Star Bulk Carriers Q1 Results

Thursday, May 20, 2010

Star Bulk Carriers Corp. (NASDAQ: SBLK) announced its unaudited financial and operating results for the first quarter ended March 31, 2010.

Akis Tsirigakis, President and CEO of Star Bulk commented: "We are pleased that our continued cost reduction campaign contributed to our financial results for the first quarter of 2010 being $0.02 per share better than expected. We also entered into contracts to grow and renew our fleet, taking advantage of attractive asset valuations and opportune timing. During the quarter, we entered into agreements to sell one of our oldest vessels, a 1993 Capesize and replace it with a 2000 Capesize vessel. We also placed orders for two newbuilding Capesize vessels with deliveries scheduled in late 2011. This organic fleet development was achieved without the need to dilute our investors, through own cash and senior debt, a result of our sound financial condition. All the while, we continue to reward our valued shareholders with a dividend of $0.05 per share payable on June 4, 2010.

"The operating results for the first quarter of 2010 would have been improved by $34 million were it not for a non-cash item related to the sale of the Star Beta in the context of our fleet renewal strategy.

"We are proud to have improved fleet utilization rate to 99.7% achieved in the first quarter 2010 reflecting the operational and commercial efficiency of our in-house management. Our exposure to market volatility remains limited. As of today we have secured $280 million of contracted revenues, with 98% of our fleet operating days in 2010 and 64% in 2011 already fixed.

"Our business depends on trends and developments in the global commodities markets which have shown extraordinary resilience in challenging times which leads us to be optimistic for the prospects of dry bulk shipping."

George Syllantavos, Chief Financial Officer of Star Bulk commented: "Our cost reduction efforts implemented in 2009 continue to produce results for us. In the first quarter 2010 our overall expenses decreased by 13% over the same period 2009 while our vessel operating expenses were lower by 16%. In fact, this is the third quarter in a row where a significant cost reduction takes place. Our remaining principal repayment is $36 million in 2010, $32 million in 2011 and roughly $25 million annually thereafter. As of today, our senior debt was $224 million while our cash position stood at $45 million, translating into a net debt of approximately 24% of our total assets."

First Quarter 2010 and 2009 Results:
For the quarter ended March 31, 2010, total revenues amounted to $29.3 million compared to $45.1 million for the quarter ended March 31, 2009. 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 market acquired time charters amounting to $0.3 million for the three-month period ended March 31, 2010 compared to $6.4 million for the three-month period ended March 31, 2009. Operating loss amounted to $31.5 million for the quarter ended March 31, 2010 compared to operating income of $25.2 million for the quarter ended March 31, 2009. Net loss for the first quarter of 2010 amounted to $33.0 million or $0.54 loss per share calculated on 61,049,760 weighted average number of shares, basic and diluted. Net income for the first quarter of 2009 amounting to $22.5 million or $0.37 per basic and diluted shares calculated on 60,390,219 weighted average numbers of shares.

The first quarter of 2010 net loss figure includes the following non-cash
items:
    -- Impairment loss of $33.7 million or $0.55 per basic and diluted share, in connection with the sale of the vessel Star Beta, which has been classified as an asset held for sale in current assets and recorded at fair value less cost to sell.
    -- Net revenue of $0.3 million or $0.01 per basic and diluted share, representing amortization of fair value of below market acquired time charters, attached to vessels acquired, over the remaining period of the time charter into revenue.
    -- Expenses of $0.8 million, or $0.01 per basic and diluted share relating to the amortization of stock based compensation recognized in connection with the 1,150,600 unvested restricted shares issued to directors and employees.
    -- An unrealized loss of $0.3 million or $0.01 per basic and diluted share associated with the mark-to-market valuation of the company's derivatives.

The first quarter of 2009 net income figure includes the following non-cash
items:
    -- Net revenue of $6.4 million, or $0.11 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 gain of $10.9 million or $0.18 per basic and diluted share associated with the gain on the time charter agreement termination which mainly relates to the unamortized fair value of below market acquired time charter on a vessel early redelivery date.
    -- Expenses of $1.5 million, or $0.02 per basic and diluted share relating to the amortization of stock based compensation recognized in connection with the 1,385,000 unvested restricted shares issued to directors and employees.
    -- An unrealized loss of $2.8 million or $0.05 per basic and diluted share associated with the mark-to-market valuation of the company's derivatives.

