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Article Excerpt
OPERATOR: Good day, ladies and gentlemen, and welcome to the fourth quarter 2008 Eagle Bulk Shipping earnings conference call. My name is Dan and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session toward the end of this conference. (Operator Instructions) As a reminder this conference is being recorded for replay purposes.
I would now like to turn the call over to your host today, Mr. Sophocles Zoullas, Chairman and CEO. Please proceed, sir.
SOPH ZOULLAS, CHAIRMAN & CEO, EAGLE BULK SHIPPING INC.: Thank you and good morning. I would like to welcome everyone to Eagle Bulk Shipping's fourth quarter and fiscal year 2008 earnings call. To supplement our remarks today, I encourage participants to access a slide presentation that is available on our website at www.eagleships.com. Please note that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance and are inherently subject to risks and uncertainties. You should not place undue reliance on these forward-looking statements. We refer all of you to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties that may have a direct bearing on our operating results, our performance and our financial condition. Please note on slide two the agenda for the call will follow our usual format.
After my opening remarks, I will discuss our fourth quarter and fiscal year 2008 highlights and provide an update of our fleet and our review of Eagle Bulk's charter contracts, which provides significant revenue visibility. I will also discuss recent events in the dry bulk market, both with regard to demand and supply before turning over the call to Alan Ginsberg, who will review the Company's financial performance. I will then end the management discussion with some concluding remarks before taking questions. Please turn to slide four for a review of our fourth quarter and fiscal year 2008. I am very pleased to report continued profitability during one of the dry bulk industry's most challenging quarters in history, which confirms the success of Eagle Bulk's strategy. During the quarter, our net income was $15.1 million or $0.32 per share adjusted for nonrecurring charges. Our gross time charter revenues were $62.4 million, up 64% quarter on quarter. EBITDA was $33.5 million, also representing a quarter on quarter increase of 20%.
Full year results were equally impressive. 2008 net income was $67.6 million or $1.44 per share adjusted for nonrecurring charges. Gross time charter revenues were $194.3 million, representing a 43% year-on-year increase. EBITDA increased 28% during the period to $127.7 million. Superior fleet utilization continues, as we maintained a 99.5% rating for the period. Slide five. 2008 operating and financial results demonstrate two very important differentiating factors at Eagle Bulk. One, consistent, strong across-the-board operating results and two, which is very important in today's markets, the ability of management to quickly make adjustments to our business to navigate the unprecedented changing macroeconomic environment that is affecting all industries worldwide. Regarding our operating results, we successfully took delivery of five vessels during 2008 and placed all of them on 1 to 10-year time charters.
During the year we took delivery of the Wren, which commenced a 10-year time charter at $24,750 a day, the Goldeneye, which commenced a one-year charter at $61,000 a day, the Redwing, which commenced a one-year charter at $50,000 a day, the Woodstar, which commenced a 10-year charter at $18,300 a day, and the Crowned Eagle, which commenced a one-year charter at $16,000 a day. During the year, we also expanded our multi-manager strategy and now have three managers, V-Chips, Wilhelmsen and Anglo Eastern. During the fourth quarter Eagle Bulk proactively and independently reached agreements with our shipyard and our lenders that significantly reduced our capital expenditure, while preserving growth potential when the markets normalize again. We also opportunistically extended our charters default insurance cover by another year to July, 2011. Please turn to slide seven for a review of our fleet.
The key message on this slide is that Eagle Bulk owns a modern, homogeneous fleet of the most flexible ships in the dry bulk market today. Modern, flexible ships have historically outperformed other asset classes in challenging markets and attributes such as on-board cranes and versatility across all cargo types becomes highly valued. As a result, we believe that Eagle Bulk's fleet is very well positioned for today's environment. The inherent flexibility of our ships becomes even more desirable to charters during current market conditions. Only two months ago, supramaxes were out earning capesize vessels, even though our ships are only one-third the size of the larger ships. Lastly, it's very important to note that in the current dry bulk market modern ships attract the most charter interest. Ships built after 2000 are much more desirable to a charter than ships built in the '90s or in the '80s.
And our current operating fleet has only two vessels built before the year 2000. Slide eight demonstrates an even more uniform supramax new build profile, as the vessels are intentionally set up in three groups of sister vessels, which provides us with increased operating efficiencies and the possibility of enhanced fleet revenues. It is important to note that these ships were not speculative orders, but were ordered at conservative prices, with significant charter cover and committed financing in place. Approximately 80% of Eagle Bulk's new builds have long-term time charters associated with the vessels. Slide nine is a new slide this quarter, which graphically demonstrates that Eagle Bulk new build vessels' contracts were put in place at significant discounts to new build contracts and prompt deliveries since Q4 2007. The graph on the left shows the prices for prompt vessels as compared to Eagle Bulk's average contract price for our new builds.
Modern secondhand capesizes during the period traded at around $150 million per vessel. Panamaxes traded around $100 million per vessel and supramaxes traded for about $80 million per vessel, which compares very favorably for Eagle Bulk's contracts inbetween $33 million and $36.5 million per vessel. Even though prompt delivery capesizes have fallen to around $60 million and panamaxes and supramaxes have fallen to under $40 million per vessel, Eagle Bulk's new build contracts still look reasonable in today's depressed market. The graph on the right shows a similar analysis for new build contract prices only and leads to the same conclusion, that Eagle Bulk's new build contracts compare well to today's market prices. During the same period, prior to the drop in the fourth quarter, the new build contracts for capesizes, panamaxes and supramaxes were about $95 million, $55 million and $45 million respectively, well above the average contract prices for Eagle Bulk's new supramaxes.
Slide ten provides additional new information and analysis regarding Eagle Bulk's liquidity position, which clearly demonstrates adequate liquidity for the remaining new builds. Starting with the CapEx table on the right, our total CapEx commitments through 2011 are approximately $625 million. It is very important to note and for me to point out that the CapEx schedule has a long timeline, which gives us payment flexibility to match cash flow to commitments, which is highly preferable to having the commitments -- than having the commitments all due within one or even two years. Further detail shows a breakout of the CapEx by quarter for 2009, as well as each of the three years, which shows annual CapEx of between $182 million and $248 million. The CapEx schedule is funded through current liquidity of $569 million, plus contracted revenues through 2011 of $391 million.
Even assuming the charter markets stays at today's levels and all open days revenue for the entire fleet for the next three years is only chartered at $12,000 per day per vessel, this would result and would provide additional liquidity of $239 million in revenues. Therefore, contracted and open days revenues could provide in excess of $600 million to Eagle Bulk to meet...
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