Diana Shipping Inc. is a holding company incorporated under the laws of Liberia in March 1999 as Diana Shipping Investments Corp. In February 2005, the Company's articles of incorporation were amended. Under the amended and restated articles of incorporation, the Company was renamed Diana Shipping Inc. and was re-domiciled from the Republic of Liberia to the Republic of the Marshall Islands. Our executive offices are located at Pendelis 16, 175 64 Palaio Faliro, Athens, Greece. Our telephone number at this address is +30-210-947-0100. Our agent and authorized representative in the United States is our wholly-owned subsidiary, Bulk Carriers (USA) LLC, established in September 2006, in the State of Delaware, which is located at 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808.
In March 2012, we entered into, through two of our wholly owned subsidiaries, shipbuilding contracts with China Shipbuilding Trading Company, Limited and Jiangnan Shipyard (Group) Co., Ltd, for the construction of two ice class Panamax dry bulk carriers for the contract price of $29.0 million each. One of the vessels, the Crystalia, was delivered on February 20, 2014 and the other vessel the Atalandi, was delivered on May 12, 2014.
On May 17, 2013, we entered, through two separate wholly owned subsidiaries, into two shipbuilding contracts with China Shipbuilding Trading Company, Limited and Jiangnan Shipyard (Group) Co., Ltd. for the construction of two Newcastlemax dry bulk vessels for a contract price of $48.7 million each. We expect to take delivery of the two vessels in 2016.
36
On May 20, 2013, we entered into a loan agreement with Eluk Shipping Company Inc., a subsidiary of Diana Containerships, to provide to it an unsecured loan of up to $50.0 million, the drawdown of which was completed on August 20, 2013. On September 9, 2015, the agreement was amended, pursuant to which the loan matures on March 15, 2022; bears interest at LIBOR plus a margin of 3% per annum; the back-end fee accumulated up to and became payable on the date of the amendment; and the borrowers will pay to the lender a fee of $200 on the maturity date. In addition, the borrowers agreed to repay the principal amount of the loan on the last day of each interest period in amounts of $5.0 million per annum, but not to exceed $32.5 million in the aggregate. The loan is subordinated to Diana Containerships' loan with the Royal Bank of Scotland.
On May 24, 2013, we entered into, through two separate wholly-owned subsidiaries, a term loan facility for up to $30.0 million with The Export-Import Bank of China having a majority interest and DNB Bank ASA, as agent, to partly finance, after delivery, the construction cost of our two newbuilding Ice Class Panamax dry bulk carriers, named Crystalia and Atalandi, which we drew down on May 22, 2014.
On June 18, 2013, we signed, through two separate wholly-owned subsidiaries, a term loan facility for up to $18.0 million with Deutsche Bank Aktiengesellschaft Filiale Deutschlandgeschäft, ("or Deutsche Bank"),Bank, and on June 20, 2013, we completed the drawdown of $18.0 million in order to partially finance the acquisition costs of the Myrto and the Maia, both delivered earlier in 2013. On the same date, our wholly owned subsidiary, Bikini Shipping Company Inc., entered into a supplemental agreement with Deutsche Bank in order to amend the terms of its loan agreement dated October 9,8, 2009 with respect to the cross collateralization of the New York with Maia and Myrto. The agreement between Deutsche Bank and Bikini was terminated on March 10, 2015 following full repayment of the outstanding loan balance and on March 20, 2015, we prepaid the outstanding indebtedness under the loan agreement for Myrto and Maia, of $15.8 million.
On August 8, 2013, Diana Shipping Services S.A., or DSS, our wholly-owned subsidiary, was found guilty on felony counts and on December 5, 2013 was sentenced by the United States District Court in Norfolk, Virginia to a fine of $1.1 million, which was fully settled in two installments, and a period of probation of three years and six months, as a result of a conviction in which DSS was held vicariously liable for the actions of the chief engineer and second assistant engineer of the Thetis, who were found guilty by the Court of violating several U.S. statutes and regulations in failing to properly handle waste oils, maintain required records and for obstruction of justice. In addition, the sentence includes a requirement to maintain an enhanced system subject to independent audit for managing waste oils on vessels managed by DSS.
On November 26, 2013, the charterers of the Houston terminated the charter earlier than the termination date determined under the terms of the charter party and redelivered the vessel. We were awarded damages in arbitration proceedings against the charterers seeking to recover the losses resulting from the early termination. Following the publication of the award, the charterers filed for a creditors' voluntary liquidation in Hong Kong and we have filed our claim in the liquidation in Hong Kong.
On January 8, 2014, we entered, through a separate wholly-owned subsidiary, into a shipbuilding contract with Yangzhou Dayang Shipbuilding Co., Ltd. and Shanghai Sinopacific International Trade Co., Ltd., and since April 21, 2014 with Sumec Marine Co., Ltd., pursuant to an addendum, for the construction of a Kamsarmax dry bulk vessel for a contract price of $28.8 million. We expect to take delivery of the vessel in 2016.
On January 9, 2014, we entered into, through two separate wholly-owned subsidiaries, a term loan facility for up to $18.0 million with Commonwealth Bank of Australia to partially finance the acquisition costs of two Panamax dry bulk vessels, the Melite and the Artemis,, which were delivered on January 28, 2010 and August 26, 2013, respectively, and we completed the drawdown of $18.0 million on January 13, 2014.
On February 24, 2014, we completed a public offering of 2,600,000 shares of 8.875% Series B Cumulative Redeemable Perpetual Preferred Shares, par value $0.01 per share at $25.00 per share. We received net proceeds from the offering of $62.7 million, net of underwriting discount and offering expenses.
On May 22, 2014, our Board of Directors authorized a share repurchase plan for up to $100 million of our common shares of which, until the date of this annual report,up to January 30, 2015, we repurchased and retired 3,259,353 shares at the aggregate cost of $28.0 million and an average price of $8.6 per share. We have not repurchased any other shares since January 30, 2015.
On June 24,In 2014, we, through atwo separate wholly-owned subsidiary, entered into a Memorandum of Agreement to acquiresubsidiaries, acquired from an unaffiliated third partyparties the G. P. Zafirakis," a new-building Capesize dry bulk vessel, built by Qingdao Beihai Shipbuilding Heavy Industry Co., Ltd., Qingdao, People's Republic of China, for a purchase price of $58.0 million. The vesselmillion, which was delivered onin August 20, 2014.2014 and the Santa Barbara, a new-building Capesize dry bulk vessel, for a purchase price of $50.0 million, which was delivered in January 2015.
On July 29, 2014, we purchased 15,936,255 shares of the common stock of Diana Containerships for an aggregate purchase price of $40.0 million, increasing our ownership in Diana Containerships to 26.34%.million.
On December 8, 2014, we, through a separate wholly-owned subsidiary, entered into a Memorandum of Agreement to acquire from an unaffiliated third party the Santa Barbara, a new-building Capesize dry bulk vessel, built by Qingdao Beihai Shipbuilding Heavy Industry Co., Ltd., Qingdao, People's Republic of China, for a purchase price of $50.0 million. The vessel was delivered on January 12, 2015.
On December 18, 2014, we entered into, through two separate wholly-owned subsidiaries, a term loan facility for up to $55.0 million with BNP Paribas to re-financefinance part of the acquisition cost of the G.P.G. P. Zafirakis and P.S. Palios.P. S. Palios. We completed the drawdown of $53.5 million on December 19, 2014.
In December 2014, DSS acquired jointly with two other related entities, from unrelated individuals, a plot of land for an aggregate purchase price of €2.0 million or $2.5 million (based on the exchange rate of $U.S. Dollars to Euro as of the date of acquisition). DSS paid 1/3one third of the purchase price amounting to $0.9 million, including additional purchase costs incurred. The plot is under the common ownership of the joint purchasers.
On February 27, 2015 we entered into a commitment letter with Danish Ship Finance for a loan facility of $30.0 million to finance part of the acquisition cost of vessel Santa Barbara, subject to signing the loan agreement by May 01, 2015. On March 12, 2015, ABN AMRO Bank NV offered a term sheet, valid until March 27, 2015, for a loan of up to $53.0 million to refinance the acquisition cost of New York, Maia and Myrto.
On March 17, 2015, we entered into, through eight separate wholly-owned subsidiaries, a term loan facility of up to $110.0 million with Nordea Bank AB, London Branch, or Nordea, to refinance the existing agreements we had with the bank for working capital and general corporate purposes. We completed the drawdown of $93.1 million on March 19, 2015 and we fully repaid all outstanding indebtedness with the bank at that date.
On March 26, 2015, we entered into, through three wholly-owned subsidiaries, a loan agreement with ABN AMRO Bank N.V. for up to $53.0 million to refinance part of the acquisition cost of the vessels New York, Myrto and Maia. On March 30, 2015, we drew down the amount of $50.16 million under the loan facility.
On April 20, 2015, we entered into, through a wholly-owned subsidiary, an agreement to acquire from an unrelated third party a new-building Capesize dry bulk vessel, named New Orleans, for a purchase price of $43.0 million. The vessel was delivered on November 10, 2015.
On April 27, 2015, we entered into, through a wholly-owned subsidiary, a memorandum of agreement with an unrelated third party to acquire a Kamsarmax dry bulk vessel, renamed to Medusa, for a purchase price of $18.05 million. The vessel was delivered in June 2015.
On April 29, 2015, we entered into, through a wholly-owned subsidiary, a loan agreement with Danish Ship Finance A/S for a loan facility of $30.0 million, drawn on April 30, 2015 to partly finance the acquisition cost of the Santa Barbara.
On May 20, 2015, we offered $63.3 million aggregate principal amount of 8.5% Senior Notes due 2020 (the "Notes"), including an overallotment, at the price of $25.0 per Note. As part of the offering, the underwriters sold $12.8 million aggregate principal amount of the Notes to, or to entities affiliated with, the Company's chief executive officer, Mr. Simeon Palios, and other executive officers and certain directors of the Company at the public offering price. As of May 29, 2015, the Notes are trading on the NYSE under the ticker symbol "DSXN". The Notes bear interest from May 28, 2015 at a rate of 8.5% per year and will mature on May 15, 2020. Interest is payable quarterly in arrears on the 15th day of February, May, August and November of each year, commencing on August 15, 2015. The Company may redeem the Notes at its option, in whole or in part, at any time on or after May 15, 2017 at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. The Notes include financial and other covenants, including maximum net borrowings and minimum tangible net worth.
On May 7, 2015, our wholly owned subsidiary Diana Ship Management Inc. and Wilhelmsen Ship Management Holding Limited, an unaffiliated third party, established Diana Wilhelmsen Management Limited, or DWM, a 50/50 joint venture, with the purpose of providing management services to a number of vessels in our fleet. The DWM office is located in Limassol, Cyprus and currently it provides services to six of our vessels.
On July 22, 2015, we entered into a loan agreement with BNP Paribas for a loan of $165.0 million, drawn on July 24, 2015 to refinance the revolving credit facility with the Royal Bank of Scotland. In this respect, the revolving credit facility, having an outstanding balance of $195.0 million, was voluntarily prepaid in full and the related agreement was terminated.
On September 30, 2015, we entered into, through two wholly-owned subsidiaries, a term loan agreement with ING Bank N.V. for a loan of up to $39.7 million, drawn in two tranches, one in October 2015 and one in November 2015, to finance part of the acquisition cost of the Medusa and the New Orleans, delivered in June and November 2015 respectively.
On November 2, 2015, we entered into, through a wholly-owned subsidiary, a memorandum of agreement with an unrelated third party to acquire a Capesize dry bulk vessel, named Seattle, for a purchase price of $28.5 million, which was delivered in November 2015.
On January 7, 2016, we entered into, through the three wholly-owned subsidiaries with vessels under construction, a loan agreement with the Export-Import Bank of China for a loan of up to $75.7 million to finance part of the construction cost of these vessels. The loan will be available for drawdown until March 12, 2017, or such later date as all the lenders may in their discretion agree and will mature by March 2032 at the latest.
On February 4, 2016, we entered into, through three separate wholly-owned subsidiaries, three Memoranda of Agreement to acquire from a related party three Panamax vessels for an aggregate purchase price of $39.8 million, reduced to $39.3 million pursuant to addendum agreements dated March 4, 2016. Two of the vessels were delivered in March 2016 and the third vessel is expected to be delivered in April 2016. The Company has agreed to acquire the vessels from entities affiliated with Mrs. Semiramis Paliou and Mrs. Aliki Paliou, each of whom is a family member of the Company's Chief Executive Officer and Chairman of the Board. Mrs. Semiramis Paliou is also a director of the Company. The transaction was approved unanimously by a committee of the Board of Directors established for the purpose of considering the transaction and consisting of the Company's independent directors and each of its executive directors other than Mrs. Semiramis Paliou and Mr. Simeon Palios. The agreed upon purchase price of the vessels was based, among other factors, on independent third party broker valuations obtained by the Company. Consummation of the purchases is subject to the Company obtaining bank financing from the sellers' existing lenders for substantially the entire purchase price of the vessels, thereby resulting in little or no current cash outlay on the part of the Company.
On March 11, 2016, we signed, through two wholly-owned subsidiaries, a commitment letter with ABN AMRO Bank N.V. for a loan of up to $25.8 million to finance the acquisition cost of two of the three Panamax vessels mentioned above.
Please see "Item 5.B Liquidity and Capital Resources" for a discussion of our loan facilities.
B. Business overview
We are a global provider of shipping transportation services. We specialize in transportingthe ownership of dry bulk cargoes, including such commodities as iron ore, coal, grain and other materials along worldwide shipping routes.vessels. Currently, our operating fleet consists of 4045 dry bulk carriers, of which 2022 are Panamax, threefour are Kamsarmax, three are Post-Panamax, twelve14 are Capesize and two are Newcastlemax vessels, having a combined carrying capacity of approximately 4.65.2 million dwt. In addition, in 2016, we expect to take delivery of three vessels under construction and one secondhand vessel we agreed to acquire from a related party.
As of December 31, 2015, our fleet consisted of 43 vessels of which 20 Panamax, four Kamsarmax, three Post-Panamax, 14 Capesize and two Newcastlemax vessels, having a combined carrying capacity of approximately 5.0 million dwt, and a weighted average age of 7.4 years. In addition, we had three vessels under construction with expected delivery in 2016.
As of December 31, 2014, our fleet consisted of 39 vessels of which 20 Panamax, three Kamsarmax, three Post-Panamax, eleven Capesize and two Newcastlemax vessels, having a combined carrying capacity of approximately 4.4 million dwt, and a weighted average age of 7.1 years. In addition, we had three vessels under construction which we expect to takewith expected delivery of in 2016 and we had agreed to acquire Santa Barbara, which was delivered in January 2015.
As of December 31, 2013, our fleet consisted of 36 vessels of which 18 Panamax, three Kamsarmax, three Post-Panamax, ten Capesize and two Newcastlemax vessels, having a combined carrying capacity of approximately 4.1 million dwt, and a weighted average age of 6.6 years, excluding four vessels we had under construction.
As of December 31, 2012, our fleet consisted of 30 vessels of which 17 Panamax, three Post-Panamax, eight CapesizeDuring 2015, 2014 and two Newcastlemax vessels, having a combined carrying capacity of approximately 3.4 million dwt, and a weighted average age of 6.0 years, excluding two vessels under construction and the Myrto which was delivered in January 2013.
During 2014, 2013, and 2012, we had a fleet utilization of 99.4%99.3%, 99.3%99.4% and 98.7%99.3%, respectively, our vessels achieved daily time charter equivalent rates of $9,739, $12,081 $12,959 and $21,255,$12,959, respectively, and we generated revenues of $157.7 million, $175.6 million $164.0 million and $220.8$164.0 million, respectively.
