Baltic Trading Limited Announces Fourth Quarter Financial Results

NEW YORK, Feb. 21, 2012 /PRNewswire/ -- Baltic Trading Limited (NYSE: BALT) ("Baltic Trading" or the "Company") today reported its financial results for the three and twelve months ended December 31, 2011.

The following financial review discusses the results for the three months and years ended December 31, 2011 and December 31, 2010.

Fourth Quarter 2011 and Year-to-Date Highlights

• Declared a $0.13 per share dividend payable on or about March 9, 2012 to all  shareholders of record as of March 2, 2012 based on Q4 2011 results;

• Recorded net income of $1.8 million, or $0.08 basic and diluted earnings per share for the fourth quarter;

• Cash position of $8.3 million as of December 31, 2011

Financial Review: 2011 Fourth Quarter

The Company recorded net income for the fourth quarter of 2011 of $1.8 million, or $0.08 basic and diluted earnings per share. Comparatively, for the three months ended December 31, 2010, the Company recorded net income of $3.7 million, or $0.17 basic and diluted earnings per share.

EBITDA was $6.6 million for the three months ended December 31, 2011 versus $8.4 million for the three months ended December 31, 2010.  

John C. Wobensmith, President and Chief Financial Officer, commented, "During the fourth quarter and full year 2011, Baltic Trading continued to employ its entire fleet of modern drybulk vessels on spot market-related time charters with multi-national companies while maintaining an efficient cost structure and strong balance sheet with low debt. Based on the implementation of our corporate strategy in a challenging drybulk market, we declared a fourth quarter dividend of $0.13 per share, representing our seventh consecutive dividend since going public in March of 2010. As we maintain our focus on distributing a substantial portion of our cash flows to shareholders, we plan to continue to secure our high-quality vessels on contracts at rates closely correlated with the various Baltic Dry indices."

Baltic Trading Limited's revenues decreased to $13.1 million for the three months ended December 31, 2011 compared to $15.2 million for the three months ended December 31, 2010 due to lower spot market rates achieved by our vessels during the fourth quarter of 2011.

The average daily time charter equivalent, or TCE, rates obtained by the Company's fleet was $15,437 per day for the three months ended December 31, 2011 as compared to $18,596 per day for the three months ended December 31, 2010. The decrease was due to lower spot rates achieved by the vessels in our fleet during the fourth quarter of 2011 versus the fourth quarter of 2010. The return of iron ore and coal cargoes during the second half of the year benefited earnings on our vessels that trade on spot-market related charters. Capesize rates for the quarter peaked in December, followed by relative weakness in the last two weeks of the year.

Total operating expenses were $10.2 million for the three months ended December 31, 2011 compared to $10.4 million for the three months ended December 31, 2010. Vessel operating expenses increased to $4.3 million for the three months ended December 31, 2011 from $4.2 million for the three months ended December 31, 2010 due to the expansion of our fleet during the fourth quarter of 2010. General, administrative and technical management fees decreased to $1.3 million in 2011 from $1.7 million during the comparative period. Depreciation and amortization expenses for the fourth quarter of 2011 were $3.7 million, in line with the same period during 2010.  For the year beginning January 1, 2011, the Company revised its estimated residual scrap value from $175 per lightweight ton to $245 per lightweight ton which had the impact of decreasing depreciation expense by $0.1 million for the three months ended December 31, 2011. The change in residual scrap value will only affect depreciation on a prospective basis.

Daily vessel operating expenses, or DVOE, marginally decreased to $5,133 per vessel per day for the fourth quarter of 2011 from $5,167 per vessel per day for the same period the prior year. We believe daily vessel operating expenses are best measured for comparative purposes over a 12month period in order to take into account all of the expenses that each vessel in our fleet will incur over a full year of operation. Based on estimates provided by our technical managers and management's expectations, we expect DVOE for 2012 to be $5,300 per vessel per day on a weighted average basis.

