Euroseas Ltd (ESEA) 2008 Q4 法說會逐字稿

Thank you for standing by ladies and gentlemen, and welcome to the Euroseas conference call on the fourth-quarter and new-year 2008 financial results. We have with us Mr. Aristides Pittas, Chairman and Chief Executive Officer; and Mr. Tasos Aslidis, Chief Financial Officer of the Company. (Operator Instructions). I must advise you that this conference is being recorded today, Friday, February 24, 2009.

We now pass the floor to Mr. Nicolas Bornozis, President of Capital Link, investor relations adviser to Euroseas. Please go ahead, sir.

Thank you very much, and good morning to everyone. This is Nicolas Bornozis of Capital Link, and we welcome you to the Euroseas fourth-quarter and a full-year 2008 financial results.

The Company announced their results yesterday, the 23rd of February, after the market closed in New York, with a press release that has been publicly distributed. If you do not have the press release or if you would like us to send you a copy, please be kind to contact us at 212-661-7566 or contact the Company directly, and we will be happy to send it to you.

In addition to today's conference call, we also have a webcast presentation that is accessible through the Company's website. Please be kind to note that the slides are user controlled. You must click on the appropriate button on your own to move to the next slide or to the previous one.

Before passing the floor to Mr. Pittas, I would like to remind everyone that in today's presentation and conference call we will be making forward-looking statements. These statements are within the meaning of the federal securities laws. Matters discussed may be forward-looking statements which are based on current plans and expectations that involve risks and uncertainties that may result in such expectations not being realized.

I kindly draw your attention to slide number two of the webcast presentation, which has the full forward-looking statement, and the [safe] (technical difficulty) statement is also included in the press release that has been publicly distributed yesterday. So I kindly suggest that you take a minute to go through the whole statement and read it.

Now without taking any more of your time, I would like to pass the floor to Mr. Aristides Pittas, the Chairman and CEO of Euroseas. Please go ahead, Mr. Pittas.

Good morning, and thank you for joining Euroseas for our conference call. I'm Aristides Pittas, Chairman and CEO of the Company. Together with me today is Tasos Aslidis, our CFO.

The purpose of today's call is to discuss the fourth-quarter and year ended the 31st of December 2008 financial results for Euroseas. Please be reminded that we issued the press release last night after the market closed with financial and operational information for the fourth quarter of 2008. If you have not received this release, you may log on to our website at www.Euroseas.gr and navigating the investment relations page, or you can call Capital Link or our CFO, Tasos Aslidis.

For those of you who want to follow the audio webcast, please log on to your computer to the homepage of Euroseas website, www.Euroseas.gr where participants of the website webcast can download the PDF.

Let us now turn to slide three and look at our 2008 fourth-quarter and full-year overview. We will begin with our fourth-quarter 2008 results, which reflect significantly lower revenues compared to the same period in 2007.

For the fourth quarter of 2008 we reported total net revenues of $24.3 million, representing a 22.8% decrease over total net revenues of $31.5 million during the fourth quarter of 2007.

We reported a net loss for the period of $22.6 million as compared to a net income of $15.3 million for the fourth quarter of 2007.

The results for the first quarter -- fourth quarter of 2008 include a $25.1 million impairment loss we took mainly from the m/v Ioanna P. This vessel was our latest dry bulk acquisition and was sold during the first quarter of 2009. Excluding this loss and the loss from the derivatives and investments and the amortization of the fair value of time charter contracts acquired, our net income would have been $7 million.

Adjusted EBITDA for the fourth quarter of 2008 was $13.1 million, a 39% decrease from $21.5 million achieved during the fourth quarter of 2007.

For the full year we reported total net revenues of $127.1 million and net income of $23.6 million, representing a 54.8% increase and 41.9% decrease, respectively, over 2007.

As in the fourth quarter of 2008, the results for the full year also include the impairment loss as well as the effect from the loss on derivatives and investments and amortization of fair value of time charter contracts acquired. Excluding these losses, net income would have been $48.1 million.

Our adjusted EBITDA for the fourth quarter of 2008 was $78.9 million.

Tasos Aslidis will discuss our fourth-quarter and year-and 2008 results in more detail later in the presentation.

