Performance Shipping Inc (PSHG) 2012 Q3 法說會逐字稿

Greetings, and welcome to the Diana Containerships Inc. third-quarter 2012 conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Edward Nebb, Investor Relation Advisor for Diana Containerships. Thank you, sir. You may begin.

Well, thank you very much, Dan, and thanks to all of you for joining us for the Diana Containerships Inc. 2012 third-quarter conference call. Members of the Company's management team who are with us today include Mr. Symeon Palios, Chairman and Chief Executive Officer; Mr. Anastasios Margaronis, President; Mr. Andreas Michalopoulos, Chief Financial Officer; Mr. Ioannis Zafirakis, Chief Operating Officer and Secretary; and Ms. Maria Dede, Chief Accounting Officer.

Before management begins their remarks, let me briefly summarize the Safe Harbor notice, which is attached to today's news release. Certain statements made during the conference call, which are not statements of historical fact, are forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act. Such forward-looking statements are based on assumptions, expectations, projections, intentions and beliefs as to future events that may or may not prove accurate.

For a description of the risks, uncertainties and other factors that may cause future results to differ materially from the forward-looking statements, please refer to the Company's filings with the Securities and Exchange Commission.

And with that, let me turn the call over to Mr. Symeon Palios, Chairman and Chief Executive Officer.

Thank you, Ed. Good morning and thank you for joining us. It is my pleasure to report to you on the performance of Diana Containerships Inc. for the third quarter and nine months ended September 30, 2012. Our results during the recent quarter continued to reflect our (technical difficulty) to expand and prudently manage our fleet, in order to deliver growing revenues and profitability for the benefit of our shareholders.

Let me review our financial performance during the period. Time charter revenues were $14.6 million in the 2012 third-quarter. This is an increase of 51% compared to $9.7 million for the third quarter of 2011. The increase reflects the sustained growth of our fleet, as we own nine vessels in the most recent period, up from five vessels a year ago.

Net income was $1.6 million for the 2012 third-quarter. This compares with net earnings of $2.7 million for the same period a year ago. We have continued to focus on maintaining a strong balance sheet to ensure that we have the financial capacity to support a sound, growing business.

At September 30, 2012, Diana Containerships had shareholders equity of $247.9 million. In comparison, long-term debt was a manageable $92.7 million of principal balance outstanding. The Company remains fairly committed to delivering value for our shareholders through our dividend policy. Today, we announced that the Board of Directors has again declared a dividend of $0.30 per share, payable on or around December 18, 2012, to all shareholders of record as at December 4, 2012.

Given the successful execution of our strategy to expand our fleet, and therefore, to grow our cash flow generation capacity, it is our intention, assuming the continued performance of our current time charters and no unanticipated extraordinary expenses, to maintain for the foreseeable future the current quarterly dividend level of $0.30 per share.

We are continuing our fleet expansion efforts as the current market provides opportunities to add productive assets at attractive prices. Today, we announced the delivery of the motor vessel APL Garnet, a 1995 built Panamax container vessel of approximately 4750 TEU capacity. The vessel is chartered for a period of 34 months, plus or minus 30 of charter disruption, at a rate of (technical difficulty) [$7,000] per day, and it is expected to generate approximately $26.7 million of revenue for the minimum agreed period of the charter.

This purchase at an attractive price of $30 million demonstrates our ability to quickly deploy the capital raised through our July public offering in a manner that will enhance therefore the value and support our dividend policy. Including the APL Garnet, Diana Containerships' fleet now consists of 10 Panamax container vessels.

Our ships have been chartered to some of the industry's leading container lines. Overall, the fleet is time chartered for 100% of the days in 2012 and approximately 95% of the days in 2013, providing a stable revenue stream. The contracted gross revenue of the fleet is approximately $106.5 million.

