Top Ships Inc (TOPS) 2008 Q2 法說會逐字稿

Greetings, and welcome to TOP Ships, Inc. second-quarter 2008 results conference call. At this time all participants are in the listen-only mode, and 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. Michael Mason, Investor Relations for Allen & Caron Inc. Thank you Mr. Mason. You may now begin.

Thanks very much, and good morning and welcome to TOP Ships results conference call for the second quarter ended June 30, 2008. As mentioned by the operator I am Michael Mason of Allen & Caron investor relations. Before we start the 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 second quarter. It was released this morning at 7:35 a.m. Eastern time. If you did not receive a copy of the release, it is posted in the client section of our website at AllenCaron.com, or you can call our office in New York at 212-691-8087, and we will e-mail to you right away. It is also posted on Yahoo finance. This call is being broadcast live over the Internet at www.TOPShips.org 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, a telephonic replay of the conference call will be available for seven days by calling 877-660-6853 from the US and Canada or 201-612-7415 from outside the US and Canada, enter account number 286 and conference ID number 292357. I would now like to turn the call over to Mr. Thomas Jackson, Chairman of the Board of Directors of TOP Ships. Good afternoon, Mr. Jackson.

Good afternoon, Michael. Thank you. Good morning, ladies and gentlemen. I am Tom Jackson, Chairman of the Board of Directors for TOP Ships Inc. It is my pleasure to welcome you to TOP Ships' earnings conference call in respect of the second quarter and first half 2008 financial 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, for the second quarter and first half of 2008 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, Chief Executive Officer and Mr. Stamatios Tsantanis, Chief Financial Officer. Mr. Pistiolis will provide you with details of TOP Ships' operation, activities and general expectations. Furthermore, he will provide you with an overall perspective of the international tanker market together with its perceived outlook.

Mr. Tsantanis will comment on the financial resource of TOP Ships Inc. for the second quarter and first half ended June 30, 2008. 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 June 30, 2008 we had a net loss of $5.589 million or $0.22 per share compared with a net income of $7,276,000 or $0.67 per share. For the second-quarter 2007 the results for the quarter include net charges of $6.661 million or $0.26 per share for special items and excluding these charges our net income for the quarter is $1,072,000 or $0.04 per share.

Our revenues for the second quarter 2008 were $76,687,000 compared to $75,289,000 recorded in the second quarter of 2007. For the six months ended June 30, 2008 we had a net loss of $24,430,000 or $1.07 per share compared with a net income of $10,275,000 or $0.95 per share for the first half of 2007.

The results for the quarter include net charges of $23,109,000 or $1.02 per share for special items and excluding these charges our net loss for the quarter is $1,321,000 or $0.05 per share. Our revenues for the six-month period were $149,324,000 compared with $149,277,000 recorded in the first half of 2007. We are pleased to see the company returning to operating profitability after three loss making quarters. We believe that this proves that our strategy to diversify into the drybulk sector and to further unwind our lease contracts has been successful.

Moreover, during the second quarter 2008 we completed a number of transactions in order to further enhance shareholders' value. The most notable events of the quarter were; the delivery of our last drybulk vessel which completed the diversification of the company into the drybulk sector. We agreed to acquire these vessels in July and August 2007. The chartering arrangements of all our drybulk vessels are with major charterers for periods between one and five years. These fixed rate charter agreements significantly reduce any potential downside of the drybulk market for the next years and provide stable operating cash flows for the company.

We entered into fixed-rate charter agreements for all six of our new building product tankers with three major charterers for periods that range between seven and 10 years. These charters have been agreed upon a bareboat basis, which not only reduces our long-term market risk, but also eliminates the Company's operational risk for the period with respect to these vessels.

The private placement of 7.3 million common shares for aggregate net proceeds of $51 million. The agreement to sell five Suezmax tankers built between '92 and '96 for an aggregate sale price of $240 million. Two of these vessels have already been delivered, and the remaining three are expected to be delivered to their new owners by the end of August 2008. The net proceeds of the sales of approximately $90 million may be applied to acquisitions and general corporate purposes.

Finally, we are close to completing the termination of additional vessel charter in contracts in order to further reduce our future charter hire expense. As of June 30, 2008 our fleet consisted of 21 vessels or 1.9 million dead weights as compared to 23 vessels or 2.3 million dead weight on June 30, 2007. In June 2008 we entered into agreements to sell five Suezmax tankers to unrelated third parties for a total consideration of $240 million.

