Star Bulk Q4 & Year End Results

Tuesday, February 23, 2010

Star Bulk Carriers Corp. (Nasdaq: SBLK), a global shipping company focusing on the transportation of dry bulk cargoes, announced its unaudited financial and operating results for the fourth quarter and the year ended December 31, 2009.

Akis Tsirigakis, President and CEO of Star Bulk commented: "We are pleased to report that the Company completed its 2009 financial year, a challenging year, in a strong financial condition. As we look forward into 2010, our approach will be one of conservative growth by seeking value-enhancing assets, while maintaining the strength of our balance sheet. In this context, we believe that the recently announced acquisition of the capesize vessel, the Star Aurora, is in line with our aim to renew and grow our fleet pursuing increased earnings capacity for the company.

“We are pleased to continue rewarding our shareholders through quarterly dividends. Taking into account our current stock price and dividend level the implied annual dividend yield is about 7%.

“We continue to believe that we are one of the better positioned dry bulk companies with a strong balance sheet and ample liquidity. As of the day of this release 91% and 53% of our fleet operating days for 2010 and 2011 respectively are contracted and we expect to secure period time-charter employment for our recent acquisition, the Star Aurora, as well.”

George Syllantavos, Chief Financial Officer of Star Bulk commented: "As of today, our senior debt was $231 million while our cash position stood at $65 million, translating into a net debt of approximately 22% of our total assets. Our hefty liquidity enables us to optimize our interest expenditure by prepaying our scheduled for March 2010 installment. Our remaining principal repayment for 2010 is $43 million, for 2011 it is $32 million and roughly $25 million annually thereafter, while we have no other capital expenditure commitments such as newbuildings. The cost reduction effort which was undertaken in 2009 continues to produce tangible results for us. In the fourth quarter 2009, our general and administrative expenses were lower by 44% compared to the same period in 2008. We are confident that our in-house technical management will be instrumental in implementing our quality objectives while further optimizing our vessel operating costs."

For the quarter ended December 31, 2009, total revenues amounted to $31.2 million compared to $72.8 million for the quarter ended December 31, 2008. This was mainly due to lower charter rates imposed by the market for most of our vessels and the decreased amortization of fair value of below/above market acquired time charters amounting $0.3 million for the three-month period ended December 31, 2009 compared to $28.7 million for the three-month period ended December 31, 2008.Operating loss amounted to $2.8 million for the quarter ended December 31, 2009 compared to operating income of $54.3 million for the quarter ended December 31, 2008. Net loss for the fourth quarter of 2009 amounted to $4.6 million or $0.07 loss per share calculated on 61,049,760 weighted average number of shares, basic and diluted. Net income for the fourth quarter of 2008 amounting to $50.2 million or $0.89 per basic and diluted shares calculated on 56,278,511 weighted average numbers of shares.

The fourth quarter of 2009 net loss figure includes the following non-cash items:
•    Net revenue of $0.3 million or $0.01 per basic and diluted share, representing amortization of fair value of below/above market acquired time charters, attached to vessels acquired, over the remaining period of the time charter into revenue.
•    A loss of $0.9 million or $0.02 per basic and diluted share associated with a loss on the time charter agreement termination which relates to the write-off of unamortized fair value of an above-market acquired time charter on a vessel due to an early redelivery date.

Fourth quarter of 2008 net income figure includes the following non-cash items:
•    Net revenue of $28.7 million or $0.51 per basic and diluted share, representing amortization of fair value of below/above market acquired time charters, attached to vessels acquired, over the remaining period of the time charter into revenue.
•    Expenses of $1.3 million, or $0.02 per basic and diluted share relating to stock-based compensation recognized in connection with the vesting of a portion of 1,255,000 unvested restricted common shares issued to directors and employees.

Adjusted EBITDA for the fourth quarter of 2009 and 2008 excluding the above items was $11.0 million and $42.9 million, respectively. A reconciliation of EBITDA and adjusted EBITDA to net cash provided by cash flows from operating activities is set forth below.

