Eagle Bulk Shipping Inc (EGLE) 2010 Q1 法說會逐字稿

Good day and welcome to the first quarter 2010 Eagle Bulk Shipping Incorporated earnings conference call. My name is Ann and I will be your coordinator for today's call. (Operator Instructions). We will be facilitating a question and answer session following the presentation. I would now like to turn the presentation over to Mr. Sophocles Zoullas, Chairman and CEO. Please proceed sir.

Thank you and good morning. I would like to welcome everyone to Eagle Bulk Shipping's first quarter 2010 earnings call. To supplement our remarks today, I encourage participants to access the 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 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 3 the agenda for today's call will be as follows -- I will first review our first quarter 2010 results and year-to-date highlights, proceed with a company update, and present our current views on the market.

Alan will then give an overview of the quarterly financials and I will end the presentation with some concluding remarks before we open the call to questions. Please turn to Slide 5 for a review of our first quarter 2010 results and year-to-date highlights. During the quarter we generated net income of $4.6 million or $0.07 per share basic and diluted. Revenues, net of charter commissions, totaled $54.2 million and EBITDA was $32.9 million. Fleet utilization for the quarter was 99%. During the first four months of 2010 we successfully took delivery of seven new build Supramaxes, expanding the company's fleet to 34 vessels. This represents an increase of 29.6% since the end of 2009. In the span of just a few years, Eagle has delivered impressive growth, becoming one of the leading owners and end-operators of Supramaxes in the world. Additionally, just yesterday we announced the delivery of our 8th vessel this year, the Grebe Bulker, which will immediately commence a three year profit sharing charter. We believe our expanding platform allows us to be opportunistic in our chartering strategy, implementing a more dynamic and balanced approach between long-term fixed and shorter term spot market charters as well as index based charters. Please turn to Slide 7 for charter details on our newly delivered fleet. Three vessels, the Crane, Thrasher, and Avocet are fixed on long term charters, for approximately nine years each, at very attractive rates providing us with stable cash flows and upside potential via profit sharing agreements.

We placed three vessels, Egret Bulker, Gannet Bulker, and Grebe Bulker, on medium term charters for approximately three years each which are currently earning a base rate plus a 50% profit share above $20,000. So we are already realizing profit splits on these three vessels. Two vessels, the Golden Eagle and Imperial Eagle have been fixed on the spot related on the Baltic Supramax Index, or BSI, for approximately one year each giving us exposure to the current strength in the market. It is important to note that the full cash flow contributions from these 8 vessels will be realized for the first time this year. On Slide 8, we highlight the impressive growth Eagle has realized since 2005. And the projected growth out to the end of 2012 when we have received the benefit of our entire new build delivery pro-am for a full year. In addition to the eight Supramaxes we expect to take delivery of an additional eight in 2010 and a final seven in 2011. Minimum contracted revenue for the new buildings total $362 million excluding any profit sharing. I also want to take this opportunity to remind everyone that our intention is to fund our CapEx with existing cash, debt, and cash flow from operations.

Please turn to Slide 9 for an update of our recent charter activity. As I stated earlier in the call, our growing scale has allowed us to become more opportunistic in our chartering strategy. During the first four months of 2010 we placed four vessels on BSI linked charters and fixed an additional four vessels on short-term charters, bringing our chartering position to a more balanced level for the remainder of 2010. With 58% fixed, 18% index to the BSI, and 24% open. Our chartering strategy is to maximize cash flow through the implementation of a balanced approach between long-term, medium-term, short-term and index-linked charters.

Please turn to Slide 11 for an update on the dry bulk market. Demand fundamentals continue to improve across all segments of dry bulk. RNR spot prices which have doubled in the past 12 months continue to trade higher on the back of strong demand. During the first quarter of 2010, Chinese iron other ore imports grew 17.8 % year on year to over 155 million tons, while inventories maintained downward momentum. In addition, ex-China demand for the commodity is recovering as well. For example, Japan imports for the first month of March totaled almost 12 million tons, an increase of almost 103% year on year. Global steel production, a vital indicator for iron ore demand totaled 342 million tons for the first quarter of 2010, an increase of 29% year on year. More importantly, world ex-China production which represents 55% of world total is recovering, posting an increase of over 33% year on year. Total iron ore trade for 2010 is projected to increase by a strong 11% to over a billion tons.

