Top Ships Inc (TOPS) 2006 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Top Tankers Inc. fourth quarter and year-end results conference call. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded.

It is my now pleasure to introduce your host, Mr. Mike Mason. Thank you, Mr. Mason, you may begin.

Thank you. Good morning and welcome to Top Tankers results conference call for the fourth quarter and year ended December 31, 2006. As mentioned by Claudia, I'm Mike Mason of Allen & Caron, Investor Relations.

Before we start this call, there are a couple of items I'd like to cover. Many of you received a copy of the press release announcing the Company's results for its fourth quarter and year ended 2006. It was released this morning at 7:35 a.m. Eastern Time. If you did not receive a copy of the press release, it is posted in the client section of our website at www.allencaron.com, or you may call our office in New York at 212-691-8087, and we will email it to you right away. It is also posted on Yahoo Finance.

This call is being broadcast live over the Internet at www.toptankers.com, or Precision IR's webcast site at www.investorcalendar.com. The Internet replay will be available shortly after the end of the call and will continue for seven days. In addition to telephonic replay, the conference call will be available for seven days by calling 877-660-6853 from the U.S. and Canada, or 201-612-7415 from outside the U.S. and Canada. And our account number 286 and conference ID number 232792.

I would now like to turn the call over to Mr. Thomas Jackson, Chairman of the Board of Directors of Top Tankers. Good afternoon, Mr. Jackson.

Thank you, Michael. Good morning, ladies and gentlemen. I am Tom Jackson, Chairman of the Board of Directors of Top Tankers Inc. This is my great pleasure to welcome you to Top Tankers' earnings conference call in respect to the fourth quarter and full year 2006 results.

Before we begin, let me draw your attention to the fact that during the conference call we might make certain forward-looking statements about the Company's future expectations including future revenues and earnings. Those statements and all other statements here today other than historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and as that term is defined in the Private Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties and are subject to change at any time, and the Company's actual results could differ materially from expected results.

The Company undertakes no obligation to publicly update forward-looking statements to reflect subsequent recurring events or circumstances. The Audit Committee has reviewed and recommended to the Board the acceptance of the accounts for the fourth quarter and full year 2006 as presented. And the Board of Directors in a meeting held this morning approved the accounts as presented.

With me today for our conference call are Mr. Evangelos Pistiolis, President and Chief Executive Officer, and Mr. Stamatios Tsantanis, Chief Financial Officer. Mr. Pistiolis will provide you with details of Top Tankers' operation, activities and general expectations. Furthermore, he will provide you with an overall perspective of the international tanker market together with his perceived outlook. Mr. Tsantanis will comment on the financial results of Top Tankers, Inc. for the quarter ended December 31 and full year 2006. Following the financial highlights, the call will move into a Q&A session.

I would now like to pass you over to Mr. Evangelos Pistiolis.

Thank you, Tom. Good morning, ladies and gentlemen. For the three months ended December 31, 2006, our net income was 3.2 million, or $0.10 per share compared with a net income of 28.1 million, or $1.00 per share for the fourth quarter of 2005. The results for the fourth quarter 2006 and 2005 include net charges of 281,000, or $0.01 per share, and $3,366,000, or $0.12 per share, respectively, for special items that affected our net results for the period which are described in the appendix of our earnings release.

For the year ended December 31, 2006, our net income was 15.1 million, or $0.47 per share compared to 68.7 million, or $2.46 per share for the previous year. The results for the year include net charges of 8.3 million, or $0.27 per share, and 9.5 million, or $0.34 per share, respectively, for special items that are described in the appendix of our earnings release.

This year was an especially challenging year for Top Tankers. We completed a 550 million sale and leaseback project which generated significant return of $7.50 per share to our shareholders. I would like to remind everybody that since our IPO in 2004, we have paid a total of $8.80 per share in past dividends to our shareholders.

During the year we dry-docked nine vessels and performed extensive upgrading of our fleet. The cost of recent and future upgrades will be in excess of 50 million, and more than 60% of it has been completed as of year end. We have conducted extensive work on our tankers closely supervised by our experienced technical team in order to upgrade the vessels to their highest possible standards.

Once again we would like to emphasize our commitment to provide the highest quality of service to our clients and to continue to operate and maintain a fleet with the utmost efficiency and professionalism. We believe that it was the right time to undertake such a large project and expect that going forward, this strategy will help to make 2007 a stronger year.

In the fourth quarter, we also sold three Handymax tankers, one built in 1998, and two built in 1999. We believe that the aggregate sales price of 128 million was one of the highest prices ever achieved for such vessels in the industry.

In addition, we have entered into an agreement to acquire six newbuilding Handymax product tankers for the purchase price of 285 million. Furthermore, we managed to arrange for the new vessels to be delivered in the first and second quarters of 2009. We view this as a real achievement since most shipyards were not offering tanker newbuilding deliveries prior to 2010 or 2011.

