since we announced our $50 million repurchase program in January 2008, we have invested to date approximately $12.9 million, leaving $37.1 million of additional repurchasing capacity. We continue to believe that at current trading levels of our common stock in the public markets, redeployment of a portion of available cash to repurchase shares remains an accretive proposition.”

Third quarter 2008 earnings reflect the effect of increased repairs expenditure for the Star Alpha. Moreover, the benefit of the high first year charter rates for the Star Cosmo and Star Ypsilon are not mirrored in the financials since revenue accounting entries per U.S. GAAP are based on the average rate of each vessel's three-year staggered rate schedule.

Excluding non-cash items, such as vessel impairment, amortization of fair value of below/above market acquired time charters and amortization of stock based compensation our Net income for the third quarter 2008 and for the nine months period ended September 30, 2008 would be $17.8 million and $38 million, respectively. We commenced operations during the fourth quarter of 2007 (December 3, 2007) and therefore we are unable to present a meaningful comparison of our first nine months and/or third quarter of 2008 and 2007 results.

Third Quarter 2008 Results
For the quarter ended September 30, 2008, Voyage Revenues amounted to $65.18 million and Operating Income amounted to $37.64 million. Net Income for the third quarter of 2008 was $35.24 million representing $0.63 earnings per share calculated on 55,873,973 weighted average number of shares, basic and $0.62 earnings per share calculated on 56,971,504 weighted average number of shares, diluted. The above Net Income figure includes:
•    Gain of $1.02 million, or $0.02 per basic and diluted share, in connection with the sale of the vessel Star Iota.
•    Amortization of fair value of below/above market acquired time charters of $16.89 million, or $0.30 per basic and diluted share, respectively, attributable to the amortization of the fair value of time charters attached to vessels acquired, which are amortized over the remaining period of the time charter as increases to net revenue. .
•    Expenses of $0.44 million, or $0.01 per basic and diluted share relating to the amortization of stock based compensation recognized in connection with the vesting portion of a total of 315,000 restricted common shares issued to directors.

Excluding all the above items above for the quarter ended September 30, 2008, Net Income would have amounted to $17.77 million, or $0.32 earnings per share calculated on 55,873,973 weighted average number of shares, basic and $0.31 earnings per share calculated on 56,971,504 weighted average number of shares, diluted.

EBITDA for the third quarter of 2008 was $51.64 million. Adjusted EBITDA for the same period excluding all the above items was $34.17 million. Please see later in this release for a reconciliation of EBITDA and adjusted EBITDA to net cash provided by cash flows from operating activities.

An average of 12.1 vessels were owned and operated during the third quarter of 2008, earning an average Time Charter Equivalent, or TCE rate of $62,156 per day. Adjusted to exclude the effect of the amortization of time charters attached to vessels acquired at above or below market rates, the TCE rate for the third quarter of 2008 was $45,756. We refer you to the information under the heading "TCE rate and adjusted TCE rate" later in this release for further information regarding our calculation of TCE rate.

Nine Months ended September 30, 2008 Results
For the nine months ended September 30, 2008, Voyage Revenues amounted to $166.10 million and Operating Income amounted to $88.53 million. Net Income for the nine months ended September 30, 2008 was $83.54 million representing $1.63 earnings per share calculated on 51,201,845 weighted average number of shares, basic and $1.54 earnings per share calculated on 54,200,802 weighted average number of shares, diluted.

The above Net Income figure includes:
•    Vessel impairment loss of $3.63 million, or $0.07 per basic and diluted share, in connection with the sale of the vessel Star Iota.
•    Amortization of fair value of below/above market acquired time charters of $51.81 million, or $1.01 and $0.96 per basic and diluted share, respectively, attributable to the amortization of the fair value of time charters attached to vessels acquired, which are amortized over the remaining period of the time charter as increases to net revenue..
•    Expenses of $2.66 million, or $0.05 per basic and diluted share, respectively, relating to the amortization of stock based compensation recognized in connection with -the vesting of a portion of a total of 315,000 restricted common shares issued to directors.

Excluding all the above items for the nine months ended September 30, 2008, Net Income would have amounted to $38 million representing $0.74 earnings per share calculated on 51,201,845 weighted average number of shares, basic and $0.70 earnings per share calculated on 54,200,802 weighted average number of shares, diluted.

EBITDA for the nine months ended September 30, 2008 was $123.54 million. Adjusted EBITDA for the same period excluding all the above items was $78.01 million. Please see later in this release for a reconciliation of EBITDA and adjusted EBITDA to net cash provided by cash flows from operating activities.

An average of 10.3 vessels were owned and operated during the nine months ended September 30, 2008, earning an average TCE rate of $63,489 per day. Adjusted to exclude the effect of the amortization of time charters attached to vessels acquired at above or below market rates, the time charter equivalent rate for the nine months ended September 30, 2008 was $43,353. We refer you to the information under the heading "TCE rate and adjusted TCE rate" later in this release for further information regarding our calculation of TCE rate.

Fleet Developments:
Vessel deliveries
On September 18, 2008, the Company took delivery of the Capesize dry bulk carrier vessel Star Ypsilon which the Company had agreed to acquire on June 3, 2008 for approximately $87.2 million. The vessel is chartered for a period of approximately three years, with the charter expiring in July 2011.

On October 6, 2008, the Company delivered the Star Iota, a Panamax bulk carrier to its buyers. The Company had previously entered into an agreement to sell the Star Iota for approximately $18.4 million.

