Small Cap / Transportation

Expanded Purchase Recommendation: August 2015

 

The Turnaround Letter recommended this small cap shipping stock in August 2015 : 

 

Star Bulk Carriers Corp. (SBLK: $3.10: 7/29/2015)

40 Agiou Konstantinou St.

Maroussi, Athens, Greece 15124

Telephone: 30 210 61 78 400

Website: www.starbulk.com

Investor Relations

Securities Exchange Commission Filings

History

Star Bulk began its corporate voyage in 2006 as a wholly owned subsidiary of Star Maritime. In late 2007, Star Maritime obtained shareholder approval for the acquisition of a fleet of eight drybulk carriers and for effecting a redomiciliation merger whereby Star Maritime merged with and into Star Bulk with Star Bulk as the surviving entity. In 2013, management began to expand the fleet with purchases and contracts for newbuilds. (Dry bulk ships, as the name suggests, transport dry, bulky cargoes such as coal, iron ore and grain.)

In 2014, management really stepped up the fleet build out. In July 2014, Star Bulk acquired, via stock, 12 dry bulk carriers and 25 newbuilds from Oceanbulk Shipping, an entity owned by Oaktree Capital and the Pappas family; the merger agreement also provided for the acquisition of two drybulks from Heron Ventures. At the same time, they acquired one drybulk and one newbuild from Dioriga Shipping, a company controlled by the Pappas family. All told, Star Bulk acquired an operating fleet of 15 dry bulk carriers and contracts for the construction of 26 new builds.

Then in August of 2014, management acquired 34 operating dry bulk vessels from the bankrupt Excel Maritime in a transaction consisting of about 30 million shares and $288 million in cash. At the time, Oaktree Capital Management and Angelo Gordon & Co., who were equity holders in Excel, provided a bridge loan facility of $231 million to facilitate the acquisition. The merger with Oceanbulk and related entities and the assets acquired from Excel Maritime established Star Bulk as the largest public dry-bulk company. Star Bulk currently owns 72 dry-bulk vessels on the water and has 22 vessels currently under construction.

Dry bulk shipping rates rose dramatically in the mid-2000s, spurred by demand from China for coal, iron ore and other dry bulk products. While rates fell in 2008 and early 2009 with the global recession, they began to bounce back later in 2009. However, when rates were at their peak, many shipping companies ordered new ships, and these came on line just as Chinese demand began to soften. This caused dry bulk rates to plummet, and they have remained at historically low levels since early 2012. As we discussed in the July issue, this has crushed the dry bulk stocks.

Turnaround Challenge/Opportunity

Although it is difficult to predict when dry bulk rates will rebound, Star Bulk is well positioned to profit when they do. The company has modern ships with low operating costs, a very experienced management team, savvy owners, and a decent balance sheet.

Star Bulk’s fleet of ships, which is well diversified across various size categories, is among the newest in the industry, which reduces operating costs, improves safety and makes the ships more attractive to potential charterers.

As of July 22, 2015, Star Bulk had the following active vessels:

                                       Number                   Class              dwt Carrying Capacity Range

                                            3                 Newcastlemax            200,000      -    210,000

                                           18                Capesize                     100,000      -    200,000

                                            4                 Post Panamax               90,000      -    100,000

                                           20                Kamsarmax                  80,000      -      90,000

                                            7                 Panamax                       65,000      -      80,000

                                            9                 Ultramax                      60,000      -      65,000

                                           10                Supramax                     50,000      -      60,000

                                            1                 Handymax                   40,000      -      50,000

The term deadweight ton (dwt) describes the size of vessels.

Dwt, expressed in metric tons, refers to the maximum weight of cargo and supplies that a vessel can carry.

