Top Ships Inc (TOPS) 2007 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the TOP Tankers Incorporated first-quarter 2007 results conference call. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Michael Mason, Allen & Caron Investor Relations. Thank you, Mr. Mason. You may begin.

Thank you. Good morning and welcome to TOP Tankers' results conference call for the first quarter ended March 31, 2007. As mentioned by the operator, I'm Michael Mason of Allen & Caron Investor Relations.

Before we start this call, there are a couple of items I would like to cover. Many of you received a copy of the press release announcing the Company's results for its first quarter 2007. It was released this morning at 7:35 AM 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 PrecisionIR's website 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, a telephonic replay of the conference call will be available for seven days by calling 877-660-6873 from the US and Canada or 201-612-7415 from outside the US and Canada. Enter account number 286 and conference ID number 242486.

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'm Tom Jackson, the Chairman of the Board of Directors of TOP Tankers Inc. It is my great pleasure to welcome you to TOP Tankers' earnings conference call in respect of the first-quarter 2007 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 subsequently occurring events or circumstances. The audit committee have reviewed and recommended to the Board the acceptance of the accounts for the first quarter 2007 as presented. And the Board of Directors have 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 March 31, 2007. 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 March 31, 2007, our net income was $947,000 or $0.03 per share compared with a net income of $30.2 million or $1.05 per share for the first quarter 2006. The results for the first quarter 2007 and 2006 include net revenues of $980,000 or $0.03 per share and net charges of $2,672,000 or $0.01 per share respectively for special items that affected our net results for the period, which are described in the appendix of our earnings release.

During the first quarter of 2007, we focused on improving the quality of our fleet management by bringing more vessels back under our own full management. With a view to increase our shareholders' value, we're continuously exploring various plans to improve our breakeven rates by focusing mainly on lowering our financial expenses. Our stock is trading at a significant discount to our estimated NAV of approximately $8.

In addition, we proposed to our annual general meeting of shareholders a two-to-one reverse split of our stock because we believe that this will improve the trading liquidity of our stock certain securities firms failed to follow and research companies having lower-priced securities. We expect that the decrease in the number of our common shares outstanding as a consequence of a reverse split and the anticipated increase in the price per share will encourage greater interest in our common shares by the financial community and the investing public and possibly promote greater liquidity for our stockholders in respect to those common shares presently held by them.

The fleet report. As of March 31, 2007, our fleet size was 24 vessels or 2.5 million deadweight, including 18 vessels sold and leaseback for a period of five to seven years as compared to 27 vessels or 2.6 million deadweight on March 31, 2006. In April 2007, we sold the Suezmax tanker, Errorless, for 52.5 million, resulting in a book gain of 2 million which will be recognized in the second quarter of 2007. The net proceeds of the sale were approximately 30 million.

The fleet deployment. During the first quarter of 2007, we had approximately 64% of our fleet operating days on long-term employment contracts. 15 of the Company's 24 tankers were on time-charted contracts with an average term of over three years with all but three of the time charges including profit-sharing agreements.

Yesterday, we announced a new time-charter contract with a major South American oil company for the M/T Flawless. The vessel is expected to earn approximately $44,500 net per day for one year and charters have the option to extend the contract for an additional one year.

We have secured approximately 63% of our estimated operating days for 2007 and the time-charter contracts. At the same time, the seven Suezmaxes that will operate in the spot market together with the profit-sharing component of the time-charter contracts expose approximately 55% of our estimated operating days for 2007 to potentially higher spot rates.

The Suezmax fleet. During the first quarter of 2007, nine of our Suezmax tankers operated in the spot market, earning on average $38,565 per vessel per day on a time-charter equivalent basis. 4 of our Suezmax tankers operated under time-charter contracts, earning on average $35,123 per vessel -- per day on a time-charter equivalent basis. As of the date of this release, 52% of the operating days of the Suezmax fleet for the second quarter of 2007 has been fixed at average daily time-charter equivalent of $45,000.

