|
Page
|
||
|
Unaudited
Interim Condensed Consolidated Balance Sheets as of December 31,
2006 and
September 30, 2007
|
F-2
|
|
|
Unaudited
Interim Condensed Consolidated Statements of Income for the nine
month
periods ended September 30, 2006 and 2007
|
F-3
|
|
|
Unaudited
Interim Condensed Consolidated Statements of Stockholders’ Equity for the
nine month periods ended September 30, 2006 and 2007
|
F-4
|
|
|
Unaudited
Interim Condensed Consolidated Statements of Cash Flows for the nine
month
periods ended September 30, 2006 and 2007
|
F-5
|
|
|
Notes
to Unaudited Interim Condensed Consolidated Financial
Statements
|
F-6
|
|
|
DRYSHIPS
INC.
|
||||||||
|
Unaudited
Condensed
Consolidated Balance Sheets
|
||||||||
|
December
31, 2006 and September 30, 2007
|
||||||||
|
(Expressed
in thousands of U.S. Dollars – except for share and per share
data)
|
||||||||
|
December
31, 2006
|
September
30, 2007
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT
ASSETS:
|
||||||||
|
Cash
and cash equivalents
|
$ |
2,537
|
$ |
47,949
|
||||
|
Restricted
cash (Note 8)
|
6,614
|
6,775
|
||||||
|
Accounts
receivable trade
|
3,187
|
6,814
|
||||||
|
Insurance
claims
|
671
|
4,816
|
||||||
|
Due
from related parties (Note 2)
|
3,353
|
6,690
|
||||||
|
Inventories
(Note 3)
|
2,571
|
2,873
|
||||||
|
Prepayments
and advances
|
5,568
|
7,550
|
||||||
|
Fair
value of above market acquired time charter (Note 6)
|
1,335
|
-
|
||||||
|
Financial
instruments (Note 9)
|
39
|
-
|
||||||
|
Total
current assets
|
25,875
|
83,467
|
||||||
|
FIXED
ASSETS, NET:
|
||||||||
|
Advances
for vessels under construction and
acquisitions (Note5)
|
27,380
|
111,444
|
||||||
|
Vessels,
net (Notes 4 )
|
1,084,924
|
1,340,657
|
||||||
|
Total
fixed assets, net
|
1,112,304
|
1,452,101
|
||||||
|
OTHER
NON CURRENT ASSETS:
|
||||||||
|
Deferred
charges, net (Note 7)
|
6,200
|
2,495
|
||||||
|
Restricted
cash (Note 8)
|
20,000
|
20,000
|
||||||
|
Financial
instruments (Note 9)
|
946
|
564
|
||||||
|
Other
|
2,848
|
2,215
|
||||||
|
Total
non current assets
|
29,994
|
25,274
|
||||||
|
Total
assets
|
$ |
1,168,173
|
$ |
1,560,842
|
||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
|
CURRENT
LIABILITIES:
|
||||||||
|
Current
portion of long-term debt (Note 8)
|
$ |
71,412
|
$ |
110,198
|
||||
|
Accounts
payable
|
11,423
|
8,261
|
||||||
|
Due
to related parties (Note 2)
|
25,086
|
-
|
||||||
|
Accrued
liabilities
|
6,326
|
10,905
|
||||||
|
Deferred
revenue
|
12,270
|
10,131
|
||||||
|
Financial
instruments (Note 9)
|
2,625
|
-
|
||||||
|
Other
current liabilities
|
202
|
184
|
||||||
|
Dividends
payable
|
-
|
7,098
|
||||||
|
Total
current liabilities
|
129,344
|
146,777
|
||||||
|
NON
CURRENT LIABILITIES:
|
||||||||
|
Fair
value of below market acquired time charter (Note
6)
|
-
|
2,385
|
||||||
|
Long
term debt, net of current portion (Note 8)
|
587,330
|
708,538
|
||||||
|
Financial
instruments (Note 9)
|
-
|
89
|
||||||
|
Other
|
607
|
367
|
||||||
|
Total
non current liabilities
|
587,937
|
711,379
|
||||||
|
COMMITMENTS
AND CONTINGENCIES
|
-
|
-
|
||||||
|
STOCKHOLDERS’
EQUITY:
|
||||||||
|
Preferred
stock, $ 0.01 par value; 30,000,000 shares authorized, none
issued.
|
-
|
-
|
||||||
|
Common
stock, $0.01 par value; 75,000,000 shares authorized; 35,490,097
shares
issued and outstanding.
|
355
|
355
|
||||||
|
Additional
paid-in capital
|
327,446
|
327,446
|
||||||
|
Retained
earnings
|
123,091
|
374,885
|
||||||
|
Total
stockholders’ equity
|
450,892
|
702,686
|
||||||
|
Total
liabilities and stockholders’ equity
|
$ |
1,168,173
|
$ |
1,560,842
|
||||
|
DRYSHIPS
INC.