Slide 12 reviews the coal market which is a key demand driver for Supramaxes. Coal prices continued their upward trend as well. Thermal coal, which is primarily used as an input by coal-fired power plants, is up 67% year on year as a result of increased power production in Asia, a positive indicator of economic growth. Coking coal, which is mostly used for the production of steel, is up 92% year on year in line with increased demand for iron ore. China's appetite for coal continues to grow as imports surge to 44 million tons during the first quarter of 2010, an increase of 230% year on year. It is important to note that over half of China's imports originate from Indonesia and Vietnam, trade routes which tend to be exclusive to Supramaxes. The table on the top right-hand corner of Slide 12 highlights the additional annual coal requirement by country on a go-forward basis to be generated from new power plants coming online just in 2010. Further more, the financial press earlier in the week stated new power plants coming online in Asia over the next three years will require an additional 1 billion tons of coal annually.

Slide 13 discusses the recovering demand in the minor bulk trade. Minor bulk trade totaled 965 million tons in 2009, or 32.4% of total dry bulk trade. This important Sub-Panamax market typically provides cargos for Supramaxes in a down market when larger ships are idle and further stimulates demand in a rising market. In 2010, minor bulk trade is expected to recover by 7.8% to 1.040 billion tons representing an increase of approximately 75 million tons in this very important Sub-Panamax market. Once again, the Supramax type is the dominant type for the work horse for the minor bulk market.

Slide 14 illustrates the competitive versatility of Supramaxes. During the first quarter of 2010, Eagle carried 3.2 million tons of cargo, an increase of 56% year on year. The split between major and minor bulks carried was 64% and 36% respectively. It is interesting to note that Eagle carried over twice the amount of coal quarter on quarter. We attribute this to the relative strength of the current demand for the commodity from India which is overwhelmingly serviced by Supramax vessels. Please turn to Slide 15 for a review of the dry bulk order book. Supply side growth continues to be contained as slip and on new build deliveries remains at high levels. 40% for the first quarter of 2010. These delivery delays are most apparent at the less sophisticated and newly established shipyards which also tend to focus on the Sub-Panamax class of vessels.

The chart on Slide 15 exhibits vessel delays lost over the past 12 months due to delivery delays. Supramaxes have benefited the most, realizing much greater slippage than the other asset classes. As we mentioned in our last call, the increase in slippage corresponds to our view that the later deliveries will experience more cancellations, delays, and other problems as ship owners have fewer deposits and later new build deliveries and have not secured financing. We expect this trend will continue.

On Slide 16, we will discuss new build order cancellations and their effect on curtailing supply growth. As for ICAP, cancellations historically were primarily caused by yard-related, operational and cash flow issues. And as with slippage, cancellations were occurring mostly at the newly established yards. Buyer related financial issues have now become the main driver for cancellations and this is expected to continue. For example, it is widely known that KGs are having difficulty raising new equity and finding alternative financing solutions. We have studied the order book and have noted that KGs have orders for approximately 240 dry bulk vessels. We believe that a great number of these very sells will be canceled. It is interesting to note that Supramaxes represent 46% of total KG dry bulk orders.

Slide 17 exhibits the age profile for the dry bulk fleet. The Sub-Panamax market has the oldest fleet with 24.3% of the fleet being over 25 years of age as compared with 14.3% for Panamaxes and only 6.5% for Capes. Even though scrapping remains at low levels during the first quarter due to strong markets as we look forward 1,948 vessels or 26% of the total global dry bulk fleet is over 25 years of age and will eventually be a large escape valve for supply coming into the market. And, should help keep supply in balance with demand.

I will now turn over the call to Alan who will review our financial performance.

Thank you, Soph. Slide 19. A brief recap on our first quarter results of operations. Eagle had a solid quarter. Net revenues for the quarter were $54.2 million compared to the first quarter of '09 figure of $56 million. All vessels were on time charter during the quarter. Operating income for the quarter was $15.7 million, compared with the first quarter 2009 figure of $23.7 million. EBITDA, as adjusted for exceptional items under the terms of our credit agreement, was $32.9 million for the quarter compared to the first quarter 2009 figure of $37.3 million. Net income was $4.6 million or $0.07 per basic and diluted share for the quarter.

