Genco Shipping & Trading Ltd (GNK) 2009 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Genco Shipping & Trading Limited Fourth Quarter 2009 Earnings Conference and Presentation. Before we begin, please note there will be a slide presentation accompanying today's conference. That presentation can be obtained from Genco's website at www.gencoshipping.com. To inform everyone, today's conference is being recorded and is now being webcast at the Company's website, www.gencoshipping.com.

We will conduct a question-and-answer session after the opening remarks. Instructions will follow at that time. A replay of the conference will be accessible at any time during the next two weeks through March 11, 2010, by dialing 888-203-1112 or 719-457-0820 and entering the passcode 1246198. At this time, I will turn the conference over to the Company. Please go ahead.

Good morning. Before we begin our presentation, I note that in this conference call we will be making certain forward-looking statements that discuss future events and performance. These statements are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements.

For a discussion of factors that could cause results to differ, please see the Company's press release that was issued yesterday, the materials relating to this call posted on the Company's website, and the Company's filings with the Securities and Exchange Commission including without limitation the Company's Annual Report on Form 10-K for the year ended December 31, 2008, and the Company's subsequent reports filed with the SEC. At this time, I would like to introduce Mr. Gerry Buchanan, the President of Genco Shipping & Trading.

Good morning and welcome to Genco's fourth quarter 2009 conference call. With me today is John Wobensmith, our Chief Financial Officer.

I will begin today's call by discussing our recent highlights as outlined in slide 3 of the presentation. I will then turn the call over to John to review our financial results for the three- and 12-month period ended December 31, 2009. Following this, I will discuss the industry's current fundamentals. We will then be happy to take your questions.

During the fourth quarter and full year 2009, Genco posted strong results for shareholders despite a volatile dry bulk market. The ongoing success management has achieved in expanding the Company's time charter coverage with leading multinational companies continues to serve as our core differentiator and bodes well for future performance.

Turning to slide 5, the fourth quarter net income was $35.5 million, or $1.13 basic undiluted earnings per share. While John will discuss the financial results in more detail later in the call, I would like to note that Genco's cash position increased to $205.8 million as of the 31st of December 2009 due to the strong cash flows generated by our high-quality fleet.

During 2009, we continued to strengthen Genco's leading reputation as an operator of modern tonnage with the delivery of three Capesize newbuildings. Building on our success, we took delivery of the Genco Claudius, completing the 2007 acquisition of nine Capesize ships from Metrostar Management Group, a major milestone for our Company and further enhancing Genco's position as an industry bellwether. This transaction significantly expands the earning power of our fleet and increases our strategic presence in the Capesize sector, the largest class of dry bulk vessel.

Genco Claudius commands the same charter with Cargill International S.A., for 10.5 to 15.5 months at a rate of $36,000 per day.

Consistent with our goal to provide shareholders with sizable contracted revenue streams while maintaining the ability to capitalize on future rate increases, management made the strategic decision to contract two Panamax, one Supramax, and one Handymax vessel during Quarter 4 on short-term time charters with durations ranging for three to six months.

Based on our opportunistic approach, we are pleased to have taken advantage of a rising freight environment during the first quarter of 2010 by signing long-term time charters for three dry bulk vessels at attractive rates.

Moving to slide 6, I will now discuss the time charter coverage for Genco's fleet in more detail.

The execution of management's time charter strategy continues to serve the Company and its shareholders well. Currently, we have approximately 50% of our fleets available days secured on contracts for the remainder of 2010. Complementing our considerable time charter coverage, three of our Capesize vessels have profit-sharing arrangements, enabling Genco to earn a rate above and beyond the basic rate during strong trademark environments.

Going forward, we will maintain our focus on employing a large portion of our fleet on contracts with bulk counterparties and providing customer service and seeks to adhere to the highest industry standards as we seek further expansion of our fleet.

Currently, Genco owns 35 dry bulk vessels consisting of nine Capesize, eight Panamax, four Supramax, six Handymax, and eight Handysize vessels with an average age of approximately seven years, well below the industry average of approximately 15 years. With a more-than-and-diverse fleet comprised of first-in-class vessels, we remain well positioned to take advantage of the positive long-term demand for the global transportation of essential dry bulk commodities. I will now turn the call over to John.