In conclusion, the ongoing expansion and sound management of our fleet have made Diana Containerships to produce increasing revenues and solid earnings for the third quarter of 2012. We also have maintained a strong balance sheet, with a prudent level of debt and the resources to support our continued growth. As we move forward, we remain committed to pursuing strategies that we build on our operational and financial strength to deliver increasing shareholder value.

Now, I will turn the call over to our President, Stacy Margaronis, for a perspective on industry conditions. We will then be followed by our Chief Financial Officer, Andreas Michalopoulos, who will provide a more detailed financial overview. Thank you.

Thank you, Symeon. And, once again, welcome to all who have joined us on this conference call. The third-quarter of this year has proven to be a disappointment for operators and independent owners, as the market exhibited signs of weak demand across all size ranges. The reasons for this will be explored below, and we will attempt to analyze the most credible theories regarding the future performance of the containership market.

Looking at the freight and time charter rates. We start by looking at Ray Marcisco during the first three quarters of this year, find that container lines have relentlessly pushed ahead with continuous rate restoration programs. At the beginning of the year, the average Asia to Europe spot freight rate was just $730 per box. As of October 1, this had increased to $1158. Similarly, the Asia to the United States spot freight rate has moved up by 50% over the same period to reach $2730 per FEU before the food container, by the end of the current quarter.

However, according to Clarkson, the time charter market remains under pressure in the second quarter this year. Supply at the smaller end of the entire spectrum remained too plentiful to warrant a surge in high season time charter rates. Furthermore, during the third quarter of this year, Howe Robinson reports that there has been an increase in the availability of ships over 4000 TEU.

At the beginning of the second quarter, only 18 ships were available on the 60-day chartering markets, but by July, that had increased to 35 ships, and by October, it had risen to 66 vessels. Also these units are traditional Panamax designs.

According to Clarkson, despite the slightly improved time charter environment for larger capacity vessels, the overall picture remains fairly bleak, with the persistently low earnings of the first part of the year showing little signs of recovery, and increasing supply of larger vessels may cause capacity to cascade into the market for medium and smaller sized vessels. Although, according to Clarkson, a potential of exhaustion of this cascade of all capacity may lead in the longer term to supply deficits in the charter market to medium and smaller sized vessels.

Let's turn to supply now. According to Clarkson's, at the beginning of September 2012, the containership fleet numbered 5134 ships, with a combined capacity of 16.1 million TEU. Turning to the new building order book. As of early July, the fully seller containership order book numbered 521 vessels with a combined capacity of 3.6 million TEU. According to Clarkson's, as a percentage of the existing fleet, this is the smallest new building order book since 2004.

However, the composition of the order book is weighted heavily toward the larger vessels. The order book for vessels over 8000 TEU represents 55.2% of the existing fleet, while the order book for vessels between 6000 and 8000 TEU represents only 12.4% of the existing fleet, while the order book for vessels between 3000 and 6000 TEU represents a mere 10% of the existing fleet.

Most Panamax vessels currently constitute 91% of the capacity on order. According to Clarkson, again, a total of 1.4 million TEU of capacity is currently projected to be delivered in 2012, and an additional 1.6 million TEU is scheduled for delivery in 2013. However, the order book delivered as scheduled dropped sharply from 2014 onwards. Just 0.8 million TEU are scheduled for delivery in 2014 and 400,000 TEU in 2015.

Let's turn to demand now. According to Clarkson, the global container trade grew by 7.5% in 2011 and are projected to grow by only 5.9% this year. Mainlane trades are expected to grow in 2012 by a mere 1.7% due to the Eurozone prices and weak demand from the United States, while non-mainlane cargoes are projected to grow by 7.9% this year. More specifically, the North-South, non-mainlane trades are expected by Clarkson's to increase by 7.1% in 2012.

The three largest, North-South trades in order of size are Asia to Latin America, Asia to Africa, and Latin to North America. All North-South trades together account for about 20% of the global container trade. In comparison, the mainlane trades, which are the Asia-Europe, the Transpacific and Trans-Atlantic routes, account for 39% of global box trade volume.