By total tonnage, Star Bulk’s 21 largest vessels, Newcastlemax and Capesize, account for about 51% of total capacity, and at 18 vessels, the Capesize group is its single largest tonnage group. Only the largest of the world’s ports are equipped to accommodate these large capacities. The Supramax category is noteworthy in that they normally offer cargo loading and unloading capabilities with cranes built onto the ship; this provides enhanced flexibility on a vessel that can approach the lower-end capacity of the larger Panamax and Ultramax categories. All of the firm’s Panamax vessels are in the 71,000-77,000 dwt range. Panamax derive their name due to their ability to transit the Panama Canal, which increases their trade-route versatility over larger vessels. Post Panamax generally have a shallower draft designed for use in draught restricted ports; they are not, however, able to pass through the Panama Canal. We note, however, that the Panama Canal is undergoing a makeover that will increase access to larger ships.

Star Bulk’s largest vessels primarily transport minerals from the Americas and Australia to East Asia, particularly China, but also Japan, South Korea, Taiwan, Indonesia and Malaysia. Its Supramax vessels carry minerals, grain products and steel between the Americas, Europe, Africa, Australia and Indonesia and from these areas to China, Japan, South Korea, Taiwan, the Philippines and Malaysia.

Reflecting the sale of vessels in June and having taken delivery of three new vessels in July, Star Bulk’s fleet consists of 72 vessels on the water and 22 under construction. Star Bulk has very deliberately built out a young fleet. The average age of its 72 operating vessels in just 7.5 years; when eliminating the six oldest ships that average roughly 17 years, the overall average drops to about 6.5 years, and fully 24% of the fleet is 2 years old or younger. All of the company’s new builds are Eco-type vessels with many expected to have the industry’s lowest fuel-consumption rates. They are also being equipped with advanced remote monitoring systems that will enhance real-time operating metrics. Most of the firm’s fleet will be retrofitted with similar systems. Such a modern, high quality fleet is helping to drive down operating costs, as evidenced by a 14% reduction in daily vessel operating costs last year and 31% since 2009. Similarly, daily general and administrative expenses have been reduced by 36% since 2010. Management believes that Star Bulk is the industry’s low-cost operator, a significant competitive advantage.

The top management team has more than 130 years of combined experience in the shipping industry. In connection with the transactions in July 2014, Mr. Petros Pappas became the Chief Executive Officer, Mr. Hamish Norton became President, Mr. Christos Begleris became Co-Chief Financial Officer, Mr. Nicos Rescos became Chief Operating Officer and Ms. Sophia Damigou became Co-General Counsel. Mr. Spyros Capralos resigned as Chief Executive Officer but remained as Board Chairman, and Mr. Zenon Kleopas (formerly Chief Operating Officer) continued as Executive Vice President—Technical Operations. Collectively they’ve developed strong relationships with customers and other key players in the industry. For example, management, in conjunction with its major shareholders, was opportunistic in acquiring the 34 vessels during Excel Maritime’s bankruptcy proceedings.

Mr. Pappas has an established track record in the dry bulk industry that, alone, spans more than 35 years of experience, including more than 270 vessel acquisitions and dispositions. His deep industry relationships, particularly with shipyards, have played a key role in developing the company’s newbuild program, including at industry-leading sites in Japan and China. He maintains a significant ownership stake in the company.

On the ownership front, Oaktree Capital, which has a long and distinguished track record as a turnaround investor, owns more than 50% of Star Bulk’s stock, and two other savvy hedge fund groups own another seven percent. A majority of the Board of Directors are nominated by institutional investors. Among other things, this should assure transparency and accuracy in Star Bulk’s financial reporting – not always a given in shipping.

In January, Star Bulk completed a public offering of 49 million shares at $5.00 per share. While dilutive, it is noteworthy that of the 49 million shares (aggregate proceeds of $242 million), fully 37 million of them were purchased by four investment groups: Oaktree Capital Management; Angelo, Gordon & Co.; Monarch Alternative Capital; and Pappas family members and affiliates. Oaktree Capital Group emerged from the offering with an ownership stake of 58%. Leading shareholders subsequently purchased more than 21 million shares of a 56 million share follow-up offering in May that generated about $176 million. Oaktree Capital remained the majority shareholder. Of the $425 million raised, including overallotments, about $242.9 million (~57%) was purchased by insiders.