Financial Review: Full Year 2011

The Company recorded a net loss of $0.4 million or $0.02 basic and diluted net loss per share for the year ended December 31, 2011, compared to net income of $8.3 million or $0.46 basic and diluted earnings per share for the year ended December 31, 2010. Voyage revenues increased to $43.5 million for the year ended December 31, 2011 compared to $32.6 million for the year ended December 31, 2010 due to operation of a larger fleet. EBITDA was $18.8 million for the year ended December 31, 2011 versus $17.7 million for the year ended December 31, 2010. TCE rates obtained by the Company decreased to $13,050 per day for the year ended December 31, 2011 from $19,692 per day for the year ended December 31, 2010 mainly due to lower rates achieved for our vessels in 2011 as opposed to the year before. Total operating expenses were $39.4 million for the year ended December 31, 2011 compared to $22.2 million for the year ended December 31, 2010 due to the operation of a larger fleet, and daily vessel operating expenses per vessel were $4,872 in 2011 versus $5,016 in 2010.

Liquidity and Capital Resources

Cash Flow

Net cash provided by operating activities for the years ended December 31, 2011 and 2010 was $15.4 million and $19.0 million, respectively. The decrease in cash provided by operating activities was primarily a result of a recorded net loss of $0.4 million offset by an increase in the size of our fleet. Lower net income was reported in 2011 compared to 2010, which resulted primarily from lower charter rates achieved in 2011 versus the prior year for the vessels in our fleet and higher depreciation due to the expansion of our fleet and the operation of our fleet for the full twelve month period in 2011, as our fleet was acquired in the second through fourth quarters of 2010.

Net cash used in investing activities was $2.6 million for the year ended December 31, 2011 due to vessel related purchases. For the year ended December 31, 2010, cash used in investing activities was $389.8 million and primarily related to the purchase of the nine vessels in our fleet.

Net cash used in financing activities for the year ended December 31, 2011 was $10.3 million and consisted primarily of $10.2 million in cash dividends paid. For the year ended December 31, 2010, cash provided by financing activities was $376.6 million and primarily consisted of $214.5 million of proceeds from the issuance of common stock, $75.0 million of capital contributions from Genco Shipping & Trading Limited, and $101.3 million of proceeds from Baltic Trading's 2010 Credit Facility.

Capital Expenditures

We make capital expenditures from time to time in connection with vessel acquisitions. Our fleet consists of two Capesize, four Supramax, and three Handysize vessels with an aggregate capacity of approximately 672,000 dwt.

In addition to acquisitions that we may undertake in future periods, we will incur additional capital expenditures due to special surveys and drydockings for our fleet.  None of our vessels were drydocked in 2011, and we do not currently expect any of our vessels to be drydocked during 2012 and 2013.   

Summary Consolidated Financial and Other Data

The following table summarizes Baltic Trading Limited's selected consolidated financial and other data for the periods indicated below.

(1) Average number of vessels is the number of vessels that constituted our fleet for the relevant period, as measured by the sum of the number of days each vessel was part of our fleet during the period divided by the number of calendar days in that period.

(2) We define ownership days as the aggregate number of days in a period during which each vessel in our fleet has been owned by us. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period.

(3) We define available days as the number of our ownership days less the aggregate number of days that our vessels are off-hire due to scheduled repairs or repairs under guarantee, vessel upgrades or special surveys and the aggregate amount of time that we spend positioning our vessels. Companies in the shipping industry generally use available days to measure the number of days in a period during which vessels should be capable of generating revenues.

(4) We define operating days as the number of our available days in a period less the aggregate number of days that our vessels are off-hire due to unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.

(5) We calculate fleet utilization by dividing the number of our operating days during a period by the number of our available days during the period. The shipping industry uses fleet utilization to measure a company's efficiency in finding suitable employment for its vessels and minimizing the number of days that its vessels are off-hire for reasons other than scheduled repairs or repairs under guarantee, vessel upgrades, special surveys or vessel positioning.

(6) We define TCE rates as our net voyage revenue (voyage revenues less voyage expenses (including voyage expenses to Parent)) divided by the number of our available days during the period, which is consistent with industry standards. TCE rate is a common shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charterhire rates for vessels on voyage charters are generally not expressed in per-day amounts while charterhire rates for vessels on time charters generally are expressed in such amounts. Since some vessels were acquired with an existing time charter at a below-market rate, we allocated the purchase price between the vessel and an intangible liability for the value assigned to the below-market charterhire.  This intangible liability is amortized as an increase to voyage revenues over the minimum remaining term of the charter.

(7) We define daily vessel operating expenses to include crew wages and related costs, the cost of insurance expenses relating to repairs and maintenance (excluding drydocking), the costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses. Daily vessel operating expenses are calculated by dividing vessel operating expenses by ownership days for the relevant period.

