Top Ships Inc (TOPS) 2010 Q2 法說會逐字稿

Thank you for standing by ladies and gentlemen and welcome to the TOP Ships' conference call on the second-quarter 2010 financial results. We have with us Mr. Evangelos Pistiolis, Chief Executive Officer and President and Mr. Alexandros Tsirikos, Chief Financial Officer of the Company.

At this time all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session at which time (Operator Instructions). I must advise you that this conference is being recorded today, Thursday August the 5th, 2010.

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. And we now pass the floor to one of your speakers today, Mr. Pistiolis. Please go ahead, sir.

Yes, hello, ladies and gentlemen. We are pleased to report a positive operating income for the second quarter of the first six months of 2010 which is a result of our committed charter portfolio. If we exclude drydocking costs, net profit will have -- would have been marginally positive for the second quarter and $1.8 million for the first six months of 2010.

We're also pleased to report that we expect to complete an agreement with DVB Bank to restructure the bridge loan which was due to be repaid on July 30th, 2010. We expect that the agreement will involve the partial repayment and new maturity date. We believe that the relation with DVB Bank remains excellent.

The visibility of our cash flows has been further enhanced following our entry into three-year time chartered contracts for the motor vessel CYCLADES, which -- with a well-established charterer at a daily rate of $20,000 a day. The charterer will commence upon the delivery of the vessel from its present charterer.

And now I'd like to pass over the call to Alexander to discuss the financials.

Thank you, Evangelos. Good morning ladies and gentlemen. For the three months ended June 30, 2010, the Company reported a net loss of $1.8 million or $0.06 per share, an operating income of $4.1 million and revenues of $21.8 million. For the six months ended June 30, 2010, the Company reported a net loss of $0.9 million or $0.03 per share, an operating income of $9.5 million and revenues, $44.9 million.

Loan covenants and discussion with banks; as of June 30, 2010, we were in breach of loan covenants relating to earnings before interest, tax depreciation and amortization, EBITDA, overall cash position, minimum liquidity covenants, adjusted net worth, net assets value and asset cover with certain banks. As a result of this covenant breaches with certain banks, we have classified all of our debt and financial instruments as current.

We have been in discussions with all of our banks in relation to this covenant breaches as well as covenant breaches previously waived for which waiver periods expired as of the end of the first quarter. As Evangelos said, we expect to complete an agreement with DVB Bank in relation to restructuring the DVB bridge loan which was due to be repaid on July 30, 2010. And as previously announced, we have also obtained waivers from Emporiki Bank for all covenant breaches until June 30, 2011.

I would now like to pass it back to the operator for any questions. Hello, operator?

Yes, sir. I apologize for the delay. Thank you. We'll now begin the question-and-answer session. (Operator Instructions)

Okay. Is there anybody on the call? Are there any participants?

Yes, from Morningstar, you now have a question from Adam Fleck. Please go ahead, sir.

Hi, guys. Good afternoon.

Hi, there.

Hello, Adam.

Hi. I was wondering if you can you provide some details on the waivers that you have so far with Emporiki, maybe not to DVB yet, but you're looking at higher interest spreads, any fees there, et cetera that you can provide?

In relation to the waivers, we basically continued to the exact same position that we were before. If you remember, last [year] to get the waiver from Emporiki Bank, we had agreed to an increased margin, and basically we have agreed to that to continue for one more year. So basically we remain where we were before in order to get the waivers.

Okay. Great. And then going forward, I know you're in discussion with all your other banks. Should we expect waivers across the board or is this kind of one-off? I mean, how does that stand in your mind right now?

We are working on it right now. Of course our target is to get waivers from everybody, but we believe that our first target is to try to complete basically the DVB agreement. This is the primary target. And then we will continue working with the rest of the banks.

Sure. Outside of the DVB bridge loan that was due and sounds like will be delayed, what's the remaining amortization schedule over the rest of the year look like? Can you remind us of that?