The equity offerings along with the October 2014 issuance of $50 million of senior notes has led to a balance sheet that looks reasonably solid. Net of the newbuild acquisitions and asset sales, management in late May said that the firm’s cash balance should be about $316 million, and the company’s newbuild program is fully funded. Even so, management acquired additional financial flexibility by deferring about $288 million of planned 2015 capital expenditures until 2016, obtaining waivers and relaxation of financial covenants from its lending institutions, the cancellation of one newbuild and the sale of a number of vessels built in the 1990s.

Shipping rates were surging prior to the financial crisis in 2008-2009, as evidenced by the chart of the Baltic Dry Index, ashipping and trade index created by the London based Baltic Exchange that measures the cost of transporting raw materials such as metals, grains and fossil fuels by sea. Ship owners, flush with cash, couldn’t contain themselves and went on a buying binge. With it taking two to three years to bring new vessels on stream, the world’s collapsing economy post financial crisis led to rapid oversupply and crashing prices; the Dry Bulk Index plunged. Then a rising Dry Bulk Index in the second half of 2013 and into early 2014 raised hopes that perhaps the worst of the pricing pressures were over. However, a perfect storm of higher numbers of vessel deliveries, reduced Chinese imports and Indonesian export bans sent freight rates tumbling again as evidenced by the Baltic Dry Bulk index falling in early 2015 to its lowest level since inception. Star Bulk’s CEO is on record as saying, “I have been in shipping for 38 years, and the market we are facing today is worse than I have ever seen.”

turnaround stock pick

There are signs, however, that the supply/demand picture in the dry bulk sector may be improving. Collapsing prices in early 2015 led to increased scrapping levels at an unprecedented rate. During the first five months of 2015, 17.0 million dwt of dry bulk vessels were scrapped; compare that with 16.2 million dwt in all of 2014. In the Capesize segment, management reports negative fleet growth following many consecutive years of expansion. Also on the supply side, orders for new ships are down. So the natural process of getting supply and demand back in to balance is well on its way. And we’d expect demand to pick up over the next year or so as low commodity prices drive increased usage around the globe. In the meantime, management has focused a bit more on chartering at spot market rates with shorter-term time horizons, thus positioning the fleet to benefit from future increases in charter rates.

All in all, Star Bulk is a good long-term option on a recovery in the dry bulk shipping sector. The stock price may continue to languish for a while, but it has a lot of upside leverage when shipping rates do eventually rebound. We recommend buying Star Bulk up to 5.

Disclosure Note: Accounts managed by an affiliate of the Publisher own Star Bulk stock.

Finance/Valuation

 

Market Capitalization = $680 million

Forward P/E = NM

Price/Book = 0.34

Total Debt/Equity = 0.66

Forward Annual Dividend Rate = None

Star Bulk management has taken care of the firm’s financials. They proactively strengthened the balance sheet to provide additional financial flexibility by raising $425.0 million of equity and $50.0 million of unsecured debt. Surely, there are no guarantees, but with net cash expected to be north of $300 million (net debt of $628 million), the firm’s newbuild program fully funded and management’s strong relationship with its institutional investors and bankers, Star Bulk is well positioned to be, in the first instance, a survivor and, secondly, a dominant force in international dry bulk shipping.

As mentioned above, management has worked on controlling operating expenses. In 2014, average daily vessel operating expenses were reduced by 14% from 2013, resulting in a cumulative reduction of 31% from 2009, while at the same time the average daily net-cash general-and-administrative (G&A) expenses have been reduced by 36% since 2010. The gains continued into 2015, as operating expenses and G&A expenses were down 7% and 22%, respectively, from 2014 levels.

Average Daily Operating Expenses

turnaround stock

Source: Star Bulk

 

Products/Services

Star Bulk is an international shipping company with extensive operational experience that owns and operates a fleet of dry bulk carrier vessels. On a fully delivered basis, they will have a fleet of 94 vessels consisting primarily of Capesize as well as Kamsarmax, Ultramax and Supramax vessels with a carrying capacity between 45,500 dwt and 209,000 dwt. Star Bulk’s vessels transport a broad range of major and minor bulk commodities, including ores, coal, grains and fertilizers, along worldwide shipping routes. Its highly experienced executive management team, with a combined 130 years of shipping industry experience, is led by Mr. Petros Pappas, who has more than 35 years of shipping industry experience and has managed more than 270 vessel acquisitions and dispositions.