The following table presents certain information concerning the dry bulk carriers in our fleet, as of March 24, 2015.28, 2016.
| Vessel | Sister Ships* | Gross Rate (USD Per Day) | Com** | Charterers | Delivery Date to Charterers*** | Redelivery Date to Owners**** | Notes |
| BUILT DWT |
| 23 Panamax Bulk Carriers |
| | | | | | | | |
1 | DANAE | A | $4,900 | 5.00% | Dampskibsselskabet Norden A/S, Copenhagen | 9-Dec-15 | 9-Nov-16 - 9-Mar-17 | |
| 2001 75,106 | | | | | | | |
2 | DIONE | A | $9,250 | 5.00% | RWE Supply & Trading GmbH, Essen | 12-Sep-14 | 8-Jan-16 | 1 |
| | | $4,350 | 5.00% | Nidera S.P.A., Roma | 4-Feb-16 | 20-Jan-17 - 4-May-17 | |
| 2001 75,172 | | | | | | | |
3 | NIREFS | A | $7,500 | 5.00% | Glencore Grain B.V., Rotterdam | 25-Dec-14 | 12-Jan-16 | |
| | | $4,600 | 5.00% | Transgrain Shipping B.V., Rotterdam | 15-Jan-16 | 15-Dec-16 - 30-Mar-17 | |
| 2001 75,311 | | | | | | | |
| Vessel | Sister Ships* | Gross Rate (USD Per Day) | Com** | Charterer | Delivery Date to Charterer | Redelivery Date to Owners*** | Notes |
| BUILT DWT |
| Panamax Bulk Carriers |
| | | | | | | | |
1 | DANAE | A | $8,250 | 5.00% | Intermare Transport GmbH, Hamburg | 10-Mar-13 | 16-Jan-15 | |
| | | $7,650 | 3.75% | Glencore Grain B.V., Rotterdam | 16-Jan-15 | 16-Dec-15 - 16-Mar-16 | |
| 2001 75,106 | | | | | | | |
2 | DIONE | A | $9,250 | 5.00% | RWE Supply & Trading GmbH, Essen | 12-Sep-14 | 12-Oct-15 - 27-Feb-16 | |
| 2001 75,172 | | | | | | | |
3 | NIREFS | A | $7,500 | 5.00% | Glencore Grain B.V., Rotterdam | 25-Dec-14 | 25-Nov-15 25-Feb-16 | |
| 2001 75,311 | | | | | | | |
4 | ALCYON | A | $7,750 | 5.00% | EDF Trading Limited, UK | 21-Dec-12 | 11-Apr-15 - 21-May-15 | 1 |
| 2001 75,247 | | | | | | | |
5 | TRITON | A | $9,250 | 5.00% | Glencore Grain B.V., Rotterdam | 24-Oct-14 | 24-Sep-15 - 24-Dec-15 | |
| 2001 75,336 | | | | | | | |
6 | OCEANIS | A | $9,000 | 5.00% | Glencore Grain B.V., Rotterdam | 19-Jun-14 | 22-Mar-15 | |
| | | $4,500 | 5.00% | | 22-Mar-15 | 11-May-15 | |
| | | $7,200 | 5.00% | | 11-May-15 | 22-Feb-16 - 22-May-16 | |
| 2001 75,211 | | | | | | | |
7 | THETIS | B | $8,300 | 5.00% | EDF Trading Limited, UK | 1-Sep-13 | 1-Jul-15 - 1-Dec-15 | |
| 2004 73,583 | | | | | | | |
8 | PROTEFS | B | $9,000 | 5.00% | Cargill International S.A., Geneva | 14-Sep-12 | 27-Mar-15 | 1,2 |
| 2004 73,630 | | | | | | | |
9 | CALIPSO | B | $8,100 | 4.75% | Cargill International S.A., Geneva | 29-Jul-13 | 29-Apr-15 - 29-Aug-15 | |
| 2005 73,691 | | | | | | | |
40
4 | ALCYON | A | $7,600 | 5.00% | Transgrain Shipping B.V., Rotterdam | 22-Aug-15 | 22-Apr-16 - 22-Jul-16 | |
| 2001 75,247 | | | | | | | |
5 | TRITON | A | $6,800 | 5.00% | Glencore Grain B.V., Rotterdam | 28-Oct-15 | 13-Sep-16 - 28-Dec-16 | |
| 2001 75,336 | | | | | | | |
6 | OCEANIS | A | $7,200 | 5.00% | Glencore Grain B.V., Rotterdam | 11-May-15 | 12-Mar-16 | 2 |
| | | $6,750 | 5.00% | Bunge S.A., Geneva | 12-Apr-16 | 12-Jun-16 | 3,4,5 |
| 2001 75,211 | | | | | | | |
7 | THETIS | B | $7,000 | 5.00% | Dampskibsselskabet Norden A/S, Copenhagen | 14-Jul-15 | 14-Jun-16 - 14-Sep-16 | |
| 2004 73,583 | | | | | | | |
8 | PROTEFS | B | $6,250 | 5.00% | Glencore Grain B.V., Rotterdam | 3-Apr-15 | 18-Feb-16 | 6 |
| | | $4,500 | 5.00% | Transgrain Shipping B.V., Rotterdam | 23-Feb-16 | 8-Feb-17 - 23-Jun-17 | |
| 2004 73,630 | | | | | | | |
9 | CALIPSO | B | $6,000 | 5.00% | China Shipping Bulk Carrier Co., Ltd., Hong Kong | 9-Jun-15 | 9-Apr-16 - 9-May-16 | 7 |
| 2005 73,691 | | | | | | | |
10 | CLIO | B | $6,500 | 5.00% | Transgrain Shipping B.V., Rotterdam | 4-Aug-15 | 4-May-16 - 4-Aug-16 | |
| 2005 73,691 | | | | | | | |
11 | NAIAS | B | $6,800 | 4.75% | Cargill International S.A., Geneva | 12-Jul-15 | 12-May-16 - 12-Aug-16 | 8 |
| 2006 73,546 | | | | | | | |
12 | ARETHUSA | B | $7,100 | 5.00% | Glencore Grain B.V., Rotterdam | 5-Mar-15 | 5-Apr-16 - 5-May-16 | 7 |
| 2007 73,593 | | | | | | | |
13 | ERATO | C | $7,100 | 5.00% | Glencore Grain B.V., Rotterdam | 9-Mar-15 | 26-Mar-16 | |
| | | $4,650 | 5.00% | 26-Mar-16 | 11-Feb-17 - 26-May-17 | |
| 2004 74,444 | | | | | | | |
14 | CORONIS | C | $6,500 | 5.00% | Sandgate Maritime Ltd | 3-Jul-15 | 19-Mar-16 | 9 |
| | | $4,750 | 5.00% | Narina Maritime Ltd | 19-Mar-16 | 19-Feb-17 - 19-May-17 | |
| 2006 74,381 | | | | | | | |
15 | MELITE | D | $7,250 | 4.75% | Cargill International S.A., Geneva | 13-Oct-15 | 13-Sep-16 - 13-Dec-16 | |
| 2004 76,436 | | | | | | | |
16 | MELIA | D | $7,200 | 5.00% | Nidera S.P.A., Roma | 24-Oct-15 | 24-Nov-16 - 24-Feb-17 | |
| 2005 76,225 | | | | | | | |
17 | ARTEMIS | | $7,500 | 5.00% | China Shipping Bulk Carrier Co., Ltd., Hong Kong | 16-Aug-15 | 16-May-16 - 16-Aug-16 | |
| 2006 76,942 | | | | | | | |
18 | LETO | | $7,100 | 4.75% | Cargill International S.A., Geneva | 19-Jun-15 | 4-Sep-16 - 3-Jan-17 | |
| 2010 81,297 | | | | | | | |
19 | SELINA | E | $5,800 | 5.00% | Dampskibsselskabet Norden A/S, Copenhagen | 24-Mar-16 | 15-Oct-16 - 15-Feb-17 | |
| 2010 75,700 | | | | | | | |
20 | MANZONI | E | - | - | - | - | - - - | 10,11 |
| (tbr. MAERA) | | | | | | | |
| 2013 75,403 | | | | | | | |
21 | INFINITY 9 | | $7,825 | 5.00% | Glencore Grain B.V., Rotterdam | 21-Mar-16 | 24-Jun-16 - 24-Oct-16 | |
| (tbr. ISMENE) | | | | | | |
| 2013 77,901 | | | | | | | |
22 | CRYSTALIA | F | $9,000 | 5.00% | Glencore Grain B.V., Rotterdam | 29-Aug-15 | 29-Jun-16 - 29-Sep-16 | |
| 2014 77,525 | | | | | | | |
23 | ATALANDI | F | $8,000 | 5.00% | Glencore Grain B.V., Rotterdam | 21-May-15 | 21-Mar-16 | |
| | | $5,300 | 5.00% | 26-Mar-16 | 26-Nov-17 - 26-Apr-18 | |
| 2014 77,529 | | | | | | | |
| 4 Kamsarmax Bulk Carriers |
24 | MAIA | G | $7,500 | 5.00% | RWE Supply & Trading GmbH, Essen | 13-Nov-15 | 13-Apr-17 - 13-Jul-17 | |
| 2009 82,193 | | | | | | | |
25 | MYRSINI | G | $8,250 | 4.75% | Clearlake Shipping Pte. Ltd., Singapore | 18-Feb-15 | 9-Mar-16 | 12 |
| | | $5,550 | 5.00% | RWE Supply & Trading GmbH, Essen | 9-Mar-16 | 9-Mar-17 - 24-Jun-17 | |
| 2010 82,117 | | | | | | | |
26 | MEDUSA | G | $7,450 | 4.75% | Clearlake Shipping Pte. Ltd., Singapore | 2-Jun-15 | 4-Apr-16 | 7,12 |
| 2010 82,194 | | | | | | | |
27 | MYRTO | G | $6,000 | 4.75% | Cargill International S.A., Geneva | 24-Dec-15 | 24-Oct-16 - 8-Feb-17 | |
| 2013 82,131 | | | | | | | |
| 3 Post-Panamax Bulk Carriers |
28 | ALCMENE | | $6,750 | 5.00% | ADM International Sarl, Rolle, Switzerland | 13-May-15 | 13-Feb-17 - 2-Jun-17 | |
| 2010 93,193 | | | | | | | |
29 | AMPHITRITE | H | $7,700 | 5.00% | Bunge S.A., Geneva | 15-Jul-15 | 30-Apr-17 - 30-Aug-17 | |
| 2012 98,697 | | | | | | | |
30 | POLYMNIA | H | $5,650 | 4.75% | Cargill International S.A., Geneva | 15-Dec-15 | 30-Nov-16 - 15-Mar-17 | |
| 2012 98,704 | | | | | | | |
| 14 Capesize Bulk Carriers |
31 | NORFOLK | | $10,250 | 4.75% | Clearlake Shipping Pte. Ltd., Singapore | 4-Mar-15 | 28-Mar-16 | 12,13 |
| | | $4,350 | 5.00% | SwissMarine Services S.A., Geneva | 28-Mar-16 | 28-Dec-16 - 28-Mar-17 | |
| 2002 164,218 | | | | | | | |
32 | ALIKI | | $26,500 | 5.00% | Minmetals Logistics Group Co. Ltd., Beijing | 1-Mar-11 | 16-Jan-16 | 14 |
| | | $5,300 | 5.00% | SwissMarine Services S.A., Geneva | 16-Jan-16 | 16-Dec-16 - 16-Mar-17 | |
| 2005 180,235 | | | | | | | |
33 | BALTIMORE | | $15,000 | 5.00% | RWE Supply & Trading GmbH, Essen | 8-Jul-13 | 8-Jul-16 - 8-Jan-17 | |
| 2005 177,243 | | | | | | | |
34 | SALT LAKE CITY | | BCI 4TCs AVG + 3.5% | 5.00% | K Noble Hong Kong Ltd., Hong Kong | 7-Feb-15 | 7-Nov-16 - 7-Feb-17 | |
| 2005 171,810 | | | | | | | |
35 | SIDERIS GS | I | $6,500 | 5.00% | Rio Tinto Shipping (Asia) Pte., Ltd., Singapore | 22-Dec-15 | 22-Jan-17 - 7-Jul-17 | |
| 2006 174,186 | | | | | | | |
36 | SEMIRIO | I | $10,000 | 5.00% | Rio Tinto Shipping (Asia) Pte., Ltd., Singapore | 20-Feb-15 | 6-Feb-16 | 15 |
| | | $4,800 | 5.00% | SwissMarine Services S.A., Geneva | 6-Feb-16 | 6-Jan-17 - 6-May-17 | |
| 2007 174,261 | | | | | | | |
37 | BOSTON | I | $13,000 | 4.75% | Clearlake Shipping Pte. Ltd., Singapore | 9-Aug-15 | 25-May-17 - 24-Oct-17 | 12 |
| 2007 177,828 | | | | | | | |
38 | HOUSTON | I | $12,750 | 5.00% | RWE Supply & Trading GmbH, Essen | 4-Jan-15 | 29-Jan-16 | |
| | | $5,150 | 5.00% | SwissMarine Services S.A., Geneva | 29-Jan-16 | 29-Dec-16 - 29-Mar-17 | |
| 2009 177,729 | | | | | | | |
39 | NEW YORK | I | $12,850 | 4.75% | Clearlake Shipping Pte. Ltd., Singapore | 17-Dec-14 | 3-Feb-16 | 12,16 |
| | | $5,200 | 5.00% | Rio Tinto Shipping (Asia) Pte., Ltd., Singapore | 3-Feb-16 | 3-Jan-17 - 18-May-17 | |
| 2010 177,773 | | | | | | | |
40 | SEATTLE | J | $7,300 | 4.75% | SwissMarine Services S.A., Geneva | 9-Dec-15 | 25-Oct-16 - 9-Feb-17 | |
| 2011 179,362 | | | | | | | |
41 | P. S. PALIOS | J | $13,000 | 5.00% | RWE Supply & Trading GmbH, Essen | 18-Sep-15 | 31-Dec-16 - 31-Mar-17 | |
| 2013 179,134 | | | | | | | |
42 | G. P. ZAFIRAKIS | K | $25,250 | 5.00% | RWE Supply & Trading GmbH, Essen | 23-Aug-14 | 14-Feb-16 | |
| | | $6,500 | 5.00% | 14-Feb-16 | 14-May-17 - 14-Aug-17 | |
| 2014 179,492 | | | | | | | |
43 | SANTA BARBARA | K | $7,500 | 5.00% | RWE Supply & Trading GmbH, Essen | 18-Dec-15 | 18-Dec-16 - 18-Mar-17 | |
| 2015 179,426 | | | | | | | |
44 | NEW ORLEANS | | $11,650 | 5.00% | SwissMarine Services S.A., Geneva | 11-Nov-15 | 11-Oct-16 - 26-Feb-17 | |
| 2015 180,960 | | | | | | | |
| 2 Newcastlemax Bulk Carriers |
45 | LOS ANGELES | L | $7,750 | 5.00% | SwissMarine Services S.A., Geneva | 9-Dec-15 | 24-Nov-16 - 24-Mar-17 | |
| 2012 206,104 | | | | | | | |
46 | PHILADELPHIA | L | $18,000 | 5.00% | EDF Trading Limited, UK | 17-May-12 | 20-Jan-16 | 17 |
| | | $6,450 | 5.00% | RWE Supply & Trading GmbH, Essen | 20-Jan-16 | 20-Dec-16 - 20-Mar-17 | |
| 2012 206,040 | | | | | | | |
| 3 Vessels Under Construction |
47 | HULL No. DY6006 | | - | - | - | - | - - - | 18 |
| (tbn. PHAIDRA) | | | | | | | |
| 2016 82,000 | | | | | | | |
48 | HULL No. H2548 | M | - | - | - | - | - - - | 18 |
| (tbn. SAN FRANCISCO) | | | | | | | |
| 2016 208,500 | | | | | | | |
49 | HULL No. H2549 | M | - | - | - | - | - - - | 18 |
| (tbn. NEWPORT NEWS) | | | | | | | |
| 2016 208,500 | | | | | | | |
10 | CLIO | B | $8,600 | 4.75% | Cargill International S.A., Geneva | 22-Aug-13 | 22-May-15 - 22-Aug-15 | |
| 2005 73,691 | | | | | | | |
11 | NAIAS | B | $8,500 | 5.00% | Bunge S.A., Geneva | 3-Sep-14 | 4-Jul-15 - 4-Oct-15 | |
| 2006 73,546 | | | | | | | |
12 | ARETHUSA | B | $8,250 | 5.00% | Glencore Grain B.V., Rotterdam | 20-Nov-14 | 5-Mar-15 | |
| | | $7,100 | 5.00% | | 5-Mar-15 | 5-Feb-16 - 5-May-16 | |
| 2007 73,593 | | | | | | | |
13 | ERATO | C | $8,500 | 5.00% | RWE Supply & Trading GmbH, Essen | 27-Nov-14 | 14-Jan-15 | |
| | | $8,000 | 5.00% | Langlois Enterprises Ltd. | 17-Jan-15 | 9-Mar-15 | |
| | | $7,100 | 5.00% | Glencore Grain B.V., Rotterdam | 9-Mar-15 | 9-Feb-16 - 9-May-16 | |
| 2004 74,444 | | | | | | | |
14 | CORONIS | C | $11,550 | 5.00% | Oberon Holdings Limited | 12-Jun-14 | 12-May-15 - 12-Aug-15 | |
| 2006 74,381 | | | | | | | |
15 | MELITE | D | $7,250 | 5.00% | Glencore Grain B.V., Rotterdam | 29-Jan-15 | 29-Sep-15 - 29-Jan-16 | 3 |
| 2004 76,436 | | | | | | | |
16 | MELIA | D | $12,000 | 3.75% | Rio Tinto Shipping Pty, Ltd., Melbourne | 10-May-14 | 10-Apr-15 - 10-Jul-15 | 4 |
| 2005 76,225 | | | | | | | |
17 | ARTEMIS | | $9,375 | 3.75% | Rio Tinto Shipping Pty, Ltd., Melbourne | 26-Aug-13 | 26-Jun-15 - 26-Oct-15 | |
| 2006 76,942 | | | | | | | |
18 | LETO | | $11,350 | 4.75% | Cargill International S.A., Geneva | 19-Jul-14 | 19-Jun-15 - 19-Sep-15 | 5 |
| 2010 81,297 | | | | | | | |
19 | CRYSTALIA | E | $15,800 | 5.00% | Glencore Grain B.V., Rotterdam | 21-Feb-14 | 21-Aug-15 - 21-Nov-15 | |
| 2014 77,525 | | | | | | | |
20 | ATALANDI | E | $13,500 | 5.00% | Glencore Grain B.V., Rotterdam | 13-May-14 | 13-Apr-15 - 18-Apr-15 | 1 |
| 2014 77,529 | | | | | | | |
| Kamsarmax Bulk Carriers |
21 | MAIA | F | $12,000 | 5.00% | RWE Supply & Trading GmbH, Essen | 29-Sep-14 | 29-Sep-15 - 29-Jan-16 | |
| 2009 82,193 | | | | | | | |
22 | MYRSINI | F | $15,500 | 4.75% | Clearlake Shipping Pte. Ltd., Singapore | 12-Feb-14 | 18-Feb-15 | 6 |
| | | $8,250 | 4.75% | | 18-Feb-15 | 18-Dec-15 - 18-Apr-16 | |
| 2010 82,117 | | | | | | | |
23 | MYRTO | F | $9,000 | 5.00% | Cargill International S.A., Geneva | 25-Jan-13 | 5-Jan-15 | |
| | | $9,850 | 5.00% | Glencore Grain B.V., Rotterdam | 5-Jan-15 | 5-Dec-15 - 5-Mar-16 | |
| 2013 82,131 | | | | | | | |
| Post-Panamax Bulk Carriers |
24 | ALCMENE | | $7,250 | 5.00% | ADM International Sarl, Rolle, Switzerland | 22-Feb-13 | 28-Feb-15 | 7,8 |
| | | $6,000 | 5.00% | Topsail Shipping Co., Limited Hong Kong | 15-Mar-15 | 30-Mar-15 | 9 |
| 2010 93,193 | | | | | | | |
25 | AMPHITRITE | | $11,300 | 5.00% | Bunge S.A., Geneva | 15-Aug-14 | 15-Jul-15 - 15-Oct-15 | |
| 2012 98,697 | | | | | | | |
26 | POLYMNIA | | $7,600 | 5.00% | Bunge S.A., Geneva | 16-Jan-13 | 3-Jan-15 | 10 |
| | | $7,500 | 5.00% | Vroon Dry Cargo Chartering B.V., Breskens | 17-Jan-15 | 17-Oct-15 - 17-Feb-16 | 11 |
| 2012 98,704 | | | | | | | |
| Capesize Bulk Carriers |
27 | NORFOLK | | $10,700 | 4.50% | Clearlake Shipping Pte. Ltd., Singapore | 16-Jan-13 | 4-Mar-15 | 6,12 |
| | | $10,250 | 4.75% | | 4-Mar-15 | 4-Apr-16 - 4-Aug-16 | |
| 2002 164,218 | | | | | | | |
28 | ALIKI | | $26,500 | 5.00% | Minmetals Logistics Group Co. Ltd., Beijing | 1-Mar-11 | 1-Feb-16 - 1-Apr-16 | |
| 2005 180,235 | | | | | | | |