The North-South trade mentioned above are fortunately not the only potential sources of robust container volume growth going forward. According to Costco, during the first half of 2012, the intra-Asian trade, including Australia, rose by 10.4% year-on-year to almost 900,000 TEU. Meanwhile, according to Clarkson's, China shipping container lines, CSCL, saw its intra-Asian box trade grow by 23% year-over-year to over 0.7 million TEU over the same period.

Moreover, again, according to Clarkson, the Chinese domestic container market saw shipments completed by CSCL rise to 1.8 million TEU in the first six months of 2012, while Costco transported nearly 1 million TEU in the same period, an increase of 18.8% year-over-year.

All the above are markets that will hopefully continue growing over the next few quarters and help take up the surplus cascaded tonnage we referred to previously. We agree with Clarkson's predictions that the expansion of volumes on North-South trade, in particular, is likely to outpace mainlane trade growth. This trade growth pattern may -- again, according to Clarkson's -- have the potential to support charter rates in the medium-term, as the share of global trade on routes largely served by medium-sized vessels thrives.

Let's turn to laid-up tonnage now. Over the second quarter of this year, the idle fleet of containerships dropped to 2.8% of the existing fleet from 5% during the first quarter. However, Clarkson's point out that the rate of reactivation stalled towards the end of the second quarter, perhaps in response of the potentially weak peak season volume growth.

Braemar Seascope calculates that at the end of the third quarter, about 550,000 TEU of capacity were laid up, representing 3.5% of the trading fleet. By the end of the year, Braemar Seascope's prediction is that laid-up tonnage will represent about 4% of the world fleet.

Let's turn to demolition. According to Clarkson's, a total of 73 ships with a combined capacity of 133,112 TEU were sold for scrap in the first half of this year. Braemar Seascope reports that during the first nine months of the year, approximately 113 fully cellular vessels with a combined capacity of 220,000 TEU was sold for demolition. During the third quarter alone, 35 fully cellular vessels were scrapped compared to only 11 during the same period last year.

Braemar Seascope predicts that by the end of 2012, about 150 container ships with a combined capacity of between 295,000 and 300,000 TEU will have been sold for demolition, representing a fleet reduction of about 2%. During 2009, demolition peaked with 370,000 TEU worth of ships having been scrapped, representing about 3% of the then-existing fleet.

Scrapping candidates for the remainder of this year and next year will come from the surplus Panamax, as well as smaller containership categories. About 10% of the sub-Panamax vessels over 2000 TEU and about 7% of the fleet of Panamax ships are 20 years or older. Overall, only 5% of the containership fleet is over 20 years old.

Let's turn to the supply/demand balance. According to Clarkson's, the containership fleet is expected to grow by 6.7% this year to 16.5 million TEU. Therefore, overall global supply is expected to marginally outpace global demand growth in 2012. Howe Robinson's view is that the scale of the 2013 order book has been apparent for some time and, regardless of demand expectations, it appears impossible for this surplus tonnage to be absorbed easily unless the industry takes its own corrective measures.

Furthermore, Howe Robinson adds that if the order book is not controlled, freight rates and liner profitability are likely to weaken significantly for the second time in four years. So what measures can the industry take to address this developing imbalance of supply and demand?

First, scrapping. Howe Robinson points out that there is 750,000 TEU capacity in the form of ships over 20 years old. These are obvious scrap candidates, as mentioned earlier. A conservative target of 300,000 TEUs sold to demolition over the next few quarters is not unreasonable. The industry will certainly benefit from such a move, although some owners may find scrapping to go against their investment strategies and objectives.

The second factor is delayed deliveries. It is quite common for the delivery of up to 25% of the order book to be delayed during poor market conditions. According to Howe Robinson, this has to happen for some stability in the freight market to return during 2013, and to avoid further erosion of earnings.

