Star Bulk Carriers Corp. — 2013 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2013. This is an annual report, not a standalone fourth-quarter filing; the supplied text does not provide clear Q4-only financial results. Figures are in U.S. dollars unless stated otherwise.
Business context
Star Bulk owns and operates drybulk vessels transporting commodities including iron ore, coal and grain, and also earns fees managing third-party vessels. At December 31, 2013, it operated 17 vessels and had nine newbuildings under construction. The company reported under U.S. GAAP.
Key financial metrics
| Metric | 2013 | 2012 |
|---|---|---|
| Voyage revenue | $68.3 million | $85.7 million |
| Management fee income | $1.6 million | $0.5 million |
| Operating income (loss) | $8.4 million | $(306.9) million |
| Net income (loss) | $1.9 million | $(314.5) million |
| Basic and diluted earnings (loss) per share | $0.13 | $(58.32) |
| Net cash from operating activities | $27.5 million | $19.0 million |
| Net cash used in investing activities | $(108.1) million | $25.5 million provided |
| Net cash from (used in) financing activities | $112.0 million | $(46.6) million |
| Cash and cash equivalents at year-end | $44.3 million | $13.0 million |
| Total assets | $468.1 million | $354.7 million |
| Total debt | $190.3 million | $224.1 million |
| Stockholders’ equity | $266.1 million | $116.7 million |
Working capital improved to $24.7 million from a $4.5 million deficit. Restricted cash was $11.7 million at year-end. Debt due within 12 months was $18.3 million. After additional facilities were drawn in February and March 2014, reported borrowings were $259.9 million as of March 20, 2014.
The average daily time charter equivalent (TCE) rate fell to $14,427 from $15,419; fleet utilization rose to 98% from 96%. Vessel operating expenses were $27.1 million, or $5,564 per ownership day, compared with $27.8 million and $5,361, respectively. No 2013 impairment charge was recorded; the 2012 results included a $303.2 million vessel impairment.
Material changes versus 2012
- Voyage revenue declined about 20%, reflecting lower charter rates and a smaller average operating fleet. TCE fell about 6%.
- Net results shifted to a small profit, largely because the $303.2 million impairment recognized in 2012 did not recur and depreciation was lower. This improvement should not be read as evidence of a comparable increase in underlying revenue.
- Operating cash flow increased by $8.5 million. Management attributed this mainly to higher management-fee income and a more favorable working-capital movement.
- Investing cash outflow rose with vessel acquisitions and newbuilding advances. The company spent $127.8 million on vessel advances, acquisitions and other fixed assets.
- Two equity offerings generated approximately $146.0 million net proceeds. Shares outstanding increased from 5.4 million at year-end 2012 to 29.1 million at year-end 2013, materially diluting existing holders.
Outlook, risks and unusual items
- Management stated it expected cash balances and operating cash flows to cover 2014 liquidity needs, while noting that results remain exposed to weak or volatile drybulk markets. No quantified earnings or charter-rate guidance was provided.
- Nine newbuilding contracts total approximately $367.4 million; $66.8 million had been paid by March 20, 2014, leaving $300.6 million in installments, primarily due in 2015–2016. The company expected to seek financing for the vessels. Two additional Newcastlemax ships are subject to 10-year bareboat charters with purchase options and end-of-term purchase obligations.
- Six vessels were on medium- to long-term charters and ten were considered exposed to the spot market because of short charter durations; one vessel was undergoing drydocking. Charter expirations and rechartering rates are significant risks.
- Loan amendments deferred installments, eased certain financial covenants and increased borrowing margins. The company said it complied with all loan covenants at December 31, 2013, but future covenant compliance is sensitive to charter rates and vessel values. Dividends were prohibited under amended loan agreements; none were paid in 2013.
- Two charterers accounted for 47% of 2013 voyage revenue. STX Pan Ocean terminated the Star Borealis charter in June 2013; $653,788 of unpaid hire was reported at year-end, in addition to a claim for damages. The company is pursuing recovery through rehabilitation proceedings.
- Other items included $3.8 million of other operational gains, primarily settlements of commercial claims and an insurance claim, and $1.1 million of other operational losses related to a settlement. The company also reported an unresolved Spanish pollution matter with fines reduced to approximately €260,000; it had not accrued an amount and could not estimate exposure pending final adjudication.
- Related-party matters include vessel management and brokerage arrangements linked to entities affiliated with directors, a $2.08 million shipbuilding commission payable to a director-affiliated company, and the February 2014 acquisition of a 33% interest in chartering broker Interchart. These arrangements warrant review for terms, governance and conflicts.
- Principal risks include charter-rate and vessel-value volatility, oversupply of drybulk capacity, refinancing and funding risk, floating-rate debt and foreign-exchange exposure, customer concentration, shipyard delivery or cost risks, counterparty failures, regulation, and operational, environmental and litigation exposures. Management reported effective disclosure controls and internal control over financial reporting; the auditor gave unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Review the audited financial statements and cash-flow detail, particularly the sources of 2013’s small profit and the impact of nonrecurring gains and the absence of the prior-year impairment.
- Confirm current debt, covenant headroom, restricted cash, repayment schedules and the terms of post-year-end HSH Nordbank and Deutsche Bank facilities.
- Assess the funding plan and remaining payment commitments for the newbuildings and bareboat-chartered vessels, including whether financing is secured and what obligations remain.
- Track charter expirations, spot-market exposure, customer concentration and collection of amounts claimed from STX and other counterparties.
- Evaluate dilution from the 2013 equity offerings and subsequent equity awards, the dividend restrictions, and related-party transactions and approvals.
- Monitor vessel market values, drybulk market conditions, pending legal or environmental matters, and the company’s ability to maintain covenant compliance.