29 | BALTIMORE | | $15,000 | 5.00% | RWE Supply & Trading GmbH, Essen | 8-Jul-13 | 8-Jul-16 - 8-Jan-17 | |
| 2005 177,243 | | | | | | | |
30 | SALT LAKE CITY | | $16,200 | 5.00% | Kawasaki Kisen Kaisha, Ltd., Tokyo | 23-Nov-14 | 7-Feb-15 | |
| | | BCI 4TCs AVG + 3.5% | 5.00% | K Noble Hong Kong Ltd., Hong Kong | 7-Feb-15 | 7-Nov-16 - 7-Feb-17 | |
| 2005 171,810 | | | | | | | |
31 | SIDERIS GS | G | $13,500 | 4.75% | Cargill International S.A., Geneva | 14-Mar-13 | 21-Feb-15 | |
| | | $10,000 | 5.00% | Rio Tinto Shipping (Asia) Pte., Ltd., Singapore | 22-Feb-15 | 22-Dec-15 - 22-Apr-16 | |
| 2006 174,186 | | | | | | | |
32 | SEMIRIO | G | $14,000 | 4.75% | Cargill International S.A., Geneva | 19-Mar-13 | 20-Feb-15 | |
| | | $10,000 | 5.00% | Rio Tinto Shipping (Asia) Pte., Ltd., Singapore | 20-Feb-15 | 20-Feb-16 - 20-Jun-16 | |
| 2007 174,261 | | | | | | | |
33 | BOSTON | G | $14,250 | 4.75% | Clearlake Shipping Pte. Ltd., Singapore | 24-Aug-13 | 9-Aug-15 - 8-Feb-16 | 6 |
| 2007 177,828 | | | | | | | |
34 | HOUSTON | G | $20,500 | 4.75% | Clearlake Shipping Pte. Ltd., Singapore | 3-Dec-13 | 4-Jan-15 | 6 |
| | | $12,750 | 5.00% | RWE Supply & Trading GmbH, Essen | 4-Jan-15 | 4-Jan-16 - 4-Apr-16 | |
| 2009 177,729 | | | | | | | |
35 | NEW YORK | G | $12,850 | 4.75% | Clearlake Shipping Pte. Ltd., Singapore | 17-Dec-14 | 17-Feb-16 - 17-Jun-16 | 6 |
| 2010 177,773 | | | | | | | |
36 | P. S. PALIOS | | $18,350 | 5.00% | RWE Supply & Trading GmbH, Essen | 3-Dec-13 | 18-Sep-15 - 31-Dec-15 | |
| 2013 179,134 | | | | | | | |
37 | G. P. ZAFIRAKIS | H | $25,250 | 5.00% | RWE Supply & Trading GmbH, Essen | 23-Aug-14 | 14-Feb-16 - 23-Jun-16 | |
| 2014 179,492 | | | | | | | |
38 | SANTA BARBARA | H | $12,000 | 5.00% | RWE Supply & Trading GmbH, Essen | 13-Jan-15 | 13-Dec-15 - 13-Mar-16 | |
| 2015 179,426 | | | | | | | |
| Newcastlemax Bulk Carriers |
39 | LOS ANGELES | I | $18,000 | 5.00% | EDF Trading Limited, UK | 9-Feb-12 | 9-Dec-15 - 9-Apr-16 | |
| 2012 206,104 | | | | | | | |
40 | PHILADELPHIA | I | $18,000 | 5.00% | EDF Trading Limited, UK | 17-May-12 | 17-Jan-16 - 17-Jul-16 | |
| 2012 206,040 | | | | | | | |
| Vessels Under Construction |
41 | HULL DY6006 | | - | - | - | - | - - - | 13 |
| 2016 82,000 | | | | | | | |
42 | HULL H2548 | J | - | - | - | - | - - - | 13 |
(tbn. SAN FRANCISCO) | | | | |
| 2016 208,500 | | | | | | | |
43 | HULL H2549 | J | - | - | - | - | - - - | 13 |
(tbn. NEWPORT NEWS) | | | | |
| 2016 208,500 | | | | | | | |
* Each dry bulk carrier is a "sister ship", or closely similar, to other dry bulk carriers that have the same letter. |
** Total commission percentage paid to third parties. |
*** Charterers' optional periodIn case of newly acquired vessel with time charter attached, this date refers to redeliverthe expected/actual date of delivery of the vessel to owners. Charterers have the rightCompany. |
**** Range of redelivery dates, with the actual date of redelivery being at the Charterers' option, but subject to add the off hire days, if any,terms, conditions, and thereforeexceptions of the optional period may be extended.particular charterparty. |
|
1 Vessel was on scheduled drydocking from January 8, 2016 to February 4, 2016. |
2 Currently without an active charterparty. |
3 Estimated delivery date to the charterers. |
4 Redelivery date based on an estimated time charter trip duration of about 60 days. |
5 Charter includes a one time gross ballast bonus payment of US$175,000. |
6 Glencore Grain B.V., Rotterdam has agreed to compensate the owners for the early redelivery of the vessel until the minimum agreed redelivery date, March 3, 2016. |
7 Based on latest information. |
2 On October 14, 2014,8 During the Company signed an addendum, extendingfirst quarter of 2016, the initially agreed maximum redelivery date by a month. On December 15, 2014, the Company agreed to further extend the maximum redelivery date till April 14, 2015. |
3 Vessel on scheduled drydocking from December 30, 2014 to January 22, 2015. |
4 Vesselvessel was off-hire for drydocking from January 15, 2015 to February 5, 2015.for approximately 24 days. |
5 Vessel off-hire9 Sandgate Maritime Ltd has agreed to compensate the owners for drydocking from February 7, 2015 to February 18, 2015.the early redelivery of the vessel until the minimum agreed redelivery date, April 3, 2016. |
610 Consummation of the purchase is subject to the Company obtaining satisfactory bank financing from the sellers' existing lenders. |
11 Expected date of delivery to the Company by the end of April 2016. |
12 Clearlake Shipping Pte. Ltd., Singapore is a member of the Gunvor Group. |
7 In February 2015, owners and charterers mutually13 Clearlake Shipping Pte. Ltd., Singapore has agreed to extendcompensate the optional period.owners for the early redelivery of the vessel until the minimum agreed redelivery date, April 4, 2016. |
8 Vessel on scheduled drydocking from14 Minmetals Logistics Group Co. Ltd., Beijing has agreed to compensate the owners for the early redelivery of the vessel until the minimum agreed redelivery date, February 28, 2015 to March 15, 2015.1, 2016. |
9 Redelivery15 Rio Tinto Shipping (Asia) Pte., Ltd., Singapore has agreed to compensate the owners for the early redelivery of the vessel until the minimum agreed redelivery date, based on an estimated time charter trip duration of about 15 days. |
10 Prior to October 12, 2013, chartered to Augustea Bunge Maritime Limited, Malta.February 20, 2016. |
11 Charter includes a one time gross ballast bonus payment16 Clearlake Shipping Pte. Ltd., Singapore has agreed to compensate the owners for the early redelivery of US$237,500.the vessel until the minimum agreed redelivery date, February 17, 2016. |
12 Charterers have exercised their right to add the off-hire days and therefore the optional period17 As per relevant charterparty, EDF Trading Limited, UK has been extended up to February 18, 2015. From then onwards, owners and charterers mutually agreed to further extendpay US$18,000 per day until the optional period.minimum agreed redelivery date, January 17, 2016. The gross charter rate was amended to US$8,500 per day until January 20, 2016 (approximately three days). |
1318 Year of delivery and dwt are based on shipbuilding contract. |
Each of our vessels is owned through a separate wholly-owned subsidiary.
Management of Our Fleet
The business of Diana Shipping Inc. is the ownership of dry bulk vessels. The parent holding company wholly owns, directly or indirectly, the subsidiaries which own the vessels that comprise our fleet. The holding company sets general overall direction for the company and interfaces with various financial markets. The commercial and technical management of our fleet, as well as providingthe provision of administrative services relating to the fleet's operations, are carried out by our wholly-owned subsidiary, Diana Shipping Services S.A., which we refer to as DSS, or our fleet manager.and Diana Wilhelmsen Management Limited, a 50/50 joint venture with Wilhelmsen Ship Management, which we refer to as DWM. In exchange for providing us with commercial and technical services, personnel and office space, we pay our fleet managerDSS a commission that is equal to 2% of ourthe revenues of the managed vessels, a fixed management fee of $15,000 per month for each vessel in operation and a fixed monthly fee of $7,500 for vessels under construction and for laid up vessels. The administrative services of Diana Shipping Inc and its subsidiariesInc. are also carried out by DSS. On October 1, 2013, Diana Shipping Inc., entered into an agreement with DSS for the provision of administrative services for a fixed monthly fee of $10,000. Such services may include budgeting, reporting, monitoring of bank accounts, compliance with banks, payroll services and any other possible service that Diana Shipping Inc. or its subsidiaries would require to perform theirits operations. Similarly, in exchange for providing us with commercial and technical services, we pay DWM a commission on the revenues of the managed vessels, a fixed management fee of $20,000 per month for each vessel in operation and a fixed monthly fee of $10,000 for laid up vessels. The amounts deriving from thesethe agreements with DSS are considered inter-company transactions and, therefore, are eliminated from our consolidated financial statements. The management fees deriving from the agreements with DWM are included in our statement of operations as "Management fees to related party", whereas commercial fees are included in "Voyage expenses".
Until March 1, 2013, DSS also provided to Diana Containerships commercial, technical, accounting, administrative, financial reporting and other services necessary for the operation of its business, pursuant to an Administrative Services Agreement and Vessel Management Agreements. DSS received a monthly fee of $10,000 for administrative services; a commission of 1% of the gross hire earned by the vessels and a technical management fee of $15,000 per vessel per month for each vessel in operation. For 2010 and until January 18, 2011, such fees received by DSS, relating to the management services offered to Diana Containerships, were eliminated from our consolidated financial statements as intercompany transactions. Effective January 19, 2011, after the partial spin-off of Diana Containerships, they were recorded as other revenues.
Pursuant to the Broker Services Agreement, datedOn June 1, 2010, DSS appointedDiana Enterprises Inc., or Diana Enterprises, a related party controlled by our Chief Executive Officer and Chairman of the Board, Mr. Simeon Palios, was appointed to act as broker to assist it in providing services to us for an annual feeus. Brokerage fees are included in "General and Administrative expenses" in our statement of $1.7 million. In February 2012, the agreement between DSS and Diana Enterprises was terminated and replacedoperations. The terms of this relationship are currently governed by a new agreement for the provision of brokerage services, for an increased commission of $2.4 million per year, paid quarterly at the beginning of each quarter and with a retroactive effect from JanuaryBrokerage Services Agreement dated April 1, 2012. On March 15, 2013, the agreement between DSS and Diana Enterprises was terminated and replaced by a new agreement providing for a monthly fee of $0.2 million payable quarterly at the beginning of each quarter and with a retroactive effect from March 1, 2013. On March 4, 2014, this agreement was terminated and replaced by an agreement having a term of fifteen months with retroactive effect from January 1, 2014 and a reduced monthly fee of $104,166, payable every quarter in advance. On April 9, 2014 this agreement was terminated and replaced by an agreement between DSI and Diana Enterprises, all other terms being the same, with effect from July 1, 2014 and until March 31, 2015.
Our Customers
Our customers include national, regional and international companies, such as Cargill International S.A., EDF Trading Ltd, RWE Supply and Trading Gmbh, Clearlake Shipping Pte Ltd. During 2015, four of our charterers accounted for 66% of our revenues: EDF Trading (10%), Glencore (20%), RWE Supply (24%) and Clearlake (12%). During 2014, four of our charterers accounted for 55% of our revenues;revenues: EDF Trading (15%), Cargill International S.A., (18%), RWE Supply.Supply (10%) and Clearlake (12%). During 2013, four of our charterers accounted for 58% of our revenues;revenues: EDF Trading (19%), Cargill International S.A., (17%), Shagang Shipping Co. (11%) and Nippon Yusen Kaisha, Tokyo (11%). During 2012, three of our charterers accounted for 40% of our revenues; EDF Trading (10%), Cargill International S.A., (18%) and Corus UK Limited (12%).
We charter our dry bulk carriers to customers primarily pursuant to time charters. Under our time charters, the charterer typically pays us a fixed daily charter hire rate and bears all voyage expenses, including the cost of bunkers (fuel oil) and canal and port charges. We remain responsible for paying the chartered vessel's operating expenses, including the cost of crewing, insuring, repairing and maintaining the vessel. In 2014,2015, we paid commissions that have ranged from 3.75% to 5.0% of the total daily charter hire rate of each charter to unaffiliated ship brokers and to in-house brokers associated with the charterer, depending on the number of brokers involved with arranging the charter.
We strategically monitor developments in the dry bulk shipping industry on a regular basis and, subject to market demand, seek to adjust the charter hire periods for our vessels according to prevailing market conditions. In order to take advantage of the relatively stable cash flow and high utilization rates, associated withwe fix some of our vessels on long-term time charters, we have fixedcharters. Currently, the majority of our vessels on long-term time. Those of our vesselsare employed on short-term time charters, providewhich provides us with flexibility in responding to market developments. We will continue tocontinuously evaluate our balance of short- and long-term charters and may extend or reduce the charter hire periods of the vessels in our fleet according to the developments in the dry bulk shipping industry.