The third factor is growth and higher demand. Howe Robinson states that if the OECD, the IMF and the World Bank are correct in predicting better economic growth in 2013, there is every likelihood that the Asia to Europe trade will return to positive growth in 2013, and that other trades might put in a stronger performance than in 2012. If to this growth we add the restocking, which usually comes with higher economic activity and worldwide containerization growth, we could see demand grow by up to 6.5% in 2013.

The fourth factor is slow steaming. An internal analysis by Howe Robinson shows that the optimal service configuration is for an average of 11 vessels in each trade loop for long-haul trade and six vessel loops on medium hauls. Therefore, if higher bunker prices persist, there is still room for additional slow steaming. It is also apparent, according to Howe Robinson, that if lines find themselves with surplus post-Panamax tonnage, they will slow down further and deploy an extra ship, rather than lay her up. The effective opportunity cost of an additional ship becomes her lay-up cost, and only marginal fuel savings in any given trade loop are needed to justify this practice.

As for newbuilding contracting, Clarkson's reported containership newbuilding demand has remained weak during the second quarter of 2012, with just 21 vessels contracted between the beginning of April and the end of June this year. As for the first eight months of this year, only 46 vessels with a combined capacity of 257,684 TEU have been ordered. This compares with 209 vessels with a combined capacity of nearly 1.6 million TEU, which was ordered in the same period of 2011.

Therefore, all in all, we could say that if owners and liner operators show restraint as regards contracting from here onwards, the market has a good chance of absorbing all surplus tonnage by the middle of 2014. Furthermore, tonnage shortages could start developing especially in the midsize ranges. This theory assumes demand growth picks up modestly over the period from now and the end of 2013.

Let's look finally at the outlook for the containership trades. A summary of the medium and long-term outlook is provided by major containership analysts. Starting by Howe Robinson, the outlook for 2013 could be as follows -- the 8000 to 10,000 TEU ships should, according to Howe Robinson, find additional trade through their existing routes by displacing smaller vessels.

Although 5500 to 7500 TEU ships may come under pressure, these are likely to find work by in turn displacing smaller units through the cascade effect. Panamax ships will most likely suffer from the cascade effect, and are unlikely to find enough alternative trading areas, at least in the medium-term. The continued oversupply of Panamax ships will, in all likelihood, limit the earnings upside for the 2000 to 4000 TEU vessels.

Howe Robinson expects passive prices to remain flat. They consider it unlikely that they will see sufficient levels of distress to mark asset values down to the levels which would correspond to the duration and severity of the downturn. Much will depend on how banks handle their problematic loans, and political factors, which unfortunately, play an important role here.

Clarkson's agrees to a large extent with the above, and states that further demand growth over time will be required to balance some of the flow of cascaded capacity. They believe progress will be a gradual, with substantial risks remaining on the demand side. However, they also point out that in today's constrained financing and ordering environment, there also remains a question of whether the containership market might begin to see a capacity deficit in medium and smaller type vessels over the longer-term.

In other words, in the longer-term, there may be a mismatch between the ship sizes required to serve the fastest growing global trade and those that dominate the current order book -- a trend which could potentially be exacerbated by the tight financial environment. According to Braemar Seascope, the market could improve sharply if more normal GDP growth rates returned to the US and Europe. However, this remains very much in doubt.

And if GDP growth does not recover, and consequently does not return to the markets following the recent US elections and the Eurozone sovereign debt resolution, we may have to wait for newbuilding volumes to recede. Unfortunately, this might only happen from the middle of 2014 onwards.

Finally, let's turn to our investment strategy. We at Diana Containerships find very credible and effective the investment policies presented by Top Tier Transport in their September container report. In summary, this strategy is based on the rather grim prediction that 2013, or at least most of the year, will be rather a miserable year for charter owners with open ships to fix.

In such an environment, Top Tier points out that those older vessels with the old design of long and slim hulls, might be attractive investment propositions for the medium-term. Such vessels could provide attractive cash flow for existing, as well as new, shareholders of Diana Containerships for the next two, possibly three years.