The fourth quarter of 2008 was a very challenging one for most shipping companies. Banks not willing to lend to buyers of commodities in the fourth quarter slowed the rate significantly, allowing rates to fall dramatically from the levels we were experiencing the last time we held our earnings conference call.

The credit and financial crisis has turned into an economic crisis. In 2001 -- in 2009 we are still faced with uncertainty on how long the global recession will last thus affecting businesses worldwide. While the US and many other countries are working towards improving their economies through economic stimulus packages, the same governments do not expect the stimulus packages to work immediately.

Euroseas continues to be well positioned to weather the current difficult market environment. Over the past year we have been preparing for a possible market downturn by maintaining a strong balance sheet with a very low level of debt and plenty of cash. In 2008 we avoided investing in new acquisitions except for one, which was protected through a three-year time charter. At the end of the year we had $73.9 million unrestricted cash and debt of only $56 million. Our debt to capitalization ratio was 17.5%.

Looking forward into 2009 and 2010, we expect to witness a difficult market which will however present significant expansion opportunities.

Let's move to slide four. Our objective continues to be to pay significant dividends throughout the cycles. Indeed, we are one of the very few companies still paying a dividend. In this context, on February 17 we declared our fourth-quarter 2008 dividend of $0.10 per share. This dividend is payable on March 20 to all shareholders of record as of March 12. This is the fourteenth consecutive quarterly dividend since the Company accessed the capital markets in August 2005.

The slide shows the dividends and dividend yields we have paid since the first quarter of 2006. Our Board confirmed its intention to continue paying healthy dividends to our shareholders throughout the market cycles in parallel with our expansion program, as far as practically possible. The latest dividend represents a yield of about 9.5% on the basis of our stock price on February 20, 2009.

Let's turn to slide five. This slide gives a comparison of the one-year time charter rate for the Panamax vessel and the 1700-teu container ships dating back to 2000.

As you can see, the credit crisis and the general economic meltdown that ensued at the end of 2008 resulted in a huge decline in charter rates, which reached record lows at the end of the year.

The dry bulk market has posed a significant recovery since credit markets improved and inventories got depleted. But the container market has failed to improve.

The current consensus is that it is unlikely to see significant continuation of the recovery rates we have seen in the dry markets because of the poor demand fundamentals and the high overhang of new deliveries. However, it is very difficult -- if not impossible -- to predict the future direction of freight rates with any accuracy.

It can be argued, though, with a significant degree of confidence that it will take a quick and strong demand pickup to put the steam back in the container trade where currently around 8.5% of the fleet is idle.

Our current fleet is shown on slide seven. It consists of five dry bulk vessels, 10 container ships, and a multi-purpose vessel.

Please turn to slide seven. This slide shows the timing of Euroseas acquisitions since 2005 when we became public till today. As you can see, except for the Ioanna P, we avoided investing at the peak of the market.

The Ioanna P on its own resulted in an impairment of $24.7 million in the fourth quarter when the markets collapsed. It was recently sold for $3.85 million, having already contributed about $14.7 million in earnings. Had the good dry bulk market lasted for a further nine months only -- till approximately mid 2009, as we had expected at the time of its purchase -- it would have earned us enough to prove a successful investment.

As mentioned, the recent fall in asset values provides for excellent opportunities to invest in the dry bulk markets, and as you can see, our two recent dry bulk acquisitions in Q1 2009, the Monica P and the Glorious Wind, are at extreme discounts to the prices available during the last few years.

Please turn to slide number eight. At the same time that we have been buying our two latest bulkers, we have sold two of our eldest ones. In the net total capital outlay for these transactions was about $30 million, while had this modernization of our fleet taken place a few months ago, it would have required close to $100 million.

Of this incremental capital expenditure, $10 million is financial debt, and we expect to use about $10 million more to finance the ships that we're taking delivery of in early March.

We will continue with our modernization and fleet expansion program at opportune times, taking advantage of our strong cash position and our debt and equity raising capabilities.

Cost control remains of paramount importance and becomes even more crucial at times like these. Despite an increase in our costs due to crew (inaudible), exchange rates, etc., and also due to the rapid doubling of the fleet under Eurobulk's management in 2007, we believe that we still remain one of the lowest cost operators among the public dry cargo companies.

For the second half of 2008, we undertook special efforts to control these escalating costs and are happy that our operating expenses are now actually lower by 5% when compared to the first half of 2008.