Slide 20. A few comments on our balance sheet. At the end of the first quarter we have $101 million in the bank including $17 million of restricted cash. During the quarter, we borrowed $117 million, in order to fund our new building program. We took delivery of six vessels during the quarter. So far, we have taken delivery of two more ships this quarter and are scheduled to take delivery of one more this quarter and four more before the end of the year. Our bank debt stands at approximately $1 billion at the end of the quarter and we are compliant with all of our current bank covenants.

Slide 21. A few moments on our expected total cash costs. $11,397 per vessel per day for the first half of 2010 which remains unchanged and which is one of the lowest in the industry. Our estimated daily vessel operating cost is $5,116 per vessel per day. Technical management fees paid to our vessel managers are estimated at $307 per vessel per day. We are on budget for the quarter. Our estimated general and administrative expenses for 2010 $1, 521per vessel per day. We are slightly above that figure for the quarter but a lot of those expenses are unique to Q1 and we expect it will smooth out over the course of the year. Based on our current interest swap profile, we estimate our interest expense, net of interest income, for the first half of 2010 is $3,850 per vessel per day. We are sticking with that figure for the second quarter. Finally, as mentioned earlier, we have increased our estimate for average dry dock costs at $603 per vessel per day on the basis of average dry dock increasing in costs from $500,000 to $550,000 once every two years. We have two or three dry docks per quarter for the balance of the year. With that I will turn it over to Soph who will complete the presentation.

Please turn to Slide 23 for concluding remarks. We believe Eagle Bulk is well positioned for 2010 and beyond. We are one of the world's largest owners of Supramax vessels, boasting the youngest fleet. The Supramax market has exhibited good demand and has been experiencing the most supply slippage and cancellations as compared to the larger dry bulk classes. We employ an opportunistic and balanced approach to our chartering strategy with the objective to maximize cash flow. Cash flow stability comes from the fixed rate charters on the existing fleet and the new builds coming online. This provides strong cash flow predictability and visibility and giving us a revenue base to continue to opportunistically charter the rest of the fleet for maximum cash flow generation in the future.

The revenue and cash flow upside potential is already in place as 8 vessels are currently trading on Baltic Supramax Index linked charters and a further four vessels are on short-term charters. We have been able to again demonstrate superior operating utilization of 99% which, combined with our opportunistic charters, will help us ensure maximizing revenues. Lastly, we continue to leverage our New York based management team to fully run financial, commercial, and technical operation from our headquarters which optimizes control of our costs going forward. I would now like to turn the call over to our operator for questions.

(Operator Instructions). Our first question comes from the line of Natasha Boyden with Cantor Fitzgerald. Please proceed.

Good morning gentlemen.

Hi, Natasha.

The Supramax rates performed exceptionally well over the last six months or so particularly relative to the larger vessels and you talked on the call about having more of the percentage of unfixed days in your fleet. Can you talk about what kind of exposure, spot exposure level you are comfortable with in this market environment and at what point would we expect you to fix more vessels?

I think the interesting thing that makes Eagle a bit unique relative to the other dry bulk peer group is we have this new build program where effectively out of the remainder of the program all of the remainder of ships coming online except for one have minimum three year charters and the profile on all of our new build fleet is effectively 3 to 9-year charters. That gives us an incredible advantage vis--vis answering your question than the other guys because with that base of revenue stream, by the way, which three quarters of them have profit sharing, it allows us to be maybe more opportunistic than most.

So that is why you have seen Eagle in the last two quarters really, a call the market right. And, you know, at a time when the fixed rate charter for a year would have been 16,000 we went into the BSI charters around have done significantly better but it gives us that sort of minimum base over the next couple of years of always having at least 40% of the fleet on fixed rate minimum, you know, profit sharing charters.

So, that allows us to bifurcate the remainder of the fleet as you is seen us do now for the remainder of the second quarter. We are starting to report our charters as long-term open and then shorter-term and then index-linked. The remainder of the fleet we will keep below three years or really sort of in the anywhere from six month to three year range and index. I think index linked charters which currently stand at about 18% is about where we are comfortable and the balance of the fleet we are going to opportunistically move between, say, six months and, say, two to three year charters and that is where we feel comfortable.

Okay, great. Thank you very much. Alan you mentioned on the call that there were unique one-time items in G&A. Can you just tell us what those were?

Mostly audit, annual report proxy. You don't have those in the rest of the year.

Okay. So the number that you have given us in the presentation going forward is something that you are obviously comfortable with?