As of July 22, 2015, Star Bulk’s operating fleet of 72 vessels had an aggregate capacity of approximately 7.5 million dwt. They have also entered into or acquired contracts for the construction of 22 of the latest generation “Eco-type” vessels, which are defined as vessels that are designed to be more fuel-efficient than standard vessels of similar size and age. By the third quarter of 2016, management expects the fleet to consist of 94 wholly-owned vessels, with an average age of 7.2 years and an aggregate capacity of 11.5 million dwt. As of July 22, 2015, the average age of Star Bulk’s operating fleet was approximately 7.5 years. On a fully delivered basis and based on publicly available information, management believes Star Bulk’s fleet will make it the largest U.S. publicly traded dry bulk shipping company by deadweight tonnage.

Star Bulk’s fleet is well-positioned to take advantage of economies of scale in commercial, technical and procurement management. For Star Bulk’s operating fleet and Star Bulk’s newbuildings, management has focused on vessels built at leading Japanese and Chinese shipyards, which, in Star Bulk’s experience, are more reliable and less expensive to operate and are accordingly preferred by charterers. Currently, because of prevailing market conditions, they primarily employ Star Bulk’s vessels in the spot market, under short term time charters or voyage charters. While employing the vessels under a voyage charter may require more management attention than under time charters, Star Bulk benefits from any fuel savings it can achieve because fuel is paid for by the vessel owner. On a fully-delivered basis, Star Bulk will have a large, modern, fuel-efficient and high-quality fleet, which emphasizes the largest Eco-type Capesize and Newcastlemax vessels, built at leading shipyards and featuring the latest technology. As a result, management believes they’ll have an opportunity to capitalize on rising market demand during a period of reduced fleet growth and customer preferences for Star Bulk’s ships and economies of scale while enabling them to capture the benefits of fuel cost savings through spot-time charters or voyage charters.

Star Bulk’s Fleet

Management has built a fleet through timely and selective acquisitions of secondhand and newbuilding vessels. Because of the industry reputation and extensive relationships of Mr. Pappas and the other members of Star Bulk’s  senior management, they have been able to contract for Star Bulk’s newbuilding vessels with leading shipyards at prices that reflect the recent dry bulk shipping downturn. Management believes that owning a modern, well-maintained fleet reduces operating costs, improves the quality of services and provides a competitive advantage in securing favorable spot time charters and voyage charters with high-quality counterparties. Each of Star Bulk’s newbuilding vessels will be equipped with a vessel remote monitoring system that will provide data to a central location in order to monitor fuel and lubricant consumption and efficiency on a real-time basis. And they expect to retrofit all of the company’s operating vessels and most of the Excel Vessels with a similar monitoring system. While these monitoring systems are generally available in the shipping industry, management believes that they can be cost-effectively employed only by large-scale shipping operators, such as Star Bulk.

The following tables summarize key information about Star Bulk’s fully delivered fleet:

Operating Fleet as of July 22, 2015

Vessel Name

Drybulk Vessel Type

Capacity (dwt.)