The overall -- I will just give you a picture. I mean, overall, the year, including the bridge loan, it was approximately $47 million.

Okay.

So that's including actually the bridge loan.

Got you. So more like in the $30 million (multiple speakers).

That was for the entire year, I apologize. So we're looking at -- that was for the entire year, so we're looking at around 26 including the bridge.

Including the bridge loan?

Yes.

Okay. And then moving on to the operational side, that three-year contract you guys signed, congratulation on getting a nice multi-year contract there. I'm just curious, what drove the agreement timing? The -- it looks like the current charterer doesn't expire until next year. I'm just curious what you saw there that drove you to just sign the deal now.

It's really that when we found the very attractive rate -- as you know, now it's like 5,000, 6,000 less already before we even started. So continuing the strategy of being fully covered in these volatile and strange times, I think we -- whenever -- when we saw the opportunity to get it, number one, and to get it at decent rates, number two, I think that we wouldn't like to lose that. Because, for example, today there is -- you can't get it. Maybe you can again in six months, but today you cannot.

Fair enough. And then on the updated management agreement, Alexandros, you talked about, if I remember correctly, a net savings on the SG&A line of around $2 million. I just want to confirm that number and then maybe get some details as to where those savings will come from.

This is something based on our forecast. I had said this is something between $1 million and $2 million, that's correct. But this is an estimate, and we hope that we will be able to achieve this savings going forward. But we will -- and these are all projections. So we will wait and see.

We believe that the outsourcing is something that will work to our benefit since we're able to convert the fixed nature of our G&A to make it more valuable in a sense, if you want. So from that sense, any changes in our fleet will result in immediate savings in our -- in this type of costs. And thereby this is one -- a very important benefit that we all -- which is not immediately quantitative, but it's something that in the future we could see we could actually benefit from it.

Okay. Great. And then one follow-up housekeeping question. As I was reading through the details of the updated management agreement, I noticed a line item in there for, I think it was information systems, runs about EUR10,000 per vessel per day. I'm just curious, that kind of jumped out of me as to the timing of that. Is that an ongoing charge and maybe a little color on that?

This is something that we don't see used in the industry, and we have also been paying a -- in the past with our -- [some managers] because the cost of having a system in order to support us, and this is something -- the cost is being passed on to the client. So it's something that is out there in the industry and it's (multiple speakers).

It's really expensive to service, if you wanted, the ships with IT, right? It's really expensive in what sense, you have a break in the computer sometimes. If it's the software, you got a problem. You got to fly the guy down to China or wherever that is and fix it. So one trip can be $10,000 alone.

On the other hand, if it's hardware, maybe you can send somebody in and transfer the software to the next hardware, et cetera. It's something that is really cost. So we have accepted that rate. The way we looked at it is, really we compared with the other big firms in the industry, what they pay with outsourcing of management, and we found it to be very much along industry standards and leveled, if you want.

Sure. So when you say, just trying to get a sense, would that be an ongoing charge that you expect to pay every day of the year or is it more just as needed when you have to fly someone down to do repairs or at a more ad hoc basis?

If I remember well, but I need to double check that, but I'm sure I remember -- I think I remember well, it is an annual cost per vessel, it's not something you pay a day or a month or even anything compared. So it happens.

Okay (multiple speakers).

It's an annual expense, meaning that for all the servicing of the IT services that our ships need, we're going to pay to these guys $10,000 a year to take care of that per vessel.

Got it. Great. That's all the questions I had guys. Thanks a lot.

Thank you, bye-bye.

Okay.

Thank you very much indeed. (Operator Instructions) As we have no further questions at this time, we now pass the floor back for closing remarks to Mr. Evangelos Pistiolis. Please go ahead, sir.

Yes, that finishes our earnings release and conference call. Thank you very much for participating. You may disconnect your lines.

Thank you very much to our speakers, thank you gentlemen.

Okay.

That does conclude our conference. Thank you for participating. You may now disconnect.