Yes.

Okay. And the debt that Eagle currently has outstanding, how much of that is associated with new build and how much of that is associated with the operating fleet?

75% is related to the on the water fleet. 25% with the new buildings. But do note that we are continuing to make progress payments on the balance of the program and at the same time taking deliveries so that number will move around a little bit.

Okay, great, thank you. I just have a couple more macro questions. The first one is really just a query on the gulf oil spill. Do you see any effect on the Supramax market as a result of that, particularly on the grain side of things?

Not yet. There is one strange phenomenon that has happened in the last couple of days, probably the last three or four days. Some vessels have had to deviate around the slick which adds, you know, a couple of days to the voyage so, you know, in one sense, marginal ton mile increase if you want to call it something. Beyond that, it depends what happens over the coming days and weeks in terms of containment. So the only measurable increase to date has been as I say, you know, a couple days, marginal days on voyages of vessels going in and out of that region. Beyond that, we are in a wait and see mode.

Okay, great. Well, thank you very much. I'll turn it over.

Thank you.

Our next question comes from the line of Seth Glickenhaus with Glickenhaus and Company.

Good morning gentlemen.

Good morning, Seth.

My only question is this. You mentioned three quarters of the ships have profit sharing arrangements, of those ships how many of the three quarters do you think will be affected in the next year?

Okay. The three quarters represents the new builds, the on the water fleet have different arrangements. And then of the new builds that have the profit sharing, Seth, three of them already are in the money, so to say. In other words, we are generating profit sharing on three of them and then we are going to get another five that will also have immediate profit sharing and the balance of the profit sharing charters kick in incrementally over the next two years.

Thank you very much. I was just curious about that.

Thank you.

Keep up the good work.

Thanks, Seth.

And our next question comes from the line of Urs Dur with Lazard Capital markets.

Hi, guys.

Hi, Urs.

Really Natasha got most of the questions that mattered to me. I wanted to ask you quickly, you know, Europe is on everybody's mind, despite the glitches we saw in the market yesterday, Europe is on everybody's mind. And your ships year on year, what are you looking at for callings to Europe, what cargoes are moving, have you seen recent headaches, are there any regional headaches that we should be aware of in terms of our ships moving in and out of Europe and overall demand flows? How does it look?

Well, I think what we saw yesterday in the markets and whether or not the issues spread into contagiant throughout the Euro zone I believe will be negatively impactful to the container trade because as people know, because, as people know, boxes move from Asia into Europe. Less impactful on dry bulk trade we haven't seen any effect in dry bulk to date and definitely not in the Supramax market. Trades to and from Europe tend to be less Supramax driven. Supramax driven. I will give you some examples. Sometimes you see steels out of the Black Sea to far east. Black Sea isn't really Europe. Sometimes you see a little bit of cement out of the Med going trans Atlantic to America. That trade basically has already been replaced from cement coming from China to the Atlantic which is a great long haul increase for cement trade for predominantly for Supramaxes.

Sure.

That doesn't really affect. You have a bit of grain going from the gulf into Europe and the Med and you also have a bit of scrap from the UK. But these are marginal relative to what is really pushing Supramax rates up, which is this incredible phenomenon that we haven't seen for years which is the establishment of long haul trade routes from the Atlantic to the Pacific and from the Pacific to the Atlantic.

Right. I guess my question and I'm aware of that and I know it is not necessarily the focus of your trade, but I guess your sense of things year on year looking at Europe today has there been a macro collapse in even the small portion of demand that you do see from Europe or are things fairly normal at this point in time?

I tell you, post Lehman brothers, Urs we saw a collapse of that trade.

No trade finance, right.

There has been a little bit of resumption in the European trade for Supramaxes. We have had four fold since that period even though there has been effectively marginal to any recovery in Europe. So Europe as been marginal to the recovery story in dry bulk and specifically to Supramaxes.

And you are up again this morning.

Good to see.

BSI up again. Thanks a lot.

Thank you, Urs.

Our next question comes from the line of Scott Burk with Bear, Stearns. Please proceed.

Good morning, Sophocles and Alan. I had a question on the balance and specifically how it relates to the potential dividends. What's the progress towards getting back to complete compliance with debt covenants that would allow dividend paying again and then how does the delivery schedule for new builds affect how you can start paying a dividend again?