(8)  EBITDA represents net income (loss) plus net interest expense, taxes, and depreciation and amortization. EBITDA is included because it is used by management and certain investors as a measure of operating performance. EBITDA is used by analysts in the shipping industry as a common performance measure to compare results across peers. Our management uses EBITDA as a performance measure in consolidating internal financial statements and it is presented for review at our board meetings. For these reasons, we believe that EBITDA is a useful measure to present to our investors. EBITDA is not an item recognized by U.S. GAAP and should not be considered as an alternative to net income, operating income or any other indicator of a company's operating performance required by U.S. GAAP. EBITDA is not a source of liquidity or cash flows as shown in our consolidated statement of cash flows. The definition of EBITDA used here may not be comparable to that used by other companies.

Baltic Trading Limited's Fleet

Baltic Trading Limited transports iron ore, coal, grain, steel products and other drybulk cargoes along worldwide shipping routes. Baltic Trading Limited's current fleet consists of two Capesize, four Supramax and three Handysize vessels with an aggregate carrying capacity of approximately 672,000 dwt.

Our current fleet contains three groups of sister ships, which are vessels of virtually identical sizes and specifications. We believe that maintaining a fleet that includes sister ships reduces costs by creating economies of scale in the maintenance, supply and crewing of our vessels. As of February 21, 2012, the average age of our current fleet was 2.1 years, as compared to the average age for the world fleet of approximately 12 years for the drybulk shipping segments in which we compete.

The following table reflects the current employment of Baltic Trading's current fleet:

1. The charter expiration dates presented represent the earliest dates that our charters may be terminated in the ordinary course.  Under the terms of each contract, the charterer is entitled to extend the time charters from two to four months in order to complete the vessel's final voyage plus any time the vessel has been off-hire.
2. We have agreed to terms on a spot market-related time charter with Swissmarine Services S.A. at a rate based on 101.5% of the average of the daily rates of the Baltic Capesize Index (BCI), published by the Baltic Exchange, as reflected in daily reports. Hire is paid in arrears net of a 6.25% brokerage commission which includes the 1.25% commission payable to Genco Shipping & Trading Limited.  The duration is 10.5 to 13.5 months.
3. We have agreed to an extension with Cargill International S.A., on a spot market-related time charter based on 100% of the average of the daily rates of the BCI, as reflected in daily reports.  Hire is paid every 15 days in arrears net of a 5.00% brokerage commission, which includes the 1.25% commission payable to Genco Shipping & Trading Limited.  The duration of the spot market-related time charter is 11 to 13.5 months.
4. We have reached an agreement with Resource Marine PTE Ltd. on two spot market-related time charters for 11 to 13.5 months based on 97% of the average of the daily rates of the Baltic Supramax Index (BSI), published by the Baltic Exchange, as reflected in daily reports.  Hire is paid every 15 days in arrears net of a 6.25% brokerage commission, which includes the 1.25% commission payable to Genco Shipping & Trading Limited.  
5. We have reached an agreement with Klaveness Chartering on a spot market-related time charter based on 95% of the average of the daily rates of the BSI, as reflected in daily reports.  The duration is 22.5 to 25.5 months with hire paid every 15 days in arrears net of a 6.25% brokerage commission, which includes the 1.25% commission payable to Genco Shipping & Trading Limited.
6. We have agreed to an extension with AMN Bulkcarriers Inc., on a spot market-related time charter based on 96% of the average of the daily rates of the BSI, as reflected in daily reports.  Hire is paid every 15 days in arrears net of a 5.00% brokerage commission, which includes the 1.25% commission payable to Genco Shipping & Trading Limited.  The duration of the spot market-related time charter is 11 to 13.5 months.
7. The rate for each of the spot market-related time charters is based on 115% of the average of the daily rates of the Baltic Handysize Index (BHSI), published by the Baltic Exchange, as reflected in daily reports. Hire is paid every 15 days in advance net of a 6.25% brokerage commission, which includes the 1.25% commission payable to Genco Shipping & Trading Limited.