|
||||||||
|
Unaudited
Condensed Consolidated Statements of Income
|
||||||||
|
For
the nine month period ended September 30, 2006 and
2007
|
||||||||
|
(Expressed
in thousands of U.S. Dollars – except for share and per share
data)
|
||||||||
|
Nine
Months Ended
September
30,
|
||||||||
|
2006
|
2007
|
|||||||
|
REVENUES:
|
||||||||
|
Voyage
revenues
|
$ |
169,324
|
$ |
349,182
|
||||
|
EXPENSES:
|
||||||||
|
Loss
on forward freight agreements (Note 9)
|
22,473
|
-
|
||||||
|
Voyage
expenses
|
11,415
|
19,610
|
||||||
|
Voyage
expenses – related party (Note 2)
|
2,117
|
4,290
|
||||||
|
Gain
on sale of bunkers, net
|
(2,689 | ) | (2,121 | ) | ||||
|
Vessel
operating expenses
|
33,490
|
44,296
|
||||||
|
Depreciation
(Note 4)
|
41,278
|
54,219
|
||||||
|
Amortization
of deferred drydocking costs (Note 7)
|
2,471
|
2,204
|
||||||
|
Gain
on sale of vessels (Note 4)
|
-
|
(103,512 | ) | |||||
|
Management
fees – related party (Note 2)
|
4,666
|
7,057
|
||||||
|
General
and administrative expenses
|
1,406
|
4,042
|
||||||
|
General
and administrative expenses – related party (Note 2)
|
2,408
|
2,869
|
||||||
|
Operating
income
|
50,289
|
316,228
|
||||||
|
OTHER
INCOME / (EXPENSES):
|
||||||||
|
Interest
and finance costs
|
(30,777 | ) | (36,982 | ) | ||||
|
Interest
and finance costs – related party (Note 2)
|
(310 | ) | (614 | ) | ||||
|
Interest
income
|
384
|
2,709
|
||||||
|
Other,
net
|
1,233
|
(1,155 | ) | |||||
|
Total
other income/ (expenses), net
|
(29,470 | ) | (36,042 | ) | ||||
|
Net
Income
|
$ |
20,819
|
$ |
280,186
|
||||
|
Earnings
per common share, basic and diluted
|
$ |
0.66
|
$ |
7.89
|
||||
|
Weighted
average number of common shares, basic and
diluted
|
31,343,241
|
35,490,097
|
||||||
|
Unaudited
Condensed Consolidated Statements of Stockholders’
Equity
|
|||||||||||||
|
For
the nine month period ended September 30, 2006 and
2007
|
|||||||||||||
|
(Expressed
in thousands of U.S. Dollars – except for share and per share
data)
|
|||||||||||||
|
Common
Stock
|
Additional
Paid-in
Capital
|
||||||||||||
|
Comprehensive
Income
|
#
of
Shares
|
Par
Value
|
Retained
|
||||||||||
|
Earnings
|
Total
|
||||||||||||
|
BALANCE,
December 31, 2005
|
30,350,000
|
$ |
304
|
$ |
264,600
|
$ |
91,597
|
$ |
356,501
|
|||||||||||||||
|
-
Net income
|
20,819
|
-
|
-
|
-
|
20,819
|
20,819
|
||||||||||||||||||
|
-
Issuance of common stock
|
4,650,000
|
46
|
56,444
|
-
|
56,490
|
|||||||||||||||||||
|
-
Dividends declared ($ 0.80 per share)
|
-
|
-
|
-
|
(25,237 | ) | (25,237 | ) | |||||||||||||||||
|
-
Comprehensive income
|
$ |
20,819
|
||||||||||||||||||||||
|
BALANCE,
September 30, 2006
|
35,000,000
|
350
|
321,044
|
87,179
|
408,573
|
|||||||||||||||||||
|
BALANCE,
December 31, 2006
|
35,490,097
|
$ |
355
|
$ |
327,446
|
$ |
123,091
|
450,892
|
||||||||||||||||
|
-
Net income
|
280,186
|
-
|
-
|
-
|
280,186
|
280,186
|
||||||||||||||||||
|
-
Dividends declared ($ 0.80 per share)
|
-
|
-
|
-
|
(28,392 | ) | (28,392 | ) | |||||||||||||||||
|
Comprehensive
income
|
$ |
280,186
|
||||||||||||||||||||||
|
BALANCE,
September 30, 2007
|
35,490,097
|
$ |
355
|
$ |
327,446
|
$ |
374,885
|
$ |
702,686
|
|||||||||||||||
|
DRYSHIPS
INC.
|
|||||||||
|
Unaudited
Condensed Consolidated Statements of Cash Flows
|
|||||||||
|
For
the nine month period ended September 30, 2006 and
2007
|
|||||||||
|
(Expressed
in thousands of U.S. Dollars)
|
|||||||||
|
Nine
Months Ended
September
30,
|
|||||||||
|
2006
|
2007
|
||||||||
|
Cash
Flows from Operating Activities:
|
|||||||||
|
Net
income
|
$ |
20,819
|
$ |
280,186
|
|||||
|
Adjustments
to reconcile net income to
|
|||||||||
|
Net
cash provided by operating activities:
|
|||||||||
|
Depreciation
|
41,278
|
54,219
|
|||||||
|
Amortization of
deferred drydocking costs
|
2,471
|
2,204
|
|||||||
|
Payments
for dry docking
|
(4,032 | ) | (1,228 | ) | |||||
|
Amortization
and write-off of financing costs
|
3,290
|
1,732
|
|||||||
|
Amortization
of fair value of acquired time charter
|
1,598
|
(3,724 | ) | ||||||
|
Gain
on sale of vessels
|
-
|
(103,512 | ) | ||||||
|
Change
in fair value of derivatives
|
13,927
|
(2,115 | ) | ||||||
|
Recognition
and amortization of free lubricants benefit
|
(120 | ) | (258 | ) | |||||
|
Changes
in operating assets and liabilities:
|
|||||||||
|
Accounts
receivable trade
|
3,721
|
(2,994 | ) | ||||||
|
Insurance
claims
|
(126 | ) | (4,145 | ) | |||||
|
Due
from related parties
|
(1,965 | ) | (3,337 | ) | |||||
|
Inventories
|
(1,495 | ) | (302 | ) | |||||
|
Prepayments
and advances
|
(1,959 | ) | (1,982 | ) | |||||
|
Accounts
payable
|
405
|
(3,162 | ) | ||||||
|
Due
to related parties
|
(4,290 | ) | (86 | ) | |||||
|
Accrued
liabilities
|
552
|
4,579
|
|||||||
|
Deferred
revenue
|
(632 | ) |
3,414
|
||||||
|
Net
Cash provided by Operating Activities
|
73,442
|
219,489
|
|||||||
|
Cash
Flows from Investing Activities:
|
|||||||||
|
Advances
for vessels’ acquisitions
|
(6,975 | ) | (98,033 | ) | |||||
|
Additions
to vessels cost
|
(203,884 | ) | (478,102 | ) | |||||
|
Proceeds
from vessels’ sale
|
-
|
290,251
|
|||||||
|
Sellers
Credit
|
3,250
|
-
|
|||||||
|
Net
Cash used in Investing Activities
|
(207,609 | ) | (285,884 | ) | |||||
|
Cash
Flows from Financing Activities:
|
|||||||||
|
Advances
to Baumarine Pool
|
(528 | ) |
-
|
||||||
|
Proceeds
from long-term debt
|
664,281
|
319,697
|
|||||||
|
Proceeds
from short-term credit facility
|
8,837
|
73,476
|
|||||||
|
Principal
payments of long-term debt
|
(546,925 | ) | (188,871 | ) | |||||
|
Payment
of short term credit facility
|
(8,837 | ) | (68,400 | ) | |||||
|
Change
in restricted cash
|
(2,154 | ) | (161 | ) | |||||
|
Contribution
to additional paid in capital and common stock
|
56,490
|
-
|
|||||||
|
Cash
dividends
|
(18,237 | ) | (21,294 | ) | |||||
|
Payment
of financing costs
|
(3,055 | ) | (2,640 | ) | |||||
|
Net
Cash provided by Financing Activities
|
149,872
|
111,807
|
|||||||
|
Net
increase in cash and cash equivalents
|
15,705
|
45,412
|
|||||||
|
Cash
and cash equivalents at beginning of period
|
5,184
|
2,537
|
|||||||
|
Cash
and cash equivalents at end of period
|
$ |
20,889
|
$ |
47,949
|
|||||
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
|||||||||
|
Cash
paid during the period for:
|
|||||||||
|
Interest
|
$ |
28,254
|
$ |
35,461
|
|||||
|
1.
|
Basis
of Presentation and General Information:
|
|
The
accompanying unaudited condensed consolidated financial statements
include
the accounts of Dryships Inc. (“Dryships”) and its wholly-owned
subsidiaries (collectively, the “Company”). Dryships was formed on
September 9, 2004, under the laws of the Republic of the Marshall
Islands.