We look forward to a very active year in 2007.

Fleet report. As of December 31, 2006, our fleet size was 24 vessels, or 2.5 million deadweight including 18 vessels sold and leased back for a period of five to seven years. As compared to 27 vessels, or 2.6 million deadweight including five vessels sold and leased back for a period of seven years on December 31, 2005.

Fleet deployment. During the fourth quarter of 2006, we had approximately 68% of our fleet operating days on long-term employment contracts. Fifteen of our 24 tankers are on time charter contracts with an average term of over three years with all but three of the time charters including profit-sharing agreements.

We have secured approximately 67% of the estimated operating days for 2007 under time charter contracts. At the same time, the nine Suezmaxes operating in the spot market together with the profit-sharing component of the time charter contracts expose approximately 56% of the Company's estimated operating days for 2007 to spot rates, which may be potentially higher.

The Suezmax fleet. During the fourth quarter of 2006, eight of our Suezmax tankers operated in the spot market earning on average $37,652 per vessel per day on a time charter equivalent basis. Four of our Suezmaxes operating in the time charter market earning on average $34,058 per vessel per day on a time charter equivalent basis.

During the fourth quarter of 2006, one of the Suezmaxes was undergoing its special survey and was not operational.

As of the date of this release, the Suezmax fleet for the first quarter of 2007 has been fixed as follows: On the spot market, 74% of operating days at average daily time charter equivalent of $38,000 a day. Total spot and time charter including the profit-sharing is 82% of operating days at an average of time charter equivalent of $37,000 a day.

In addition, as of the date of this release, we have a total of 65 off-hire Suezmax days in the first quarter of 2007 associated with the dry-docking of the M/T Spotless and the ballast tank cleaning process of the M/TFaultless.

Handymax fleet. All of our Handymax tankers operate on the long-term employment agreements that provide for a base rate and additional profit-sharing. During the fourth quarter 2006, including the profit-sharing allocated to us from these profit-sharing agreements, the Handymax fleet earned an average of $17,082 per vessel per day on a time charter equivalent basis.

As of the date of this release, Handymax fleet for the first quarter 2007 has been fixed for 70% of its operating days at a daily average of time charter equivalent of $20,500 per day.

In addition, as of the date of this release, we have a total of 48 off-hire Handymax dates in the first quarter of 2007, associated with the dry-docking of the M/T Vanguard.

On this note, I'll pass you over to Stamatios Tsantanis, who will take you through the financial details.

Thank you, Evangelos. Good morning, ladies and gentlemen. For the fourth quarter of 2006, our net income was 3.2 million, or $0.10 per share, compared to net income of 28.1 million, or $1.00 per share for the fourth quarter of '05. The results for the fourth quarter includes special items of $0.01 per share and $0.12 per share for the fourth quarters of 2006 and 2005, respectively.

EBITDA for the quarter was 18.3 million, compared to 49 million for the fourth quarter of '05. Voyage revenues for the quarter were 67.8 million compared to 90.6 million recorded in the fourth quarter of '05.

For the full year of 2006, our net income was 15.1 million, or $0.47 per share, compared to 68.7 million, or $2.46 per share in 2005. The results for '06 and '05 include special items of $0.27 per share and $0.34 per share, respectively.

EBITDA for '06 was 90.1 million, compared to 140.1 million for '05. Voyage revenues for the year were 310 million, compared to 244 -- sorry, 244.2 million in '05.

As we announced on December 7, we restated our financial statements for the first and second quarters of '06 to reflect the change of treatment of the sellers' credits that were part of sale leasebacks of 13 vessels. These transactions were completed in 2006 and do not affect the Company's results from previous years. A revised statement of the sellers' credits has been reflected in the results for the fourth quarter and the full year of 2006.

As of December 31, our total senior secured debt was 220 million, with RBS and HSH Nordbank maturing in 2015 and 2013, respectively. This amount includes 20 million that was advanced for four of the six newbuildings that we ordered. As of today and after giving effect of the payment of the first installment of the two remaining newbuildings, our total debt is 230 million.

On December 31, our cash was $80 million, including the 50 million required by our covenants. As of today, our cash again is approximately $80 million. On December 31, 2006, our debt-to-equity ratio was approximately 52.4%, and our net debt to capital was 41%.

The Company dividends paid in 2006 were paid a total of 217.5 million. Out of this amount 86.7 million came from current and accumulated earnings, and $130.8 million [inaudible]. On that note, I would like to pass the call back to Tom.

Thank you, Stamatios. I would now like to pass the call back to the operator for the Q&A session.

Thank you. (OPERATOR INSTRUCTIONS) Our first question is coming from Natasha Boyden with Cantor Fitzgerald.

Good morning, gentlemen. This is one for Evangelos. You mentioned in the press release that 60% of the fleet upgrading processes with 113 dry-docking days in the first quarter. Can you give us a total for 2007 and possibly 2008, if you can?