In the meantime, the Company could consider ordering newbuildings at historically low prices for delivery in 2015 or 2016. These ships would have all the latest developments in design, engine efficiency and environmental friendliness, and could replace the older tonnage as they are delivered. If Top Tier's predictions are correct, the market will have improved considerably by 2015, so the older ships could be sold at relatively attractive prices.

This would be a win-win investment scenario, as the ships of older design would have been bought cheaply and then sold at reasonably firm prices, having earned some money through trading in the meantime. The newer ships will then be delivered into a firm market, attracting very respectable freight or higher rates while having been ordered at rock-bottom newbuilding prices.

The recent addition to the Diana Containerships fleet have followed the general principles of this investment strategy, although the vessels are indeed older than those who referred to by Top Tier in its report. We should be aware, however, of the fact that the market does not present investment opportunities meeting the exact investment criteria of any particular investment strategy.

Therefore, our CEO and the Board of Directors, have approved the acquisition of older units with secure, profitable employment, which will support the Company's declared dividend policy going forward. These ships could be eventually replaced by younger units, applying the same investment strategy until the market recovers and the new buildings are added to the fleet.

I will now pass the call to our CFO, Andreas Michalopoulos, who will provide us with the financial highlights of the third quarter and first nine months of 2012.

Thank you, Stacy, and good morning. I'm pleased to be discussing today with you Diana Containerships Inc.'s results for the third-quarter 2012 and the nine months ended September 30, 2012.

For the third quarter 2012, net income of Diana Containerships Inc. amounted to $1.6 million and the earnings per share amounted to $0.05. Time charter revenues amounted to $14.6 million compared to $9.7 million in 2011. The increase in time charter revenues was due to the enlargement of the fleet after the addition of the Cap San Marco renamed to Cap Domingo, Cap San Raphael renamed to Cap Doukato, APL Sardonyx and APL Spinel in February and March 2012.

This increase was partially offset by decreased average time charter rates achieved during the quarter compared with the same period last year. Ownership days were 828 for the quarter, compared to 460 in the same period of 2011. Fleet utilization was 99.9% compared to 99.6% in 2011, and the daily time charter equivalent rate was $17,198, compared to $20,600 in 2011.

Owner expenses were $0.4 million for the quarter. Operating expenses amounted to $7.4 million compared to $3.7 million for the same quarter of 2011. Operating expenses in the third quarter of 2012 increased due to enlargement of the fleet compared to the same quarter of 2011. On the average, operating expenses increased mainly due to increased crew costs and repairs and maintenance costs.

Daily operating expenses were $8949 for the third quarter of 2012 compared to $8075 in 2011. Depreciation amounted to $3.2 million for the quarter. Management fees amounted to $0.4 million and represent the fees paid to the management during the quarter. General and administrative expenses were $0.9 million compared to $0.7 million in the third quarter of 2011. The increase was mainly due to (technical difficulty) meeting expenses that did not occur during the same quarter last year. Interest in finance costs for the third quarter of 2012 amounted to $0.8 million and include the interest in loan fees related to our $100 million (technical difficulty).

Turning now to the nine months ended September 30, 2012. Net income of Diana Containerships Inc. amounted to $5.7 million and the earnings per share amounted to $22 -- $0.22, that is. Time charter revenues amounted to $42 million, compared to $17.2 million in 2011. An increase in time charter revenues was due to the enlargement of the fleet following the addition to our fleet in 2012 of the four vessels mentioned earlier, and also the addition to our fleet of the three Maersk vessels, Malacca, Madrid and Merlion, in June 2011.

This increase was partially offset by increased average daily rates achieved during the nine months ended September 30, 2012, compared to the same period of 2011. Ownership days were 2285 in 2012, compared to 815 in 2011. Fleet utilization was 99.8% compared to 99.1% in 2011, and the daily time charter equivalent rate was $17,927 for the period compared to $19,429 for the same period of 2011.