Year Built

Date Delivered to Star Bulk

Goliath

Newcastlemax

209,537

2015

15-Jul-15

Gargantua

Newcastlemax

209,529

2015

2-Apr-15

Maharaj

Newcastlemax

209,472

2015

15-Jul-15

Deep Blue

Capesize

182,608

2015

27-May-15

Leviathan

Capesize

182,511

2014

19-Sep-14

Peloreus

Capesize

182,496

2014

22-Jul-14

Indomitable

Capesize

182,476

2015

8-Jan-15

Obelix

Capesize

181,433

2011

11-Jul-14

Christine

Capesize

180,274

2010

31-Oct-14

Sandra

Capesize

180,274

2008

29-Dec-14

Pantagruel

Capesize

180,181

2004

11-Jul-14

Star Borealis

Capesize

179,678

2011

9-Sep-11

Star Polaris

Capesize

179,600

2011

14-Nov-11

Star Angie

Capesize

177,931

2007

29-Oct-14

Big Fish

Capesize

177,643

2004

11-Jul-14

Kymopolia

Capesize

176,990

2006

11-Jul-14

Big Bang

Capesize

174,109

2007

11-Jul-14

Star Aurora

Capesize

171,199

2000

8-Sep-10

LowlandsBeilun

Capesize

170,162

1999

29-Dec-14

Star Eleonora

Capesize

164,218

2001

3-Dec-14

Star Monisha

Capesize

164,218

2001

2-Feb-15

Amami

Post Panamax

98,681

2011

11-Jul-14

Madredeus

Post Panamax

98,681

2011

11-Jul-14

Star Sirius

Post Panamax

98,681

2011

7-Mar-14

Star Vega

Post Panamax

98,681

2011

13-Feb-14

Star Angelina

Kamsarmax

82,981

2006

5-Dec-14

Star Gwyneth

Kamsarmax

82,790

2006

5-Dec-14

Star Kamila

Kamsarmax

82,769

2005

3-Sep-14

Pendulum

Kamsarmax

82,619

2006

11-Jul-14

Star Maria

Kamsarmax

82,598

2007

5-Nov-14

Star Markella

Kamsarmax

82,594

2007

29-Sep-14

Star Danai

Kamsarmax

82,574

2006

21-Oct-14

Star Georgia

Kamsarmax

82,298

2006

14-Oct-14

Star Sophia

Kamsarmax

82,269

2007

31-Oct-14

Star Mariella

Kamsarmax

82,266

2006

19-Sep-14

Star Moira

Kamsarmax

82,257

2006

19-Nov-14

Star Nina

Kamsarmax

82,224

2006

5-Jan-15

Star Renee

Kamsarmax

82,221

2006

19-Dec-14

Star Nasia

Kamsarmax

82,220

2006

29-Aug-14

Star Laura

Kamsarmax

82,209

2006

9-Dec-14

Star Jennifer

Kamsarmax

82,209

2006

15-Apr-15

Star Helena

Kamsarmax

82,187

2006

29-Dec-14

Mercurial Virgo

Kamsarmax

81,545

2013

11-Jul-14

Magnum Opus

Kamsarmax

81,022

2014

11-Jul-14

Tsu Ebisu

Kamsarmax

81,001

2014

11-Jul-14

Star Iris

Panamax

76,466

2004

8-Sep-14

Star Aline

Panamax

76,429

2004

4-Sep-14

Star Emily

Panamax

76,417

2004

16-Sep-14

Star Natalie

Panamax

73,798

1998

29-Aug-14

Star Nicole

Panamax

73,751

1997

14-Jan-15

Star Vanessa

Panamax

72,493

1999

7-Nov-14

Star Claudia

Panamax

71,662

1997

20-Jan-15

Idee Fixe

Ultramax

63,458

2015

25-Mar-15

Roberta

Ultramax

63,426

2015

31-Mar-15

Laura

Ultramax

63,399

2015

7-Apr-15

Kaley

Ultramax

63,283

2015

26-Jun-15

Star Challenger

Ultramax

61,462

2012

12-Dec-13

Star Fighter

Ultramax

61,455

2013

30-Dec-13

Honey Badger

Ultramax

61,297

2015

27-Feb-15

Wolverine

Ultramax

61,297

2015

27-Feb-15

Star Aquarius

Ultramax

60,916

2015

22-Jul-15

Maiden Voyage

Supramax

58,722

2012

11-Jul-14

Strange Attractor

Supramax

55,742

2006

11-Jul-14

Star Omicron

Supramax

53,489

2005

17-Apr-08

Star Gamma

Supramax

53,098

2002

4-Jan-08

Star Zeta

Supramax

52,994

2003

2-Jan-08

Star Delta

Supramax

52,434

2000

2-Jan-08

Star Theta

Supramax

52,425

2003

6-Dec-07

Star Epsilon

Supramax

52,402

2001

3-Dec-07

Star Cosmo

Supramax

52,246

2005

1-Jul-08

Star Kappa

Supramax

52,055

2001

14-Dec-07

Star Michele

Handymax

45,588

1998

14-Oct-14

 

Newbuilding Vessels as of July 22, 2015

Vessel Name

Drybulk Vessel Type

Capacity (dwt.)