Sure. Well, the total for 2007, we expect to have a total of 350 days, that's special surveys. And the cost to be around 22.5 million.

Okay. You said 350 or 360?

No, 350 days, 3-5-0.

And do you have any information for 2008 yet?

Well, 2008 will be approximately 300 days. That's what to expect, and the cost will be around 17 to 18 million.

Okay, great. And are you planning to use the same shipyards that you've been using that experienced delays in 2006? Are they still experiencing the same kind of delays?

Frankly, we don't know what's happening at the moment with them. We're not going to take any more chances in China at this point in time, because we don't really need it. And it wasn't done by mistake, it was done on purpose, because we had quite a few ships that needed some -- or a lot of steel replacement in '06, which is not the case for '07. So, whenever you need a lot of steel, you go with China. That's pretty much it for everyone. And that's not the case for this year. All the ships that needed a lot of steel have been done last year, so we are mostly using yards in the Black Sea, or maybe, if we are in the Far East, we're going to be using probably Singapore, Malaysia, or other shipyards other than China.

So, the plan for the time being is not to use any of China's yards this year.

Okay, great. And then if you could just remind us what your net income and cash break-even rates are Suezmax fleet?

Yes. The cash flow break-evens for Suezmax fleet is around 34,500.

Thirty-four five hundred?

Thirty-four five hundred. And for the Handymax is approximately 19.7.

Nineteen point seven, okay, great. Thank you. And then, lastly, if I could just talk some D&A here. We were a little surprised to see the bump in D&A. We were expecting a significantly lower number because of the sale of vessels during the quarter. Can you just tell us what caused this bump and how we see this going forward?

Well, G&A for the fourth quarter --

D&A, I'm sorry. That's depreciation, I apologize.

Well, sorry. [Inaudible]

Okay.

-- because in the fourth quarter of 2006, we started to have the full effect of the vessels that underwent the special survey in 2006. As a run rate going forward, I would expect around 5.5 million per quarter, to adjust for amortization of dry-docks.

That will just be amortization?

Yes, correct.

And then the deprecation on top of that?

Yes, deprecation on top of that which is approximately per quarter another 5 million.

Another 5 million, okay.

So, let's say 5.2 for deprecation and 5.4 for dry-dock amortization.

Okay, so about 10.7, roughly.

Yes.

Okay, I think that's pretty much it. Evangelos, maybe you could just give us, really, an update on what you're seeing industry-wise. It's been pretty -- it's been pretty volatile with the fourth quarter really not shaping up as everybody hoped it would and things getting a little stronger in the first quarter. If you could just give us some views on that?

Yes. We have seen, like we said, the fourth quarter was not that amazing. It was expected definitely a lot better than it actually was. The finishing of it was quite good, though. I mean, the last 20 days or so, which gave a bit of a better income for some of the ships that will open up these dates. The beginning -- the very beginning of 07 was okay, was good to okay. And anything forward from there was actually not so good. We have seen some increases, but they were just in a weekly volatility, like you said. So, it was very much a matter of luck of when your vessels were open, really, in the first quarter.

So, now going forward, you know, who knows? We have seen [inaudible] summer maybe ever experiencing the recent history [inaudible], which is not good news for tankers, as you know. So, things might change again. I mean, summer might be okay. Last year summer was very good with 60,000, 65,000 for the Suezmaxes. Many would have said up to now it was really for Suezmaxes, right? I mean, the Handymaxes have been not too bad for the past month or so. They've been doing good to okay. So, Suezmaxes have been hit more rather than [inaudible] of course, rather than the smaller ships.

All right, great. Well, thank you very much.

Our next question is coming from Lee Carter with Oppenheimer & Company.

Yes. I know you don't have regular dividends, but when will the next consideration for dividends be forthcoming?

Well, you know that we have seen some time now to [change] our strategy from the fixed dividend to just special dividends. Now, I'm sure that we're looking to us to [inaudible] deals that might help us with the current market situations and all that. We'll see how that will go. And, of course, before we are clear to pay more dividends, I think we need to see the market improve before anything else happens, right?

So, like we said with Natasha, the market has not been amazing the past quarters, and I'm sure that, of course, the board of directors considers that. But before -- I'm sure before the board considers anything like that, they would have to see the market improve. So, let's wait for that and then we can have -- we can have a look at it again.

Thank you.

(OPERATOR INSTRUCTIONS) Gentlemen, there are no further questions in the queue at this time.

Okay.

Do you have any closing remarks, gentlemen?

Thank you, Claudia. That completes the Q&A session today. Thank you, ladies and gentlemen, for participating in this call. We look forward to talking to you again sharing our continuing progress on the next quarter conference call. Thank you and have a good day. Ladies and gentlemen, you may now disconnect your lines.