[Ownership] expenses were $1 million. Operating expenses for the nine months ended September 30, 2012, amounted to $20.2 million compared to $6.5 million for the same period in 2011. The increase was due to the enlargement of the fleet and also due to increased costs to all categories of operating expenses.

Daily operating expenses were $8823 for the nine months ended September 30, 2012, compared to $7547 in the same period last year. Depreciation amounted to $9.1 million. Management fees amounted to $1.1 million and represent the fees paid to the management for the period. General and administrative expenses amounted to $2.7 million compared to $2.5 million for the same period in 2011. The increase was mainly due to increased legal and brokerage fees, fees for the annual meetings and Company promotion, and was partially offset by decreased (technical difficulty) fees.

Interest and finance costs were $2.3 million for the nine months ended September 30, 2012, and related to our $100 million credit facility with RBS. Turning to dividend policy for the third quarter of 2012, the Board of Directors has decided to declare a dividend of $0.30 per share.

Thank you for your attention. We would now be pleased to respond to your questions. And I will turn the call to the operator, who will instruct you as to the procedure for asking questions.

(Operator Instructions). Ross Briggs, Wells Fargo.

Before you ask your question, let me make a correction. The Diana Containerships fleet is chartered 65% days in 2013 and not 95%, as erroneously stated before. Thank you.

Okay, got it, thanks. Good morning. I guess, to start, I wanted to ask about the revolver. Has there been any more progress? And do you still think that's possible to get that expansion done by the end of this year? Is that still the target? Or has that moved a little bit?

First of all, we are confident that this is still on our agenda, the $50 million. We feel -- we don't want that at every conference call we tell you the same things over and over, but you haven't seen any announcement or anything of the sort in that respect. We feel we are progressing and I don't believe that we will have closed all matters by the end of the year, but we feel confident very soon thereafter. So, $50 million is still on our agenda; additional to the $100 million we have with the Royal Bank of Scotland.

Right. And your balance, I think it was, like, $64 million as of Q3, $30 million for this vessel, so you're probably somewhere just a bit above $30 million. Looking at other deals, do you need the revolver to do another deal -- I mean, of the same size? I guess looking at -- how comfortable would you be with a minimum cash balance when you look at deals out there?

We feel comfortable that we can tap another deal with the cash available.

Okay. (multiple speakers) Okay. And then just a couple questions on the 2013 recharters. So, I think it's mostly towards kind of mid-second quarter, moving into the third quarter, that those delivery dates start. Have you started looking at marketing those? And I think the outlook that you presented in line with ours is a relatively negative outlook for the charter market. So how do you approach those? Are those going to be kind of short-term?

I mean, I think the last one you did was about a year -- shorter than that? Longer? Or how are you thinking about it?

I think it's too early to discuss the rechartering of those vessels. Our President, Mr. Margaronis, presented the case. Nevertheless, we have to cross that bridge when we come closer to that date. But if you consider the fact that we still have equity, as we said earlier, to buy another vessel, we are very confident that this will compensate for the possible decrease in the rate that we may get at the end of the second quarter for three of our vessels. But we have to cross that bridge as we come to that.

Okay. And so some of those, if I remember right, they have -- the charter has options to extend; those are way above the current market, as I read it. But when would they have to declare those options?

Those options, as you can see on our fleet employment table, they have to be declared no later than 20 months for the first option and 32 months for the second option. That's for the motor vessel APL Sardonyx. But you are asking for Maersk Malacca and Merlion and Madrid?

Yes.

They have to be declared before the end of the 20th month for their employment.

Okay, okay. Got you. All right, thank you. That's all I have.

Ken Hoexter, Bank of America Merrill Lynch.

Just a follow-up on that question. Your move to get older tonnage on the newbuilds, is that -- I just want to understand -- is that what you were suggesting, you've got the cash settled for that? To do not only the older tonnage, or were you just suggesting this one potential add-on vessel to keep your dividend at the same rate?