On October 18, 2004, all of the outstanding shares of the vessel
owning
companies listed under 1 through 6 in the table below (collectively,
the
“Contributed Companies”), were contributed to the Company through
Entrepreneurial Spirit Foundation (the “Foundation”), a family foundation
of Vaduz, Liechtenstein. The Company’s Chief Executive Officer,
Mr. George Economou and members of his immediate family (the “Family”)
control and are beneficiaries of the Foundation. The transaction
described
above constituted a reorganization of companies under common control,
and
has been accounted for in a manner similar to a pooling of interests
and
the Contributed Companies are presented at historical cost as control
of
the Contributed Companies before and after the reorganization was
with the
Family. In February 2005 the Company completed its initial public
offering
in the United States under the United States Securities Act of 1933,
as
amended, the net proceeds of which amounted to $251,285. On February
14,
2006, the Foundation transferred its shares of the Company to its
wholly-owned subsidiary, Elios Investments Inc. (“Elios”), a corporation
organized under the laws of the Republic of the Marshall
Islands.
|
|
|
The
accompanying unaudited condensed consolidated financial statements
have
been prepared in accordance with accounting principles generally
accepted
in the United States of America (“U.S. GAAP”) for interim financial
information. Accordingly, they do not include all the information
and
notes required by U.S. GAAP for complete annual financial statements.
These statements and the accompanying notes should be read in conjunction
with our Annual Report on Form 20-F for the year ended December 31,
2006.
These unaudited condensed consolidated financial statements have
been
prepared on the same basis as the annual financial statements and,
in the
opinion of management, reflect all adjustments, which include normal
recurring adjustments considered necessary for a fair presentation
of the
Company’s financial position, results of operations and cash flows for the
periods presented. Operating results for the nine-month period ended
September 30, 2007 are not necessarily indicative of the results
that
might be expected for the fiscal year ending December 31,
2007.
|
|
|
The
balance sheet as of December 31, 2006 has been derived from the
audited consolidated financial statements at that date, but does
not
include all of the information and footnotes required by U.S. GAAP
for
complete annual financial statements.
|
|
|
The
Company’s wholly-owned subsidiaries as of September 30, 2007 are listed
below:
|
|
1.
|
Basis
of Presentation and General Information
-(continued):
|
|
Ship-owning
Company
|
Country
of
Incorporation
|
Vessel
|
|||
|
1.
|
Hydrogen
Shipping Company Limited (“Hydrogen”)
|
Malta
|
|
Mostoles
(sold - July 2007)
|
|
|
2.
|
Oxygen
Shipping Company Limited (“Oxygen”)
|
Malta
|
|
Shibumi
(sold – April 2007)
|
|
|
3.
|
Annapolis
Shipping Company Limited (“Annapolis”)
|
Malta
|
Lacerta
|
||
|
4.
|
Helium
Shipping Company Limited (“Helium”)
|
Malta
|
Striggla
(sold – January 2007)
|
||
|
5.
|
Blueberry
Shipping Company Limited (“ Blueberry “)
|
Malta
|
Panormos
(sold – January 2007)
|
||
|
6.
|
Silicon
Shipping Company Limited (“Silicon”)
|
Malta
|
Flecha
(sold – December 2006)
|
||
|
7.
|
Lancat
Shipping Company Limited (“Lancat”)
|
Malta
|
Matira
(Note 10)
|
||
|
8.
|
Tolan
Shipping Company Limited (“Tolan”)
|
Malta
|
Tonga
|
||
|
9.
|
Malvina
Shipping Company Limited (“Malvina”)
|
Malta
|
Coronado
|
||
|
10.
|
Arleta
Navigation Company Limited (“Arleta”)
|
Malta
|
Xanadu
|
||
|
11.
|
Selma
Shipping Company Limited (“Selma”)
|
Malta
|
La
Jolla
|
||
|
12.
|
Royerton
Shipping Company Limited (“Royerton”)
|
Malta
|
Netadola
|
||
|
13.
|
Samsara
Shipping Company Limited (“Samsara”)
|
Malta
|
Ocean
Crystal
|
||
|
14.
|
Lansat
Shipping Company Limited (“Lansat”)
|
Malta
|
Paragon
|
||
|
15.
|
Farat
Shipping Company Limited (“Farat”)
|
Malta
|
Toro
|
||
|
16.
|
Madras
Shipping Company Limited (“Madras”)
|
Malta
|
Alona
(sold – June 2007)
|
||
|
17.
|
Iguana
Shipping Company Limited (“Iguana”)
|
Malta
|
Iguana
|
||
|
18.
|
Borsari
Shipping Company Limited (“Borsari”)
|
Malta
|
Catalina
|
||
|
19.
|
Onil
Shipping Company Limited (“Onil”)
|
Malta
|
Padre
|
||
|
20.
|
Zatac
Shipping Company Limited (“Zatac”)
|
Malta
|
Waikiki
|
||
|
21.
|
Fabiana
Navigation Company Limited (“Fabiana”)
|
Malta
|
Alameda
|
||
|
22.
|
Fago
Shipping Company Limited (“Fago”)
|
Malta
|
Lanikai
(sold -July 2007)
|
||
|
23.
|
Felicia
Navigation Company Limited (“Felicia”)
|
Malta
|
Solana
|
||
|
24.
|
Karmen
Shipping Company Limited (“Karmen”)
|
Malta
|
Sonoma
|
||
|
25.
|
Thelma
Shipping Company Limited (“Thelma”)
|
Malta
|
Manasota
|
||
|
26.
|
Celine
Shipping Company Limited (“Celine”)
|
Malta
|
Mendocino
|
||
|
27.
|
Seaventure
Shipping Limited (“Seaventure”)
|
Marshall
Islands
|
Hille
Oldendorff (sold June 2007)
|
||
|
28.
|
Tempo
Marine Co. (“Tempo”)
|
Marshall
Islands
|
Maganari
|
||
|
29.
|
Star
Record Owning Company Limited (‘Star”)
|
Marshall
Islands
|
Ligari
|
||
|
30.
|
Human
Owning Company Limited (“Human”)
|
Marshall
Islands
|
Estepona
(sold – April 2007)
|
||
|
31.
|
Classical
Owning Company Limited (“Classical”)
|
Marshall
Islands
|
Delray
(sold – May 2007)
|
||
|
32.
|
Maternal
Owning Company Limited (“Maternal”)
|
Marshall
Islands
|
Lanzarote
|
||
|
33.
|
Paternal
Owning Company Limited (“Paternal”)
|
Marshall
Islands
|
Formentera
(Note 4)
|
||
|
34.
|
Argo
Owning Company Limited (“Argo”)
|
Marshall
Islands
|
Redondo
|
||
|
35.
|
Rea
Owning Company Limited (“Rea”)
|
Marshall
Islands
|
Ecola
(ex Zella Oldendorff)
|
||
|
36.