An average of 11.89 and 12.10 vessels were owned and operated during the fourth quarter of 2009 and 2008, respectively, earning an average Time Charter Equivalent, ('TCE") rate per day of $23,012 and per day $41,521, respectively. We refer you to the information under the heading "Summary of Selected Data" later in this release for further information regarding our calculation of TCE rates.

Total expenses, excluding the impairment loss from the sale of vessel Star Alpha and the loss on time charter agreement termination, increased approximately 17% to $33.0 million for the three-month period ended December 31, 2009 compared to $28.2 million for the three-month period ended December 31, 2008. Although depreciation and general and administrative expenses decreased by 18% and 44%, respectively, the 17% increase in expenses was mainly due to increased vessel voyage expenses and a loss of $1.4 million related to derivative instruments.

Voyage expenses consist of hire paid for chartered-in vessels, port, canal and fuel costs. There was a $7.1 million increase in voyage expenses in the fourth quarter of 2009 as compared to the same period of 2008. The increase is mainly due to the fact that on September 13, 2009 we chartered-in the vessel Star Beta from its charterer to serve the third shipment under the Vale's contract of affreightment (COA) and on November 6, 2009 we also chartered-in a third party vessel to serve the fourth shipment under the same COA.

Vessel operating expenses were $6.8 million for the fourth quarter of 2009 compared to $6.4 million for the same period last year.

Depreciation expenses decreased to $13.1 million for the fourth quarter of 2009 from $16.0 million for the fourth quarter of 2008. This decrease is mainly due to the fact that there was no depreciation expense related to Star Alpha during the quarter ended December 31, 2009 as this vessel was reclassified as asset held for sale on July 20, 2009 and delivered to her new owners on December 21, 2009.

General and administrative expenses decreased to $2.4 million for the quarter ended December 31, 2009 from $4.3 million for the quarter ended December 31, 2008, respectively. This decrease is mainly due to lower stock-based compensation expense.

Years ended December 31, 2009 and 2008 Results
For the year ended December 31, 2009, total revenues amounted to $142.4 million compared to $238.8 million for the year ended December 31, 2008. This decrease is mainly due to lower charter rates earned for most of our vessels during 2009 and the decreased amortization of fair value of below/above market acquired time charters to $5.7 million for the year ended December 31, 2009 compared to $80.5 million for the year ended December 31, 2008. Operating loss amounted to $49.3 million for the year ended December 31, 2009 compared to operating income of $142.8 million for the year ended December 31, 2008. Net loss for the year ended December 31, 2009 amounted to $58.4 million representing $0.96 loss per basic and diluted share calculated on 60,873,421 weighted average number of basic and diluted shares. Net income for the year ended December 31, 2008 amounted to $133.7 million or $2.55 per basic share calculated on 52,477,947 weighted average number of shares, and $2.46 per diluted share calculated on 54,280,472 weighted average number of shares. Year ended December 31, 2009 net income figure includes the following non-cash items:
•    Impairment loss of $75.2 million or $1.23 per basic and diluted share, in connection with the sale of the vessel Star Alpha.
•    Net revenue of $5.7 million or $0.09 per basic and diluted share, representing amortization of fair value of below/above market acquired time charters, attached to vessels acquired, over the remaining period of the time charter into revenue.
•    Expenses of $1.8 million, or $0.03 per basic and diluted share relating to the stock-based compensation recognized in connection with the vesting of a portion of 1,385,000 restricted shares (vested and unvested) issued to directors and employees.