Thank you, Gerry. I will begin my remarks by directing you to slide 9, which presents our financial results for the fourth quarter and 12 months ended December 31, 2009.

For the three- and 12-months period ended December 31, 2009, we recorded revenues of $96.2 million and $379.5 million, respectively. This compares with revenues for the fourth quarter of 2008 and 12 months ended December 31, 2008, of $101.6 million and $405.4 million, respectively.

The year-over-year decreases were due to lower charter rates achieved for certain of our vessels. Operating income for the fourth quarter and 12-month period ended December 31, 2009, was $51.9 million and $210.5 million, respectively. This compares with operating income for the fourth quarter and 12-month period ended December 31, 2008, of $7.7 million, and $234.4 million, respectively. The decrease in operating income for the 12-month period ended December 31, 2009, is attributable to increased vessel operating expenses, management fees, depreciation and amortization associated with the operation of a larger fleet, as well as a $26.2 million gain in connection to the sale of the Genco Trader, and a $53.8 million loss on the forfeiture of vessel deposits associated with the cancellation of the six-vessel acquisition during the comparative period in 2008, partially offset by lower general and administrative expenses.

Interest expense for the fourth quarter of 2009 was $16.4 million and $61.8 million for the 12-month period ended December 31, 2009. This compares to interest expense of $17.2 million for the fourth quarter of 2008, and $52.6 million for the 12-month period ended December 31, 2008.

The Company recorded net income for the fourth quarter of 2009 of $35.5 million, or $1.13 basic and diluted earnings per share. Net income for the 12 months ended December 31, 2009, was $148.6 million, or $4.75 basic, $4.73 diluted earnings per share. This compares to a net loss of $111.3 million or $3.56 basic and diluted earnings per share for the fourth quarter of 2008 and net income of $86.6 million, or $2.86 basic and $2.84 diluted earnings per share for the 12-month period ended December 31, 2008.

As a reminder, we recorded a total of $159.7 million in unusual events during the fourth quarter of 2008, including approximately $108 million in noncash charges.

The key balance sheet and other items as presented on slide 10 include the following -- our cash position was $205.8 million as of December 31, 2009, and our debt-to-capital ratio was 58.8%. Our total assets as of December 31, 2009, were $2.3 billion consisting primarily of our current fleet, cash, and cash equivalents, and our investment in Jinhui Shipping & Transportation.

Our EBITDA for the three months ended December 31, 2009, was $75.8 million, which represents an EBITDA margin of 78.8% of revenues.

Moving to slide 11, our utilization rate was 99% for the fourth quarter of 2009 compared to 98.2% in the year-earlier period. Our time charter equivalent rate for the fourth quarter of 2009 was $30,567 versus $35,304 recorded in the fourth quarter of 2008. The decrease in the time charter equivalent rates was due to the lower charter rates achieved in the fourth quarter of 2009 versus the fourth quarter of 2008 for five of the Panamax vessels, six of the Supramax and Handymax vessels and five of the Handysize vessels in our current fleet. This was partially offset by higher revenues on two of our Panamax vessels in the fourth quarter of 2009 as well as higher revenue from the profit-sharing agreements on two of our Capesize vessels.

For the fourth quarter of 2009, our daily vessel operating expenses were $4,817 per day, which compares to $4,734 per day for the fourth quarter of 2008.

Daily vessel operating expenses for the 12 months ended December 31, 2009, were $4,796 per day versus $4,400 per day for the 12 months ended December 31, 2008. The increase in daily vessel operating expenses is due to the operation of more Capesize vessels for the fourth quarter of 2009 versus the same period last year, expenses due to the purchases of spare store and supplies as well as insurance expenses.

As we have stated in the past, we believe daily vessel operating expenses are best measured for comparative purposes over a 12-month period in order to take into account all the expenses that each vessel in our fleet will incur over a full year of operations.

In maintaining an efficient cost structure, we are pleased that our daily vessel operating expenses for the 12 months ended December 31, 2009, were below our budget of $5,350 per vessel per day on a weighted basis.