Shipyard

Expected

Delivery Date

HN NE 198 (tbn Star Poseidon)

Newcastlemax

209,000

NACKS China

 March 2016

HN 1359 (tbn Star Marisa)

Newcastlemax

208,000

SWS China

 November 2015

HN 1372 (tbn Star Libra)

Newcastlemax

208,000

SWS China

 November 2015

HN 1360 (tbn Star Ariadne)

Newcastlemax

208,000

SWS China

 February 2016

HN 1342 (tbn Star Gemini)

Newcastlemax

208,000

SWS China

 March 2016

HN 1371 (tbn Star Virgo)

Newcastlemax

208,000

SWS China

 February 2016

HN 1361 (tbn Star Magnanimus)

Newcastlemax

208,000

SWS China

 May 2016

HN 1343 (tbn Star Leo)

Newcastlemax

208,000

SWS China

 March 2016

HN 1363 (tbn Star Chaucer)

Newcastlemax

208,000

SWS China

 September 2016

HN 5055 (tbn Behemoth)

Capesize

182,000

JMU Japan

 January 2016

HN 5056 (tbn Megalodon)

Capesize

182,000

JMU Japan

 January 2016

HN 1312 (tbn Bruno Marks)

Capesize

180,000

SWS China

 September 2015

HN 1313 (tbn Jenmark)

Capesize

180,000

SWS China

 October 2015

HN 1338 (tbn Star Aries)

Capesize

180,000

SWS China

 November 2015

HN 1339 (tbn Star Taurus)

Capesize

180,000

SWS China

 March 2016

HN 1080 (tbn Kennadi)

Ultramax

64,000

New Yangzijiang China

 January 2016

HN 1081 (tbn Mackenzie)

Ultramax

64,000

New Yangzijiang China

 February 2016

HN 1082 (tbn Night Owl)

Ultramax

64,000

New Yangzijiang China

 March 2016

HN 1083 (tbn Early Bird)

Ultramax

64,000

New Yangzijiang China

 April 2016

HN NE 196 (tbn Star Antares)

Ultramax

61,000

NACKS China

 October 2015

HN NE 197 (tbn Star Lutas)

Ultramax

61,000

NACKS China

 January 2016

HN 5043 (tbn Star Pisces)

Ultramax

60,000

JMU Japan

 September 2015

 

Management

Board of Directors

Management Team

Petros Pappas, Chief Executive Officer

Petros Pappas is the Chief Executive Officer of Star Bulk and has been a member of Star Maritime's Board of Directors since inception. Throughout his career as a principal and manager in the shipping industry, Mr. Pappas has overviewed over 120 vessel acquisitions and disposals. In 1989, he founded Oceanbulk Maritime S.A., a dry cargo shipping company that has operated managed vessels aggregating as much as 1.6 million deadweight tons of cargo capacity. He also founded a number of affiliated companies, which are involved in the service sectors of the shipping industry. Mr. Pappas is a Director of the UK Defense Club, a leading insurance provider of legal defense services in the shipping industry worldwide, since January 2002, and is a member of the Union of Greek Shipowners (UGS). Mr. Pappas received his B.A. in Economics and his MBA from The University of Michigan, Ann Arbor.