Adjusted EBITDA for the first quarter of 2010 and 2009 excluding the above items was $14.6 million and $27.8 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 11.0 and 12.0 vessels were owned and operated during the first quarter of 2010 and 2009, respectively, earning an average Time Charter Equivalent (TCE) rate per day of $25,919 and per day $35,158, respectively. We refer you to the information under the heading "Summary of Selected Data" later in this earnings release for further information regarding our calculation of TCE rates.

Expenses, excluding the impairment loss from the sale of vessel Star Beta in the first quarter of 2010 and the loss on time charter agreement termination in the first quarter of 2009, decreased approximately 13% to $27.1 million for the three-month period ended March 31, 2010 compared to $31.1 million for the three-month period ended March 31, 2009. Vessel operating expenses also decreased approximately 16% to $5.6 million for the first quarter of 2010 compared to $6.7 million for the same period last year. The decreases are mainly due to a more cost efficient in-house management which was fully implemented during the first quarter of 2010.

Voyage expenses consist of hire paid for chartered-in vessels, port, canal and fuel costs. There was a $1.6 million increase in voyage expenses in the first quarter of 2010 as compared to the same period of 2009. The increase is mainly due to the fact that on November 6, 2009 we chartered-in a third party vessel to serve a shipment under a COA. During the first quarter of 2010 the vessel was chartered-in for 32 days.

Depreciation expenses decreased to $11.6 million for the first quarter of 2010 from $15.7 million for the first quarter of 2009. The decrease in depreciation expense was due to the fact that our fleet was reduced from an average of 12 vessels during the first quarter of 2009, to an average of 11 during the first quarter of 2010. Furthermore, depreciation expense was further reduced due to the reclassification of the vessel Star Beta during the first quarter of 2010 as an asset held for sale.

General and administrative expenses decreased to $2.4 million for the quarter ended March 31, 2010 from $2.9 million for the quarter ended March 31, 2009, respectively. This 15% decrease is mainly due to lower stock-based compensation expense.

Liquidity and Capital Resources:
Cash Flows
Net cash provided by operating activities for the quarters ended March 31, 2010 and 2009, was $13.1 million and $24.6 million, respectively. Net cash provided by operating activities for the quarter ended March 31, 2010 was primarily a result of recorded net loss of $33.0 million, adjusted for depreciation of $11.6 million, and an impairment loss of $33.7 million resulting from the sale of vessel Star Beta which has been classified as asset held for sale and recorded at fair value less costs to sell. Net cash provided by operating activities for the quarter ended March 31, 2009 was primarily a result of recorded net income of $22.5 million, mainly adjusted for depreciation of $15.7 million and offset by amortization of fair value of below/above market acquired time charter agreements of $6.4 million and non-cash gain on time charter agreement termination of $10.9 million.

Net cash used in investing activities for the quarters ended March 31, 2010 and 2009 was $5.9 million and $20.0 million, respectively. Net cash used in investing activities for the quarter ended March 31, 2010, was primarily due to the 20% advance given for the vessel Star Aurora that is to be acquired during the fourth quarter of 2010, amounting to $8.5 million, offset by a decrease in restricted cash amounting to $2.6 million. For the quarter ended March 31, 2009 there was no cash used in investing activities due to the lack of acquisitions and/or sales of vessels during the period, although, there was an increase in restricted cash of $20.0 million which related to the waivers obtained for the existing loan agreements.

Net cash used in financing activities for the quarters ended March 31, 2010 and 2009 was $19.5 million and $10.1 million respectively. For the quarter ended March 31, 2010, net cash used in financing activities consisted of loan installment payments amounting to $16.3 million, cash dividend payments of $3.1 million and financing fees amounting $0.2 million. For the quarter ended March 31, 2009 net cash used in financing activities consisted of the payments of loan installments amounting to $12.0 million offset by cash provided from the Director's reinvesting their dividend of $1.9 million.
 

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