The Dry Bulk Shipping Industry
The global dry bulk carrier fleet could be divided into seven categories based on a vessel's carrying capacity. These categories consist of:
| · | Very Large Ore Carriers (VLOC). Very large ore carriers have a carrying capacity of more than 200,000 dwt and are a comparatively new sector of the dry bulk carrier fleet. VLOCs are built to exploit economies of scale on long-haul iron ore routes. |
| · | Capesize. Capesize vessels have a carrying capacity of 110,000-199,999 dwt. Only the largest ports around the world possess the infrastructure to accommodate vessels of this size. Capesize vessels are primarily used to transport iron ore or coal and, to a much lesser extent, grains, primarily on long-haul routes. |
| · | Post-Panamax. Post-Panamax vessels have a carrying capacity of 80,000-109,999 dwt. These vessels tend to have a shallower draft and larger beam than a standard Panamax vessel with a higher cargo capacity. These vessels have been designed specifically for loading high cubic cargoes from draught restricted ports, although they cannot transit the Panama Canal. |
| · | Panamax. Panamax vessels have a carrying capacity of 60,000-79,999 dwt. These vessels carry coal, iron ore, grains, and, to a lesser extent, minor bulks, including steel products, cement and fertilizers. Panamax vessels are able to pass through the Panama Canal, making them more versatile than larger vessels with regard to accessing different trade routes. Most Panamax and Post-Panamax vessels are "gearless," and therefore must be served by shore-based cargo handling equipment. However, there are a small number of geared vessels with onboard cranes, a feature that enhances trading flexibility and enables operation in ports which have poor infrastructure in terms of loading and unloading facilities. |
| · | Handymax/Supramax. Handymax vessels have a carrying capacity of 40,000-59,999 dwt. These vessels operate in a large number of geographically dispersed global trade routes, carrying primarily grains and minor bulks. Within the Handymax category there is also a sub-sector known as Supramax. Supramax bulk carriers are ships between 50,000 to 59,999 dwt, normally offering cargo loading and unloading flexibility with on-board cranes, or "gear," while at the same time possessing the cargo carrying capability approaching conventional Panamax bulk carriers. |
| · | Handysize. Handysize vessels have a carrying capacity of up to 39,999 dwt. These vessels are primarily involved in carrying minor bulk cargoes. Increasingly, ships of this type operate within regional trading routes, and may serve as trans-shipment feeders for larger vessels. Handysize vessels are well suited for small ports with length and draft restrictions. Their cargo gear enables them to service ports lacking the infrastructure for cargo loading and unloading. |
Other size categories occur in regional trade, such as Kamsarmax, with a maximum length of 229 meters, the maximum length that can load in the port of Kamsar in the Republic of Guinea. Other terms such as Seawaymax, Setouchmax, Dunkirkmax, and Newcastlemax also appear in regional trade.
The supply of dry bulk carriers is dependent on the delivery of new vessels and the removal of vessels from the global fleet, either through scrapping or loss. The level of scrapping activity is generally a function of scrapping prices in relation to current and prospective charter market conditions, as well as operating, repair and survey costs. The average age at which a vessel is scrapped over the last fivedropped to 25 years has been 31 years.in 2015 from 27 years in 2014 and 28 years in 2013.
The demand for dry bulk carrier capacity is determined by the underlying demand for commodities transported in dry bulk carriers, which in turn is influenced by trends in the global economy. Demand for dry bulk carrier capacity is also affected by the operating efficiency of the global fleet, along with port congestion, which has been a feature of the market since 2004, absorbing tonnage and therefore leading to a tighter balance between supply and demand. In evaluating demand factors for dry bulk carrier capacity, the Company believes that dry bulk carriers can be the most versatile element of the global shipping fleets in terms of employment alternatives.
Charter Hire Rates
Charter hire rates fluctuate by varying degrees among dry bulk carrier size categories. The volume and pattern of trade in a small number of commodities (major bulks) affect demand for larger vessels. Therefore, charter rates and vessel values of larger vessels often show greater volatility. Conversely, trade in a greater number of commodities (minor bulks) drives demand for smaller dry bulk carriers. Accordingly, charter rates and vessel values for those vessels are usually subject to less volatility.
Charter hire rates paid for dry bulk carriers are primarily a function of the underlying balance between vessel supply and demand, although at times other factors may play a role. Furthermore, the pattern seen in charter rates is broadly mirrored across the different charter types and the different dry bulk carrier categories. In the time charter market, rates vary depending on the length of the charter period and vessel-specific factors such as age, speed and fuel consumption.
In the voyage charter market, rates are, among other things, influenced by cargo size, commodity, port dues and canal transit fees, as well as commencement and termination regions. In general, a larger cargo size is quoted at a lower rate per ton than a smaller cargo size. Routes with costly ports or canals generally command higher rates than routes with low port dues and no canals to transit. Voyages with a load port within a region that includes ports where vessels usually discharge cargo or a discharge port within a region with ports where vessels load cargo also are generally quoted at lower rates, because such voyages generally increase vessel utilization by reducing the unloaded portion (or ballast leg) that is included in the calculation of the return charter to a loading area.
Within the dry bulk shipping industry, the charter hire rate references most likely to be monitored are the freight rate indices issued by the Baltic Exchange. These references are based on actual charter hire rates under charters entered into by market participants as well as daily assessments provided to the Baltic Exchange by a panel of major shipbrokers. The Baltic Panamax Index is the index with the longest history. The Baltic Capesize Index and Baltic Handymax Index are of more recent origin.
The Baltic Dry Index, or BDI, a daily average of charter rates in 20 shipping routes measured on a time charter and voyage basis and covering Capesize, Panamax, Supramax, and Handysize dry bulk carriers declined from a high of 11,793 in May 2008 to a low of 663 in December 2008. In 2012, the BDI ranged from a high of 1624 in January to a low of 647 in February. In 2013, the BDI ranged from a low of 698 in January to a high of 2,337 in December. In 2014, the BDI ranged from a high of 21132,113 in January to a low of 723 in July. On March 20,In 2015, the BDI stood at 591ranged from a high of 1,222 in August to a low of 471 in December. The BDI recorded a record low of 290 in February 2016.
Vessel Prices
As of the end of 2014,2015, dry bulk vessel values decreased as compared to 2013.2014. Consistent with these trends, the market value of our dry bulk carriers had also decreased. As charter rates and vessel values remain at low levels, there can be no assurance as to how long charter rates and vessel values will remain at their current levels or whether they will decrease or improve to any significant degree in the near future.
Competition
Our business fluctuates in line with the main patterns of trade of the major dry bulk cargoes and varies according to changes in the supply and demand for these items. We operate in markets that are highly competitive and based primarily on supply and demand. We compete for charters on the basis of price, vessel location, size, age and condition of the vessel, as well as on our reputation as an owner and operator. We compete with other owners of dry bulk carriers in the Panamax, Post-Panamax and smaller class sectors and with owners of Capesize and Newcastlemax dry bulk carriers. Ownership of dry bulk carriers is highly fragmented.
We believe that we possess a number of strengths that provide us with a competitive advantage in the dry bulk shipping industry:
· | We own a modern, high quality fleet of dry bulk carriers. We believe that owning a modern, high quality fleet reduces operating costs, improves safety and provides us with a competitive advantage in securing favorable time charters. We maintain the quality of our vessels by carrying out regular inspections, both while in port and at sea, and adopting a comprehensive maintenance program for each vessel. |
· | Our fleet includes tentwelve groups of sister ships.ships including our vessels under construction. We believe that maintaining a fleet that includes sister ships enhances the revenue generating potential of our fleet by providing us with operational and scheduling flexibility. The uniform nature of sister ships also improves our operating efficiency by allowing our fleet manager to apply the technical knowledge of one vessel to all vessels of the same series and creates economies of scale that enable us to realize cost savings when maintaining, supplying and crewing our vessels. |
· | We have an experienced management team.Our management team consists of experienced executives who each have, on average, more than 2930 years of operating experience in the shipping industry and has demonstrated ability in managing the commercial, technical and financial areas of our business. Our management team is led by Mr. Simeon Palios, a qualified naval architect and engineer who has more than 40 years of experience in the shipping industry. |
· | Internal managementWe benefit from the experience and reputation of vessel operations. We conduct all of the commercial and technical management of our vessels in-house through DSS. We believe having in-house commercial and technical management provides us with a competitive advantage over many of our competitors by allowing us to more closely monitor our operations and to offer higher quality performance, reliability and efficiency in arranging chartersDiana Shipping Services S.A. and the maintenance of our vessels.relationship with Wilhelmsen Ship Management through the Diana Wilhelmsen Management Limited joint venture. |
· | We benefit from strong relationships with members of the shipping and financial industries. We have developed strong relationships with major international charterers, shipbuilders and financial institutions that we believe are the result of the quality of our operations, the strength of our management team and our reputation for dependability. |
· | We have a strong balance sheet and a relatively low level of indebtedness. We believe that our strong balance sheet and relatively low level of indebtedness provide us with the flexibility to increase the amount of funds that we may draw under our loan facilities in connection with future acquisitions and enable us to use cash flow that would otherwise be dedicated to debt service for other purposes. |
Permits and Authorizations
We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses and certificates with respect to our vessels. The kinds of permits, licenses and certificates required depend upon several factors, including the commodity transported, the waters in which the vessel operates the nationality of the vessel's crew and the age of a vessel. We have been able to obtain all permits, licenses and certificates currently required to permit our vessels to operate. Additional laws and regulations, environmental or otherwise, may be adopted which could limit our ability to do business or increase the cost of us doing business.
Disclosure Pursuant to Section 219 of the Iran Threat Reduction And Syrian Human Rights Act
Section 219 of the U.S. Iran Threat Reduction and Syria Human Rights Act of 2012, or the ITRA, added new Section 13(r) to the U.S. Securities Exchange Act of 1934, as amended, (the "Exchange Act")or the Exchange Act, requiring each SEC reporting issuer to disclose in its annual and, if applicable, quarterly reports whether it or any of its affiliates have knowingly engaged in certain activities, transactions or dealings relating to Iran or with the Government of Iran or certain designated natural persons or entities involved in terrorism or the proliferation of weapons of mass destruction during the period covered by the report.
Pursuant to Section 13(r) of the Exchange Act, we note that for the period covered by this annual report, the vessels Amphitrite and PolymniaClio made fourfive port calls to Iran in 20142015 for a combined length of 9860 days. The vessel Amphitrite made calls to the port of Bandar Imam Khomeini on March 16, 2014, on September 26, 2014 and on December 29, 2014 (discharging corn), April 29, 2015 (discharging soya beans), September 6, 2015 (discharging corn) and November 28, 2015 (discharging maize), and remained in the port of Bandar Imam Khomeini during 2015 for 50 days in the aggregate. The vessel Clio made a call to the port of Bandar Imam Khomeini on October 27, 2015, discharging corn, and remained in the port of Bandar Imam Khomeini for 41 days in the aggregate. The vessel Polymnia made a call to the port of Bandar Imam Khomeini on December 29, 2013, discharging maize, and remained in the port of Bandar Imam Khomeini during 2014 for 5710 days. During this time the Amphitrite was on time charter to Bunge S.A. at a gross rate $10,000 and $11,300 per day and the Polymnia was on time charter to Bunge S.A. at a gross rate of $7,600$11,300 per day and the Clio was on time charter to Transgrain Shipping B.V at a gross rate of $6,500 per day. Our aggregate gross revenue attributable to these 9860 days of port calls was approximately $0.9 million.$3.2 million, less 5% commissions paid to third parties. As we do not attribute profits to specific voyages under a time charter, we have not attributed any profits to the voyages which included these port calls. Our charter party agreements for the Amphitrite and PolymniaClio restrict the charterers from calling in Iran in violation of U.S. sanctions, or carrying any cargo to Iran which is subject to U.S. sanctions. However, there can be no assurance that the Amphitrite Polymnia, Clio or another of our vessels will not, from time to time in the future on charterer's instructions, perform voyages which would require disclosure pursuant to Exchange Act Section 13(r).
Environmental and Other Regulations
Government regulation significantly affects the ownership and operation of our vessels. We are subject to international conventions and treaties, national, state and local laws and regulations in force in the countries in which our vessels may operate or are registered relating to safety and health and environmental protection including the storage, handling, emission, transportation and discharge of hazardous and non-hazardous materials, and the remediation of contamination and liability for damage to natural resources. Compliance with such laws, regulations and other requirements entails significant expense, including vessel modifications and implementation of certain operating procedures.
A variety of government and private entities subject our vessels to both scheduled and unscheduled inspections. These entities include the local port authorities (such as the U.S. Coast Guard, harbor master or equivalent), classification societies; flag state administrations (countries of registry) and charterers, particularly terminal operators. Certain of these entities require us to obtain permits, licenses, certificates or approvals for the operation of our vessels. Failure to maintain necessary permits, licenses, certificates or approvals could require us to incur substantial costs or temporarily suspend the operation of one or more of our vessels.
We believe that the heightened level of environmental and quality concerns among insurance underwriters, regulators and charterers is leading to greater inspection and safety requirements on all vessels and may accelerate the scrapping of older vessels throughout the dry bulk shipping industry. Increasing environmental concerns have created a demand for vessels that conform to the stricter environmental standards. We are required to maintain operating standards for all of our vessels that emphasize operational safety, quality maintenance, continuous training of our officers and crews and compliance with United States and international regulations. We believe that the operation of our vessels is in substantial compliance with applicable environmental laws and regulations and that our vessels have all material permits, licenses, certificates or other approvals necessary for the conduct of our operations. However, because such laws and regulations are frequently changed and may impose increasingly strict requirements, we cannot predict the ultimate cost of complying with these requirements, or the impact of these requirements on the resale value or useful lives of our vessels. In addition, a future serious marine incident, such as the 2010 Deepwater Horizon oil spill, that results in significant oil pollution, release of hazardous substances, loss of life, or otherwise causes significant adverse environmental impact could result in additional legislation, regulation, or other requirements that could negatively affect our profitability.
The laws and regulations discussed below may not constitute a comprehensive list of all such laws and regulations that are applicable to the operation of our vessels.
International Maritime Organization
The IMO has adopted the International Convention for the Prevention of Pollution from Ships of 1973, as modified by the Protocol of 1978 relating thereto (collectively referred to as MARPOL 73/78 and herein as "MARPOL"). MARPOL entered into force on October 2, 1983. It has been adopted by over 150 nations, including many of the jurisdictions in which our vessels operate. MARPOL sets forth pollution-prevention requirements applicable to drybulk carriers, among other vessels, and is broken into six Annexes, each of which regulates a different source of pollution. Annex I relates to oil leakage or spilling; Annexes II and III relate to harmful substances carried, in bulk, in liquid or packaged form, respectively; Annexes IV and V relate to sewage and garbage management, respectively; and Annex VI, lastly, relates to air emissions. Annex VI, separately adopted by the IMO in September of 1997, related to air emissions, which entered into force on 19 May 2005.
In 2013, the MEPC adopted by resolution amendments to the MARPOL Annex I Conditional Assessment Scheme, or CAS. The amendments, which are expected to become effective on October 1, 2014, pertain to revising references to the inspections of bulk carriers and tankers after the 2011 ESP Code, which enhances the programs of inspections, becomes mandatory.
Air Emissions
In September of 1997, the IMO adopted Annex VI to MARPOL to address air pollution. Effective May 2005, Annex VI sets limits on nitrogen oxide emissions from ships whose diesel engines were constructed (or underwent major conversions) on or after January 1, 2000. It also prohibits "deliberate emissions" of "ozone depleting substances," defined to include certain halons and chlorofluorocarbons. "Deliberate emissions" are not limited to times when the ship is at sea; they can for example include discharges occurring in the course of the ship's repair and maintenance. Emissions of "volatile organic compounds" from the shipboard incineration (from incinerators installed after January 1, 2000) of certain substances (such as polychlorinated biphenyls (PCBs)) are also prohibited. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions, known as ECAs, (see below).
The IMO's Marine Environment Protection Committee, or MEPC, adopted amendments to Annex VI on October 10, 2008, which amendments were entered into force on July 1, 2010. The amended Annex VI seeks to further reduce air pollution by, among other things, implementing a progressive reduction of the amount of sulphur contained in any fuel oil used on board ships. As of January 1, 2012, the amended Annex VI required that fuel oil contain no more than 3.50% sulfur. By January 1, 2020, sulfur content must not exceed 0.50%, subject to a feasibility review to be completed no later than 2018.