The Handymax fleet. All of our Handymax tankers operate under long-term employment agreements that provide for a base rate and additional profit-sharing. During the first quarter of 2007, including the profit-sharing allocated to us, the Handymax fleet earned on average $20,279 per vessel per day on a time-charter equivalent basis. As of the date of this release, our Handymax fleet for the second quarter of 2007 has been fixed for 66% of its operating days and average daily time-charter equivalents of $21,000 per day.

Now, I will pass you over to Mr. Stamatios Tsantanis, who will take you through the numbers.

Good morning, ladies and gentlemen. For the first quarter of 2007, our net income was $947,000 or $0.03 per share compared with net income of 30.2 million or $1.05 per share for the first quarter of 2006. Results for the first quarter of '07 and '06 include special items of $0.03 per share and $0.10 per share respectively.

EBITDA for the first quarter was 10.8 million compared with 55.6 million for the first quarter of '06. Voyage revenues for the quarter were 74 million compared to 101.7 million recorded in the first quarter of '06.

As of March 31, our total debt under senior secured credit facilities was 225.7 million with the Royal Bank of Scotland and HSH Nordbank maturing in 2015 and 2015 respectively. As of March 31, our cash was 74 million including the 50 million required by our covenants. As of today, our cash is approximately 105 million. On March 31, 2007, our debt to equity ratio was approximately 53%. Our current debt to equity ratio is approximately 50% and our current net debt to equity ratio is approximately 33%.

As Evangelos mentioned, we're currently working on certain deals in order to significantly decrease our financial expenses and increase our operating margins. We believe to be in a position to announce relevant transactions in the next few weeks. In addition to that, we are constantly exploring opportunities to improve our shareholders' value.

Lastly, today is the mailing date of our annual general meeting material. And we have posted our Annual Report for 2006 on our website.

And on that note, back to Tom Jackson.

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

(Operator Instructions). Lee Carter, Oppenheimer.

Last May, you had a very good idea. You were going to dry-dock several of your ships. They were going to be -- should have been ready by the fourth quarter or at least the first quarter. Did something happen in between?

Are you referring to the delays in the drydocks of last year? Hello?

Yes?

Are you -- which vessel are you talking about?

Well, last May, you were going to put into drydock several of the ships because things were slow then. And you had anticipated there would be a lot better pricing in the fourth quarter and the first quarter of '07. Did something happen in between? We haven't seen the earnings because of that. I'm just asking you, what happened?

No, I'm trying to get the question. As far as the drydocks are concerned, yes, it is true that many drydocks they took place last summer. And it's pretty standard in the tanker industry to pick the summer as a low period -- a low earnings period if you want, so you can take advantage of that and stop your vessels during that period.

Now -- and we expected at the end of the year and the beginning of this year like you said to be of higher numbers. What happened is actually the opposite. The market was a lot stronger during the summer and a lot weaker during the winter months. In fact, the first quarter of '07 was significantly lower than -- as far as time-charter equivalent earnings than the Q1 '06. It was actually one of the lowest quarters we have seen the last two years. So, this is something that is -- we were calling it abnormality but it did happen.

On top of that, we were facing some delays in China vis-a-vis the ships that went to China were facing significant delays because of the overbooking of the shipyards. The ships that went to the Persian Gulf and to the Med were okay on timings. But, the ones from China were a bit delayed. So, that's pretty much what happened. We expected ships to be ready and start earning in the winter but the winter was not there. And as you know, this was one of the warmest winters in the history really.

You also mentioned that you had budgeted 50 million and 30 million was already spent on these. How much is left for the second quarter?

Well, actually, last year, we spent that amount. This year is a lot lighter as far as drydocks' operate time and the costs are concerned. So, in total this year, we expect to pay in total around 20 million in drydocks. And we expect the operate periods in total for 2007 to be a lot lower than last year, less than half.

Will that be expensed mostly in the second quarter, sir?

In the second quarter of '07?

Yes.

For the year, yes. Most of the expense is going to go in the second and third quarter of '07.

Seth Lehman, Financial Guaranty Insurance.

I just wanted to ask you a question about the agreement you just came to with the Flawless. Are there additional opportunities in your fleet for similar transactions?

Are you talking about the time charter?

Correct and at the rate that you received it at.