|
Gaia
Owning Company Limited (“Gaia”)
|
Marshall
Islands
|
Samsara
(ex Cape Venture)
|
||
|
37.
|
Kronos
Owning Company Limited (“Kronos”)
|
Marshall
Islands
|
Primera
(ex Sea Epoch)
|
||
|
38.
|
Trojan
Maritime Co. (“Trojan”)
|
Marshall
Islands
|
Brisbane
(ex Spring Brave)
|
||
|
39.
|
Atlas
Owning Company Limited (“Atlas”)
|
Marshall
Islands
|
Menorca
(ex Oinoussian Legend)
|
||
|
40.
|
Dione
Owning Company Limited (“Dione”)
|
Marshall
Islands
|
Marbella
(ex Restless)
|
||
|
41.
|
Phoebe
Owning Company Limited (“Phoebe”)
|
Marshall
Islands
|
Majorca
(ex Maria G.O.)
|
||
|
42.
|
Uranus Owning
Company Limited (“Uranus”)
|
Marshall
Islands
|
Heinrich
Oldendorff
|
||
|
43.
|
Platan
Shipping Company Limited (“Platan”)
|
Malta
|
Daytona
(sold – January 2007)
|
||
|
44.
|
Selene
Owning Company Limited (“Selene”)
|
Marshall
Islands
|
Bargara
(ex Songa Hua)
|
||
|
45.
|
Tethys
Owning Company Limited (“Tethys”)
|
Marshall
Islands
|
Capitola
(ex Songa Hui)
|
||
|
46.
|
Ioli
Owning Company Limited (“Ioli”)
|
Marshall
Islands
|
Clipper
Gemini
|
||
|
47.
|
Iason
Owning Company Limited (“Iason”)
|
Marshall
Islands
|
Oregon
(ex Athina Zafirakis)
|
||
|
48.
|
Orpheus
Owning Company Limited (“Orpheus”)
|
Marshall
Islands
|
Avoca
(ex Nord Mercury)
|
||
|
49.
|
Team
up Owning Company Limited (“Team-up”)
|
Marshall
Islands
|
Saldahna
(ex Shino Brilliance)
|
||
|
50.
|
Iokasti
Owning Company Limited (“Iokasti”)
|
Marshall
Islands
|
VOC
Galaxy
|
||
|
51.
|
Boon
Star Owners Inc. (“Boon”)
|
Marshall
Islands
|
Samatan
(ex Trans Atlantic)
|
||
|
52.
|
Roscoe
Marine Ltd. (“Roscoe”)
|
Marshall
Islands
|
Hull
1518A
|
||
|
53.
|
Monteagle
Shipping S.A. (“Monteagle”)
|
Marshall
Islands
|
Hull
1519A
|
||
|
54.
|
Iktinos
Owning Company Limited (“Iktinos”)
|
Marshall
Islands
|
Hull
SS058
|
||
|
55.
|
Kallikrates
Owning Company Limited (“Kallikrates”)
|
Marshall
Islands
|
Hull
SS059
|
||
|
56.
|
Mensa
Enterprises Inc (“Mensa”)
|
Marshall
Islands
|
Hull
0002
|
||
|
57.
|
Mandarin
Shipholding Co (“Mandarin”)
|
Marshall
Islands
|
Hull
0003
|
||
|
58.
|
Faedon
Owning Company Limited (“Faedon”)
|
Marshall
Islands
|
Hull
2089
|
||
|
Other
company
|
Activity
|
||||
|
59.
|
Wealth
Management Inc. (“Wealth”)
|
Marshall
Islands
|
Cash
Manager
|
|
1.
|
Basis
of Presentation and General Information
-(continued):
|
|
The
operations of the Company’s vessels are managed by Cardiff Marine Inc.
(the “Manager”), a related party entity incorporated in
Liberia. Furthermore, Drybulk S.A., a related party, Liberian
corporation acted as the charter and sales and purchase broker for
the
Company until September 30, 2006. Effective October 1, 2006 the Manager
acts as the Company’s charter and sales and purchase
broker. The majority shareholding (70%) of the Manager and
Drybulk S.A. is owned by the Foundation. The 30% shareholding of
the
Manager and Drybulk S.A. is held by Prestige Finance S.A., a Liberian
corporation, which is wholly owned by the sister of the Company’s Chief
Executive Officer.
|
|
|
During
the nine-month period ended September 30, 2006, one charterer (Oldendorff
Carriers Gmbh), accounted for 16% of the Company’s voyage revenues. No
charterer accounted for 10% or more of the Company’s voyage revenues for
the nine-month period ended September 30, 2007.
|
|
|
In
addition, of the Company’s voyage revenues during the nine-month periods
ended September 30, 2006 and 2007, 25% and 14%, respectively, were
derived
from the participation of certain Company’s vessels in a drybulk
pool.
|
|
|
In
September 2006, the FASB issued Staff Position (FSP) AUG AIR−1,
“Accounting for Planned Major Maintenance Activities.” FSP AUG AIR−1
addresses the accounting for planned major maintenance activities.
Specifically, the FSP prohibits the practice of the accrue−in−advance
method of accounting for planned major maintenance activities, but
continues to permit the application of the other three alternative
methods
of accounting for planned major activities: direct expense, built−in
overhaul, and deferral. FSP AUG AIR−1 is effective for fiscal years
beginning after December 15, 2006. The Company continued
applying deferral accounting method for dry−docking costs. As such,
FSPAUG AIR−1 did not have significant impact on our financial
position, results of operations or cash flows.
|
|
|
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”), which permits
entities to choose to measure many financial instruments and certain
other
items at fair value. SFAS 159 is effective as of the beginning of
an
entity’s first fiscal year that begins after November 15, 2007. Earlier
adoption is permitted as of the beginning of a fiscal year that begins
on
or before November 15, 2007, provided the entity also elects to apply
the
provisions of FASB Statement No. 157, “Fair Value Measurements.” The
Company is currently evaluating the impact of SFAS 159, but does
not
expect the adoption of SFAS 159 to have an effect on its consolidated
financial position, results of operations or cash
flows.
|
|
2.
|
Transactions
with Related Parties:
|
|
|
(a)
|
Cardiff
Marine Inc.: The Manager provides the Company a wide range of
shipping services such as technical support and maintenance, insurance
consulting, chartering, financial and accounting services, in exchange
for
a daily fixed management fee of Euro 530 per day, per
vessel. In addition the Manager charges the Company with: (i) a
fee of U.S. Dollars one hundred per day per vessel for compliance
with
section 404 of Sarbanes-Oxley Act of 2002; (ii) U.S. Dollars five
hundred
and fifty for superintendent visits on board vessels in excess of
five
days per annum, per vessel, for each additional day, per superintendent;
(iii) chartering commission of 1.25% on all freight, hire and
demurrage revenues; (iv) a commission of 1.00% on all gross
sale proceeds or purchase price paid of vessels since October 1,
2006; and
(v) a quarterly fee of $250 for services in relation to the financial
reporting requirements of the Company under the Securities and Exchange
Commission Rules and the establishment and monitoring of internal
controls
over financial reporting.