We are not there yet and we are getting there slowly. Basically, asset prices as we are still building debt as we are building the fleet.

Right.

Our asset prices would have to move up a fair bit for us to get into compliance and, of course, once we have taken delivery of all the ships then we will start repaying debt and that will -- that will help it as well.

Okay. That's kind of what I suspected. I just wanted to get an update there. And then I had kind of a follow on to the line of questioning that Urs had. Specifically, I wanted to ask more about the European banks. I know that Eagle doesn't have any exposure directly to any Greek banks but just wonder if you can tell us what percentage of the industry is financed by Greek banks and then by European banks and if you are seeing any kind of tightening in credit availability as a result of these problems in Greece?

I would say Greek banks as a percentage are you asking European or global ship finance capabilities?

I'm talking about global ship finance capabilities.

Globally Greek banks represent a small percentage of global ship finance capabilities. European banks represent a large part of ship financing capabilities going forward. We have seen some Asian banks fill that void a little bit since the end of 2008. But, you know, our view, which is -- I think a very accurate view is that if you look back traditionally, banks have financed anywhere from one third to three quarters of any ship acquisition whether it is new builds or second hand and, you know, that is just not there today. And even the banks that are willing to step in and finance any of these new builds, you don't get that three quarter financing you used to get. And, you know, we all know that there are problems in Germany still. So part of our thesis for supply is that the financing just isn't there.

Okay. And I guess has there been an incremental reduction in financing ability since the problems in Greece the last two months or still kind of from the collapse 2008?

I think it is the latter. Then, let's see what happens with Greece and Spain and, you know, where this goes within the Euro zone. You may get a further curtailing of financing which would have a positive impact on supply.

Okay. Understood. And then kind of more of a demand question. We have seen China try to kind of reel in speculation in real estate and also reserve requirements quite a few times this year so far. Have you started to see any reduction in either steel demand or iron ore demand that is starting to be visible from those moves China has made?

No, in fact, inventory levels in China are down.

Yeah, I have noticed that as well. Okay. And then finally, just talking about yesterday's downside. I mean you know, the thing that I can point out was the Greek thing but is there anything else that you saw that might have contributed to downsizing Eagle shares and then, more broadly, dry bulk shares that you think would have been the driver of that, and is it temporary or potentially a continuing issue?

I mean when you see Procter & Gamble falling more than Eagle yesterday and then recovering, that's such a dislocation in the market that I think people just have to look at yesterday and say that was sort of a freak event especially with the NASDAQ I think is now recalling some of the trades between two-thirty and three o'clock because of that thousand point momentary drop so, you know, I think it was a broad sharp impact on all shares that has no reflection on dry bulk and definitely no reflection on Eagle.

Thanks for your thoughts, Soph.

Thank you.

Our next question from the line of Chris Wetherbee with FBR Capital Markets.

I guess really just have one question left and it's kind of a broader. And, frankly, seems a little difficult to quantify but you guys put some really helpful information together in the slide deck on the order book and so I was just curious to get your perspective, Soph. When we think about kind of SL production obviously, we are seeing slippage rates. Seems like the absolute number of vessels is picking up a bit. I wanted to get some color on your view relative to ship building capacity and what type of level we appear to be running at, trying to get an idea what it could ramp up to going forward. We know there is a lack of financing but I'm just curious about that.

I can just tell you through some of the -- connections we have in Asia, I would say the important thing people should focus on, but this is very hard for the broader market to get this information, we, of course, have access to it is slack capacity if the shipyards which I think is what you are getting at like what could they ramp up to.

That is exactly right.

I could tell you a couple of yards that I know personally, have actually, you know, gone, looked at and invested in expansion programs back in, say, 2007 period, 2007 period. Those expansion plans have been subsequently scrapped. So, in other words, they were building bigger graving docks to build nor ships and those have been abandoned. I don't have a hard number for you today but I definitely see sheer global ship building capacity has been curtailed in the last 18 to 24 months.

That is fair. That is kind of the sense that we are getting is that you may be running a lot closer to absolutely capacity than maybe people had anticipated and that could be a good portion of what is going on in the slippage side. That is very helpful. You guys have and all the other questions I had so I appreciate the time. Thank you.

Thank you.

Our next question from the line of John Chappell from JP Morgan.

Hi, guys.

Hi, John.