On slide 12, we present a pro forma balance sheet that shows our pro forma cash position of $157.7 million, which includes $17.5 million of restricted cash under the terms of our revolving credit facility and takes into account the repayment of $12.5 million under our revolving credit facility and $35.5 million related to the deposits for Baltic Trading Limited's acquisition of six dry bulk vessels, our pro forma net debt to total capital ratio of 59% as of December 31, 2009.

Building upon the completion of the Metrostar acquisition, as Gerry mentioned earlier on the call, we intend to draw upon our strong liquidity position and continue to consolidate the dry bulk industry as we have consistently done in the past. In pursuing fewer growth -- future growth opportunities that further strengthen our industry leadership, we will remain disciplined in our approach by adhering to a strict set of return criteria related to earnings and cash flow accretion as well as return on capital hurdles.

On slide 13, we present our anticipated breakeven levels. For the year 2010, we estimate our daily vessel operating expenses to be $5,350 per vessel per day on a weighted basis of an average number of 35 vessels. We expect our daily free cash flow breakeven to be $16,442 and our daily net income breakeven rate to be $20,407.

Before I turn the call back to Gerry, I mentioned that, as you may know, Genco announced the proposed IPO of its subsidiary, Baltic Trading Limited, in an October 2009 press release. Baltic Trading intends to conduct a dry bulk shipping business focused on the spot market. As announced, Genco intends to make a $75 million capital contribution to Baltic Trading, which would be used, along with IPO proceeds, to acquire its initial fleet. The $35.5 million in deposits towards the purchase of six vessels for Baltic Trading Limited will be credited towards the $75 million capital contribution. Genco has no current plans to contribute any of its assets to Baltic Trading in connection with Baltic Trading's IPO.

As Baltic Trading is currently in registration, we cannot take questions on Baltic Trading during this call.

I will now turn the call back to Gerry.

Thank you, John. I would like to take this opportunity to spend a few moments discussing the industry fundamentals. I will start with slide 15, which points to the dry bulk indices. Represented on this slide are the overall Baltic Dry Index and the Baltic Capesize Index. As can be seen when looking at the graphs, the Baltic Dry Index has been trading at the 2,000 to 3,000-point range since June of 2009. As I'll explain later in more detail, we believe that the strength in the dry bulk market has been almost exclusively driven by China's infrastructure growth and the short-term volatility has been a factor of increased resilience -- reliance, sorry, on the spot market for iron ore cargos.

Moving on to slide 16, we summarize the current demand site fundamentals. As indicated on the graph at the bottom right, Chinese fuel production reached 565 million tons for the 12 months of 2009, showing a 13% increase over last year's production figures.

Over 628 million tons of iron ore were imported into China for the same period, showing a 41% increase on a year-over-year basis. The first reason for the record iron ore imports has been the increased demand for steel driven by China's appetite for infrastructure and real estate development, clearly seen by the 50% of the steel consumption in China goes towards construction projects.

As can be seen on the graph at the bottom left of the slide, China's economy and the country's demand for iron ore was the driving force behind a relatively strong rate environment through the second half of 2009, while demand from Europe and Japan has been lagging significantly.

A slight increase in iron ore demand from the rest of the world was evident towards the end of the year, and we believe that expectation of the global economy growing by 3.9% and the Chinese economy by 10% for 2010 bodes well for the transportation of dry bulk goods. Furthermore, we believe that in the long run, India will play a significant role in the dry bulk trade with a similar growth profile to that of China, mainly driven by the demand for coal to fuel domestic electricity consumption and steel demand.

Lastly, we mentioned that the slight weakness in the freight rate environment over the past month has been a factor of both the Chinese New Year holidays as well as anticipation of a possible early conclusion of the iron ore price negotiations. That was evident by iron ore imports into China reaching only 46.6 million tons for January as opposed to 62.2 million tons in December.

Lastly, we also note the iron ore inventories at Chinese ports have moved on a relatively tight range over the past three months between 65 million and 70 million tons.

Moving to slide 17, we reiterate China's support to the dry bulk markets over 2009 by outlining the iron ore re-imports into China increased 41% year-over-year for 2009 while, at the same time, Japan's imports decreased by approximately 25%.