As already discussed, our leverage has been kept at extremely low levels and has been paid down rapidly during the good times. We have low loan repayments due in the next few years and a low cash flow breakeven level, as Tasos will explain later.

We maintained a good working relationship with our banks, and all of them state that they are happy to finance us going forward. Where currently targeting debt levels of around 50% for our new acquisitions.

Maintenance of a balance between period and spot employment has always been our strategy. As you can see in slide number 10 -- slide number nine, we have currently covered about 75% of our dry bulk available days for 2009 and 2010 through time charters and FFAs at rates on average above our cash flow breakeven.

Provided the correlation between FFAs and what we actually achieve in the physical markets holds, the FFAs provide good support for our bulkers -- better, we feel, than time charters as it eliminates charterers' performance and default risk whilst also providing flexibility in trading the vessels and also the ability to reverse positions easily in the changing market.

The only drawbacks of such an instrument are the increased margins that may be required in a rising market, which will affect short-term liquidity, and the volatility it creates in the quarterly earnings as the FFAs are valued on a mark-to-market basis, accounting-wise.

Turning to slide 10, you can see that 54% of our container available days for 2009 and about 26% of our container available days for 2010 are covered via time charters. We will continue to seek to obtain some period coverage for vessels coming open, but this may not be possible at rates above operating costs, and it may prove more economical to temporarily lay up some of them.

We have already laid up the m/v Artemis. Laid-up vessels will be closely monitored by our manager so to be in a position to return to service quickly when markets pick up.

Please now turn to slide 13. Sorry -- to slide 12 for just a brief overview of the market, as I am sure most of you do your own detailed analyses.

As you can see on slide 12, global GDP growth for 2009 has been revised downwards by the IMF from about 2.2% expected just three months ago to 0.5%, a 77% drop signaling continued economic weakness and prolonged recessions in many developed economies including the US, the Euro zone, and Japan. Some are already challenging this growth rate as too optimistic.

Most economists in the IMF are suggesting that we should expect growth to pick up gradually in 2010 and more strongly in 2011. Dry bulk and containerized trade closely follow GDP developments, and there is a good correlation between them.

Not surprisingly, the growth rate in dry bulk terms, or number of teu's carried, has been also declining in 2008. For 2009, Clarksons predicts a further drop for growth rates to negative 4% in dry bulk trade on a tons basis and a low 5% growth in containerized trade. One would reasonably expect that as GDP rises in 2010, onwards, and eventually reaches 2006, 2007 levels, trade growth should also return to these levels as well.

Please turn to slide 13.

Against this demand background we should look at ship supply. The current delivery schedule for dry bulk vessels in 2009 and 2010 stands at 17% and 20%, respectively, with the Capesize vessels, however, dominating it. This does not take into account though order cancellations, delays, and scrapping of older vessels.

It's very difficult to quantify how much of this order book will not actually get delivered, but it is logical to assume that nearly all the vessels over 25 years old, or 14%, and many over 20 -- 13 percent -- will be scrapped rather than undergo a further special or intermediate survey unless of course the dry market improves further.

Please turn to slide number 14. The container ship order book is similar to the dry bulk. The delivery schedule for 2009 and 2010 stands at around 17% for 2009 and 13% for 2010.

Again, just as in supply of dry bulk vessels, the large vessels dominate the order book while the smaller vessels' order book is more in line with expected trade growth. Here as well the order book will not all be delivered. Cancellations and scrapping will affect the balance, though to a lesser extent than in bulkers, as most container ships are ordered at established yards where it is more difficult to cancel, and the fleet is much younger, which will result in more lay-ups than scrapping.

Please turn to slide 15. All the above point towards a difficult 2009. Supply is expected to outpace demand as trade growth essentially comes to a standstill and the world fleet grows at a rapid pace despite the corrective effects of delivery delays, cancellation, and scrapping.

Will we witness a recovery in 2010? We believe we may if demand picks up as a result of world economies growing again and if the supply growth is constrained. This may be achieved as scrapping should continue unabated and if cancellations and delays of about half the current total book materialize -- and if cancellation and delays of about half the current total materialize. It is hard to quantify what the number will turn out to be, but there are many analysts that believe that this will happen.

I will now pass the floor over to our CFO, Tasos Aslidis, to take you through our financials in a bit more detail.