 

Consolidated Financial Statements December 31, 2014

STATEMENTS OF CONSOLIDATED OPERATIONS

(In thousands U.S. Dollars, except per share amounts)

 

2012

 

2013

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Voyage revenues

 

$

85,684

 

 

$

68,296

 

 

$

145,041

 

Management fee income

 

 

478

 

 

 

1,598

 

 

 

2,346

 

 

 

 

86,162

 

 

 

69,894

 

 

 

147,387

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Voyage expenses

 

 

19,598

 

 

 

7,549

 

 

 

42,341

 

Vessel operating expenses

 

 

27,832

 

 

 

27,087

 

 

 

53,096

 

Dry docking expenses

 

 

5,663

 

 

 

3,519

 

 

 

5,363

 

Depreciation

 

 

33,045

 

 

 

16,061

 

 

 

37,150

 

Management fees

 

 

—  

 

 

 

—  

 

 

 

158

 

General and administrative expenses

 

 

9,320

 

 

 

9,910

 

 

 

32,723

 

Bad debt expense

 

 

—  

 

 

 

—  

 

 

 

215

 

Vessels’ impairment loss

 

 

303,219

 

 

 

—  

 

 

 

—  

 

Gain on time charter agreement termination

 

 

(6,454

)

 

 

—  

 

 

 

—  

 

Other operational loss

 

 

1,226

 

 

 

1,125

 

 

 

94

 

Other operational gain

 

 

(3,507

)

 

 

(3,787

)

 

 

(10,003

)

Loss on sale of vessel

 

 

3,190

 

 

 

87

 

 

 

—  

 

Gain from bargain purchase

 

 

—  

 

 

 

—  

 

 

 

(12,318

)

 

 

 

393,132

 

 

 

61,551

 

 

 

148,819

 

Operating (loss) / income

 

 

(306,970

)

 

 

8,343

 

 

 

(1,432

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income/ (Expenses):

 

 

 

 

 

 

 

 

 

 

 

 

Interest and finance costs

 

 

(7,838

)

 

 

(6,814

)

 

 

(9,575

)

Interest and other income

 

 

246

 

 

 

230

 

 

 

629

 

Gain / (Loss) on derivative financial instruments, net

 

 

41

 

 

 

91

 

 

 

(799

)

Loss on debt extinguishment

 

 

—  

 

 

 

—  

 

 

 

(652

)

Total other expenses, net

 

 

(7,551

)

 

 

(6,493

)

 

 

(10,397

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Income/(Loss) before equity in income of investee

 

 

(314,521

)

 

 

1,850

 

 

 

(11,829

)

Equity in income of investee

 

 

—  

 

 

 

—  

 

 

 

106

 

Net (loss) / income

 

$

(314,521

)

 

$

1,850

 

 

$

(11,723

)

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) / Earnings per share, basic and diluted

 

$

(58.32

)

 

$

0.13

 

 

$

(0.20

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding, basic

 

 

5,393,131

 

 

 

14,051,344

 

 

 

58,441,193

 

Weighted average number of shares outstanding, diluted

 

 

5,393,131

 

 

 

14,116,389

 

 

 

58,441,193

 

 

CONSOLIDATED BALANCE SHEETS

(In thousands U.S. Dollars, except per share amounts)

 

 

 

2013

 

 

 

2014

 

 

ASSETS

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

53,548

 

 

$

86,000

 

 

Restricted cash, current

 

 

1,862

 

 

 

3,352

 

 

Trade accounts receivable, net

 

 

3,203

 

 

 

24,765

 

 

Inventories

 

 

1,726

 

 

 

14,368

 

 

Due from managers

 

 

81

 

 

 

81

 

 

Due from related parties

 

 

486

 

 

 

245

 

 

Other current assets

 

 

1,561

 

 

 

1,269

 

 

Prepaid expenses and other receivables

 

 

1,212

 

 

 

4,350

 

 

Total Current Assets

 

 

63,679

 

 

 

134,430

 

 

 

 

 

 

 

 

 

 

 

 

FIXED ASSETS

 

 

 

 

 

 

 

 

 

Advances for vessels under construction and acquisition of vessels

 

 

67,932

 

 

 

454,612

 

 

Vessels and other fixed assets, net

 

 

326,674

 

 

 

1,441,851

 

 

Total Fixed Assets

 

 

394,606

 

 

 

1,896,463

 

 

 

 

 

 

 

 

 

 

 

 

OTHER NON-CURRENT ASSETS

 

 

 

 

 

 

 