|
|
|
The
management agreements concluded between the Manager and the vessel-owning
companies have an initial term of five years and will automatically
be
extended to successive five-year terms. Notice to terminate shall
not be
effective until 30 days following its having been delivered, unless
otherwise mutually agreed in writing.
|
||
|
The
management fees charged by the Manager for the nine-month periods
ended
September 30, 2006 and 2007, totaled $4,666 and $7,057 respectively
and
are separately reflected in the accompanying consolidated statements
of
income, in “Management fees – related party”. Chartering commissions
charged by Drybulk S.A. for the nine-month period ended September
30, 2006
and by the Manager for the nine-month period ended September 30,
2007
totaled to $2,117 and $4,290, respectively, which are separately
reflected
as “Voyage expenses - related party” in the accompanying consolidated
statements of income. The fees charged by the Manager for the
services discussed in (i) and (v) above for the nine month periods
ended
September 30, 2006 and 2007, totalled $1,312 and $1,773, respectively,
and
are included in “General and administrative expenses – related party” in
the accompanying consolidated statements of income. In addition,
during
the nine month period ended September 30, 2006 and 2007, an amount
of
$2,011 and $7,871 respectively, was charged by Drybulk
S.A. and the Manager respectively, for the acquisition and sale of
vessels. The amounts that relate to vessels’ acquisitions are capitalized
and are included in “Vessels, net” in the accompanying consolidated
balance sheets. The amounts that relate to vessels’ sales are included in
“Gain on sale of vessels” in the accompanying consolidated statements of
income.
|
||
|
The
amounts due from the Manager as at December 31, 2006 and September
30,
2007 totaled to $3,353 and $6,690,
respectively.
|
||
|
2.
|
Transactions
with Related Parties-(Continued):
|
||
|
(b)
|
Lease
Agreement: On October 1, 2005 and effective as of the same date,
the Company entered into a rental agreement with its Chief Executive
Officer to lease office space in Athens, Greece. The agreement is
for
duration of 5 years beginning October 1, 2005 and expires on September
30,
2010. The annual rental for the first two years is Euro 9 and thereafter
it will be adjusted annually for inflation increases. The related
rent
expense for the nine month periods ended September 30, 2006 and 2007
totaled $8 and $9, respectively, and is included in “General and
administrative expenses - related parties” in the accompanying
consolidated statements of income.
|
||
|
(c)
|
Consultancy
Agreements: On February 3, 2005, the Company concluded two
agreements with Fabiana Services S.A. (“Fabiana”) a related party entity
incorporated in Marshall Islands. Fabiana is beneficially owned by
the
Company’s Chief Executive Officer. Under the agreements, Fabiana provides
the services of the individuals who serve in the positions of Chief
Executive and Chief Financial Officers of the Company. The duration
of the
agreements is for three years beginning February 3, 2005 and ending,
unless terminated earlier on the basis of any other provisions as
may be
defined in the agreement, on the day before the third anniversary
of such
date. The Company pays Euro 1,066,600 (Euro 1,126,000 until November
21,
2006) per annum payable monthly on the last working day of every
month in
twelve instalments for the services of the Chief Executive and Chief
Financial Officers. The related expense for the nine month periods
ended
September 30, 2006 and 2007 totaled $1,087 and $1,087, respectively,
and
is included in “General and administrative expenses - related parties” in
the accompanying consolidated statements of income. At December 31,
2006
and September 30, 2007 an amount of $86 and $0, respectively, was
payable
to Fabiana.
|
||
|
(d)
|
Acquisition
of vessel: In March 2006 the
Company concluded a Memorandum of Agreement with a company controlled
by
the Company’s Chief Executive Officer for the acquisition of the vessel
Hille Oldendorff for $40,760 which was delivered to the Company in
April
2006. The purchase price was partly financed by an unsecured sellers’
credit of $3,250 as provided by the Memorandum of Agreement. In October
2006, the sellers’ credit was fully settled with common stock. The vessel
was sold on June 8, 2007 for $50,500 and realized a gain of
$12,876.
|
||
|
(e)
|
Short-term
credit facilities:
|
||
|
(i)
|
In
December 2006, the Company borrowed an amount of $25,000 from Elios
in
order to partially finance the acquisition cost of vessel Redondo.
The
facility was fully repaid in January 2007.
|
||
|
(ii)
|
On
April 5, 2007 the Company obtained a short term credit facility of
$33,000
from Elios to partially finance the acquisition cost of the vessel
Primera
(ex Sea Epoch) (Note 4). The loan was fully repaid on April 23,
2007.
|
||
|
2.
|
Transactions
with Related Parties-(Continued):
|
||
|
(e)
|
Short-term
credit facilities:
|
||
|
(iii)
|
On
May 23, 2007 the Company obtained a short term credit facility of
$30,000
from Elios, in addition to the amendment of the loan facility discussed
in
Note 8(c) below, to partially finance the acquisition cost of the
vessels
Bargara (ex Songa Hua), Marbella (ex Restless), Primera (ex Sea Epoch),
Brisbane (ex Spring Brave), Menorca (ex Oinoussian Legend), Capitola
(ex
Songa Hui), Ecola (ex Zella Oldendorff) and Majorca (ex Maria G.O.).
The
facility was fully repaid on June 15, 2007. Interest and finance
costs
paid by the Company for the above facility during the nine month
period
ended September 30, 2007 totaled $614 and are separately reflected
as
“Interest and finance costs - related party” in the accompanying
consolidated statements of income.
|
||
|
(f)
|
Purchase
of derivatives from related parties
|
||
|
In
order to maintain the minimum hedging ratio of the loan amendment
(Note
8c), on June 22, 2007 the Company acquired the following interest
rate
derivatives which were valued on that date by the financial institutions
which were counterparties to these agreements at an amount of $1,290
(asset), from the following two related companies:
|
|||
|
(i)
Sea Glory Navigation Ltd. which originally entered into an interest
rate
cap and floor agreement on November 3, 2004 for a period of seven
years
through November 2011, for a notional amount of $60 million. Under
the cap
leg of the agreement the interest rate is 5.34% if three-month USD
LIBOR
lies between 5.34% and 7%. If three-month USD LIBOR is above 7% the
interest rate is three-month USD LIBOR. Under the floor leg of the
agreement the interest rate is 2.75% if the three-month USD LIBOR
is equal
or less than 1.75%.
|
|||
|
(ii)
River Camel Shipping Co which originally entered into an interest
rate cap
and floor agreement for a period of seven years through November
2011, for
a notional amount of $75 million. Under the cap leg of the agreement
the
interest rate is 5.25% if three-month USD LIBOR is within the range
of
5.25% and 7%. If three-month USD LIBOR exceeds 7%, then the interest
rate
is three-month USD LIBOR. Under the floor leg of the agreement the
interest rate is 2.75%, if the three-month USD LIBOR is equal or
less than
1.75%.