Sulfur content standards are even stricter within certain "Emission Control Areas" ("ECAs")., or ECAs. As of July 1, 2010, ships operating within an ECA were not permitted to use fuel with sulfur content in excess of 1.0%, which has been further reduced to 0.10% on January 1, 2015. Amended Annex VI establishes procedures for designating new ECAs. Currently, the Baltic Sea, the North Sea and certain coastal areas of North America have been so designated. .Furthermore as of January 1, 2014 the applicable areas of the United States Caribbean Sea adjacent to Puerto Rico and the U.S. Virgin Islands were designated ECAs. Ocean-going vessels in these areas will be subject to stringent emissions controls and may cause us to incur additional costs. If other ECAs are approved by the IMO or other new or more stringent requirements relating to emissions from marine diesel engines or port operations by vessels are adopted by the EPA or the states where we operate, compliance with these regulations could entail significant capital expenditures, operational changes, or otherwise increase the costs of our operations.
As of January 1, 2013, MARPOL made mandatory certain measures relating to energy efficiency for ships in part to address greenhouse gas emissions IMO's Marine Environment Protection Committee (MEPC) has given extensive consideration to control of GHG emissions from ships and finalized in July 2009 a package of specific technical and operational reduction measures. In March 2010 MEPC started the consideration of making the technical and operational measures mandatory for all ships irrespective of flag and ownership. This work was completed in July 2011 with the breakthrough adoption of technical measures for new ships and operational reduction measures for all ships, which are, consequently, the first ever mandatory global GHG reduction regime for an entire industry sector. The adopted measures add to MARPOL Annex VI a new Chapter 4 entitled "Regulations on energy efficiency for ships", making mandatory the Energy Efficiency Design Index (EEDI) for new ships and the Ship Energy Efficiency Plan (SEEMP) for all ships. The regulations apply to all ships over 400 gross tonnage and above and entered into force through the tacit acceptance procedure on 1 January 2013.
Amended Annex VI also establishes new tiers of stringent nitrogen oxide emissions standards for new marine engines, depending on their date of installation with a "Tier II" emission limit for engines installed on or after January 1, 2011; then with a more stringent "Tier III" emission limit for engines installed on or after January 1, 2016 operating in ECAs. Marine diesel engines installed on or after January 1, 1990 but prior to January 1, 2000 are required to comply with "Tier I" emission limits.
The U.S. Environmental Protection Agency promulgated equivalent (and in some senses stricter) emissions standards in late 2009.
Safety Management System Requirements
The IMO also adopted the International Convention for the Safety of Life at Sea, or the SOLAS Convention, and the International Convention on Load Lines, or the LL Convention, which impose a variety of standards that regulate the design and operational features of ships. The IMO periodically revises the SOLAS and LL Convention standards. May 2012 SOLAS Convention amendments entered into force as of January 1, 2014. The Convention on Limitation of Liability for Maritime Claims (LLMC) was recently amended and the amendments are expected to gowent into effect on June 8, 2015. The amendments alter the limits of liability for loss of life or personal injury claims and property claims against ship-owners.
The operation of our ships is also affected by the requirements set forth in Chapter IX of the SOLAS Convention, which sets forth the IMO's International Management Code for the Safe Operation of Ships and Pollution Prevention, or the ISM Code. The ISM Code requires ship owners and bareboat charterers to develop and maintain an extensive "Safety Management System" that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. The failure of a ship owner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, may decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports.
The ISM Code requires that vessel operators obtain a safety management certificate, or SMC, for each vessel they operate. This certificate evidences compliance by a vessel's operators with the ISM Code requirements for a safety management system, or SMS. No vessel can obtain an SMC under the ISM Code unless its manager has been awarded a document of compliance, or DOC, issued in most instances by the vessel's flag state. Our appointed ship managers have obtained documents of compliance for their offices and safety management certificates for all of our vessels for which the certificates are required by the IMO. The document of compliance, or the DOC, and ship management certificate, or the SMC, are renewed as required.
International Labor Organization
The International Labour Organization (ILO) is a specialized agency of the UN with headquarters in Geneva, Switzerland. The ILO has adopted the Maritime Labor Convention 2006 (MLC 2006). A Maritime Labor Certificate and a Declaration of Maritime Labor Compliance will be required to ensure compliance with the MLC 2006 for all ships above 500 gross tons in international trade. The MLC 2006 entered into force on August 20, 2013. The MLC 2006 requires us to develop new procedures to ensure full compliance.
Pollution Control and Liability Requirements
The IMO has negotiated international conventions that impose liability for pollution in international waters and the territorial waters of the signatories to such conventions. IMO adopted the International Convention for the Control and Management of Ships' Ballast Water and Sediments, or the BWM Convention, in February 2004. The BWM Convention will not become effective until 12 months after it has been adopted by 30 states, the combined merchant fleets of which represent not less than 35% of the gross tonnage of the world's merchant shipping. To date, therethe BWM Convention has not yet been sufficient adoption of this standard for itratified but proposals regarding implementation have recently been submitted to take force, but it is close.the IMO. Many of the implementation dates originally written in the BWM Convention have already passed, so that once the BWM Convention enters into force, the period for installation of mandatory ballast water exchange requirements would be extremely short, with several thousand ships a year needing to install ballast water management systems (BWMS). For this reason, on December 4, 2013, the IMO Assembly passed a resolution revising the application dates of BWM Convention so that they are triggered by the entry into force date and not the adoption dates originally in the BWM Convention. This in effect makes all vessels constructed before the entry into force date 'existing' vessels, and allows for the installation of a BWMS on such vessels at the first renewal survey following entry into force.force of the Convention. Furthermore, in October 2014 the MEPC met and adopted additional resolutions concerning the BWM Convention's implementation. Once mid-ocean ballast exchange or ballast water treatment requirements become mandatory, the cost of compliance could increase for ocean carriers.carriers and the costs of ballast water treatments may be material. However, many countries already regulate the discharge of ballast water carried by vessels from country to country to prevent the introduction of invasive and harmful species via such discharges. The United States for example, requires vessels entering its waters from another country to conduct mid-ocean ballast exchange, or undertake some alternate measure, and to comply with certain reporting requirements. Although we do not believe that the costs of such compliance would be material, it is difficult to predict the overall impact of such a requirement on our operations.
The IMO adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage, or the Bunker Convention, to impose strict liability on ship owners for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel. The Bunker Convention requires registered owners of ships over 1,000 gross tons to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance with the Convention on Limitation of Liability for Maritime Claims of 1976, as amended). With respect to non-ratifying states, liability for spills or releases of oil carried as fuel in ship's bunkers typically is determined by the national or other domestic laws in the jurisdiction where the events or damages occur.
In March 2006, the IMO amended Annex I to MARPOL, including a new regulation relating to oil fuel tank protection, which became effective August 1, 2007. The new regulation applies to various ships delivered on or after August 1, 2010. It includes requirements for the protected location of the fuel tanks, performance standards for accidental oil fuel outflow, a tank capacity limit and certain other maintenance, inspection and engineering standards.
Noncompliance with the ISM Code or other IMO regulations may subject the ship owner or bareboat charterer to increased liability, lead to decreases in available insurance coverage for affected vessels or result in the denial of access to, or detention in, some ports.
The IMO continues to review and introduce new regulations. It is impossible to predict what additional regulations, if any, may be passed by the IMO and what effect, if any, such regulations might have on our operations.
The U.S. Oil Pollution Act of 1990 and Comprehensive Environmental Response, Compensation and Liability Act
OPA established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA affects all "owners and operators" whose vessels trade with the United States, its territories and possessions or whose vessels operate in United States waters, which includes the United States' territorial sea and its 200 nautical mile exclusive economic zone around the United States. The United States has also enacted the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, which applies to the discharge of hazardous substances other than oil, whether on land or at sea. OPA and CERCLA both define "owner and operator" "in the case of a vessel, as any person owning, operating or chartering by demise, the vessel."
Under OPA, vessel owners and operators are "responsible parties" and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels. OPA defines these other damages broadly to include:
(i) injury to, destruction or loss of, or loss of use of, natural resources and related assessment costs;
(ii) injury to, or economic losses resulting from, the destruction of real and personal property;
(iii) net loss of taxes, royalties, rents, fees or net profit revenues resulting from injury, destruction or loss of real or personal property, or natural resources;
(iv) loss of subsistence use of natural resources that are injured, destroyed or lost;
(v) lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources; and
(vi) net cost of increased or additional public services necessitated by removal activities following a discharge of oil, such as protection from fire, safety or health hazards, and loss of subsistence use of natural resources.
OPA contains statutory caps on liability and damages; such caps do not apply to direct cleanup costs. Effective July 31, 2009,December 21, 2015, the U.S. Coast Guard adjusted the limits of OPA liability for non-tank vessels (e.g. drybulk) to the greater of $1,000$1,100 per gross ton or $854,400$939,800 (subject to periodic adjustment for inflation). These limits of liability do not apply if an incident was proximately caused by the violation of an applicable U.S. federal safety, construction or operating regulation by a responsible party (or its agent, employee or a person acting pursuant to a contractual relationship), or a responsible party's gross negligence or willful misconduct. The limitation on liability similarly does not apply if the responsible party fails or refuses to (i) report the incident where the responsibility party knows or has reason to know of the incident; (ii) reasonably cooperate and assist as requested in connection with oil removal activities; or (iii) without sufficient cause, comply with an order issued under the Federal Water Pollution Act (Section 311 (c), (e)) or the Intervention on the High Seas Act.
CERCLA contains a similar liability regime whereby owners and operators of vessels are liable for cleanup, removal and remedial costs, as well as damage for injury to, or destruction or loss of, natural resources, including the reasonable costs associated with assessing same, and health assessments or health effects studies. There is no liability if the discharge of a hazardous substance results solely from the act or omission of a third party, an act of God or an act of war. Liability under CERCLA is limited to the greater of $300 per gross ton or $5.0 million for vessels carrying a hazardous substance as cargo and the greater of $300 per gross ton or $500,000 for any other vessel. These limits do not apply (rendering the responsible person liable for the total cost of response and damages) if the release or threat of release of a hazardous substance resulted from willful misconduct or negligence, or the primary cause of the release was a violation of applicable safety, construction or operating standards or regulations. The limitation on liability also does not apply if the responsible person fails or refused to provide all reasonable cooperation and assistance as requested in connection with response activities where the vessel is subject to OPA.
OPA and CERCLA each preserve the right to recover damages under existing law, including maritime tort law.
OPA and CERCLA both require owners and operators of vessels to establish and maintain with the U.S. Coast Guard evidence of financial responsibility sufficient to meet the maximum amount of liability to which the particular responsible person may be subject. Vessel owners and operators may satisfy their financial responsibility obligations by providing a proof of insurance, a surety bond, qualification as a self-insurer or a guarantee.
The 2010 Deepwater Horizon oil spill in the Gulf of Mexico may also result in additional regulatory initiatives or statutes, including the raising of liability caps under OPA. Compliance with any new requirements of OPA may substantially impact our cost of operations or require us to incur additional expenses to comply with any new regulatory initiatives or statutes. For example, on August 15, 2012, the U.S. Bureau of Safety and Environmental Enforcement, or BSEE, implemented a final drilling safety rule for offshore oil and gas operations that strengthens the requirements for safety equipment, well control systems, and blowout prevention practices. A new rule issued by the U.S. Bureau of Ocean Energy Management, or BOEM, that increased the limits of liability of damages for offshore facilities under OPA based on inflation took effect in January 2015. In April 2015, it was announced that new regulations are expected to be imposed in the United States regarding offshore oil and gas drilling. In December 2015, the BSEE announced a new pilot inspection program for offshore facilities. Compliance with any new requirements of OPA may substantially impact our cost of operations or require us to incur additional expenses to comply with any new regulatory initiatives or statutes. Additional legislation, regulations, or other requirements applicable to the operation of our vessels that may be implemented in the future could adversely affect our business.
We currently maintain pollution liability coverage insurance in the amount of $1 billion per incident for each of our vessels. If the damages from a catastrophic spill were to exceed our insurance coverage it could have an adverse effect on our business and results of operation.
OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, provided they accept, at a minimum, the levels of liability established under OPA and some states have enacted legislation providing for unlimited liability for oil spills. In some cases, states which have enacted such legislation have not yet issued implementing regulations defining vessel owners' responsibilities under these laws.
Other Environmental Initiatives
The U.S. Clean Water Act, or CWA, prohibits the discharge of oil, hazardous substances and ballast water in U.S. navigable waters unless authorized by a duly-issued permit or exemption, and imposes strict liability in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available under OPA and CERCLA. Furthermore, many U.S. states that border a navigable waterway have enacted environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance. These laws may be more stringent than U.S. federal law.
The EPA regulates the discharge of ballast and bilge water and other substances in U.S. waters under the CWA. EPA regulations require vessels 79 feet in length or longer (other than commercial fishing and recreational vessels) to comply with a Vessel General Permit, or VGP, authorizing ballast and bilge water discharges and other discharges incidental to the operation of vessels. The VGP imposes technology and water-quality based effluent limits for certain types of discharges and establishes specific inspection, monitoring, recordkeeping and reporting requirements to ensure the effluent limits are met. On March 28, 2013, the EPA re-issued the VGP for another five years; this VGP took effect of December 19, 2013. The new VGP focuses on authorizing discharges incidental to operations of commercial vessels. The VGP also contains numeric ballast water discharge limits for most vessels to reduce the risk of invasive species in US waters, more stringent requirements for exhaust gas scrubbers and the use of environmentally acceptable lubricants.
U.S. Coast Guard regulations adopted under the U.S. National Invasive Species Act, or NISA, also impose mandatory ballast water management practices for all vessels equipped with ballast water tanks entering or operating in U.S. waters. As of June 21, 2012, the U.S. Coast Guard implemented revised regulations on ballast water management by establishing standards on the allowable concentration of living organisms in ballast water discharged from ships in U.S. waters. The revised ballast water standards are consistent with those adopted by the IMO in 2004. Compliance with the EPA and the U.S. Coast Guard regulations could require the installation of certain engineering equipment and water treatment systems to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial cost, or may otherwise restrict our vessels from entering U.S. waters.
As of January 1, 2014, vessels are technically subject to the phasing-in of these standards. As a result, the USCG has provided waivers to vessels which cannot install the as-yet unapproved technology. The EPA, on the other hand, has taken a different approach to enforcing ballast discharge standards under the VGP. On December 27, 2013, the EPA issued an enforcement response policy in connection with the new VGP in which the EPA indicated that it would take into account the reasons why vessels do not have the requisite technology installed, but will not grant any waivers.
It should also be noted that in October 2015, the Second Circuit Court of Appeals issued a ruling that directed the EPA to redraft the sections of the 2013 VGP that address ballast water. However, the Second Circuit stated that 2013 VGP will remains in effect until the EPA issues a new VGP. It presently remains unclear how the ballast water requirements set forth by the EPA, the USCG, and IMO BWM Convention, some of which are in effect and some which are pending, will co-exist.
The USCG's revised ballast water standards are consistent with requirements under the BWM Convention. Compliance with the EPA and the USCG regulations could require the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial cost, or may otherwise restrict our vessels from entering U.S. waters. In addition, certain states have enacted more stringent discharge standards as conditions to their required certification of the VGP.
The U.S. Clean Air Act of 1970 (including its amendments of 1977 and 1990), or the CAA, requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. The CAA also requires states to draft State Implementation Plans, ("SIPs")or SIPs, designed to attain national health-based air quality standards in each state. Although state-specific, SIPs may include regulations concerning emissions resulting from vessel loading and unloading operations by requiring the installation of vapor control equipment.
European Union Regulations
In October 2009, the European Union amended a directive to impose criminal sanctions for illicit ship-source discharges of polluting substances, including minor discharges, if committed with intent, recklessly or with serious negligence and the discharges individually or in the aggregate result in deterioration of the quality of water. Aiding and abetting the discharge of a polluting substance may also lead to criminal penalties. Member States were required to enact laws or regulations to comply with the directive by the end of 2010. Criminal liability for pollution may result in substantial penalties or fines and increased civil liability claims. The directive applies to all types of vessels, irrespective of their flag, but certain exceptions apply to warships or where human safety or that of the ship is in danger.
The European Union has adopted several regulations and directives requiring, among other things, more frequent inspections of high-risk ships, as determined by type, age, and flag as well as the number of times the ship has been detained. The European Union also adopted and then extended a ban on substandard ships and enacted a minimum ban period and a definitive ban for repeated offenses. The regulation also provided the European Union with greater authority and control over classification societies, by imposing more requirements on classification societies and providing for fines or penalty payments for organizations that failed to comply.