Year ended December 31, 2008 net income figure includes the following non-cash items:
•    Vessel impairment loss of $3.6 million, or $0.07 per basic and diluted share, in connection with the sale of the vessel Star Iota.
•    Net revenue of $80.5 million, or $1.53 and $01.48 per basic and diluted share, respectively, attributable to the amortization of the fair value of time charters attached to vessels acquired, over the remaining period of the time charter.
•    Expenses of $4.0 million, or $0.08 and $0.07 per basic and diluted share, respectively, relating to the stock-based compensation recognized in connection with the vesting of a portion of 1,385,000 (vested and unvested) restricted common shares issued to directors and employees.
Adjusted EBITDA for years ended December 31, 2009 and 2008 excluding all the above items was $80.4 million and $120.9 million respectively. A reconciliation of EBITDA and adjusted EBITDA to net cash provided by cash flows from operating activities is set forth below.

An average of 11.97 and 10.76 vessels were owned and operated during the years ended December 31, 2009 and 2008, respectively, earning an average TCE rate per day of $29,450 and $42,824, respectively. We refer you to the information under the heading "Summary of Selected Data" later in this release for further information regarding our calculation of TCE rates.

Total expenses increased to $121.6 million for the year ended December 31, 2009 compared to $102.2 million for the year ended December 31, 2008 due to higher vessel operating and voyage expenses and depreciation as a result of a longer period of operations arising from higher ownerships days. Vessel operating expenses were $30.2 million for the year ended December 31 2009 compared to $26.2 million for the same period last year. The increase in vessel operating expenses was due to the operation of a larger fleet, higher crewing and insurance expenses.

Depreciation expenses increased approximately 14% to $58.3 million for the year ended December 31, 2009 from $51.1 million for the year ended December 31, 2008 arising from higher ownerships days. General and administrative expenses decreased approximately 30% to $8.7 million for the year ended December 31, 2009 from $12.4 million the year ended December 31, 2008, respectively. This decrease was mainly due to lower stock based compensation expense.

Liquidity and Capital Resources

Cash Flows

Net cash provided by operating activities for the year ended December 31, 2009 and 2008, was $65.8 million and $110.7 million, respectively. Net cash provided by operating activities for the year ended December 31, 2009 was primarily a result of recorded net loss of $58.4 million, adjusted for depreciation of $58.3 million, and an impairment loss from sale of vessel Star Alpha of $75.2 million, and offset by amortization of fair value of below/above market acquired time charter agreements of $5.7 million. Net cash provided by operating activities for the year ended December 31, 2008 was primarily a result of recorded net income of $133.7 million, adjusted for depreciation, stock based compensation and the vessel impairment loss related to the sale of the vessel Star Iota of $58.7 million offset by the amortization of the fair value of below/above market acquired time charter agreements of $80.5 million.

Net cash used in investing activities for the years ended December 31, 2009 and 2008 was $1.4 million as compared to $423.3 million used in investing activities, respectively. Net cash provided by investing activities for the year ended December 31, 2009, was primarily a result of the proceeds from sale of vessel Star Alpha amounting to $19.1 million offset by an increase in restricted cash of $20.5 million relating to the waivers obtained for existing loan agreements. For the year ended December 31, 2008 the cash used in investing activities related mainly to the payment of the cash consideration of $413.5 million for our initial fleet and additional vessels, $14.4 million related to the purchase price allocated to the above-market time charters and 12.0 million related to an increase in restricted cash, which was offset by $16.6 million which represented proceeds from the sale of the Star Iota.

Net cash used in financing activities for the year ended December 31, 2009 was $53.8 million as compared to $323.0 million of net cash provided by financing activities for the year ended December 31, 2008. For the year ended December 31, 2009, net cash used in financing activities consisted of loan installment payments amounting to $49.3 million and cash dividend payments of $6.2 million, offset by cash provided from our directors' dividend reinvestment of $1.9 million. For the year ended December 31, 2008 net cash provided by financing activities consisted of the drawdown of $317.5 million related to our loan facilities and the proceeds from exercise of warrants of $94.2 million mainly offset by $52.6 million of cash dividends paid, $21.0 million of repayments under our loan agreements and payments of $13.4 million in connection with our repurchase of common stock and warrants.
 

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