Thank you very much Aristides. Good morning ladies and gentlemen.

We will now provide you with a brief overview of our financial results for the fourth quarter and full year of 2008.

Let's move to slide 17. This slide shows our financial highlights for the fourth quarter and the full year ending December 31, 2008 and 2007. I will repeat some of the figures that Aristides gave in the beginning of the presentation.

During the fourth quarter of 2008 we achieved a fleet utilization rate of about 96% on net voyage revenues of $24.3 million, a decrease of 22.8% over the $31.5 million we earned in the fourth quarter of 2007.

We showed a net loss of $22.6 million for the quarter. As Aristides mentioned earlier, during the fourth quarter of 2008 we were negatively affected by impairment and other non-cash losses on interest rate derivatives and FFAs, and declines in value of a small amount of securities we hold.

Our GAAP loss per share based on the net loss I mentioned above was $0.74 per share, basic and diluted, compared to earnings of $0.55 per share, basic and diluted, in the same period of 2007.

In neither period we did not have any capital gains to report.

Ignoring the effect on earnings for the quarter from the impairment loss, the loss from investments in derivatives, as well excluding the amortization of the fair value of time charter contracts, the earnings per share for the quarter ended December 31, 2008 were $0.23 per share, basic and diluted, compared to $0.50 per share, basic and diluted, for the same period of last year.

Adjusted EBITDA for the fourth quarter of 2008 was $13.1 million, representing a 39% decrease over the $21.5 million we achieved during the fourth quarter of 2007.

As Aristides mentioned earlier, we declared a $0.10 per share dividend based on the results of the fourth quarter.

On the right side of the slide, we see the full-year results for 2008 and compare them against the same period of 2007. During 2008 we achieved a fleet utilization rate of 98% on net voyage revenues of $127.1 million, representing 54.8% increase over the $82.1 million we earned in the full year of 2007.

Our net income for the period was $23.6 million, representing a 41.9% decrease compared to the same period of last year. Again, our results were negatively affected by impairment and other non-cash losses on interest rate derivatives, FFAs, and the declines in value of a small amount of securities we hold.

Results for the year ended December 31, 2007 included the capital gain of $3.4 million from the sale of our vessel Ariel.

Our GAAP earnings per share were $0.77 diluted for the year 2008, and that compares with $1.88 diluted for 2007.

Ignoring the effect on the earnings for the year from the impairment loss, the loss on the investments in derivatives, as well excluding the amortization of the fair value of time charter contracts, the earnings -- the adjusted operating earnings per share for the full-year 2008 were $1.58, diluted, while for the same period in 2007 were $1.74 per share, diluted, excluding again contribution from capital gains for 2007.

Adjusted EBITDA for the full-year 2008 was $78.9 million, a 27.9% increase over the $61.7 million we received during the previous year.

Before we leave this slide, I would like to remind you to look at the earnings release we issued yesterday for the reconciliation of the adjusted EBITDA to net income and cash flow from operations as well as a reconciliation of what we call operating adjusted earnings per share to GAAP earnings per share.

Let's now move to slide 18. This slide shows our fleet performance for the fourth quarter and full year ended December 31, 2008 and compares them with the same periods of last year.

During the fourth quarter of 2008 we operated an average of 16 vessels earning average time charter rate of $17,971 per day, a significant decrease over -- from the $26,479 per day we earned in the same period of 2007.

Our total operating expenses in the fourth quarter of 2008 were $6,255 per ship day compared to $6,504 per ship day in the same period of 2007.

Operating costs continue a decline we observed in the third quarter as in addition to our efforts to reverse their increases over the last two or three years, the overall weak market conditions did not exert any more upward pressures.

During the full-year 2008 we operated a fleet of 15.62 vessels earning an average time charter equivalent of $23,857 per day, an increase of about 10% over the $21,468 per day that we earned on average in 2007.

Our total operating expenses were $6,469 per ship day compared to $5,625 per ship day for the same period of last year.

This year-on-year increase in operating cost is primarily due to higher crew expenses because of the increased competition in securing quality personnel, higher dollar to Euro exchange rate on average, higher expense for spare parts and repairs, and higher cost of lubricants due to the higher price of oil for the first nine months of the year.