With effect from January 1, 2010, the Directive 2005/33/EC of the European Parliament and of the Council of July 6, 2005, amending Directive 1999/32/EC came into force. The objective of the directive is to reduce emission of sulfur dioxide and particulate matter caused by the combustion of certain petroleum derived fuels. The directive imposes limits on the sulfur content of such fuels as a condition of their use within a Member State territory. The maximum sulfur content for marine fuels used by inland waterway vessels and ships at berth in ports in EU countries after January 1, 2010, is 0.10% by mass. As of January 1, 2015, all vessels operating within ECAs worldwide must comply with 0.10% sulfur requirements. Effective July 1, 2010, the reduction of applicable sulfur content limits in the North Sea, the Baltic Sea and the English Channel Sulfur Emission Control Areas was 1%. On July 15, 2011, the European Commission also adopted a proposal for an amendment to Directive 1999/32/EC which would align requirements with those imposed by the revised MARPOL Annex VI which introduced stricter sulphur limits.
Greenhouse Gas Regulation
Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, which entered into force in 2005 and pursuant to which adopting countries have been required to implement national programs to reduce greenhouse gas emissions. The 2015 United Nations Convention on Climate Change Conference in Paris did not result in an agreement that directly limited greenhouse gas emissions from ships.
As of January 1, 2013, all new ships must comply with two new sets of mandatory requirements, which were adopted by MEPC in July 2011, to address greenhouse gas emissions from ships. Currently operating ships will be required to develop SEEMPs, and minimum energy efficiency levels per capacity mile, outlined in the Energy Efficiency Design Index, will apply to new ships. The IMO is also planning to implement market-based mechanisms to reduce greenhouse gas emissions from ships at an upcoming MEPC session. The European Union has indicated that it intends to propose an expansion of the existing European Union emissions trading scheme to include emissions of greenhouse gases from marine vessels, and in January 2012 the European Commission launched a public consultation on possible measures to reduce greenhouse gas emissions from ships.
In April 2013, the European Parliament rejected proposed changes to the European Union Emissions Law regarding carbon trading. In June 2013 the European Commission developed a strategy to integrate maritime emissions into the overall European Union Strategy to reduced greenhouse gas emissions. If the strategy isIn April 2015, a regulation was adopted by the European Parliament and Councilrequiring that large vessels usingships (over 5,000 gross tons) calling at European Union ports would be required to monitor, report,from January 2018 collect and verify theirpublish data on carbon dioxide emissions beginning in January 2018. and other information.
In December 2013 the European Union environmental ministers discussed draft rules to implement monitoring and reporting of carbon dioxide emissions from ships. In the United States, the EPA has issued a finding that greenhouse gases endanger the public health and safety and has adopted regulations to limit greenhouse gas emissions from certain mobile sources and large stationary sources. Although the mobile source emissions regulations do not apply to greenhouse gas emissions from vessels, such regulation of vessels is foreseeable, and the EPA has in recent years received petitions from the California Attorney General and various environmental groups seeking such regulation. Any passage of climate control legislation or other regulatory initiatives by the IMO, European Union, the U.S. or other countries where we operate, or any treaty adopted at the international level to succeed the Kyoto Protocol, that restrict emissions of greenhouse gases could require us to make significant financial expenditures, including capital expenditures to upgrade our vessels, which we cannot predict with certainty at this time.
Vessel Security Regulations
Since the terrorist attacks of September 11, 2001 in the United States, there have been a variety of initiatives intended to enhance vessel security such as the Maritime Transportation Security Act of 2002, or MTSA. To implement certain portions of the MTSA, in July 2003, the U.S. Coast Guard issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States. The regulations also impose requirements on certain ports and facilities, some of which are regulated by the U.S. Environmental Protection Agency (EPA).
Similarly, in December 2002, amendments to the SOLAS Convention created a new chapter of the convention dealing specifically with maritime security. The new Chapter VXI-2 became effective in July 2004 and imposes various detailed security obligations on vessels and port authorities, and mandates compliance with the International Ship and Port Facilities Security Code, or the ISPS Code. The ISPS Code is designed to enhance the security of ports and ships against terrorism. To trade internationally, a vessel must attain an International Ship Security Certificate, or ISSC, from a recognized security organization approved by the vessel's flag state. Among the various requirements are:
| · | on-board installation of automatic identification systems to provide a means for the automatic transmission of safety-related information from among similarly equipped ships and shore stations, including information on a ship's identity, position, course, speed and navigational status; |
| · | on-board installation of ship security alert systems, which do not sound on the vessel but only alert the authorities on shore; |
| · | the development of vessel security plans; |
| · | ship identification number to be permanently marked on a vessel's hull; |
| · | a continuous synopsis record kept onboard showing a vessel's history including the name of the ship, the state whose flag the ship is entitled to fly, the date on which the ship was registered with that state, the ship's identification number, the port at which the ship is registered and the name of the registered owner(s) and their registered address; and |
| · | compliance with flag state security certification requirements. |
Ships operating without a valid certificate may be detained at port until it obtains an ISSC, or it may be expelled from port, or refused entry at port.
The U.S. Coast Guard regulations, intended to be aligned with international maritime security standards, exempt non-U.S. vessels from MTSA vessel security measures, provided such vessels have on board a valid ISSC that attests to the vessel's compliance with the SOLAS Convention security requirements and the ISPS Code.
Inspection by Classification Societies
Every oceangoing vessel must be "classed" by a classification society. The classification society certifies that the vessel is "in class," signifying that the vessel has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the vessel's country of registry and the international conventions of which that country is a member. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag state, the classification society will undertake them on application or by official order, acting on behalf of the authorities concerned.
The classification society also undertakes on request other surveys and checks that are required by regulations and requirements of the flag state. These surveys are subject to agreements made in each individual case and/or to the regulations of the country concerned.
For maintenance of the class certification, regular and extraordinary surveys of hull, machinery, including the electrical plant, and any special equipment classed are required to be performed as follows:
| · | Annual Surveys: For seagoing ships, annual surveys are conducted for the hull and the machinery, including the electrical plant, and where applicable for special equipment classed, within three months before or after each anniversary date of the date of commencement of the class period indicated in the certificate. |
| · | Intermediate Surveys: Extended annual surveys are referred to as intermediate surveys and typically are conducted two and one-half years after commissioning and each class renewal. Intermediate surveys are to be carried out at or between the occasion of the second or third annual survey. |
| · | Class Renewal Surveys: Class renewal surveys, also known as special surveys, are carried out for the ship's hull, machinery, including the electrical plant, and for any special equipment classed, at the intervals indicated by the character of classification for the hull. At the special survey, the vessel is thoroughly examined, including audio-gauging to determine the thickness of the steel structures. Should the thickness be found to be less than class requirements, the classification society would prescribe steel renewals. The classification society may grant a one-year grace period for completion of the special survey. Substantial amounts of money may have to be spent for steel renewals to pass a special survey if the vessel experiences excessive wear and tear. In lieu of the special survey every four or five years, depending on whether a grace period was granted, a shipowner has the option of arranging with the classification society for the vessel's hull or machinery to be on a continuous survey cycle, in which every part of the vessel would be surveyed within a five-year cycle. Upon a shipowner's request, the surveys required for class renewal may be split according to an agreed schedule to extend over the entire period of class. This process is referred to as continuous class renewal. |
All areas subject to survey as defined by the classification society are required to be surveyed at least once per class period, unless shorter intervals between surveys are prescribed elsewhere. The period between two subsequent surveys of each area must not exceed five years.
Most vessels are also drydocked every 30 to 36 monthsdry-docked for inspection of the underwater parts and for repairs related to inspections. If any defects are found, the classification surveyor will issue a recommendation which must be rectified by the ship owner within prescribed time limits.
All insurance underwriters make it a condition for insurance coverage that a vessel be certified as "in class" by a classification society which is a member of the International Association of Classification Societies, or IACS. All our vessels are certified as being "in class" either by Lloyd's Register of Shipping, American Bureau of Shipping, DNV-GL, or Bureau Veritas, or Class NK. All new and second hand vessels that we purchase must be certified prior to their delivery under our standard purchase contracts and memorandum of agreement. For the second hand vessels same is verified by a Class Maintenance Certificate issued within 72 hours prior to delivery, including full certification delivered at the time of closing. If the vessel is not certified on the date of closing, we have the option to cancel the agreement due to Seller's default and not take delivery of the vessel.
Risk of Loss and Liability Insurance
General
The operation of any dry bulk vessel includes risks such as mechanical failure, collision, property loss, cargo loss or damage, and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. OPA, which imposes virtually unlimited liability upon owners, operators and demise charterers of vessels trading in the United States exclusive economic zone for certain oil pollution accidents in the United States, has made liability insurance more expensive for ship owners and operators trading in the United States market.
While we maintain hull and machinery insurance, war risks insurance, protection and indemnity cover and freight, demurrage and defense cover for our operating fleet in amounts that we believe to be prudent to cover normal risks in our operations, we may not be able to achieve or maintain this level of coverage throughout a vessel's useful life. Furthermore, while we believe that our present insurance coverage is adequate, not all risks can be insured, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates.
Hull & Machinery and War Risks Insurance
We maintain marine hull and machinery and war risks insurance, which cover, among other marine risks, the risk of actual or constructive total loss, for all of our vessels. Our vessels are each covered up to at least fair market value with deductibles ranging to a maximum of $100,000 per vessel per incident for Panamax, Kamsarmax and Post-Panamax vessels and $150,000 per vessel per incident for Capesize and Newcastlemax vessels.
Protection and Indemnity Insurance
Protection and indemnity insurance is provided by mutual protection and indemnity associations, or P&I Associations, which insure our third party liabilities in connection with our shipping activities. This includes third-party liability and other related expenses resulting from the injury or death of crew, passengers and other third parties, the loss or damage to cargo, claims arising from collisions with other vessels, damage to other third-party property, pollution arising from oil or other substances and salvage, towing and other related costs, including wreck removal. Protection and indemnity insurance is a form of mutual indemnity insurance, extended by protection and indemnity mutual associations, or "clubs."
Our current protection and indemnity insurance coverage for pollution is $1 billion per vessel per incident. The 13 P&I Associations that comprise the International Group insure approximately 90% of the world's commercial tonnage and have entered into a pooling agreement to reinsure each association's liabilities. As a member of a P&I Association, which is a member of the International Group, we are subject to calls payable to the associations based on the group's claim records as well as the claim records of all other members of the individual associations and members of the pool of P&I Associations comprising the International Group. Our vessels may be subject to supplemental calls which are based on estimates of premium income and anticipated and paid claims. Such estimates are adjusted each year by the Board of Directors of the P&I Association until the closing of the relevant policy year, which generally occurs within three years from the end of the policy year. Supplemental calls, if any, are expensed when they are announced and according to the period they relate to. We are not aware of any supplemental calls in respect of any policy year that have not been recorded in our consolidated financial statements.
C.Organizational structure | C. | Organizational structure |
Diana Shipping Inc. is the sole owner of all of the issued and outstanding shares of the subsidiaries listed in Note 1 "Basis of Presentation and General Information" of our consolidated financial statements under Item 18 and in exhibit 8.1 to this annual report.
D. Property, plants and equipment
Since October 8, 2010, DSS owns the land and the building where we have our principal offices in Athens, Greece and in December 2014, DSS acquired a plot of land jointly with two other related entities from unrelated individuals for an aggregate purchase price of approximately $2.5 million, of which DSS paid one-third, amounting to $0.9 million.individuals. Other than this interest in real property, our only material properties are the vessels in our fleet.
Item 4A. Item 4A. | Unresolved Staff Comments |
None.
Item 5.Operating and Financial Review and ProspectsItem 5. | Operating and Financial Review and Prospects |
The following management's discussion and analysis should be read in conjunction with our historical consolidated financial statements and their notes included elsewhere in this annual report. This discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as those set forth in the section entitled "Risk Factors" and elsewhere in this annual report.
We charter our vessels to customers primarily pursuant to short-term and long-term time charters. Currently, the majority of our vessels are employed on short-term time charters ranging in duration from 11 to 61 months.charters. Under our time charters, the charterer typically pays us a fixed daily charter hire rate and bears all voyage expenses, including the cost of bunkers (fuel oil) and port and canal charges. However, our voyage results may be affected by differences in bunker prices. We remain responsible for paying the chartered vessel's operating expenses, including the cost of crewing, insuring, repairing and maintaining the vessel, the costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses, and we also pay commissions to one or more unaffiliated ship brokers and to in-house brokers associated with the charterer for the arrangement of the relevant charter.
Factors Affecting Our Results of Operations
We believe that the important measures for analyzing trends in our results of operations consist of the following:
| · | Ownership days. 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. |
| · | Available days. 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 for such events. The shipping industry uses available days to measure the number of days in a period during which vessels should be capable of generating revenues. |
| · | Operating days. 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 any reason, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues. |
| · | Fleet utilization. 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 amount 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 for such events. |
| · | TCE rates. We define Time Charter Equivalent, or TCE rates as our time charter revenues less voyage expenses during a period divided by the number of our available days during the period, which is consistent with industry standards. TCE rate is a non-GAAP measure and is a standard 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 charter hire rates for vessels on voyage charters are generally not expressed in per day amounts while charter hire rates for vessels on time charters generally are expressed in such amounts. |
The following table reflects our ownership days, available days, operating days, fleet utilization and TCE rates for the periods indicated.
| | Year Ended December 31, | | | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2015 | | | 2014 | | | 2013 | |
Ownership days | | | 13,822 | | | | 12,049 | | | | 10,119 | | | | 14,900 | | | | 13,822 | | | | 12,049 | |
Available days | | | 13,650 | | | | 12,029 | | | | 9,998 | | | | 14,600 | | | | 13,650 | | | | 12,029 | |
Operating days | | | 13,564 | | | | 11,944 | | | | 9,865 | | | | 14,492 | | | | 13,564 | | | | 11,944 | |
Fleet utilization | | | 99.4 | % | | | 99.3 | % | | | 98.7 | % | | | 99.3 | % | | | 99.4 | % | | | 99.3 | % |
Time charter equivalent (TCE) rate (1) | | $ | 12,081 | | | $ | 12,959 | | | $ | 21,255 | | | $ | 9,739 | | | $ | 12,081 | | | $ | 12,959 | |
(1) Please see Item 3.A for a reconciliation of TCE to GAAP measures.
(1) | Please see Item 3.A for a reconciliation of TCE to GAAP measures. |
Time Charter Revenues
Our revenues are driven primarily by the number of vessels in our fleet, the number of days during which our vessels operate and the amount of daily charter hire rates that our vessels earn under charters, which, in turn, are affected by a number of factors, including:
| · | the duration of our charters; |
| · | our decisions relating to vessel acquisitions and disposals; |
| · | the amount of time that we spend positioning our vessels; |
| · | the amount of time that our vessels spend in drydock undergoing repairs; |
| · | maintenance and upgrade work; |
| · | the age, condition and specifications of our vessels; |
| · | levels of supply and demand in the dry bulk shipping industry; and |
| · | other factors affecting spot market charter rates for dry bulk carriers. |
Vessels operating on time charters for a certain period of time provide more predictable cash flows over that period of time, but can yield lower profit margins than vessels operating in the spot charter market during periods characterized by favorable market conditions. Vessels operating in the spot charter market generate revenues that are less predictable but may enable their owners to capture increased profit margins during periods of improvements in charter rates although their owners would be exposed to the risk of declining charter rates, which may have a materially adverse impact on financial performance. As we employ vessels on period charters, future spot charter rates may be higher or lower than the rates at which we have employed our vessels on period charters. Currently, all vessels in our fleet are employed on time charters, unless they are on drydock. Our time charter agreements subject us to counterparty risk. In depressed market conditions, charterers may seek to renegotiate the terms of their existing charter parties or avoid their obligations under those contracts. Should a counterparty fail to honor their obligations under agreements with us, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows. Since 2010, our revenues have decreased due to the decrease in the charter rates. In 2014, although charter rates continued to decline; howeverdecline, revenue increased due to the enlargement of our fleet. For 2015,2016, we expect our revenues to remain at current levels, or decrease due to further decreases in charter rates.
Voyage Expenses
We incur voyage expenses that mainly include commissions and bunker (fuel oil) expenses (or income) because all of our vessels are employed under time charters that require the charterer to bear voyage expenses such as bunkers (fuel oil), port and canal charges.
Although the charterer bears the cost of bunkers, we also have bunker expenses or income deriving from the price differences of bunkers. When a vessel is delivered to a charterer, bunkers are purchased by the charterer and sold back to us on the redelivery of the vessel. Bunker expenses, or income, result when a vessel is redelivered by her charterer and delivered to the next charterer at different bunker prices.
prices, or quantities.