It's a combination, actually, of things which we are going to try and formalize, depending -- formally -- depending on how well the market moves over the next couple of quarters. In other words, we are in no rush to order ships now, because there are plenty of opportunities to have ships delivered in 2015.

We need to have them ordered at the best possible price and at the best possible specifications. And with the minimum amount of cost required. So, the plan is to keep operating with the older units. And then while we are operating, entertain the possibility of timing newbuilding contracts for delivery of ships from about 2015 onward. So, the older ships will be primarily supporting the dividend payments, but the enhanced capital base of the Company is then to support the placement of deposit payments for the newbuilding contracts.

And what do you see now as your cost per day to operate some of the -- on average, the older vessels?

Well, I think basically, if you take the average of our operating expenses, which was, for the nine months, at $8800, and if you consider that most of our fleet is composed of older tonnage, apart from two vessels, I think you can easily see that an older tonnage is running at operating expenses of an average $9000 per day. And that's where we stand today.

Of course, you must, when you say that, you must put into -- take into account the fact that, when we say that, every time, that our Technical and Operations Department have a thorough preventative maintenance program that we apply to the vessels, which is very important to us. And this is why, maybe, this $9000 is there, in support of that preventive maintenance program.

No, I appreciate that. I just want to make it clear, so you still see as buying those older vessels here, that it's still a profitable market for you to go acquire those vessels at the $20,000 you're seeing in the market today?

And how are the discussions with -- I appreciate the market discussion you gave earlier, but how are the discussions going on with the liner companies, in terms of -- I know you've got some rechartering coming up, but in terms of adding on more vessels, are they more sale-leaseback discussions? Are they adding on other vessels and then rechartering them to newer charters? How are those discussions going, from your perspective?

There are very reputable liner operators but they are still willing to sell and lease back some of the older tonnage. We have been discussing about those vessels. And we feel confident that we will be able to employ the remaining cash at an accretive way to our dividend. And also at the same time gain some more time by chartering that vessel for the next three years, also. And to cut a long story short, yes, there are still vessels out there to be purchased with a lease-back, at an increased price, with a much better charter rate.

Appreciate that. And then, given that, I guess my last question would be just, do you see -- not if, I mean, if you don't have too many vessels expiring that rapidly, but do you see any bias in the demand for newer vessels from those liner companies? Or has your willingness to go and buy the older use capacity and still recharter them -- can you talk about how the market still differentiates between the vessels?

At the bad period, the market differentiates between those vessels, but we consider the difference becoming smaller and smaller when the market gets better. In other words, in a very good market, in a good market, the market will not differentiate big-time between the older and the new tonnage.

Okay. And I'm sorry, one other one, if I can. On your dividend, is there any thought of lowering the dividend to conserve cash to make some of these additional investments in adding on the vessels?

For the foreseeable future, no.

Okay. Appreciate the time. Thank you.

Natasha Boyden, Global Hunter.

Just a quick question on -- I see you've got some nice contracts added to that, that are one of our market. Do you see any kind of indication at all from your counterparties that there is any kind of risk associated with those contracts? If not, are you seeing any trend toward that in the industry, in general?

No, we -- as you can see, the names that we do business with, they are first-class liner operators. And we have assessed, we think, correctly the risk and we do not worry at all about their performance.

And we've got to keep in mind, Natasha, that these are relatively young contracts, which these liner operators have entered. So we have to assume, with a great degree of certainty, that they have done their math properly when they actually offer these enhanced time charter hires, as regards the particular ships. These are not contracts that were done three or four years ago, and the market suddenly drops and they find themselves exposed in a weak freight market environment with very high time charter rates.

Okay, that makes sense. Okay, thank you. And then, just a sort of more general question. I know this has been a relatively hot topic issue in the space, but how important do you think fuel-efficiency is in the container market? And would -- you're talking about potentially entering in the (technical difficulty) going down the line. Would this be something that you would look into, getting these sort of eco-friendly ships? Or do you not really subscribe to that opinion?

