Star Bulk Carriers Corp. current report, Q3 FY2009

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Business Context and Reporting Period

Star Bulk Carriers Corp. (Nasdaq: SBLK), a global dry bulk shipping company headquartered in Athens, Greece, reported unaudited financial and operating results for the second quarter and first half ended June 30, 2009. The filing, submitted on August 12, 2009, covers a period of significant market volatility. The company operates a fleet of 12 vessels (4 Capesize, 8 Supramax) with a total capacity of 1,106,253 DWT.

Key Financial Metrics

Second Quarter 2009 (vs. Q2 2008)

  • Revenue: $32.4 million (down from $59.2 million).
  • Operating Income/Loss: Operating loss of $1.0 million (compared to operating income of $33.2 million).
  • Net Income/Loss: Net loss of $3.4 million ($0.06 per share) vs. net income of $31.6 million ($0.62 basic EPS).
  • EBITDA: $14.9 million (down from $45.4 million).
  • Adjusted EBITDA: $15.5 million (down from $29.7 million).
  • TCE Rate: Average Time Charter Equivalent rate was $30,019 per day (down from $46,068).
  • Fleet Utilization: 98.9%.

First Half 2009 (vs. H1 2008)

  • Revenue: $77.5 million (down from $100.9 million).
  • Operating Income: $24.2 million (down from $50.9 million).
  • Net Income: $19.0 million ($0.31 per share) vs. $48.3 million ($1.01 basic EPS).
  • EBITDA: $55.7 million (down from $71.9 million).
  • Adjusted EBITDA: $43.3 million (down from $43.9 million).
  • TCE Rate: Average TCE rate was $32,591 per day (down from $41,749).
  • Fleet Utilization: 98.5%.

Liquidity and Balance Sheet (as of June 30, 2009)

  • Cash and Restricted Cash: $35.95 million (Cash: $64.5 million mentioned in text, Balance Sheet shows $35.95M total cash/restricted).
  • Senior Debt: $272 million (Current portion: $56.975 million; Long-term: $215.025 million).
  • Net Debt: Approximately 26% of fixed assets.
  • Operating Cash Flow (H1 2009): $42.1 million.
  • Investing Cash Flow (H1 2009): Net cash used of $25.5 million (primarily increase in restricted cash).
  • Financing Cash Flow (H1 2009): Net cash used of $22.6 million (loan repayments).

Material Changes vs. Prior Period

  • Revenue Decline: Driven by lower charter rates and 46 scheduled dry-docking days for the vessel Star Ypsilon in Q2.
  • Expense Increases: Total expenses rose to $33.4 million in Q2 (from $26.0 million) due to a larger fleet, higher crewing/insurance costs, and increased depreciation ($15.8M vs $12.2M).
  • Non-Cash Items Impact: Q2 2008 results included a $17.1 million gain from amortization of below-market time charters, whereas Q2 2009 included a $1.0 million loss from the same item. H1 2009 included a $10.9 million non-cash gain on time charter agreement termination.
  • Cost Controls: General and administrative (G&A) expenses decreased by approximately 34% per vessel compared to the prior year due to economies of scale.

Guidance, Outlook, and Management Commentary

  • Dividend Declaration: The company declared a dividend of $0.05 per share for Q2 2009, becoming the first shipping company to declare a dividend after suspending it, subject to lender approval.
  • Financial Position: Management cites a strong cash position and low debt level as strategic advantages to navigate market volatility.
  • Debt Repayment Schedule: Remaining principal repayments are approximately $23 million for 2009, $60 million for 2010, and $32 million for 2011, reducing to ~$25 million thereafter.
  • Asset Sale: The company agreed to sell the vessel Star Alpha for $19.85 million, with delivery expected in December 2009.
  • Outlook: Management expects cash reserves to continue growing due to high contract coverage on the fleet.
  • Risks: Forward-looking statements highlight risks including fluctuations in charter rates, vessel values, bunker prices, drydocking costs, and global economic conditions.

Investor Verification Checklist

  • Verify the impact of the $10.9 million non-cash gain on time charter termination on H1 2009 net income.
  • Confirm the status of lender approval for the $0.05 per share Q2 dividend.
  • Monitor the execution of the Star Alpha sale scheduled for December 2009.
  • Review the trend in TCE rates ($30,019/day in Q2) against market benchmarks for Capesize and Supramax vessels.
  • Assess the sustainability of G&A cost reductions as the fleet expands.
  • Validate the restricted cash increase of $25.4 million related to loan waivers and FFAs.