The M/T Stormless was delivered to its new owners on June 22, 2008, and the M/T Edgeless was delivered to its new owners on July 10, 2008. The remaining three vessels are expected to be delivered to the their new owners by the end of August 2008. During the second quarter of 2008 we had approximately 78% of our fleet operating days on long-term employment contracts and 15 of our 21 vessels were on time charter contracts with an average term of over two years.

During the second quarter of 2008, 5 of our Suezmax tankers operated in the spot market earning an average of $42,670 per vessel per day on a time charter equivalent basis. And four of our Suezmax operated under time charter contracts, earning an average of $41,910 per vessel per day on a TCE basis.

Seven of our Handymax tankers operated on a long-term employment agreements and earned on average $18,567 per day on a TCE basis including the profit sharing allocated to the company and one of our Handymax operated in the spot market, earning on average $24,363 per vessel per day on a TCE basis.

Drybulk vessels. During the second quarter of 2008 all of our drybulk vessels operated under time charter contracts, earning on average $50,071 per vessel per day on a TCE basis including the amortization of the fair value of the time charter contracts of $10,417 per vessel per day.

Now I will pass you over to Stamatios Tsantanis to take you through the financials.

Thank you, Evangelos. Good morning, ladies and gentlemen. For the second quarter of 2008 we had a net loss of $5.6 million or $0.22 or share compared with a net income of $7.3 million or $0.67 per share for the same period last year. The results for the quarter include net charges of $6.7 million or $0.26 per share of special items which I will describe in the appendix of our release. Excluding these charges our net income for the quarter is $1.1 million or $0.04 per share.

Our operating income was $7.1 million compared with an operating income of $8.7 million for the second quarter of 2007. Our revenue for the quarter were $76.7 million compared to $75.3 million recorded in the second quarter 2007. For the six months ended June 30, 2008 we had a net loss of $24.4 million or $1.07 per share compared with a net income of $10.3 million or $0.95 per share for the first half of 2007. The results for the period include net charges of $23.1 million or $1.02 per share of special items which are again described in the appendix of our release.

Excluding these charges our net loss for the six-month period is $1.3 million or $0.05 per share. Operating income was $4.6 million compared with $12.1 million for the first half of 2007. Revenues for the first half of 2008 were $149.3 million as also were in the first half of 2007. On June 30, 2008 we had a total debt of $477 million under senior secured credit facilities. This includes the $119 million classified as current portion and associated with the agreed sale of four remaining Suezmaxes.

On June 30 our debt to equity ratio was approximately 66.5%. (inaudible) sale of the five Suezmaxes our total debt is $358 million, our debt to equity ratio is approximately 56% and our net debt to equity ratio is 46%.

Lastly we have received third commitments from two banks for the debt financing of three of our new buildings and we are finalizing the agreement for the remaining three with one bank. On that note, back to Tom Jackson.

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

(OPERATOR INSTRUCTIONS) Paul Bornstein, Black Diamond.

I had two questions. One with your special items; I think one of the things which you really didn't go into detail -- I got on to the call a little late -- was the loss of I guess a loss on the sale of a vessel. That seems to be part of your continuing operations since you buy and sell vessels all the time, so I am just wondering whether that is going to continue or you are pretty much done trading and buying. And I know you are building which is something different, but just trying to understand all the action you've been doing with your vessel transactions since it doesn't really have much impact on enhancing shareholder value. Given that you've sold a lot of stock at higher levels and on a pre-split basis your stock is down to about $2 or less. So I am just kind of trying to understand the management's thought process in actually delivering value relative to the other shipping companies out there that seem to be a little more successful than you guys have been.

Typically the analysts are excluding gains and losses from sales of vessels and that is why we put it in the special items. In respect of the delivery of the four vessels that was going to take place in the third quarter 2008 to the new owners, one has already been delivered, we have the amount of the gain that is going to be associated with that sale, the book gain in the press release. And that again is going to be included in the special items of our next earnings release, as always.

Okay, so buying and selling vessels, I'm just trying to understand how that enhances value for the shareholders.