The rate that we achieved was one of the highest ever really achieved in that vessel size if you want. Just very few time charters have gone, maybe a couple of thousand more. All of the others were like 5 or 10,000 less. So, yes, it is a very good number. Yes, there are other opportunities to get something like that. But these opportunities don't come across every day. And you don't get all of them as you have this year. But, it was a good thing that we got that one because there was great competition as you will appreciate.

You also mentioned (multiple speakers) -- sorry.

No. I was just trying to elaborate if you want. This shows that we have great relationship with these charters. And as you know, as we have reported in our release, we have one more ship with these guys and they chose us one more time.

Okay. You also mentioned in your release what the average [LETCs] are so far for the second quarter and we are about halfway done through the second quarter. What do you think the outlook is for the remaining six to eight weeks in terms of rates?

I'll tell you. On the [MRs], we are about $800 more and were 66% of the quarter. And the outlook is very, very good. It looks as if it's going to be maybe even higher than what I just said, the 21,000. That's the outlook.

Now, on the Suezmaxes, we have covered 52% of the days at 45,000, which is significantly higher than the first quarter but this is a very liquid market as you know and it's not really very strong since the beginning of this year. We -- some not we -- some analysts expected to be maybe stronger in the second half of the year. But it's very hard to predict. But, maybe where it is, maybe lower -- I wouldn't know really. But it looks as if it's a program -- unless something big happens, it looks just going to be better than the first.

Okay. And in terms of the fleet utilization for the first quarter, you recorded about a 92.4% of your available shipping days. Is the second quarter, do you believe to be a comparable ratio?

Yes, it is. We have some drydocks also for the second quarter. So it's going to be around the same, yes.

And just on a topic which hasn't been discussed in several calls, any new information or update on this SEC inquiry that started about a year ago?

No. It started and it -- the last thing we heard was actually 10 months ago. So, as far as the information is from the experts in the US and lawyers, it's really then if you don't hear anything, there's nothing. So for as far as we are concerned, there's nothing going on at the present without it as it's something that has stopped last July or September.

And in terms of the reverse split that you also mentioned in your release, what is your expected timing for this action to occur?

It's going to happen immediately after our AGM. The AGM is on June 28. So, effective July 1, the -- assuming of course that the AGM approves that, from July 1 -- July 2, it will be effective.

[Bill Fraser], Greenhill Capital.

Getting back to the drydock days, how many days do you expect to be off higher this year?

Around 315 total.

315 in total?

Yes.

And is there any way to break that down by quarter?

Yes, sure. We have the first quarter approximately 100 days. So it's going to be another 100 in the second quarter. I would say most likely another 100 in the third and then 50 for the last.

So, 350 in total.

Yes.

In your opening remarks, you mentioned looking at expenses or trying to cut expenses to improve profitability. I was wondering what opportunities do you see in that area.

Well, as we said, we're looking at certain transactions right now and we expect the transactions to significantly improve our financial expenses. We're not talking about deferral of expenses. We're just saying about decreasing of expenses.

Very good. Have the shareholder lawsuit gone away or is that still pending?

No, that is still pending. I don't think we're going to hear anything for the next month about that. And you know, it's something that our lawyers in New York are taking care of. So, things are quite quiet for the moment.

Very good. The -- do you see -- is there possibility of adding more tankers this year? I see you have some products tankers on order. They don't come in until next year; is that correct?

They don't come in until the beginning of the following year really. It's -- we have delivery January to June '09. So, we're going to have to be a bit more patient for that; it will be about 1.5 years. But, we -- it looks very good on those contracts. The numbers we have achieved back then are now -- they have now divided if you want. They have now increased. And so, we can -- we have some profits on those contracts.

And on top of that, we have very good delivery dates. Don't forget that companies the last month have signed for 2011 for products tankers. So the beginning of '09 is quite a good date.

Now, as far as adding other tonnage to the other ships to our fleet, it's really a matter of how things will move with the market. We're going to be -- we are like Stamatios just said to you, we're looking at several deals there to maybe increase our own fleet rather than the chartered-in fleet. The market has moved a bit to the south since 1.5 years when this deal took place. And it has not been as it was really predicted, not only in [its path] but it's not really as booming as it was at the beginning of last year. So yes, we're looking. I wouldn't be able to give you an exact date or anything like that, but we're looking at making several moves, yes.