|
|||
|
3.
|
Inventories:
|
|
The
amounts shown in the accompanying consolidated balance sheets are
analyzed
as follows:
|
|
December
31, 2006
|
September
30, 2007
|
|||||||
|
Lubricants
|
$ |
2,328
|
$ |
2,568
|
||||
|
Victualling
stores
|
243
|
305
|
||||||
|
Total
|
$ |
2,571
|
$ |
2,873
|
||||
|
4.
|
Vessels,
net:
|
|
The
amounts in the accompanying consolidated balance sheets are analyzed
as
follows:
|
|
Vessel
Cost
|
Accumulated
Depreciation
|
Net
Book Value
|
||||||||||
|
Balance,
December 31, 2006
|
$ |
1,197,053
|
$ | (112,129 | ) | $ |
1,084,924
|
|||||
|
-Vessel
acquisitions
|
495,397
|
-
|
495,397
|
|||||||||
|
-Vessel
disposals
|
(221,214 | ) |
35,769
|
(185,445 | ) | |||||||
|
-
Depreciation
|
-
|
(54,219 | ) | (54,219 | ) | |||||||
|
Balance,
September 30, 2007
|
$ |
1,471,236
|
$ | (130,579 | ) | $ |
1,340,657
|
|||||
|
As
at September 30, 2007 the Company owned thirty-four drybulk carriers
having total carrying value of
$1,340,657.
|
|
4.
|
Vessels,
net-(continued):
|
|
During
the nine month period ended September 30, 2007 the following vessels
were
disposed:
|
|
Vessel
|
M.O.A.
date
|
Delivery
date
|
M.O.A.
price
|
Gain
on sale
|
||||||
|
Panormos
|
September
8, 2006
|
January
8, 2007
|
$ |
35,000
|
$ |
15,256
|
||||
|
Striggla
|
December
18, 2006
|
January
22, 2007
|
12,120
|
9,184
|
||||||
|
Daytona
|
December
15, 2006
|
January
23, 2007
|
25,300
|
6,058
|
||||||
|
Estepona
|
February
9, 2007
|
April
10, 2007
|
36,735
|
7,585
|
||||||
|
Shibumi
|
November
20, 2006
|
April
12, 2007
|
24,600
|
17,813
|
||||||
|
Delray
|
January
16, 2007
|
May
8, 2007
|
36,735
|
8,172
|
||||||
|
Hille
Oldendorff
|
March
26, 2007
|
June
8, 2007
|
50,500
|
12,873
|
||||||
|
Alona
|
March
2, 2007
|
June
12, 2007
|
39,500
|
7,323
|
||||||
|
Mostoles
|
March
26, 2007
|
July
3, 2007
|
13,260
|
10,312
|
||||||
|
Lanikai
|
March
13, 2007
|
July
27, 2007
|
26,100
|
8,936
|
||||||
|
Total:
|
$ |
299,850
|
$ |
103,512
|
||||||
|
The
aggregate gain resulting from the sale of the above vessels is separately
reflected in the accompanying consolidated statement of income for
nine-months period ended September 30, 2007.
|
|
|
On
August 7, 2007 the Company concluded a Memorandum of Agreement for
the
disposal of the vessel Formentera to an unaffiliated third party
for
$63,000 with expected delivery date in the fourth quarter of 2007.
The
vessel aggregate carrying value at September 30, 2007, amounted to
$30,558. The resulting gain from the sale of the above vessel will
be
approximately $31,000 and will be included in the Company’s consolidated
statement of income for the year ending December 31,
2007.
|
|
|
During
the nine month period ended September 30, 2007 the following vessels
were
acquired:
|
|
Vessel
acquisitions
|
||||||
|
Vessel
|
M.O.A.
date
|
Delivery
date
|
Acquisition
price
|
|||
|
Samsara,
(ex Cape Venture)
|
December
14, 2006
|
February
14, 2007
|
$ |
62,620
|
||
|
Primera
(ex Sea Epoch)
|
December
15, 2006
|
April
11, 2007
|
38,380
|
|||
|
Marbella
(ex Restless)
|
February
27, 2007
|
April
27, 2007
|
46,460
|
|||
|
Bargara
(ex Songa Hua)
|
April
11, 2007
|
May
14, 2007
|
49,490
|
|||
|
Brisbane
(ex Spring Brave)
|
January
10, 2007
|
May
23, 2007
|
60,600
|
|||
|
Capitola
(ex Songa Hui)
|
April
11, 2007
|
June
1, 2007
|
49,490
|
|||
|
Menorca
(ex Oinoussian Legend)
|
January
18, 2007
|
June
7, 2007
|
41,410
|
|||
|
Majorca
(ex Maria G.O.)
|
March
26, 2007
|
June
11, 2007
|
54,035
|
|||
|
Heinrich
Oldendorff
|
March
23, 2007
|
June
11, 2007
|
52,815
|
|||
|
Ecola
(ex Zella Oldendorff)
|
November
23, 2006
|
August
28, 2007
|
40,097
|
|||
|
Total:
|
$ |
495,397
|
||||
|
4.
|
Vessels,
net-(continued):
|
|
On
June 8 and August 8, 2007 the Company concluded two Memoranda of
Agreement
(M.O.A.) with unaffiliated third parties for the acquisition of two
second
hand Supramaxes Clipper Gemini and VOC Galaxy vessels for $50,162
and
$55,500 respectively. The vessels are expected to be delivered during
the
fourth quarter of 2007.
|
|
|
On
July 13, 26 and August 6, 15, 2007 the Company concluded four Memoranda
of
Agreement with unaffiliated third parties for the acquisition of
four
second hand Panamaxes Athina Zafirakis, Nord Mercury, Shinyo Brilliance
and Trans Atlantic for a price of $67,175, $69,500, $75,000,
and $71,000 respectively. The vessels are expected to be delivered
during
the fourth quarter of 2007 and first quarter of 2008.
|
|
|
On
July 27, 30 and 31, 2007 the Company concluded five Memoranda of
Agreement
for the acquisition of one and other two 180,000 dwt Capesize Bulk
Carriers and other two 82,000 dwt Kamsarmax Bulk Carriers for a total
consideration of $433,500. The vessels are expected to be delivered
during
the second quarter of 2009 and second quarter of 2010.
|
|
|
The
delivery of all the above hulls from the sellers to buyers (The Company)
will take place simultaneously after the delivery of the vessels
to the
sellers, by the builder.
|
|
|
All
Company’s vessels, having total carrying value of $1,340,657 as of
September 30, 2007, have been pledged as collateral to secure the
bank
loans discussed in Note 8. As at September 30, 2007, three vessels
were
operating under a drybulk pool (Note 1) while the remaining vessels,
except for MV Heinrich Oldendorff which is employed under a bareboat
charter, were operating under time charters, the last of which expires
in
July 2008.
|
|
|
When
the Company concludes a Memorandum of Agreement for the disposal
of a
vessel which has still to complete a time charter contract, it is
considered that the “held for sale” criteria discussed under SFAS 144
paragraph 30 are not met until the time charter contract has been
completed. As a result such vessels are not classified as held for
sale.
|
|
|
When
the Company concludes a Memorandum of Agreement for the disposal
of a
vessel which has no time charter contract to complete, it is considered
that the “held for sale” criteria discussed under SFAS 144 paragraph 30
are met. As a result such vessels are classified as held for sale.