My question o on the remainder of the new order book. You mentioned use of cash from operations and established financing already. So first of all, I want to be clear that there is no other equity financings in the plans? And then second of all, I'm not sure if you have this, how much of the operating cash that you expect to generate over the next two years or let's call it for the remaining time of the order book is pegged towards paying down the new building order book and how much of that do you think you can use for deleveraging your balance sheet over the next three years?

John, we have stated pretty clearly that we intend to complete the program without raising equity so if your goal is to have us reiterate it, consider that reiterated. Second, the facility does not require any principle payments. In fact, the first reduction in availability of the facility begins July of 2012 after the new building program has been completed at which point we will have the entire fleet generating cash flow. So, 2012 is a little bit more forward-looking than we would want to get into on this call.

Okay. And then a macro one, Soph. I have been asking everyone this quarter because I have a tough time getting my head around it. Outside of fourth quarter 2008 and the beginning of 2009 when trade credit was nonexistent and rates were completely at the bottom we really haven't seen much scrapping and we have heard a lot about the age of the fleet and 25% over 25 years old. But the rate environment seems right now that from an economic perspective you wouldn't want to scrap a ship regardless of the age. What gives you confidence that if the rate environment plays out as you kind of laid out with the strong demand environment that there will be a significant ramp up in scrapping going forward despite the age of the fleet?

As former chairman and current vice chairman of the US Committee for Lloyd's Register, I can tell you that it is something that I focus on closely and the organization at Eagle has very close ties to shipyards and to technical agencies. And basically what is happening is you are entering a period of increased regulatory pressure globally, environmentally, you know, we see it on the sulfur emissions but it is also going environmentally in terms of regulating and marginalizing older vessels of all types. It started with, you know, a target about 10, 15 years ago on single haul tankers. The tanker industry was first targeted for that.

We are seeing that kind of regulatory change happening, believe it or not, in dry bulk, and we believe over the next -- again, you can't tell exactly when it is going to happen but, say, over the next survey cycle either intermediate survey cycle or special survey cycle of ships at 25 years or older it is just going to be very, very, very difficult for a ship owner even if he wants to throw a lot of money at it, to get trading certificates for a ship beyond a certain age. So, maybe we will answer it probably different from what you heard other people say. We think more than commercial pressure you will also have regulatory pressure for scrapping in the next -- remember, survey cycles are every two and a half years for intermediate survey and every five years for special survey and when a ship gets over 25 years of age the annual survey becomes almost like a special survey.

That's interesting. So do you foresee a regulatory advancement similar to the single haul phase out where something is mandated or is this something that the classification societies are just going to become more strict and approving those vessels over 25 years.

The classification societies are already getting more stringent on their inspections. But I don't think it will be a mandated like some kind of IMO change. I think it will be more that certain countries, you already see it in certain areas like Japan, for example, you know, and other area, certain areas of India and China, they just don't want bulkers over 25 years of age. It is going to be more commercial driven than driven by IMO.

That's helpful. Thanks a lot, Soph. Thanks Alan.

And our final question of the day comes from the line of Justin Yagerman with Deutsche Bank.

Hey guys, how are you?

Good morning, Justin.

I wanted to ask a few questions here. You're still the listing option and I just wanted to get reminded on when you have to pull the trigger on those and what your current thoughts are given that the market has been working in your favor?

The options don't have an expiry date but we haven't declared them. We are very happy with our current new building program and I think that is our current position.

Okay, fair enough. On the data that you guys gave on China obviously lays out a compelling case for continuing strong demand but part of the worries I guess yesterday and this past week, you know, I think have not just been Europe but also concerns over China slowing down. What are your thoughts there? I mean we are constantly hearing about China tightening and potentially trying to stop overheating but whenever I listen to a dry bulk presentation and read dry bulk material and commodity material it sounds like demand is continuing to be fairly robust. Why do you thing there is that bifurcation in information flow and when you guys talk to the primarily sources the mills and what have you that you do business with, what are your thoughts and take aways from there?

Let me try and shed some new light on this and hopefully you haven't heard this before. There has been a very interesting phenomenon in the dry bulk market that I haven't seen in quite awhile, probably the last two months it has been happening which is the traditional relationships between Cape size, Panamax and Supramax rates has fallen apart, and I'm sure you've seen this. Where, at one point, Supramaxes were out earning Cape sizes triple the size and Panamaxes were greatly out-earning the same as Capes as well. And now you have Supramaxes earning about as much as Panamaxes and Capes have recovered a bit. I think, people within the industry are trying to say well, is this a one time dislocation, is it sustainable, is this the new world order going forward?