Most of these factors are industry-wide factors and affected all shipping companies. And as I mentioned, we managed to see reductions in the second half of 2008.

I would like to conclude the overview of our financial statistics by drawing your attention to our daily cash flow breakeven level per vessel per day, as shown in the last line of this table. For the fourth quarter of 2008, we had an average daily cash flow breakeven of approximately $11,600 per day per ship. For the full year, we had a cash flow breakeven level of approximately $12,500 per vessel per day.

I should mention that these figures do not give credit to our interest income, which was significant in 2008. In fact, our interest income in 2008 was higher than our interest expense. And if we included that, it would reduce the 2008 cash flow breakeven levels by $400 and $500 per vessel per day, respectively.

Let us now move to slide 19. This slide picks up on the point that I made earlier on the cash flow breakeven level and makes a rough estimate of our cash flow breakeven levels for 2009. This is an important number to have in mind as we try to navigate through the challenging markets that we expect, as Aristides explained.

Let's start with one of the components of our breakeven rate, the loan repayments. At the left of this slide, we can see the repayment schedule of our debt. As you can see, we have been rapidly repaying our debt.

Our current repayment schedule indicates that we have to repay about $13.2 million in 2009, which is about $12 million less than what we paid in 2008. This drop results in a $2,100 per vessel per day lower cash flow breakeven requirement. After making estimates for the other elements of our cash flow, as you can see on the table on the right, we have an overall rough estimate for 2009 of about $9,000 per vessel per day. Again, this does not give any credit to interest income we might have in 2009.

Let me conclude my remarks with a couple of highlights from our balance sheet, as usual. And for that let's go to slide 20.

As of December 31, 2008, we had unrestricted cash of about $74 million and also restricted cash of about $7 million. Our debt including current portion was about $56 million, resulting in a debt to capitalization ratio of about 18%.

Given our low levels of debt, it is not surprising that we comfortably satisfied all our debt covenants.

After the two vessel purchases and the two sales of vessels that we discussed earlier, and assuming we secure a $10 million loan to finance partly the acquisition of Glorious Wind, we estimate that we would have unrestricted cash on a pro forma basis of about $64 million and debt of about $76 million.

This bring me to the last point that I would like to make, what we call our firepower. This is the funds that we have available for further growth. Based on the numbers forecast I mentioned above, we would have conservatively about $50 million of cash available for further expansion -- for further vessel acquisitions -- which totaled with 50% debt would give us a purchasing power of around $100 million. With this purchasing power we can buy five or six vessels like the two ones we bought recently.

And with this, I would like to pass the floor back to our Chairman and CEO, Mr. Aristides Pittas.

Thank you Tasos. I would now like to open the floor for questions.

(Operator Instructions). If Justin Yagerman, Wachovia.

I guess my first question is, looking out at the S&P market currently, wanted to get your thoughts on vessel values and what they have been doing recently. On the dry bulk I was curious what your thoughts were -- age-wise, where there's a cutoff where you're seeing value, and what age you're targeting for asset acquisitions as we move forward. What sizes you're looking at. Are you only looking at Panamax and smaller? Or would you consider Capes if they start to come in a bit?

And on the container side, curious given how depressed that market is, if you'd consider buying vessels and -- that may even go straight into lay-up because of distressed opportunities and waiting out the cycle, depending on what your view is there.

So I know that's a lot, but just kind of a general overview on your thoughts on the S&P market right now.

Well definitely, Justin, as we have shown, prices have come off substantially. The big question mark we're all facing is -- will they come down even further? It is possible. I think we will wait for some time -- a couple of months, not more -- to reevaluate the situation, see how the market is moving and continue with purchases. So we will follow our usual strategy of not investing all the funds in one go. And we'll wait and see.

It will be dry bulk or container ships. You are right. Container ships are very depressed. Lately we're hearing some container ships being circulated for sale at very low prices. And that makes us think that perhaps what you suggested before is something that we should do. Perhaps we should be buying ships and putting them straight into lay-up if prices fall substantially further.

So we're not excluding anything. We're keeping our eyes open, and we will continue our investment program.

I guess on the Artemis, the one ship you do have on lay-up, when you look at that vessel, how long would you keep it on lay-up before you would think about selling or scraping that vessel? And I guess in terms of the costs involved with keeping it in lay-up, how does that compare to regular daily OpEx on the Artemis right now?