Following the above transactions, Star Bulk's fleet is currently comprised of 12 vessels of an average age of 9.5 years with a total capacity of 1,106,250 dwt including 4 Capesize and 8 Supramax vessels.

New Charter Party Agreement
The Star Beta has entered into a short term period employment with Brazil's Companhia Vale do Rio Doce (Vale) for a minimum of two and a maximum of four months at the gross daily rate of $15,500 for the first 50 days and $25,000 for the days beyond 50 plus a repositioning ballast bonus of $525,000.

Currently, the Company has secured 100% of its operating days in 2008, 74% in 2009 and 64% in 2010 under time charters.

Other Developments
Star Bulk commenced an arbitration proceeding as complainant against Oldendorff Gmbh & Co. KG of Germany ("Oldendorff"), seeking damages resulting from Oldendorff's repudiation of a charter relating to the Star Beta. The Star Beta had been time chartered by a subsidiary of Star Bulk to Industrial Carriers Inc. of Ukraine ("ICI"). Under that time charter, ICI was obligated to pay a gross daily charter hire rate of $106,500 until February 2010. In January 2008, ICI sub-chartered the vessel to Oldendorff for one year at a gross daily charter hire rate of $130,000 until February 2009. In October 2008, ICI assigned its rights and obligations under the sub-charter to a subsidiary of Star Bulk in exchange for ICI being released from the remaining term of the ICI charter. According to press reports, ICI subsequently filed for protection from its creditors in a Greek insolvency proceeding. Oldendorff notified Star Bulk that it considers the assignment of the sub-charter to be an effective repudiation of the sub-charter by ICI. Star Bulk believes that the assignment was valid and that Oldendorff has erroneously repudiated the sub-charter.

On November 3, 2008, the SEC declared effective a Registration Statement on Form F-3 relating to the resale of shares held by F5 Capital, the nominee of TMT Co. Ltd. ("TMT") . In August 2008, TMT alleged that it had suffered unspecified damages arising from an alleged breach by the Company of a purported obligation under the Master Agreement, dated January 12, 2007. As of the date hereof, no claim has been filed by TMT or any affiliate thereof against the Company.

Share Buyback Program Update
The company, under the share and warrant repurchase program announced on January 24, 2008 has repurchased as of November 24, 2008 977,000 shares of common stock for $7,458,828 (average $7.63 per share) and 1,362,500 warrants for $5,474,363 (average $4.02 per warrant). During the third quarter, the Company has repurchased 700,000 shares of common stock for $5,667,420 (average $8.10 per share). Moreover, post quarter-end and during the month of October 2008, the Company purchased an additional 225,000 shares of common stock for $1,204,702.50 (average $5.35 per share).

The company has paid an aggregate of $12,933,191 for the repurchased securities leaving $37,066,809 of repurchasing capacity in Star Bulk's $50,000,000 share and warrant buyback program.

Dividend Payment
On November 17, 2008, the Company declared a cash and stock dividend on its common stock totaling $0.36 per common share. The dividend payment consists of a cash portion in the amount of $0.18 per share with the remaining half of the dividend payable in the form of newly issued common shares. The amount of newly issued shares will be based on the volume weighted average price of Star Bulk's shares on the Nasdaq Global Market during the five trading days before November 25, 2008. The dividend will be payable on or about December 1, 2008 to stockholders of record on November 28, 2008.

The company also announced that management and directors who currently hold approximately 10.3 million of the Company's common shares have committed to reinvest the cash portion of their dividend into newly issued shares in a private placement at the same weighted average price, thereby electing to effectively receive the full amount of their dividend in the form of newly issued shares.

By paying a portion of this quarterly dividend in the form of newly issued shares, the Company has limited the cash outlay to approximately $8 million and conserved $11.6 million of cash. During the nine months ended September 30, 2008, our fleet utilization was significantly affected by the dry-docking and upgrading expenses of the five vessels, Star Beta, Star Iota, Star Theta, Star Delta and Star Alpha which resulted in 190 off-hire days. Excluding off-hire days due to scheduled dry-dockings, fleet utilization would amount to approximately 98% for third quarter and nine months period ended September 30, 2008, respectively.

TCE rate and adjusted TCE rate
The company reports TCE revenues, a non-GAAP measure, because management believes it provides additional meaningful information in conjunction with voyage revenues, the most directly comparable GAAP measure and because management uses TCE revenues in making decisions regarding the deployment and use of its vessels and in evaluating their financial performance. TCE rate is also included herein because it is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company's performance despite changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed between the periods and because the company believes that it presents useful information to investors.

Star Bulk Carriers Corp. considers EBITDA to represent net income before interest, taxes, depreciation and amortization. EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations, as determined by United States generally accepted accounting principles, or U.S. GAAP, and our calculation of EBITDA may not be comparable to that reported by other companies. EBITDA is included herein because it is a basis upon which the company assesses its liquidity position; it is used by our lenders as a measure of our compliance with certain loan covenants; and because the company believes that it presents useful information to investors regarding the Company's ability to service and/or incur indebtedness.

The company excluded amortization of the fair value of above/below market acquired time charters associated with time charters attached to vessels acquired the vessel impairment adjustment relating to the sale of Star Iota and expenses relating to the amortization of stock - based compensation recognized during the period to derive adjusted EBITDA.

(www.starbulk.com)

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