Coal, the second most important commodity in dry bulk shipping, has been an increasingly important factor through 2009. While suppressed demand in the world's economy through 2009 can be seen by coal imports into Japan recording a 16% decrease on a year-over-year basis. China's coal imports increased approximately 210% over the same period.

As can be seen in the graph at the bottom left of the page, China has been a net coal importer since the beginning of the year with increasing amounts of the commodity being imported through the second half of the year. While the main factor of the increased imports has been the increase in power consumption and steel production, pressures from the Chinese government to shut down domestic coal mines due to environmental and safety reasons have also contributed.

To illustrate the magnitude of this effect, I note that China was a net importer of 104 million tons of coal in the 12 months of 2009, while an exporter of 4.6 million tons over the same period last year.

While one would expect higher freight rates as a result of the record iron ore and coal imports into China, the effects of the financial crisis in the rest of the world have held back a more substantial increase in freight rates.

As you can see on the bottom right of the slide, apparent fuel usage for 2009 for the world, excluding China's fuel usage, decreased by 24% in 2009. As a reversal of that trend is expected for 2010 with apparent steel production increasing by 13%, the demand for coal and iron ore and any ingredients used for production of steel should increase accordingly.

On slide 18 we present our views for the supply side of the equation. Looking at the graph on the bottom left of the slide, we can see the dry bulk orderbook through 2013. Although the projected dry bulk orderbook still represents 60% of the existing fleet, it is questionable whether that will be delivered in its entirety.

As presented below, over 30% of the newbuilding orders scheduled to deliver in 2010 are contracted at newly established expansion or greenfield jobs. While some of the vessels contracted in expansion on newly established yards might be delivered assuming the presence of funding for working capital and other purposes, we believe that most greenfield yards, let alone vessels contracted in the same, will not make it into the supply picture.

Back to financing -- for vessels that have already been contracted, also creates significant uncertainty as to the percentage of the existing orderbook that will be delivered. In addition to funding issues, we believe that the current orderbook, as it appears in most brokers' reports, is lightly overstated by a number of options that, although are currently out of money and will not get exercised, have been included. It is currently estimated that approximately 450 contracted vessels have been canceled, and that only 42 vessels out of a total of 143 vessels, which were scheduled to be delivered during January 2010 have actually delivered to their owners.

Approximately 27% of the world's fleet is 20 years or older. As we have indicated in past calls, all carrier scrapping is not mandated. It is more of an economical equation. To that extent, scrapping showed (inaudible) significant strength starting at the last quarter of 2008, the first quarter of 2009. Amid a higher spot rate environment during the remainder of 2009, scrapping leveled off.

As illustrated on the graph at the bottom of the page, only five vessels have been scrapped year-to-date in 2010, while 260 vessels were scrapped in 2009 as compared to approximately 80 vessels scrapped in 2008.

Turning to slide 19, we note that, as visually illustrated in the graph at the bottom of the page, the main engine of growth and what has been providing support to drive bulk rates through the recent financial crisis and over the year in 2009 has been an increase in infrastructure spending around the world led by stimulus efforts in China.

Leading worldwide efforts to boost economic growth through the fiscal policy was the Chinese government's $586 billion stimulus plan, which we have always argued would stimulate demand for the commodities our vessels carried. Moreover, we believe that although the approximately $300 billion of stimulus spending around the world is not as heavily weighted towards infrastructure as the funds invested in China. The prospects of a world economic recovery driven by stimulus or even consumption spending bodes well for dry bulk fundamentals.

Indications of the positive effects of the economic stimulus plan and the growth trajectory on China come from a variety of different metrics of which I will mention only a few. Namely, the country's GDP growth on a year-over-year basis was 8.7% for 2009 reaching $4. trillion and ranking second after US GDP. PMI rose to 55.8 in continuing expansionary territory and urban fixed asset investment increased to 30.5% on a year-over-year basis for 2009.

On a much-discussed subject lately, we do not believe that the recent bank intervention by the Chinese government is meant to stall growth but is rather meant to curb any speculative investments and control inflationary pressures.

Lastly, we believe that an effort to stimulate rural development bodes well for dry bulk shipping as infrastructure projects as well as widespread affordable housing projects will increase demand for the commodities carried on our vessels.