The costs of keeping a vessel in lay-up is about $0.5 million a year in total, and the Artemis is a rather old ship, built '87, so it's already 22 years old, but it is a very well maintained ship. In our mind, it can easily last another eight years.

And we know that in shipping, markets go up and down, and we expect that there will be a recovery. If that recovery is towards the end of this year or the next year, I don't really know. But there will be a recovery, and we think that we will make further money out of that ship. It is not our intention to scrap the vessel or sell it, because we will not make significant money by selling at. It's an option that we have that we believe that at one point will deliver.

That's interesting. That's good color.

I guess just getting back to that S&P question, when you look at the dry bulk assets in particular, is there an age cut-off right now where there's a kind of dichotomy in the market where let's say five-year-old vessels have seen less of a discount to -- over the last several months than say 10- or 15-year-old vessels? Are you seeing older vessels come in more? Do you expect the younger vessels to start showing more of a discount, and would you start going a little bit younger on your purchases if you saw that?

It is possible that our next purchases will be younger. It depends really on how prices fluctuate. But we have seen the difference between a young ship and an old ship. The price difference now narrows substantially. It used to be, had we done this change of our elder dry bulk vessels with younger ships -- albeit they are 10, 12 years old -- earlier, we would have paid $100 million in difference. Now we only pay $30 million. So that shows that prices have come much closer.

If the markets fall further, they will come even closer. And at that point we might be buying even younger ships.

Also -- to answer the previous question -- we are not excluding Capesize vessels, but the order book there is huge. And we would really have to see that effect translated into the vessel prices falling substantially further to look into them.

That makes a lot of sense. Tasos, one of the items on the P&L this quarter was a $1.4 million loss on investments. Just curious -- that charge, is that cash or non-cash, and what was that related to?

We had -- as we mentioned in previous conference calls, we had bought sales of a shipping company, a small, very small amount. And that is essentially unrealized losses by marking to the market the value of those securities.

Okay. So that's the equity investment in that company, and that's unrealized as of yet.

That's correct.

Scott Burk, Oppenheimer.

You talked about having 75% coverage for 2009 for your -- with FFAs, and if you -- is that converted for the age of your ships? If you kind of convert to get to the age of the ships, do you get close to 100? Or how does that work out?

Yes, we convert for the -- to account for the age of the ships, but more importantly to account for the differences that these ships have to the standard BPI vessel. So we use a formula which is used by Klaveness in the Baumarine and the Bulkhandling pools to evaluate the earnings capacity of the ships in question, and based on that formula we calculate what we call the earning points. You can see what our assumptions are if you look at the footnote on page nine where we state that.

So just to be clear, so the 75%, is that after that adjustment then? Or it's --?

It is after that adjustment, yes, because the FFA days we have sold convert to more days for our receipts because more than a day of our receipts is required to cover an indexed date.

Thanks for clearing that up.

And then you talked about the costs of the lay-up, and I'm just wondering, how does the -- where do the lay-up costs figure into that average, the $9,000 per day OpEx -- or I mean cash breakeven costs you're talking about?

It does not. It includes those vessels -- there it includes those vessels as operating.

So that would be an additional charge if you're going to average it out to be -- you would have to add another $500,000 a day divided by total days -- or I'm sorry -- $500,000 over the year divided by total ship days?

Yes. If you include the -- if you put the vessel that we have in lay-up as the lay-up cost, then average -- the total dollar amount would be less, but to be fair you'd have to divide it by one vessel less.

Right.

So if -- I think it would come about -- very, very similar. But to avoid getting into these differences we did it as if all the vessels were operating.

I see. Is there going to be a big change in terms of -- you know, DD&A per day is kind of how we consider that. What's the change in the -- or on a dollar basis, also, what's the change in DD&A run rate going forward after the sale of the Ioanna P and then the purchase of the other two vessels?

The D&A -- the depreciation and amortization you mean?

Yes.

I think the Ioanna was being depreciated at about $7.5 million a year. So that will not be there in 2009. And then Nikolaos was pretty much fully depreciated. I think we were depreciating it at $500,000 a year in '08.

Yes.

And the two new acquisitions depreciate about $1 million a year, or something like that (multiple speakers)

Don't give them out already -- but it's $18 million over the remaining (multiple speakers) over the life of 25 years.