Well, the latest deals that we have been doing were actually more into the market that change and corrective action to the market changes that were not anticipated, so it was more focused on the sale of vessels and mainly more focused on the unwinding of the leases rather than the actual sale of the vessel. So we have, like you said, we have both the drybulk ships out of which we have only sold one because it didn't fit into the strategy because it was a '95 built ship rather than a post-2000. So now we have all the ships post-2000 and we are not planning to sell any of those. We have many, many chances to sell with a very good profit the new buildings that we had ordered in '06. We could make an excess of $10 million per ship on those six ships, but we decided to stick with the vessels because we believe going long would be better than going short on these ones, so we are not selling those. So basically what I'm trying to get to is the majority of the deals have been done; we are more focused on the sale of all the tonnage or leased tonnage for the actual owners. And basically renewing the fleet and we are very close to finishing that process, and I am sure you will see in the next quarter the results of that.

Okay, so basically we can expect an enhanced cash flow from all the vessels and so you should be positive cash flow.

Yes. The cash flow is not going to change for the vessels we have. It will only be enhanced by the new buildings that are coming at the beginning of the year. But what will change is the cash outflow for the vessels that were older and losing money. So the average of that will be, of course, positive now rather than when it was negative having so many older vessels, some of them leased.

Okay, so we should have cleaner operations going forward?

Absolutely. You can see that we have remaining a few vessels now. We are under process of trying to fix them out as well in other words get rid of them, as well. And then we will have a much cleaner fleet than what it has been after today.

Alright, and you won't have any free cash flow since you are still paying off the debt that you've taken on to buy these vessels.

Actually, excluding CapEx we will have a free cash flow, yes.

Okay, so you will have free cash flow then?

Excluding the CapEx, yes. Because don't forget that we have to make equity installments for the new buildings that are coming up in the first half. So from operations and from normal operations of the vessels and upon delivery of the new buildings we will have free cash flow, yes.

Okay, because I guess I am trying to get at when does the cash flow actually either share price or dividends get to the shareholder?

I think we need to first of all finish the program that we started almost a year ago now. We are, like I said we are close to doing that but we are not there yet. So let's wait to finish that. We hope to do that or to be very close to the end in the next month or two and then we can start, let's see the results coming in and then we can discuss everything else.

Okay, all right. We will give you one more quarter to see if you actually can turn this around.

Yes, we are getting there I think.

A year is a long time in this business.

It is, but selling and unwinding the last number of large ships is a lot more difficult than turning around something which is a lot more liquid.

I understand and that is why you are paid well. And shareholders aren't paid to wait.

That is correct. If I include myself as a big shareholder, with one heart I am with you.

Okay, that's good to hear then.

(OPERATOR INSTRUCTIONS) There are no further questions at this time. I would like to hand the floor back over to management. We do have another question that just came in. [Noel Parkett], Cantor Fitzgerald.

My question was about the charter unwinding. (inaudible) just reported last week that those vessels were sold to new owners. Can you maybe give a little color on the progress you are having on that; if you talked to the new owners or when you expect those unwindings to happen?

We cannot really comment on the sale of those because it has not taken place yet. We are close in concluding it, and we will have a press release as soon as we actually conclude it 100%. But yes, we are close. The reports were a bit too fast as usual I can say, and I think the release will have all the color that you need on that.

Okay, I just have another question on the financing that you have for the new buildings. Do you have a firm commitment for three of them?

Yes.

Could you give me some -- can you just maybe go into detail on the terms of those financings?

Basically on a 10-year repayment profile, over a 15-year balloon at the end, just basically 10-year repayment on a 15-year total to be more exact. It is more or less LIBOR plus the spreads of approximately 150 basis points, and that is it, I guess. It is pretty straightforward.

Have you hedged LIBOR at all, or are you exposed to that still?

Not yet. We are actually thinking of various products right now, mostly the Board of Directors and the management would like to forward starting swaps. But that is something that we need to look into a bit more careful over the next couple of weeks. And upon all the receipt of the commitments we will go ahead and fix it.

And then I guess it brings me to the question is, why did you decide to terminate the swap with Deutsche Bank in April?

Because that was, let's say, an amicable termination. That particular swap was not related with any secured facility, so that was an unsecured part. We had an understanding with Deutsche to terminate it at that point, and that is what we did.

Okay, all right. That's it. Thank you.

There are no further questions at this time. I will hand the floor back over to management for any closing comments.

Thank you, operator. 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.