This concludes our presentation, and we'll be happy to take your questions.

(Operator Instructions) Doug Mavrinac, Jefferies & Company.

Great quarter. First, you guys have been active in time chartering -- a handful of your ships across a few different asset classes in recent weeks. My first question is how would you describe the current appetite for time charters by charterers compared to where they were, say, a few months ago?

I think it's about the same, to be quite honest with you. We saw time charter activity pick up probably two months ago when you saw us do quite a few long-term fixtures, you know, 12 months. The market softened a little bit over Chinese New Year, and we've been taking a little more of a short-term focus. But as the market picks back up, we will continue to lock away ships, long term.

So would it be fair, John, to say sustained at a higher level than we saw? Or the increased level that we've seen a few months ago, that that's been sustained compared to what, say, maybe in mid-2009?

Yes, absolutely. I think things have, on the long-term front, have slowed up a little bit over the last couple of weeks, but I think that comes more from the owner side. But, you know, we're definitely seeing active charters in the market.

Okay, perfect, thank you. And then as it relates to bank financing, which, obviously, touches a bunch of different topics. How would you describe the current environment for bank financing at this point? Is it still as tight as it was also a few months ago, or have things loosened up on that front as well?

I think it's still pretty tight.

Yes.

You know, we just haven't seen much being done.

Right, right, okay. Yes, neither have I, so I was just checking, since you guys obviously see a whole lot more. And then, finally, this is just more of a modeling question -- you know, as far as operating expenses, John, you touched on it in your comments, but you guys have been doing an excellent job of managing those operating costs all year long. Is there anything specific that you can attribute to you guys consistently coming in under your daily OpEx guidance that was a pleasant surprise for you all?

Well, we -- yes. Look, we obviously keep a close eye and try to manage that as much as possible. We did have lower-than-anticipated crew expenses. I think the fourth quarter has a lot to do with timing of spares. We are still -- we're obviously giving guidance for [$5,350.00] a day next year -- or this year 2010. And I think that's the right number to be using.

Jon Chappell, JP Morgan.

John, I kind of wanted to ask Doug's last question a different way. You mentioned in your guidance, 5350. That would be growth of almost 12%. Did a lot of the cost that should have fallen in 2009 get pushed back into 2010? Or are you just setting the bar really low to be able to beat operating expenses again this year?

No, I don't think that's the case. It's Gerry here. A lot of -- when you make these budgets up, your operating costs for the following year, there's a lot of anticipated costs that you've built in there, like, (inaudible), insurance, et cetera. And as the year materializes, sometimes these things don't materialize to the level that you actually anticipated, including crew costs as well. We've been very, very successful in maintaining a flat base for our crew costs for this year. So -- I'm very confident that the numbers we put in there are very good numbers.

Do you think there are, like, two years' worth of crew cost inflation potential for this year, since it was able to be kept flat last year?

It's difficult to anticipate crew costs. We sit down at the end of the year with our crew suppliers, and we see where things are going. We explain what's going on in the industry, we explain to our seafarers what's going on in the industry as well. A couple of years ago, crew costs were going up every week. You couldn't control them at all. We have actually managed to do that now, and I don't think there's two years of inflation in there. I just think that we have done a good job in maintaining the flat balance here.

Okay. This question does not have to do with Baltic Trading, it just has to do with Genco as relation to Baltic Trading. I just want to be sure, after today's announcement, there still are only 75 million contribution from Genco's balance sheet to this new entity?

Correct.

Okay. And then if the deal does not get done, that $34 million, $35 million deposit that you put down that's in your pro forma numbers, you'd get that back regardless?

Yes, that was in the public filing this morning, (inaudible) in the 8K.

Okay. One last industry question for Gerry or John. On your slide 16, the chart at the bottom right-hand corner, the Chinese iron imports versus steel production. It looks like over the last year, the imports have really pulled away from the steel production. They're not tracking the same amount. Do you think this is a structural shift to where imports are far more important to the Chinese steel industry than domestic production? Or is this an issue where they've just been importing far more than they are actually consuming, and that they may have more robust inventories than they actually need?