In the past, we were basically about half in the Suezmax and half in the Handymax or Handysize. Do you see that relationship continuing or do you see more of a shift towards the product tankers?

Now we are like 50-50 as you said. And that is by not taking into account the new buildings, right? If you take into account the new buildings, we're more like 65-35 with the Handies being the 65. Now, in terms of that yes, I think that balance has been -- has not been bad for us in the past. And I think we will more or less stick to that, yes.

It appears the Handy rates are much in excess of the charter rates that we currently have. Is that correct?

That is correct. And the Handymaxes have been like we say, they have been proving their reputation which is the workhorses of the industry. But, don't forget that the great earnings that we had in '05 and '04 and other years were mainly because of the Suezmaxes rather than the Handymaxes. So, it's a matter of having the Handymaxes when the market is so-so, providing you the cash flow, and the Suezmaxes when the market is high, provide you the upper earnings. So that's really the way we have set up this Company.

Okay. One final question, the Suezmax sale that we're having in the second quarter, do you view that as a strategic sale or was it done to perhaps raise cash for the capital needs for the year or both?

No, not really for the year. I would call it more -- first of all, it was a very good deal I think in terms of liquidity for the Company and earnings. So the second thing, it's an opportunity to get the cash and do some more of the other deals that we just described to you that we're looking for.

[John Allen], [Future Oaks Limited].

Can you please explain the shortfall quarter-on-quarter comparison between last year and this year of about $29 million in revenue?

Yes, the revenue is about the decrease of the spot rate in the Suezmaxes. If you look at the average Suezmax rate of last year compared to this year, you'll see that last year, we had 61,800 per Suezmax per day. And this year, we have 38,500. So it's basically because of market.

Do you have an opinion on the future rates going into the third and fourth quarter?

Like I said on the previous call, what we can see more into the future is really the Handymaxes. And for that, the market looks as if it's becoming even stronger than what it is today, which is already a strong market. Now on the Suezmax, it would be very hard to predict. But we have been seeing since the beginning of the year two weeks being at 60,000 and then three weeks being at 30,000. So, it would be very hard to predict that, sir.

Last question, do you have any opinion on new builds in either the Suezmax or Handymax in terms of fleet capacity?

For us you mean or in general the world fleet?

The world fleet.

The world fleet. Yes, the Handymaxes are -- we have about 51% of the world fleet under order at present. And, on the Suezmaxes, it looks a bit better. It's about 45% on order at present. Although -- and thankfully, these new billings are not coming in within a year. They're going to coming in within the next three or four years.

So, don't forget in 2010, we have the phase-out of the [single house], which the way it looks now it's going to definitely take place and on top of that of course the annual increase in demand for oil transportation. So, really if you put all that together, we'll get pretty much the answer of what's going to happen in the next three years. But, it's [also] going to be an easy equation.

Tim Moynihan, Bear Stearns.

Can you review your dividend policy at present and what we might be able to expect for the remainder of the year?

I don't see any big changes happening in the months to come. The end of the year is a bit too far to really give you an accurate prediction. But, in the next -- in the coming months, I don't see anything changing for the time being.

So, annual dividend rate on the present amount of shares is at $0.84.

No, we have actually discontinued our dividend payment since last year.

Oh, you did, okay.

Yes, that has been discontinued about for more than a year now, 1.5 years now actually.

Reuters must have it wrong. I apologize.

No problem. No problem. That was actually cut off after the super dividend, the very high super dividend that was given out at the beginning of last year. That was discontinued after that until further notice.

I am understanding of that. Can you give us an idea of what on a percentage basis, how many from January present all the way through to December of '07 this year, how many of your leases are renewing? What type of increase could we expect due to the spot rate being up so much?

About the leases, we're not -- we don't have any renewals this year. The leases are expiring in -- from 2011 and after that.

There are no further questions at this time. I would like to turn the floor back over to Thomas Jackson for any closing remarks.

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