We currently pay commissions ranging from 3.75%4.75% to 5.00%6.00% of the total daily charter hire rate of each charter to unaffiliated ship brokers and, in-house brokers associated with the charterers, depending on the number of brokers involved with arranging the charter.charter and to DWM for certain vessels. In addition to commissions paid to third parties, we pay our fleet managerto DSS a commission that is equal to 2% of ourthe revenues in exchangeof those vessels for providing us withwhich it provides technical and commercial management services in connection with the employment of our fleet. However,and this commission is eliminated from our consolidated financial statements as an intercompany transaction. During 2010 and until January 18, 2011, Diana Containerships also paid our fleet manager a commission of 1%, which was eliminated from our consolidated financial statements as an intercompany transaction. After its partial spin-off in January 2011 and until March 1, 2013 when the management agreements between DSS and Diana Containerships were terminated, the 1% commission paid by Diana Containerships constituted revenue of DSS. For 2015,2016, we expect our voyage expenses to remain at current levels, or decrease, in line with our expectation for our time charter revenues.revenues and also because we expect less bunker expenses due to vessels being redelivered at increased bunker prices.
Vessel Operating Expenses
Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores, tonnage taxes, environmental plan costs and other miscellaneousoperating expenses. Our vessel operating expenses, which generally represent fixed costs, have historically increased as a result of the enlargement of our fleet. For 2015,Similarly, for 2016, we expect our operating expenses to increase as a result of the enlargement of our fleet. There may also be other factors beyond our control, some of which may affect the shipping industry in general, including, for instance, developments relating to market prices for insurance, crew wages and crew wagesexchange rates that may cause these expenses to increase.
Vessel Depreciation
The cost of our vessels is depreciated on a straight-line basis over the estimated useful life of each vessel. Depreciation is based on the cost of the vessel less its estimated salvage value. We estimate the useful life of our dry bulk vessels to be 25 years from the date of initial delivery from the shipyard, which we believe is common in the dry bulk shipping industry. Furthermore, we estimate the salvage values of our vessels based on historical average prices of the cost of the light-weight ton of vessels being scrapped. The salvage value of all of our vessels is $250 per lightweight ton. Our depreciation charges have increased in recent periods due to the enlargement of our fleet. Since January 1, 2013, we increased the salvage value of all of our vessels from $150 per lightweight ton to $250 per lightweight ton. This change was made because the historical scrap rates over the past ten years have increased and as such the $150 value was not considered representative. For 2015,2016, we expect depreciation expense to increase as a result of the enlargement of our fleet.
General and Administrative Expenses
We incur general and administrative expenses which include our onshore related expenses such as legal and professional expenses and other general vessel expenses. Our general and administrative expenses also include payroll expenses of employees, executive officers, directors and consultants, compensation cost of restricted stock awarded to senior management and non-executive directors, traveling, promotional and other expenses of the public company.company, such as legal and professional expenses and other general expenses. For 2015,2016, we expect our general and administrative expenses to remain at current levels.
63
Interest and Finance Costs
We have historically incurred interest expense and financing costs in connection with the vessel-specific debt. As of December 31, 2014debt and 2013, we had $486.0 million and $433.1 million of indebtedness outstanding, respectively. We incur interest expense and financing costs relating tosince May 2015 in connection with our outstanding debt.Notes. Currently, our debt amounts to $492.4$596.9 million, including our Notes issued in May 2015 at a fixed rate of 8.5%, and we expect to incur additional debt in 2015. We may incur additional debt to finance future acquisitions or constructions.2016. We expect to manage any exposure in interest rates through our regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. For 2015,2016, we expect interest and finance expenses to increase as a result of increased indebtedness.indebtedness and increased interest rates.
Lack of Historical Operating Data for Vessels before Their Acquisition
Although vessels are generally acquired free of charter, we have acquired (and may in the future acquire) some vessels with time charters. Where a vessel has been under a voyage charter, the vessel is usually delivered to the buyer free of charter. It is rare in the shipping industry for the last charterer of the vessel in the hands of the seller to continue as the first charterer of the vessel in the hands of the buyer. In most cases, when a vessel is under time charter and the buyer wishes to assume that charter, the vessel cannot be acquired without the charterer's consent and the buyer entering into a separate direct agreement (called a "novation agreement") with the charterer to assume the charter. The purchase of a vessel itself does not transfer the charter because it is a separate service agreement between the vessel owner and the charterer.
Where we identify any intangible assets or liabilities associated with the acquisition of a vessel, we record all identified assets or liabilities at fair value. Fair value is determined by reference to market data. We value any asset or liability arising from the market value of the time charters assumed when a vessel is acquired. The amount to be recorded as an asset or liability at the date of vessel delivery is based on the difference between the current fair market value of the charter and the net present value of future contractual cash flows. When the present value of the time charter assumed is greater than the current fair market value of such charter, the difference is recorded as prepaid charter revenue. When the opposite situation occurs, any difference, capped to the vessel's fair value on a charter-free basis, is recorded as deferred revenue. Such assets and liabilities, respectively, are amortized as a reduction of, or an increase in, revenue over the period of the time charter assumed.
We entered into agreements to purchase vessels with time charters assumed for the Thetis, the Salt Lake City, the Norfolk and the Houston. Accordingly, we evaluated the charters of those vessels and recognized an asset in the case of the Thetis and the Houston with a corresponding decrease of the vessel's value, and a liability in the case of the Salt Lake City, with a corresponding increase of the vessel's value and the actual cost for the Norfolk. The asset recognized for the Thetis was fully amortized to revenue in 2007 and for Houston was fully amortized in 2013. The liability recognized for the Salt Lake City was fully amortized in 2012.
When we purchase a vessel and assume or renegotiate a related time charter, among others, we must take the following steps before the vessel will be ready to commence operations:
| · | obtain the charterer's consent to us as the new owner; |
| · | obtain the charterer's consent to a new technical manager; |
| · | in some cases, obtain the charterer's consent to a new flag for the vessel; |
| · | arrange for a new crew for the vessel, and where the vessel is on charter, in some cases, the crew must be approved by the charterer; |
| · | replace all hired equipment on board, such as gas cylinders and communication equipment; |
| · | negotiate and enter into new insurance contracts for the vessel through our own insurance brokers; |
| · | register the vessel under a flag state and perform the related inspections in order to obtain new trading certificates from the flag state; |
| · | implement a new planned maintenance program for the vessel; and |
| · | ensure that the new technical manager obtains new certificates for compliance with the safety and vessel security regulations of the flag state. |
When we charter a vessel pursuant to a long-term time charter agreement with varying rates, we recognize revenue on a straight line basis, equal to the average revenue during the term of the charter.
The following discussion is intended to help you understand how acquisitions of vessels affect our business and results of operations.
Our business is mainly comprised of the following elements:
| · | employment and operation of our vessels; and |
| · | management of the financial, general and administrative elements involved in the conduct of our business and ownership of our vessels. |
The employment and operation of our vessels mainly require the following components:
| · | vessel maintenance and repair; |
| · | crew selection and training; |
| · | vessel spares and stores supply; |
| · | contingency response planning; |
| · | onboard safety procedures auditing; |
| · | vessel insurance arrangement; |
| · | vessel security training and security response plans (ISPS); |
| · | obtaining of ISM certification and audit for each vessel within the six months of taking over a vessel; |
| · | vessel hiring management; |
| · | vessel performance monitoring. |
The management of financial, general and administrative elements involved in the conduct of our business and ownership of our vessels mainly requires the following components:
| · | management of our financial resources, including banking relationships, i.e., administration of bank loans and bank accounts; |
| · | management of our accounting system and records and financial reporting; |
| · | administration of the legal and regulatory requirements affecting our business and assets; and |
| · | management of the relationships with our service providers and customers. |
The principal factors that affect our profitability, cash flows and shareholders' return on investment include:
| · | rates and periods of charter hire; |
| · | levels of vessel operating expenses; |
| · | fluctuations in foreign exchange rates. |
Our Fleet – Illustrative Comparison of Possible Excess of Carrying Value Over Estimated Charter-Free Market Value of Certain Vessels
In Critical"Critical Accounting Policies – Impairment of long-lived assets," we discuss our policy for impairing the carrying values of our vessels. Historically, the market values of vessels have experienced volatility, which from time to time may be substantial. As a result, the charter-free market value of certain of our vessels may have declined below those vessels' carrying value, even though we would not impair those vessels' carrying value under our accounting impairment policy.
Based on: (i) the carrying value of each of our vessels as of December 31, 2015 and 2014, consisting of the net book value of the vessels and 2013,the unamortized value of deferred dry-dock and special surveys cost and (ii) what we believe the charter-free market value of each of our vessels was as of December 31, 20142015 and 2013,2014, the aggregate carrying value of 2742 and 1827 of the vessels in our fleet as of December 31, 20142015 and 2013,2014, respectively, exceeded their aggregate charter-free market value by approximately $501$762 million and $410$504 million, respectively, as noted in the table below. This aggregate difference represents the approximate analysis of the amount by which we believe we would have to increase our loss or reduce our net income if we sold all of such vessels at December 31, 2015 and 2014, and 2013, on charter freea charter-free basis, on industry standard terms, in cash transactions, and to a willing buyer where we were not under any compulsion to sell, and where the buyer was not under any compulsion to buy. For purposes of this calculation, we have assumed that these 2742 and 1827 vessels would be sold at a price that reflects our estimate of their charter-free market values as of December 31, 20142015 and 2013,2014, respectively. As of December 31, 20142015 and as of the date of this annual report, we were not and are not holding any of our vessels for sale.
Our estimates of charter-free market value assume that our vessels were all in good and seaworthy condition without need for repair and if inspected would be certified in class without notations of any kind. Our estimates are based on information available from various industry sources, including:
| · | reports by industry analysts and data providers that focus on our industry and related dynamics affecting vessel values; |
| · | news and industry reports of similar vessel sales; |
| · | news and industry reports of sales of vessels that are not similar to our vessels where we have made certain adjustments in an attempt to derive information that can be used as part of our estimates; |
| · | approximate market values for our vessels or similar vessels that we have received from shipbrokers, whether solicited or unsolicited, or that shipbrokers have generally disseminated; |
| · | offers that we may have received from potential purchasers of our vessels; and |
| · | vessel sale prices and values of which we are aware through both formal and informal communications with shipowners, shipbrokers, industry analysts and various other shipping industry participants and observers. |
As we obtain information from various industry and other sources, our estimates of charter-free market value are inherently uncertain. In addition, vessel values are highly volatile; as such, our estimates may not be indicative of the current or future charter-free market value of our vessels or prices that we could achieve if we were to sell them. We also refer you to the risk factors entitled "The market values of our vessels have decreased, which could limit the amount of funds that we can borrow under our creditloan facilities", "IfA decrease in the market values of our vessels decrease, could cause us to breach covenants in our creditloan facilities and adversely affect our operating results"and the discussion herein under the heading Item"Item 4.B. Business overview – Vessel PricesPrices".
Vessel | Dwt | Year Built | Carrying Value (in millions of US dollars) |
| | | 2014 | 2015 |
1 | Alcmene | 93,193 | 2010 | 34.5* | 33.3* |
2 | Alcyon | 75,247 | 2001 | 10.3 | 9.9* |
3 | Aliki | 180,235 | 2005 | 75.1* | 70.3* |
4 | Amphitrite | 98,697 | 2012 | 23.0 | 22.2* |
5 | Arethusa | 73,593 | 2007 | 25.4* | 24.5* |
6 | Artemis | 76,942 | 2006 | 19.1* | 18.4* |
7 | Atalandi | 77,529 | 2014 | 30.6* | 29.5* |
8 | Baltimore | 177,243 | 2005 | 26.4 | 24.8* |
9 | Boston | 177,828 | 2007 | 80.1* | 76.0* |
10 | Calipso | 73,691 | 2005 | 13.7 | 13.3* |
11 | Clio | 73,691 | 2005 | 14.1 | 13.3* |
12 | Coronis | 74,381 | 2006 | 27.9* | 26.6* |
13 | Crystalia | 77,525 | 2014 | 30.3* | 29.1* |
14 | Danae | 75,106 | 2001 | 12.0* | 11.6* |
15 | Dione | 75,172 | 2001 | 11.8* | 11.0* |
16 | Erato | 74,444 | 2004 | 25.4* | 23.7* |
17 | G. P. Zafirakis | 179,492 | 2014 | 57.6* | 55.5* |
18 | Houston | 177,729 | 2009 | 51.3* | 48.8* |
19 | Leto | 81,297 | 2010 | 28.6* | 27.5* |
20 | Los Angeles | 206,104 | 2012 | 53.7* | 51.6* |
21 | Maia | 82,193 | 2009 | 19.3 | 18.4* |
22 | Medusa | 82,194 | 2010 | | 17.7* |
23 | Melia | 76,225 | 2005 | 18.1* | 17.3* |
24 | Melite | 76,436 | 2004 | 26.8* | 25.4* |
25 | Myrsini | 82,117 | 2010 | 21.8 | 21.1* |
26 | Myrto | 82,131 | 2013 | 24.9 | 23.9* |
27 | Naias | 73,546 | 2006 | 27.0* | 25.6* |
28 | New Orleans | 180,960 | 2015 | | 43.1* |
29 | New York | 177,773 | 2010 | 52.3* | 49.8* |
30 | Nirefs | 75,311 | 2001 | 10.3 | 9.9* |
31 | Norfolk | 164,218 | 2002 | 89.9* | 83.1* |
32 | Oceanis | 75,211 | 2001 | 10.5 | 9.9* |
33 | Philadelphia | 206,040 | 2012 | 54.5* | 52.4* |
34 | Polymnia | 98,704 | 2012 | 22.9 | 22.1* |
35 | Protefs | 73,630 | 2004 | 13.8* | 12.9* |
36 | P. S. Palios | 179,134 | 2013 | 50.1* | 48.2* |
37 | Salt Lake City | 171,810 | 2005 | 115.6* | 109.1* |
38 | Santa Barbara | 179,426 | 2015 | | 48.5* |
39 | Seattle | 179,362 | 2011 | | 29.0 |
40 | Semirio | 174,261 | 2007 | 69.8* | 66.2* |
41 | Sideris GS | 174,186 | 2006 | 63.0* | 59.6* |
42 | Thetis | 73,583 | 2004 | 25.1* | 23.5* |
43 | Triton | 75,336 | 2001 | 10.5 | 10.1* |
| Total | 5,012,926 | | 1,377.1 | 1,447.7 |
Vessel | | Dwt | | | Year Built | | | Carrying Value (in millions of US dollars) | |
| | | | | | | | 2014 | | | 2013 | |
| 1 | | Alcmene | | | 93,193 | | | | 2010 | | | | 34.5 | * | | | 36.0 | * |
| 2 | | Alcyon | | | 75,247 | | | | 2001 | | | | 10.3 | | | | 10.9 | |
| 3 | | Aliki | | | 180,235 | | | | 2005 | | | | 74.5 | * | | | 79.1 | * |
| 4 | | Amphitrite | | | 98,697 | | | | 2012 | | | | 23.0 | | | | 23.9 | |
| 5 | | Arethusa | | | 73,593 | | | | 2007 | | | | 25.4 | * | | | 26.8 | * |
| 6 | | Artemis | | | 76,942 | | | | 2006 | | | | 19.1 | * | | | 20.1 | |
| 7 | | Atalandi | | | 77,529 | | | | 2014 | | | | 30.6 | * | | | | |
| 8 | | Baltimore | | | 177,243 | | | | 2005 | | | | 26.0 | | | | 27.3 | |
| 9 | | Boston | | | 177,828 | | | | 2007 | | | | 80.1 | * | | | 84.2 | * |
| 10 | | Calipso | | | 73,691 | | | | 2005 | | | | 13.7 | | | | 14.4 | |
| 11 | | Clio | | | 73,691 | | | | 2005 | | | | 14.0 | | | | 14.8 | |
| 12 | | Coronis | | | 74,381 | | | | 2006 | | | | 27.9 | * | | | 29.4 | * |
| 13 | | Crystalia | | | 77,525 | | | | 2014 | | | | 30.3 | * | | | | |
| 14 | | Danae | | | 75,106 | | | | 2001 | | | | 12.0 | * | | | 12.8 | |
| 15 | | Dione | | | 75,172 | | | | 2001 | | | | 11.8 | * | | | 12.6 | |
| 16 | | Erato | | | 74,444 | | | | 2004 | | | | 25.0 | * | | | 26.5 | * |
| 17 | | GP Zafirakis | | | 179,492 | | | | 2014 | | | | 57.6 | * | | | | |
| 18 | | Houston | | | 177,729 | | | | 2009 | | | | 50.8 | * | | | 53.1 | * |
| 19 | | Leto | | | 81,297 | | | | 2010 | | | | 28.6 | * | | | 29.8 | * |
| 20 | | Los Angeles | | | 206,104 | | | | 2012 | | | | 53.7 | * | | | 55.8 | * |
| 21 | | Maia | | | 82,193 | | | | 2009 | | | | 19.0 | | | | 19.8 | |
| 22 | | Melia | | | 76,225 | | | | 2005 | | | | 18.1 | * | | | 19.1 | |
| 23 | | Melite | | | 76,436 | | | | 2004 | | | | 26.8 | * | | | 28.5 | * |
| 24 | | Myrsini | | | 82,117 | | | | 2010 | | | | 21.8 | | | | 22.7 | |
| 25 | | Myrto | | | 82,131 | | | | 2013 | | | | 24.9 | | | | 25.8 | |
| 26 | | Naias | | | 73,546 | | | | 2006 | | | | 27.0 | * | | | 28.5 | * |
| 27 | | New York | | | 177,773 | | | | 2010 | | | | 51.8 | * | | | 54.0 | * |
| 28 | | Nirefs | | | 75,311 | | | | 2001 | | | | 10.3 | | | | 11.0 | |
| 29 | | Norfolk | | | 164,218 | | | | 2002 | | | | 89.4 | * | | | 95.9 | * |
| 30 | | Oceanis | | | 75,211 | | | | 2001 | | | | 10.5 | | | | 11.2 | |
| 31 | | Philadelphia | | | 206,040 | | | | 2012 | | | | 54.5 | * | | | 56.6 | * |
| 32 | | Polymnia | | | 98,704 | | | | 2012 | | | | 22.9 | | | | 23.8 | |
| 33 | | Protefs | | | 73,630 | | | | 2004 | | | | 13.4 | * | | | 14.1 | |
| 34 | | PS Palios | | | 179,134 | | | | 2013 | | | | 50.1 | * | | | 52.0 | |
| 35 | | Salt Lake City | | | 171,810 | | | | 2005 | | | | 115.6 | * | | | 122.5 | * |
| 36 | | Semirio | | | 174,261 | | | | 2007 | | | | 69.8 | * | | | 73.5 | * |
| 37 | | Sideris GS | | | 174,186 | | | | 2006 | | | | 63.0 | * | | | 66.4 | * |
| 38 | | Thetis | | | 73,583 | | | | 2004 | | | | 24.8 | * | | | 26.3 | * |
| 39 | | Triton | | | 75,336 | | | | 2001 | | | | 10.5 | | | | 11.2 | |
| | | Total | | | 4,390,984 | | | | | | | | 1,373.1 | | | | 1,320.4 | |
___________________________
*Indicates dry bulk vessels for which we believe, as of December 31, 20142015 and 2013,2014, the charter-free market value was lower than the vessel's carrying value. We believe that the aggregate carrying value of these vessels exceeded their aggregate charter-free market value by approximately $501$762 million and $410$504 million, respectively.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions and conditions.