No, I don't think it's more robust inventories. I mean, inventories, on average, have moved up slightly overall but that's on the back of increased steel production as well. And, yes, you're seeing less and less domestic iron ore being used.

Justin Yagerman, Deutsche Bank.

Hey, good morning, guys. This is Mike Weber on for Justin. How are you?

Good.

Good. Just a couple of questions. I guess, first, on -- I guess your chartering strategy, going forward. You mentioned, in a question earlier, you looked to lock up some tonnage, longer term, if sea rates improve, and you guys are obviously picking up a bit of spot exposure eventually through your investment in Baltic. Is there a target you guys are looking at in your planning for 2010? And how should we think about that going forward, just from an exposure perspective?

Yes, I mean, Genco's strategy since 2005 has been to have 75% of the fleet fixed on time charter. That goal is still in place. However, as you've seen what we've done from our chartering strategy, we tend to be pretty opportunistic about it, and at the end of 2008 we were only fixing short term because of the rates. And then as things picked up in the middle of 2009, we started putting ships away for one and two years. It got a little soft again, we went short term and, lately, we've been fixing 12-month charters at some pretty good rates, particularly on the Capes.

Right. I guess what I'm getting at is it seems like you guys can add a little bit of flexibility or downside to that 75% target. Is there a situation in which you would go above that 75% target, or is that more like a ceiling?

No, it's a target. And we've been above that number in the past. So it really is -- it's market-dependent.

Okay. All right, and with regards to -- and this is not a question, again, about Baltic but just more about Genco's, I guess, potential funding. It seems like -- and correct me if I'm wrong -- but if a deal came along, and the IPO market wasn't open, and you pulled the trigger, and there could be, I guess, a bit of a gap here. Is there any situation in which, I guess, Genco would be on the hook for acquiring these vessels outright? It's a subsidiary, so I'm guessing that is the case, and if that is the case, is there any sort of covenant restriction on what you could draw down on and would that just be funded with cash? How do you think about that, just from a Genco perspective?

I'm not sure if I understand your question. You are referring to the six ships that Baltic has entered into MOAs with?

Yes.

If you look at the 8K, you'll see that if an IPO is not completed by March 16th, both buyer and seller have the option to walk away and deposits returned. So, hopefully, that answers your question.

(Operator Instructions) Chris Wetherbee, FBR Capital Markets.

I guess just kind of thinking conceptually about uses of cash, going forward, you're at the end of the -- you finished the CapEx kind of schedule that you had had going through this year, and as you think about the polling cash, how do you think about paying down debt? Is that a priority relative to opportunistic vessel acquisitions? And, I guess, kind of further to that, when you think about your compliance with covenants, is that also a priority for you to get back on the right side of that equation, going forward? I just kind of want to get your thoughts on that process?

Well, first of all we're obligated to repay, under the revolver, $12.5 million a quarter for 2010. So obviously we're going to do that. As I've said, even last quarter we talked about this -- we're back in the mode of actively looking at acquisitions, and we'll continue to do that at Genco.

As far as getting the collateral maintenance clause put back into place, I think that comes from sort of two things. One, we do expect vessel values to improve somewhat over the medium term as well as paying down debt. It's definitely a focus. We're obviously all incentivized to put the dividend back into place, which means the collateral maintenance clause needs to go back into place. But I don't see it happening over the next two quarters or anything like that. But it is definitely a focus.

Okay, that certainly is helpful. And I guess when you look at potential opportunities for acquisitions, and you think about the orderbook for 2010, obviously, it's very large with a lot of scheduled deliveries, and some of these vessels are coming or had been ordered at relatively close to peak prices in the market. Do you see that as a decent source of potential acquisition opportunities? Are yards and banks willing to negotiate to try to get some of these deals done that may be partially built at this point and need to get delivered but the funding isn't there? How do you guys think about that opportunity?

Yes, I think that opportunity is still there. What's interesting is, even if you look at the January numbers, you only had about 30% of the scheduled fleet delivered in January. Now, I'm certainly not representing that's going to be a run rate for 2010, but I do think it's very indicative of some of the slippage we're going to see in 2010. We still expect 40% to 45% slippage, going forward, in 2010.

I do think transactions will shake out of that. It's been pretty quiet in the first part of the year, but it is possible, as we get towards the end of second quarter, that we start to see more of these transactions.