And then let's see, on the derivative loss, the $3.4 million derivative loss, what is realized versus unrealized mark-to-market losses on the FFAs?

On the FFAs, as of December 31, all is unrealized.

All right. So should we (multiple speakers)

Part of the [deal] with losses is an interest rate swap that we had. About $77,000 is realized, and the remaining roughly $1.2 million unrealized.

And then, let's see. I already asked my -- you answered the question about the lay-ups there. Okay. Well, I will turn it over to anybody else. Thanks.

Charles Rupinski, Maxim Group.

All my questions asked and answered. Thank you. Easiest call I ever did.

(Operator Instructions). Justin Yagerman, Wachovia.

I may as well chime back in here. I wanted to get a sense, Tasos, on the debt. You're looking for the financing on your latest purchase. What are you guys -- do you have any early indication of what cost of debt looks like on that facility?

I think we have an early indication it would be similar to the one that we -- for Monica. Maybe a couple of points above or below. We're still negotiating with the bank. But around -- between 2.5% and 3% margin over LIBOR.

That's helpful. And as of now I would imagine it's a pretty small amount and you guys have a healthy balance sheet and you are not anticipating any issues with getting that financing?

We haven't secured it yet, but we don't anticipate any issue [really].

We have -- as I said in the presentation, we've got good relationships with all the banks that we're dealing with, and all have said that they are there to do it, so we will get I think the project financed.

How is that process different? As you are going through I guess it'd just be interesting to get the color. You guys have made several acquisitions over the last couple of years. Is there a notably longer period of time to get the financing? Is that why there isn't a facility in place yet?

No, not really. If you look back on what we've done in the past, we've bought quite a few vessels cash, and financed them just after the delivery. This also gives the comfort to the banks that you don't really need them to buy the ships. So usually you can negotiate a little bit better terms by doing that. We've done it in the past, and we're doing it now. If we needed the debt to get -- to buy the ships, we would have worked on it before.

Okay. No, that's good color and it's fair. Thanks.

Scott Burk, Oppenheimer.

I'm back. Got just a few more questions. You mentioned you've got $50 million in firepower. Is there -- do you need to preserve -- do you need to keep about $14 million in cash on the balance sheet? Is that how you get to that $50 million number?

Not that we need. It's because we wanted to present a conservative number.

So potentially there would be some incremental amount available above what you are presenting there?

Potentially. Of course don't forget, there is also $7 million in restricted funds that are -- some of them are not really hard restricted. They are for margin requirement, and they get released or locked depending on how the markets move.

Oh, okay. Interesting.

But we are looking at other sources of equity because we do think that there will be opportunities -- other sources of financing, also debt and equity. We've got I think five ships which are totally unencumbered. We think there will be opportunities, and we would like to take advantage of those.

A question on the lay-up. You mentioned that you may have to put some additional container ships into lay-up near term. Are any of those other ones that are approaching -- I guess the other ones are more in their teens in terms of the age. I think the next one is like a 1990-built vessel. Are any of those that are maybe not in -- in not as good a shape as Artemis and would go to scrap? Or do you feel like all those would be worth putting (multiple speakers)

Oh, no. There is currently no scrap candidate amongst our ships. We have been through that kind of crisis in the early '80s, and we've seen -- if you have a ship that has a few years in front of it and you can afford paying the $0.5 million a year to keep it, usually it pays to wait for one or two years or however -- how long that crisis might last.

Can you give me a breakout of total like either operating costs or cash breakeven costs for the container fleet versus the dry bulk fleet? The dry bulk fleet -- you've got larger vessels there, so I'm assuming the operating costs are a little bit higher.

I can't give the exact breakdown. I can give it to you off-line, but I think they are awfully similar.

No, I think there's about $500 less on the container fleet than the dry bulk fleet on the operating expense.

Okay. So not -- sort it's really a pretty minor difference.

About half -- you know, half -- $500 approximately.

(Operator Instructions). (Operator Instructions). There are no further questions, sir. Please continue with -- Mr. Pittas.

Thank you very much, all, for attending our conference call. We will talk to you again in about three months to report the first-quarter 2009 results. Thanks again and goodbye.

That does conclude our conference for today. Thank you for participating. You may now all disconnect.