Well, we're not ready to describe exactly what kind of ships would we be looking at, if that's what you're asking. But Mr. Palios essentially is in continuous contact with the shipyards that build the best containerships, and studying specifications, prices and terms of payments. This discussion will continue for a while now. And in our forthcoming conference calls, you will get more color and more specific details on these ships that we are looking at.

Okay, great. And then just lastly, just a quick modeling question, yes, depreciation was definitely below our expectations. Just wondering if this -- what we saw this quarter is a good run rate going forward, adjusted for the (technical difficulty) delivery.

Repeat your question on depreciation, Natasha.

Yes, as this (technical difficulty), it was a little below our expectations. I'm just wondering if that number is a good run rate going forward, adjusted for the (technical difficulty) delivery.

It is.

It is. Okay. All right, thank you very much.

Urs Dur, Clarkson Capital Markets.

The only remaining question I have here is, is there a reasonable amount of liquidity in this market, seeing that the Garnet, which you recently purchased -- are there a significant number of opportunities such as that available in today's market being discussed? Would we see others trying to do this as well? Or is this much more of a one-off situation in a stressed market?

No, there are not a lot, but we still can see some. I cannot say that there are too many. At the same time, there are not too many buyers around.

Right, right. All right. Everything else really has been asked. I just wanted to see what kind of liquidity there was there. Thank you very much.

Kevin Sterling, BB&T Capital Markets.

How should we think about your drydocking schedule for 2013 and maybe some of those costs for 2013?

I will start with the -- Kevin -- with this quarter. Basically, this quarter, we have in Europe drydock. So, basically, in your CapEx expenses, you should have zero. It goes into OpEx and it's in the vicinity of (technical difficulty) [$2000] because it's done only with an underwater inspection. We will have motor vessel Sagitta, and we already have the motor vessel Centaurus that have been -- that has had its intermediate survey done with an in-Europe drydock.

For 2013, what we have in our schedule -- and you know that this moves as we go -- is to have, in the first quarter, motor vessel Maersk Merlion. Again, here it's going to be in-Europe drydock, so the vessel is not going to drydock; it's going to have an underwater inspection for its intermediate survey. And in the second quarter, we foresee to have again in Europe drydock, motor vessel Malacca, Maersk Malacca and APL Sardonyx. So, that's all for 2013. So, basically, in your budget, I wouldn't put any CapEx for that.

Okay. Thank you, Andreas. That was very helpful. And then can you help us think about the impairment charge for the prepaid charter revenues for 2013? As you know, you guys have added some vessels this year. And maybe help us think about a good quarterly run rate to use for 2013, if that's possible?

Yes, basically, what you should do is add to the vessel that you have now, the APL Garnet, that we just purchased. And, of course, if we purchase with another vessel in the meantime with a charter attached to it, we will have this one as well. A good run rate for -- added to the deferred charter revenue that you have -- prepaid charter revenue that you have now, added to that, the APL Garnet should be at around $1.1 million per quarter, the run rate that you have there, the quarterly expense. So, that's what you should take into account for that.

Okay, thank you for that clarification. And that's all I had to today. And best of luck as you continue to make some vessel acquisitions.

Thank you.

Tim Fronda, Sidoti & Company.

Just one question. On acquiring vessels and balancing this with the low charter rates, have you had to move more slowly in expanding your fleet? Are you where you hope to be at this point?

Yes, we are very happy with what we have achieved up to now. I can say that the accretion on the dividend on any -- on every purchase that we have done is better than we had initially anticipated. Being in a position to pay $0.30 per quarter is something that it was on the top of our expectations.

Great. Thanks for your time.

You're welcome. Thank you.

We have no more questions at this time. I would now like to turn the floor back to management for closing comments.

Thank you again for your interest and support of Diana Containerships. We look forward to speaking with you in the months ahead. Thank you.

This concludes today's teleconference. You may now disconnect your lines at this time and thank you for your participation.