Does it seem like you need a little bit more clarity on iron ore negotiations? Maybe the direction China is headed in post-New Year to get comfortable with that? Does that seem like that's a factor that people are focused on right now?

I do. Even today there was an article on Bloomberg that the German government came out and said they're not going to support shipowners, and that the shipowners need to negotiate directly with the South Korean yard. But, clearly, that is much more of a container ship issue, but there are also plenty of these German KGs that have dry bulk orders that are well underwater. So having that come down, you may see more of these transactions shake out.

Okay, fair enough. And then just kind of switching gears, the final question just on a modeling point. I just want to make sure I understand, and I apologize if you covered it already. In the fourth quarter, your G&A number was a bit below where I thought and kind of seemed like the low number for the year. Obviously, you've given us your view looking forward to 2010, but could you just give me a little bit of color around that number in the fourth quarter?

Yes, look, a large part of it was due to -- I hate to say it -- lower employee compensation. And also, obviously, with restricted stock having a lower share price that's used in that calculation. That's the majority of it. And we saved a little bit on legal expenses, but it's nothing -- it's not that big.

And just finally -- is there any implication to G&A or compensation -- executive compensation, going forward, as a result of the Baltic transaction? I'm assuming there is nothing that would change the structure at Genco, particularly, but I'm just curious.

There is nothing that would change the structure at Genco.

Scott Burk, Oppenheimer.

You talked about your acquisition criteria and your strong cash position. Do you have any identified acquisition opportunities for Genco, in particular, beyond the -- not the six at Baltic (inaudible).

Nothing that's firm, but as I said, we're in the mode of looking at a lot of things right now, and we'll have to see what happens, going forward.

And in terms of the size of that opportunity, what kind of -- how many ships could you actually purchase with the amount of cash you have? Would you be looking at two or three or would it just be kind of a one-at-a-time-type situation?

No, I think if you look at what Genco has done in the past, they have been larger transactions. And so I think there are many ways to get larger transactions. There are buying fleets of ships, there are buying companies, et cetera.

But in terms of financing for that, how would you approach the financing? Because that would obviously go beyond the cash balance you have.

Yes, I think -- look, the financing market is still tight, and I don't think you can do the large syndicated transactions that you were able to do two years ago. But, clearly, we -- you have to look at the S1 for Baltic and look at what we've done there on the financing side. Again, I don't want to get into too much detail on that. But financing is available for select companies.

Okay, and actually I did have a question regarding Genco's relationship to Baltic. What is the -- is there kind of a right of first refusal for Genco? In other words, when you have an acquisition opportunity that surfaces, who gets the first look at that acquisition -- Genco or Baltic?

Scott, this is just getting too much into Baltic. So I'm going to ask you just to look at the public filing and the S1, and all of that is detailed.

Okay, all right, thanks. I have not looked through that filing yet. Let me ask you this -- we've seen a bit of improvement in rates since the end of the Chinese New Year. Do you expect more upside going into iron ore -- before iron ore prices increase in April? Or what's the near-term outlook for day rates from your perspective?

Things are a little slow right now. I think -- well, look, we anticipate rates to pick back up. I think if you go back, and you look historically, this first quarter tends to be a little slower period for iron ore and usually picking up in the second quarter. I don't see any reason why we wouldn't see that again.

Daniel Burke, Clarkson Johnson Rice.

I actually just had one question left. Looking at the orderbook, we've also been scrutinizing the role that options might be played. Any sense on what portion of the publicly reported orderbooks, as you guys look at them, might consist of options rather than true newbuild commitments?

I can't put a number on it. I think it's very difficult, and it's unfortunate, but it is. And you don't really figure this out until you get up to when the options were supposed to be exercised, and then they fall away. I think it's tough.

Okay, John. Maybe one other way to parse it -- another way I can think of parsing it would be do you think it's more prevalent in the larger sizes or the small sizes, or is it even tough to look at it that way at this point?

I think it's across the board.

Ladies and gentlemen, that will conclude today's question-and-answer session and also will bring us to the conclusion of today's conference. We do thank you for your participation. Everyone please have a wonderful day.