 

 

Long-term investment

 

 

—  

 

 

 

634

 

 

Deferred finance charges, net

 

 

1,114

 

 

 

8,029

 

 

Restricted cash , non-current

 

 

620

 

 

 

10,620

 

 

Derivative asset

 

 

91

 

 

 

—  

 

 

Fair value of above market acquired time charter

 

 

7,978

 

 

 

11,908

 

 

TOTAL ASSETS

 

$

468,088

 

 

$

2,062,084

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

 

Current portion of long term debt

 

$

18,286

 

 

$

88,317

 

 

Excel Vessel Bridge Facility from related parties, current portion

 

 

—  

 

 

 

8,168

 

 

Accounts payable

 

 

6,638

 

 

 

18,487

 

 

Advances from sale of vessel

 

 

—  

 

 

 

1,100

 

 

Due to related parties

 

 

559

 

 

 

2,166

 

 

Accrued liabilities

 

 

3,501

 

 

 

13,738

 

 

Derivative liability, current

 

 

—  

 

 

 

5,722

 

 

Deferred revenue

 

 

750

 

 

 

2,500

 

 

Total Current Liabilities

 

 

29,734

 

 

 

140,198

 

 

 

 

 

 

 

 

 

 

 

 

NON-CURRENT LIABILITIES

 

 

 

 

 

 

 

 

 

8.00% 2019 Notes

 

 

—  

 

 

 

50,000

 

 

Long term debt

 

 

172,048

 

 

 

667,315

 

 

Excel Vessel Bridge Facility from related parties, non current portion

 

 

—  

 

 

 

47,993

 

 

Derivative liability, non-current

 

 

—  

 

 

 

2,010

 

 

Other non-current liabilities

 

 

200

 

 

 

266

 

 

TOTAL LIABILITIES

 

 

201,982

 

 

 

907,782

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Preferred Stock; $0.01 par value, authorized 25,000,000 shares; none issued or outstanding at December 31, 2013 and 2014

 

 

—  

 

 

 

—  

 

 

Common Stock, $0.01 par value, 300,000,000 shares authorized; 29,059,671 and 109,426,236 shares issued and outstanding at December 31, 2013 and 2014, respectively

 

 

291

 

 

 

1,094

 

 

Additional paid in capital

 

 

668,219

 

 

 

1,567,713

 

 

Accumulated other comprehensive loss

 

 

—  

 

 

 

(378

)

 

Accumulated deficit

 

 

(402,404

)

 

 

(414,127

)

 

Total Stockholders’ Equity

 

 

266,106

 

 

 

1,154,302

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

468,088

 

 

$

2,062,084

 

 

 

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IBM: Not Yet Time to Swing at this Pitch

IBM’s stock underperformance since IBM’s current CEO took the helm in 2012 has been stark, with the shares declining 23% while the S&P500 Index has more than doubled. One big problem: revenue growth rate is zero, at best. Without revenue growth, what’s left to entice investors? The real driver of value at IBM – free cash flow that is used to repurchase shares. Can IBM borrow its way to shareholder prosperity as its cash flows shrink? What to do with IBM shares? Wait for a better pitch in the form of a catalyst or much lower valuation. Read More.

Comparing Stocks Vs. Bonds

While the common stock of a turnaround candidate usually has the greatest upside potential, other classes of securities, such as bonds or preferred stock, may offer attractive profit possibilities with less risk. Many turnaround companies have only one class of securities available to investors but where there are different classes to choose from, it can pay to do a little extra analysis of the various options.

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Turnaround Letter Stock Pick Named Top Performer of 2017

 

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What Last Year's Top Stock Pickers Are Buying in 2018

 

This Forbes write-up follows up on the recent Top Stock Tips report--naming The Turnaround Letter's Crocs recommendation the top performer of 2017: With 90% gains, CROX beat out 100 other investment ideas included in the report; and the stock continues to have value investing appeal, according to Putnam.

 

George notes, "We see additional upside for the stock in 2018 as management's efforts continue to bear fruit, though the gains will likely be more muted than we saw in 2017."