No
assets met these criteria to be classified as held for sale at September
30, 2007.
|
|
5.
|
Advances
for vessels under construction and
acquisitions:
|
|
During
the year ended December 31, 2006 advances amounting to $27,380 were
made
for the vessels Ecola ($3,970), Primera ($3,800) and Samsara ($6,200)
and
for the Hulls 1518A and 1519A ($6,650), each respectively
and capitalized interest ($110).
|
|
|
During
the nine months ended September 30, 2007 advances amounting to
$111,444 were made for the Clipper Gemini ($5,016), Oregon
($10,076), VOC Galaxy ($5,550), Samatan ($7,100), Avoca ($6,950),
Saldahna
($7,500), Hull 2089 ($22,800), Hulls 0002 and 0003 ($10,550 each),
Hulls
SS058 and SS059 ($5,425 each) while the vessels Samsara, Primera
and Ecola
were delivered, and capitalized interest for the nine month period
($1,091).
|
|
|
6.
|
Fair
value of acquired time charter:
|
|
During
the nine-month period ended September 30, 2006, the Company acquired
six
dry bulk carrier vessels for $201,110, which were under existing
time
charter contracts which the Company agreed to assume through arrangements
with the respective charterers. The Company upon delivery of each
of the
above vessels evaluated the charter contracts assumed and recognized
(a)
an asset of $5,517, for two of the vessels, with a corresponding
decrease
in the vessels’ purchase price and (b) a liability of $8,121, for the
other four vessels, with a corresponding increase in the vessels’ purchase
price.
|
|
|
During
the nine-month period ended September 30, 2007, the Company acquired
one
dry bulk carrier vessel for $49,000, which was under an
existing bareboat time charter contract which the Company agreed
to assume
through arrangements with the respective charterers. The Company
upon
delivery of the above vessel evaluated the charter contracts assumed
and
recognized a liability of $3,325, representing the excess of the
then fair
value of such charters at current market rates over the then excess
of the
present value of the charters assumed.
|
|
|
These
amounts are amortized on a straight-line basis to the end of the
charter
period. As of December 31, 2006 and September 30, 2007, the unamortized
balance of the fair value of below market acquired time charter in
the
accompanying consolidated balance sheets amounted to $5,553 and $2,385,
respectively and are reflected in “Deferred revenue” and “Fair value of
below market acquired time charters”, respectively in accompanying
consolidated balance sheets. As of December 31, 2006 and September
30,
2007, the unamortized balance of the fair value of above market acquired
time charters in the accompanying consolidated balance sheets amounted
to
$1,335 and $0, respectively.
|
|
7.
|
Deferred
Charges, net:
|
|
The
movement in the account which represents drydocking costs during
the nine
month period ended September 30, 2006 and 2007, is analysed as
follows:
|
|
September
30, 2006
|
September 30,
2007
|
|||||||
|
Balance,
beginning of the period
|
$ |
3,781
|
$ |
6,200
|
||||
|
-
Additions
|
4,032
|
1,228
|
||||||
|
-
Amortization
|
(2,471 | ) | (2,204 | ) | ||||
|
-
Write-off due to sale of vessels
|
- | (2,729 | ) | |||||
|
Balance,
end of period
|
$ |
5,342
|
$ |
2,495
|
||||
|
During
nine month period ended September 30, 2007, vessels Mendocino, Alona
and
Matira underwent their drydocking at a total cost of
$1,228.
|
|
8.
|
Long-term
Debt, net of deferred financing fees:
|
|
The
amount of long-term debt, obtained from HSH Nordbank, shown in the
accompanying consolidated balance sheets is analyzed as
follows:
|
|
December
31, 2006
|
September
30, 2007
|
|||||||
|
Term
loan
|
$ |
661,586
|
$ |
792,411
|
||||
|
Bridge
loan
|
-
|
30,076
|
||||||
|
Less
related deferred financing costs
|
(2,844 | ) | (3,751 | ) | ||||
|
Total
|
658,742
|
818,736
|
||||||
|
Less:
Current portion
|
(71,412 | ) | (110,198 | ) | ||||
|
Long-term
portion
|
$ |
587,330
|
$ |
708,538
|
||||
|
(a)
|
In
March 2006 the Company concluded an agreement to borrow an amount
of up to
$628,750 and in November 2006 entered into a supplemental agreement
to the
loan concluded in March 2006 to increase the line of credit to $711,093.
The purpose of the loan was to refinance prior indebtedness, to partially
finance the acquisition cost of eight vessels acquired during the
year
ended December 31, 2006 and to provide the Company with working capital.
On May 23, 2007 the Company amended the loan to increase the amount
available under the loan by up to $181,000 and to include a re-borrowing
option for mandatory repayment due to sale of vessels of up to $200,000
in
order to partly finance the acquisition cost of the second hand vessels
Samsara (ex Cape Venture), Bargara (ex Songa Hua), Marbella (ex Restless),
Primera (ex Sea Epoch), Brisbane (ex Spring Brave), Menorca (ex Oinoussian
Legend), Capitola (ex Songa Hui) and Ecola (ex Zella Oldendorff),
Majorca
(ex Maria G.O.), Heinrich Oldendorff and any additional vessels.
The loan
bears interest at LIBOR plus a margin. The interest rate, including
the
margin, at December 31, 2006 was 6.35% for $550,154 and 7.78% for
$111,432
and at September 30, 2007 was 5.98% for $660,432 and 7.33% for $131,980.