Dividend Announcement and Policy

The Company's Board of Directors declared a dividend for the fourth quarter of 2011 of $0.13 per share payable on or about March 9, 2012 to all shareholders of record as of March 2, 2012.  Our dividend policy is to pay a variable quarterly dividend equal to our Cash Available for Distribution, during the previous quarter, subject to any reserves our board of directors may from time to time determine are required. The application of the formula in our policy would have resulted in a lesser dividend for the fourth quarter of 2011.  However, our Board of Directors nonetheless determined to declare a $0.13 per share dividend after taking into account our cash flow and our liquidity and capital resources. Dividends will be paid equally on a per-share basis between our common stock and our Class B stock. Cash Available for Distribution represents our net income less cash expenditures for capital items related to our fleet, such as drydocking or special surveys, other than vessel acquisitions and related expenses, plus non-cash compensation. For purposes of calculating Cash Available for Distribution, we may disregard non-cash adjustments to our net income, such as those that would result from acquiring a vessel subject to a charter that was above or below market rates. We intend to pay dividends on a quarterly basis.

The declaration and payment of any dividend will be subject to the discretion of our board of directors. The timing and amount of dividend payments will depend on our earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in our loan agreements, the provisions of Marshall Islands law affecting the payment of distributions to shareholders and other factors. Our board of directors may review and amend our dividend policy from time to time in light of our plans for future growth and other factors.

About Baltic Trading Limited

Baltic Trading Limited is a drybulk company focused on the spot charter market. Baltic Trading transports iron ore, coal, grain, steel products and other drybulk cargoes along global shipping routes. Baltic Trading's fleet consists of two Capesize, four Supramax and three Handysize vessels with an aggregate carrying capacity of approximately 672,000 dwt.

Conference Call Announcement

Baltic Trading Limited announced that it will hold a conference call on Wednesday, February 22, 2012 at 10:00 a.m. Eastern Time, to discuss its 2011 fourth quarter financial results.  The conference call and a presentation will be simultaneously webcast and will be available on the Company's website, www.BalticTrading.com. To access the conference call, dial (888)-487-0346 or (719) 457-2694 and enter passcode 9504638.  A replay of the conference call can also be accessed for two weeks by dialing (888) 203-1112 or (719) 457-0820 and entering the passcode 9504638. The Company intends to place additional materials related to the earnings announcement, including a slide presentation, on its website prior to the conference call.

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements use words such as "anticipate," "budget," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with a discussion of potential future events, circumstances or future operating or financial performance.  These forward looking statements are based on management's current expectations and observations. Included among the factors that, in our view, could cause actual results to differ materially from the forward looking statements contained in this report are the following: (i) declines in demand or rates in the drybulk shipping industry; (ii) prolonged weakness in drybulk rates; (iii) changes in the supply of or demand for drybulk products, generally or in particular regions; (iv) changes in the supply of drybulk carriers including newbuilding of vessels or lower than anticipated scrapping of older vessels; (v) changes in rules and regulations applicable to the cargo industry, including, without limitation, legislation adopted by international organizations or by individual countries and actions taken by regulatory authorities; (vi) increases in costs and expenses including but not limited to: crew wages, insurance, provisions, lube, oil, bunkers, repairs, maintenance and general, administrative, and management fee expenses; (vii) whether our insurance arrangements are adequate; (viii) changes in general domestic and international political conditions; (ix) acts of war, terrorism, or piracy; (x) changes in the condition of the Company's vessels or applicable maintenance or regulatory standards (which may affect, among other things, our anticipated drydocking or maintenance and repair costs) and unanticipated drydock expenditures; (xi) the number of offhire days needed to complete repairs on vessels and the timing and amount of any reimbursement by our insurance carriers for insurance claims, including offhire days; (xii) the Company's acquisition or disposition of vessels; (xiii) our ability to leverage Genco's relationships and reputation in the shipping industry; (xiv) the completion of definitive documentation with respect to charters; (xv) charterers' compliance with the terms of their charters in the current market environment; and other factors listed from time to time in our public filings with the Securities and Exchange Commission including, without limitation, the Company's Annual Report on Form 10-K for the year ended December 31, 2010 and its reports on Form 10-Q and Form 8-K. Our ability to pay dividends in any period will depend upon various factors, including the limitations under any credit agreements to which we may be a party, applicable provisions of Marshall Islands law and the final determination by the Board of Directors each quarter after its review of our financial performance.  The timing and amount of dividends, if any, could also be affected by factors affecting cash flows, results of operations, required capital expenditures, or reserves.  As a result, the amount of dividends actually paid may vary.  

SOURCE Baltic Trading Limited