I think if you really granularly analyze why those historical relationships have broken down it partly answers the question that you asked which is, you know, the big amounts, the single shipments of iron ore, of coal have come in a bit and also, you know, Capes have the biggest order book so that has been a factor, too. But that doesn't necessarily mean that just because an iron ore order of 150,000-tons isn't being shipped, iron ore for 50,000-tons isn't required. So that's why we have been doing a iron ore, call it replacement cargos, on shorter hauls, and also we've been doing a hell of a lot of coal.

And the other thing that no one seems to focus on but we have been saying sort of probably for two years now, three years now, is India is very strong. India is a huge, huge requirements for coal and this is probably the biggest quarter we have ever had for coal movements. So, I would say these dislocations in historical relationships between the bigger ships and our ships might be here to stay longer than people expect partly because of reasons I gave which I think answers that question.

Okay. That is interesting. When I think about the way you have got your fleet set up from an employment standpoint, you know, it looks pretty attractive. When I think about spot and the 24% open and obviously they are not all going to potentially trade spot is that a consideration and as you build up that kind of critical mass in the Supramax market do you think about taking on COAs or potentially forming pool arrangements and those kind of things? You guys have a lot of vessels at this point.

It is not just the number of ships but one of the things that charters really focus on and are attracted to is how homogeneous the fleet is. We have a five groups of large groups of sister ships within the big fleet and we probably at this point do about 75% of our business off market. And what we are finding is charters are now coming to us for two and three ships at a time. So we are now recognized as the partner of choice for a lot of these industrial end users who want and need Supramaxes. I guess the question is do we have the scale to do COAs and pools, the answer is definitely, yes. So, you know, it is something we are going to evaluate but it is an opportunity that maybe two, three years ago we couldn't have considered because we didn't have the scale but we definitely do today.

Two more short questions. On the time charters, I can't remember if the three 3-year charter that you guys signed if those were already attached to the new builds or if not? I was just curious because the durations from timed charters in the market have generally been on the lower end, at least on the bigger vessels, on Capes and Panamaxes. So is there is reason, if these were signed recently, that you would be seeing more long-term liquidity or willingness for profit share charters in the Supramax market than in the larger vessel markets?

No, the -- those three charters are great, great charters with very high floor rates. You know, $17,000, $18,000 floor rates with profit sharing that you could not replicate today.

Okay. And so when you look at today's timed charter market, I guess, where is the -- charter market, where is the liquidity in terms of beyond a one year time charter? Is it too big of a discount or are you able to get any kind of profit sharing on the out years? Obviously the BSI type charters seem available and that is an interesting alternative. But in terms of a base rate plus maybe some profit sharing is that something that is economically attractive at this point?

As you know, Justin, I think back in 2006 we pioneered the profit sharing model within the US-listed peer group of dry bulk companies. So it is something we like. We have continued to develop. We now moved into the index-linked charters, well timed and very effectively. My comment to your question is we are seeing what I call a barbell demand right now for charters. So you are seeing a lot of demand, i.e. short term, sort of spot to one year, one year plus. And then sort of five to seven years. I would say the two to four year liquidity really isn't there today it is more of a barbell.

Got it. That is interesting. And my last question is on currency. I know you hedged out a decent amount on any kind of Yen exposure but on the crew costs I think is where you had Euro exposure in the past and with Euro targets moving down against the dollar is there a potential tailwind as we move through the year if we start to see the dollar strengthening against the Euro for you guys?

We have actually always been dollar base.

Okay. Maybe I was thinking with the Ukrainian crews there was some Euro exposure.

We pay in dollars. We think it's easier for us to keep everything in dollars.

Certainly is for us. Appreciate the time. Thanks a lot, guys.

You're welcome.

Ladies and gentlemen, this concludes today's question and answer session. I would now like to turn the call back over to Mr. Sophocles Zoullas for closing remarks.

I would like to thank you for joining us for our first quarter 2010 earnings call. And we look forward to keeping you updated on new developments in the future. Thank you again.

Ladies and gentlemen, we thank you for your participation in today's conference. This concludes the presentation and you may now disconnect. Have a good day.