The outstanding balance of $792,411 (gross of unamortized deferred
financing fees of $3,751 at September 30, 2007) is repayable in thirty
five variable consecutive quarterly instalments commencing on August
2007
and through May 2016 plus a balloon payment of $160,926 payable together
with the last instalment.
|
|
|
(b)
|
On
February 13, 2007, the Company borrowed an amount of $43,400 in order
to
partly finance the acquisition cost of vessel Samsara (ex Cape Venture)
(Note 5). The loan bears interest at LIBOR plus a margin and was
repaid in
one instalment on May 29, 2007.
|
|
|
(c)
|
On
April 19, 2007 the Company concluded a bridge facility of up to $181,000
in order to partly finance the acquisition cost of the second hand
vessels
Primera (ex Sea Epoch), Menorca (ex Oinoussian Legend), Marbella
(ex
Restless), Brisbane (ex Spring Brave), Capitola (ex Songa Hui) and
Bargara
(ex Songa Hua). The loan bears interest at LIBOR plus a margin and
was
repaid in one single instalment on May 29,
2007.
|
|
8.
|
Long-term
Debt, net of deferred financing
fees-(continued):
|
|
|
(d)
|
On
August 30, 2007 the Company concluded a bridge facility of up to
$30,076
in order to partly finance the acquisition cost of the second hand
vessels
Oregon (ex Athina Zafirakis), Nord Mercury, Saldahna (ex Shino
Brilliance), and VOC Galaxy. The loan bears interest at LIBOR plus
a
margin and will be repaid in one instalment on during the first quarter
of
2008.
|
|
|
The
principal payments required to be made after September 30, 2007,
for the
loans discussed above are the
follows:
|
||
|
Year
ending September 30,
|
||||
|
2008
|
$ |
111,199
|
||
|
2009
|
79,234
|
|||
|
2010
|
74,896
|
|||
|
2011
|
74,896
|
|||
|
2012
|
74,896
|
|||
|
2013
and there after
|
407,366
|
|||
|
822,487
|
||||
|
Less-Financing
fees
|
(3,751 | ) | ||
| $ |
818,736
|
|||
|
Total
interest incurred on debt for the nine month periods ended September
30,
2006 and 2007 amounted to $26,261 and $35,555, respectively. Of the
nine
month period ended September 30, 2007 an amount of $1,091 was capitalized
as part of the vessel cost for advances paid for vessels under
construction. Interest expense, net of interest capitalized, is included
in “Interest and finance costs” in the accompanying consolidated
statements of income.
|
|
|
In
terms of the loan agreement, the Company is required to hold bank
deposits
which are used to fund the loan instalments coming due. The fund
can only
be used for the purposes of loan repayments and are shown as restricted
cash. Restricted cash also includes additional minimum cash deposits
required to be maintained with certain banks under the company’s borrowing
arrangements. The Company is in compliance with all the debt
covenants.
|
|
9.
|
Derivatives:
|
|
|
i.
|
Interest
rate cap and floor agreements: As of December 31,
2006 and September 30, 2007, the Company had outstanding six and
eight,
respectively, interest rate cap and floor agreements concluded in
May
2005. The fair value of these six and eight interest rate cap and
floor
agreements equates to the amount that would be received or paid by
the
Company if the agreements were cancelled. Such fair value at December
31,
2006 was an asset of $946 and at September 30, 2007 was an asset
of $564
and a liability of $ 89, and are included in “Financial Instruments” in
the accompanying consolidated balance sheets. For the nine months
period
ended September 30, 2006 and 2007 a gain of $1,024 and a loss of
$1,761,
respectively, are included in “Other, net” in the accompanying
consolidated statements of income.
|
|
|
ii.
|
Foreign
exchange transactions: In January 2006, the Company engaged
in a total of 12 foreign currency call options, maturing in monthly
intervals from February 2006 to January 2007, under one foreign exchange
transaction involving the US dollar against the Euro. As of December
31,
2006 the Company had one open foreign currency call option which
matured
in January 2007. The strike rate under this option is 1.21 U.S. dollars
per Euro, for an amount of Euro 200,000.
|
|
|
In
January 2006, the Company engaged in a total of 12 forward foreign
exchange contracts, maturing in monthly intervals from February 2006
to
January 2007. As of December 31, 2006 the Company had one open
forward foreign exchange contract which matured in January 2007.
The
forward rate was 1.2320 U.S. Dollars per Euro for an amount of Euro
200,000.
|
||
|
As
of December 31, 2006, the fair market values of the open foreign
currency
call option and open forward foreign exchange contract discussed
above
were $22 and $17, respectively. For the nine month period ended September
30, 2006 and 2007 a gain of $116 and a loss of $8, respectively,
has been
included in “General and administrative expenses” in the accompanying
statements of income.
|
||
|
iii.
|
Forward
freight agreements: During the year ended
December 31, 2006, the Company entered into seventeen forward freight
agreements (“FFAs”) with the objective to utilize them as economic hedging
instruments in order to reduce its exposure to market price fluctuations
with respect to its fleet. Such agreements did not qualify for hedge
accounting and therefore changes in their fair value were reflected
in
earnings. During the nine months period ended September 30,
2006, the loss on FFAs amounted to $22,473. As of December 31,
2006 the fair value of the FFAs resulted in a liability of $2,625.
As of
September 30, 2007, no FFAs remain
open.
|
|
|
10.
|
Subsequent
Events:
|
||
|
a)
|
Vessel
deliveries: On October 9 and 17, 2007, the Company took
delivery of the vessels Clipper Gemini (Notes 4 & 5) and Samatan (ex
Trans Atlantic) (Notes 4 & 5) which the Company had agreed to acquire
on June 8 and August 15, 2007, respectively.
|
||
|
b)
|
Vessel
disposals: On October 1, 2007 the Company concluded a
memorandum of agreement for the disposal of the vessel Matira to
an
unaffiliated third party for $46,500 with expected delivery date
between
the fourth quarter of 2007 and the first quarter of 2008. The vessel’s
aggregate carrying value at September 30, 2007, amounted to $21,779.
The
resulting gain from the sale of the above vessel will be approximately
$24,568 and will be included in the Company’s consolidated statement of
income in the quarter in which the vessel will be delivered to her
new
owners.
|
||
|
c)
|
Hulls
acquisitions: On October 1, 2007 the Company concluded a
memorandum of agreement with an unaffiliated third party for the
acquisition of a 170,000 dwt Capesize Bulk Carrier, currently under
construction, for a price of $147,500. The vessel is expected to
be
delivered during the second quarter of 2008.
|
||
|
d)
|
New
Loans: The following loans were concluded by the
Company:
|
||
|
(i)
|
On
October 2, 2007 the Company concluded a loan agreement of up to $
35,000
with Deutsche Schiffsbank in order to partly finance the acquisition
cost
of the second hand vessel Clipper Gemini (Note 5). The loan bears
interest
at Libor plus a margin and will be repaid in thirty-six quarterly
instalments through July 2016.
|
||
|
(ii)
|
On
October 5, 2007 the Company concluded a loan agreement of up to $
90,000
with Piraeus Bank in order to partly finance the acquisition cost
of the
second hand vessels Samatan (ex Trans Atlantic) and VOC Galaxy (Note
5).
The loan bears interest at Libor plus a margin and will be repaid
in
thirty-two quarterly instalments through July 2015.
|
||
|
e)
|
Shares: During
October 2007
an amount of 691,000 shares of common stock with par value $0.01
were
issued. The net proceeds, after underwriting commissions of 2.5%
and other
issuance fees, amounted to $83,058.
|
||
|
DryShips
Inc.
|
||
|
(Registrant)
|
|
Dated: November
7, 2007
|
By:
|
/s/George
Economou
|
|
|
George
Economou
|
|||
|
Chief
Executive Officer and Interim Chief Financial Officer
|