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Article Excerpt
PARTICIPANTS
. Soph Zoullas, Eagle Bulk Shipping Inc., Chairman & CEO . Alan Ginsberg, Eagle Bulk Shipping Inc., CFO . Doug Mavrinac, Jefferies & Co, Analyst . Natasha Boyden, Cantor Fitzgerald, Analyst . Charles Rupinski, Maxim, Analyst . Jon Chappell, JPMorgan, Analyst . Scott Burk, Oppenheimer, Analyst . Justin Yagerman, Wachovia, Analyst . Chris Wetherbee, Merrill Lynch, Analyst
OVERVIEW
EGLE reported full-year 2008 net revenues of $185.4m and net income adjusted for non-recurring charges of $67.6m or $1.44 per share. 4Q08 net revenues were $60m, and net income adjusted for non-recurring charges was $15.1m or $0.32 per share.
FINANCIAL DATA
A. Key Data From Call 1. Full-year 2008 net revenues = $185.4m. 2. 4Q08 net revenues = $60m. 3. Full-year 2008 net income (adjusted for non-recurring charges) = $67.6m. 4. 4Q08 net income (adjusted for non-recurring charges) = $15.1m. 5. Full-year 2008 EPS (adjusted for non-recurring charges) = $1.44. 6. 4Q08 EPS (adjusted for non-recurring charges) = $0.32.
PRESENTATION SUMMARY
S1. Operational Review (S.Z.) 1. Highlights: 1. 4Q08: 1. Continued profitability during one of dry bulk industry's most challenging quarters in history. 1. Confirms success of Co.'s strategy. 2. Net income was $15.1m or $0.32 per share, adjusted for non-recurring charges. 3. Gross time charter revenues, $62.4m. 1. Up 64% QonQ. 4. EBITDA, $33.5m. 1. QonQ increase of 20%. 2. Full-year 2008: 1. Net income, $67.6m or $1.44 per share, adjusted for non-recurring charges. 2. Gross time charter revenues, $194.3m. 1. 43% YonY increase. 3. EBITDA increased 28% to $127.7m. 4. Superior fleet utilization continues as Co. maintained 99.5% rating for period. 2. 2008 Operations: 1. Operating and financial results demonstrate two differentiating factors at Co. 1. Consistent strong across-the-board operating results. 2. Ability of management to quickly make adjustments to business to navigate unprecedented changing macroeconomic environment that is affecting all industries worldwide. 2. Successfully took delivery of five vessels, and placed all of them on 1-10 year time charters. 1. Wren, commenced ten-year time charter at $24,750 a day. 2. Goldeneye, commenced one-year charter at $61,000 a day. 3. Redwing, commenced one-year charter at $50,000 a day. 4. Woodstar, commenced ten-year charter at $18,300 a day. 5. Crowned Eagle, commenced one-year charter at $16,000 a day. 3. Expanded multi-managers strategy. 1. Now has three managers: 1. V Ships. 2. Wilhelmsen. 3. Anglo Eastern. 4. During 4Q08, proactively and independently reached agreements with shipyard and lenders that significantly reduced CapEx, while preserving growth potential when markets normalize again. 5. Opportunistically extended charterers default insurance cover by another year to July 2011. 3. Fleet: 1. Owns a modern, homogenous fleet of the most flexible ships in dry bulk market today. 2. Modern flexible ships have historically outperformed other asset classes in challenging markets. 3. Attributes such as onboard cranes and versatility across all cargo types becomes highly valued. 4. Inherent flexibility of ships becomes even more desirable to charterers during current market conditions. 5. Only two months ago, Supramaxs were outearning Capesize vessels even though Co.'s ships are only one-third the size of larger ships. 6. In current dry bulk market, modern ships attract the most charterer interest. 1. Ships built after 2000 are much more desirable to a charter than ships built in 1990s or in 1980s. 2. Current operating fleet has only two vessels built before 2000. 7. Supramax Newbuildings: 1. Vessels are intentionally set up in three groups of sister vessels, which provides Co. with increased operating efficiencies, and possibility of enhanced fleet revenues. 2. These ships were not speculative orders, but were ordered at conservative prices, with significant charter cover and committed financing in place. 3. Approx. 80% of Co.'s newbuilds have long-term time charters associated with vessels. 8. Prompt Deliveries & Newbuild Contracts Since 4Q07: 1. Modern secondhand Capesizes during period traded at around $150m per vessel. 2. Panamaxs, traded around $100m per vessel. 3. Supramaxs, traded for about $80m per vessel, which compares favorably for Co.'s contracts in between $33.0-36.5m per vessel. 4. Even though prompt delivery Capesizes have fallen to around $60m and Panamaxs and Supramaxs have fallen to under $40m per vessel, Co.'s newbuild contracts still look reasonable in today's depressed market. 5. Co.'s newbuild contracts compare well to today's market prices. 6. During same period, prior to drop in 4Q, newbuild contracts for Capesizes, Panamaxs and Supramaxs were about $95m, $55m and $45m respectively, well above avg. contract prices for its new Supramaxs. 4. Liquidity Position: 1. Demonstrates adequate liquidity for remaining newbuilds. 2. Total CapEx commitments through 2011 are approx. $625m. 1. CapEx schedule has a long timeline, which gives payment flexibility to match cash flow to commitments, which is highly preferable than having commitments all due within one or even two years. 2. Breakout of CapEx by qtr. for 2009 and each of the three years: 1. Annual CapEx between [$182-248m]. 3. CapEx schedule is funded through current liquidity of $569m, plus contracted revenues through 2011, of $391m. 3. Even assuming charter market stays at today's levels, and all open days revenue for entire fleet for next three years is only chartered at $12,000 per day per vessel. 1. This would result and would provide additional liquidity of $239m in revenues. 2. Contracted and open days revenues could provide in excess of $600m to Co. to meet its commitments for growth. 4. Avg. CapEx per vessel is only $26m, which averages to only $2,500 per day assuming 28-year useful life. 5. Charter Cover: 1. Now stands at 74% for 2009. 2. Provides significant cash flow to Co. 3. Smoothes out volatility of trading vessels in spot market. 4. Continues to pursue strategy of deploying ships on time charter contracts, which provides shareholders with transparent, stable, visible revenues, especially when external shocks to market, such as current global liquidity crisis occur. 5. Time charter contracts have added benefit of insulating Co. from any costs associated with fuel, ports, canals or delays. 6. Maintained consistent, conservative strategy in charter market and avoided any FFA exposure. 6. Charter Default Insurance Policy: 1. All of Co.'s charterers are current with their charter payments. 2. Insurance is provided by one of the world's largest credit insurers that underwrites more than 30% of world's credit insurance. 1. They maintain A and [A2] ratings by S&P and Moody's. 3. Annual revenues are in excess of $2b. 4. Underwriter has no material adverse exposure to large troubled financial institutions and credit derivatives that have caused problems for so many other insurers. 5. Insurance has been placed by securers. 6. Believes this insurance gives a strong competitive advantage in today's markets as most other dry bulk companies have not been able to secure similar coverage for their fleets. 7. Insurance would also assist Co. in any response to a default situation. 7. Dry Bulk Market: 1. As Co. had anticipated by steps it took during 4Q last year, dry bulk market entered a new range of charter rates that was driven by credit, which in turn...
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