Critical accounting policies are those that reflect significant judgments of uncertainties and potentially result in materially different results under different assumptions and conditions. We have described below what we believe are our most critical accounting policies, because they generally involve a comparatively higher degree of judgment in their application. For a description of all our significant accounting policies, see Note 2 to our consolidated financial statements included in this annual report.
Accounts Receivable, Trade
Accounts receivable, trade, at each balance sheet date, include receivables from charterers for hire, ballast bonus billings, if any, hold cleanings and extra voyage insurance, net of a provision for doubtful accounts. At each balance sheet date, all potentially uncollectible accounts are assessed individually for purposes of determining the appropriate provision for doubtful accounts.
Accounting for Revenues and Expenses
Revenues are generated from time charter agreements and are usually paid 15 days in advance. Time charter agreements with the same charterer are accounted for as separate agreements according to the terms and conditions of each agreement. Time charter revenues are recorded over the term of the charter as service is provided when they become fixed and determinable. Revenues from time charter agreements providing for varying annual rates over their term are accounted for on a straight line basis. Income representing ballast bonus payments and compensation paid by the charterer due to earlier than agreed redelivery of the vessel to the vessel owner isare recognized in the period earned. Deferred revenue includes cash received prior to the balance sheet date for which all criteria for recognition as revenue have not been met. Deferred revenue may also include deferred revenue resulting from charter agreements providing for varying annual rates, which are accounted for on a straight line basis, or the unamortized balance of the liability associated with the acquisition of second-hand vessels with time charters attached which were acquired at values below fair market value at the date the acquisition agreement is consummated.
Voyage expenses, primarily consisting of commissions, are deferred over the related voyage charter period to the extent revenue has been deferred since commissions are due as the Company's revenues are earned.
All vessel operating expenses are expensed as incurred.
Prepaid Charter Revenue
The Company records identified assets associated with the acquisition of a vessel at fair value, determined by reference to market data. The Company values any asset arising from the market value of the time charters assumed when a vessel is acquired. The amount to be recorded as an asset at the date of vessel delivery is based on the difference between the current fair market value of the charter and the net present value of future contractual cash flows. When the present value of the contractual cash flows of the time charter assumed is greater than its current fair value, the difference, capped to the vessel's fair value on a charter freecharter-free basis, is recorded as prepaid charter revenue. When the opposite situation occurs, any difference, capped to the vessel's fair value on a charter freecharter-free basis, is recorded as deferred revenue. Such assets and liabilities, respectively, are amortized as a reduction of, or an increase in, revenue over the period of the time charter assumed. We test such assets for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.
Vessel Depreciation
We record the value of our vessels at their cost less accumulated depreciation. We depreciate our dry bulk vessels on a straight-line basis over their estimated useful lives, estimated to be 25 years from the date of initial delivery from the shipyard which we believe is common in the dry bulk shipping industry. Second hand vessels are depreciated from the date of their acquisition through their remaining estimated useful life. Depreciation is based on cost less the estimated salvage value. Each vessel's salvage value is equal to the product of its lightweight tonnage and estimated scrap rate. Furthermore, we estimate the salvage values of our vessels based on historical average prices, which we believe is common in the dry bulk shipping industry. In 2013, we identified that the estimated scrap rate used for the determination of annual depreciation was not in line with the current average historical rate and as such, the estimated scrap rate was revised from $150 per lightweight ton to $250 per lightweight ton. A decrease in the useful life of a vessel or in its salvage value would have the effect of increasing the annual depreciation charge. When regulations place limitations on the ability of a vessel to trade on a worldwide basis, the vessel's useful life is adjusted at the date such regulations are adopted.
Deferred Drydock Cost
Our vessels are required to be drydocked approximately every 30 to 36 months for major repairs and maintenance that cannot be performed while the vessels are operating. We defer the costs associated with drydockings as they occur and amortize these costs on a straight-line basis over the period through the date the next dry-docking is scheduled to become due. Unamortized drydocking costs of vessels that are sold are written off and included in the calculation of the resulting gain or loss in the year of the vessel's sale. Costs deferred as part of the drydocking include actual costs incurred at the yard and parts used in the drydocking. We believe that these criteria
Equity method investments
Investments in common stock in entities over which the Company exercises significant influence, but does not exercise control are consistent with industry practiceaccounted for by the equity method of accounting. Under this method, we record such an investment at cost and thatadjust the carrying amount for our policy of capitalization reflects the economics and market valuesshare of the vessels.earnings or losses of the entity subsequent to the date of investment and report the recognized earnings or losses in income. Dividends received reduce the carrying amount of the investment. When our share of losses in an entity accounted for by the equity method equals or exceeds our interest in the entity, we do not recognize further losses, unless we have made advances, incurred obligations and made payments on behalf of the entity. Equity method investments are evaluated to determine if a loss in value that is other than temporary should be recognized. Evidence of a loss in value might include absence of an ability to recover the carrying amount of the investment, inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment, or other investors ceasing to provide support or reduce their financial commitment to the investee. As of December 31, 2015 the fair value of our investment in Diana Containerships, based on the quoted price of Diana Containerships' share of common stock (NASDAQ: DCIX) of $0.80, was $15.4 million. We assessed that the decline in the fair value of our investment in Diana Containerships did not constitute other than temporary impairment. In our assessment, we considered the financial position of Diana Containerships, the expected growth of the world seaborne containership demand and trade over the period of the next three years based on the public reports of international organizations and independent brokers, the current order book and deployment relevant to the size of containerships owned by Diana Containerships and the efforts of Diana Containerships management to modernize its fleet throughout the containerships cycle. As of December 31, 2015 and the date of this report, we have the intent and ability to retain our investment in Diana Containerships for a period of time sufficient to allow for the anticipated recovery of its market value, as discussed above.
Impairment of Long-lived Assets
Long-lived assets (vessels, land, and building) held and used by an entity are reviewed for impairment whenever events or changes in circumstances (such as market conditions, obsolesce or damage to the asset, potential sales and other business plans) indicate that the carrying amount of the assets may not be recoverable or that their useful lives require modification. When the estimate of undiscounted projected net operating cash flows, excluding interest charges, expected to be generated by the use of the asset over its remaining useful life and its eventual disposition is less than its carrying amount, we should evaluate the asset for an impairment loss. Measurement of the impairment loss is based on the fair value of the asset. We determine the fair value of our assets based on management estimates and assumptions and by making use of available market data and taking into consideration third party valuations.
70
With respect to the vessels, the current conditions in the dry bulk market with decreased charter rates and decreased vessel market values are conditions that the Company considers indicators of a potential impairment. We determine undiscounted projected net operating cash flows for each vessel and compare it to the vessel's carrying value. The projected net operating cash flows are determined by considering the historical and estimated vessels' performance and utilization, assuming (i) future revenues calculated for the fixed days, using the fixed charter rate of each vessel from existing time charters and for the unfixed days, the most recent 10 year average historical 1 year time charter rates available for each type of vessel over the remaining estimated life of each vessel, net of brokerage commissions; (ii) expected outflows for scheduled vessels' maintenance; (iii) vessel operating expenses increasing annually by an annual inflation rate of 3%; (iv) effective fleet utilization of 98% taking into account the period each vessel is expected to remain off hire for scheduled maintenance (dry docking and special surveys) and 1% off hire days (other than for dry docking and special surveys) each year. Historical ten-year blended average one-year time charter rates used in our impairment test exercise are in line with our overall chartering strategy, especially in periods/years of depressed charter rates; they reflect the full operating history of vessels of the same type and particulars with our operating fleet (Panamax/Post-Panamax/Kamsarmax and Capesize/Newcastlemax vessels) and they cover at least a full business cycle. The average annual inflation rate applied on vessels' maintenance and operating costs approximates current projections for global inflation rate for the remaining useful life of our vessels. Effective fleet utilization assumed is in line with the Company's historical performance and our expectations for future fleet utilization under our current fleet deployment strategy.
A comparison of the average estimated daily time charter equivalent rate used in our impairment analysis with the average "break even rate" for each major class of vessels is presented below:
| | Average estimated daily time charter equivalent rate used | | | Average break even rate | | Average estimated daily time charter equivalent rate used | Average break even rate |
Panamax/Kamsarmax/Post-Panamax | | $ | 24,517 | | | $ | 11,958 | | $22,681 | $11,571 |
Capesize/Newcastlemax | | $ | 44,875 | | | $ | 19,866 | | $40,815 | $18,073 |
Our impairment test exercise is sensitive to variances in the time charter rates and fleet effective utilization. Our current analysis, which also involved a sensitivity analysis by assigning possible alternative values to these two significant inputs, indicated a reduction of approximately 33%29% in the time charter rates or 27%24% of off hire days (other than for dry docking and special surveys) to result to an impairment of individual long lived assets. However, there can be no assurance as to how long charter rates and vessel values will remain at their currently low levels or whether they will improve by any significant degree. Charter rates may remain at depressed levels for some time which could adversely affect our revenue and profitability, and future assessments of vessel impairment.
For the purpose of presenting our investors with additional information to determine how the Company's future results of operations may be impacted in the event that daily time charter rates do not improve from their current levels in future periods, we set forth below an analysis that shows the 1-year, 3-year and 5-year average blended rates and the effect of the use of each of these rates would have on the Company's impairment analysis.
| | | | | Impairment charge (in USD million) | | | 3-year (period) | | | Impairment charge (in USD million) | | | 5-year (period) | | | Impairment charge (in USD million) | | | Impairment charge (in USD million) | 3-year (period) | Impairment charge (in USD million) | 5-year (period) | Impairment charge (in USD million) |
Panamax/Kamsarmax/Post-Panamax | | $ | 12,028 | | | | 98.3 | | | $ | 10,611 | | | | 105.8 | | | $ | 14,211 | | | | - | | $7,492 | 234 | $9,873 | 234 | $10,798 | 218 |
Capesize/Newcastlemax | | $ | 21,777 | | | | 298.5 | | | $ | 17,074 | | | | 365.8 | | | $ | 20,225 | | | | 334.3 | | $10,049 | 527 | $15,862 | 482 | $15,642 | 482 |
Derivatives
We are exposed to interest rate fluctuations associated with our variable rate borrowings and our objective is to manage the impact of such fluctuations on our results of operations and cash flows of our borrowings. We currently have one collar agreement which is considered an economic, and not accounting, hedge, as it does not meet the hedge accounting criteria. The fair value of the collar agreement determined through Level 2 inputs of the fair value hierarchy is derived principally from or corroborated by observable market data. Inputs include interest rates, yield curves and other items that allow value to be determined.
Results of Operations
Year ended December 31, 2015 compared to the year ended December 31, 2014
Time Charter Revenues. Time charter revenues decreased by $17.9 million, or 10%, to $157.7 million in 2015, compared to $175.6 million in 2014. The decrease was due to decreased time charter rates which resulted in a 19% decrease of our average charter rates from $12,081 in 2014 to $9,739 in 2015 and was also due to increased drydock days during the year for which our vessels did not earn revenue as they were not available for charter. This decrease was partly offset by increased revenues due to an 8% increase of our ownership days resulting from the delivery of the Crystalia, in February 2014; the Atalandi, in May 2014; the G. P. Zafirakis in August 2014; the Santa Barbara in January 2015; the Medusa in June 2015; and the New Orleans and the Seattle in November 2015. In 2015 we had total operating days of 14,492 and fleet utilization of 99.3%, compared to 13,564 total operating days and a fleet utilization of 99.4% in 2014.
Voyage Expenses.Voyage expenses increased by $4.8 million, or 45%, to $15.5 million in 2015 compared to $10.7 million in 2014. This increase in voyage expenses is primarily attributable to the increase in loss from bunkers which amounted to $7.5 million in 2015, compared to a loss of $2.0 million in 2014. This was the result of the different prices of the bunkers purchased at redelivery and sold to the new charterers for those vessels that entered into new charters during the year. This increase was partly offset by decreased commissions due to the decrease in revenues.
Vessel Operating Expenses. Vessel operating expenses increased by $1.4 million, or 2%, to $88.3 million in 2015 compared to $86.9 million in 2014. The increase in operating expenses is primarily attributable to the 8% increase in ownership days resulting from the delivery of the new vessels to our fleet in 2015. The increase was also due to increased repairs and maintenance, other operating expenses and environmental expenses and was partly offset by decreases in crew costs, insurances, stores and spares and taxes. Daily operating expenses were $5,924 in 2015 compared to $6,289 in 2014, representing a 6% decrease.
Depreciation and Amortization of Deferred Charges. Depreciation and amortization of deferred charges increased by $5.8 million, or 8%, to $76.3 million in 2015, compared to $70.5 million 2014. This increase was due to the enlargement of our fleet. Additionally, the increase in depreciation and amortization was due to increased amortization of deferred drydocking costs, mainly due to additional vessels which went under drydock surveys compared to 2014.
General and Administrative Expenses. General and Administrative Expenses decreased by $0.9 million, or 3%, to $25.3 million in 2015 compared to $26.2 million in 2014. The decrease is mainly attributable to decreased salaries and the exchange rate between the U.S. dollar and the Euro and was partly offset by increased board of directors fees, legal and other professional fees.
Management fees to related party. Management fees to a related party amounted to $0.4 million and represent management fees paid to DWM for the technical management of six vessels of our fleet gradually transferred to DWM from DSS during the year.
Interest and Finance Costs. Interest and finance costs increased by $7.2 million, or 86%, to $15.6 million in 2015 compared to $8.4 million in 2014. The increase is primarily attributable to higher average interest rates, especially after the issuance of our Notes in May 2015 at a fixed rate of 8.5% and on increased average long term debt outstanding during 2015 compared to 2014. Interest expense in 2015 amounted to $13.9 million compared to $7.8 million 2014.
Interest and Other Income. Interest and other income decreased by $0.4 million, or 11%, to $3.2 million in 2015 compared to $3.6 million in 2014. The decrease is attributable to decreased interest income which derived from our loan agreement with Diana Containerships, dated May 20, 2013 and as amended on September 9, 2015, as since September 9, 2015, the outstanding balance of the loan is being reduced by an amount of $5.0 million per annum, the margin was reduced to 3% from 5% and the accrued, up to the date of the amendment, back end fee was paid in full and seized from being accrued.
Income / (loss) from Equity Method Investments. Loss from our investment in Diana Containerships amounted to $5.0 million in 2015 and was due to loss incurred by Diana Containerships and our dilution from the decrease in our share ownership from 26.34% as at December 31, 2014 to 26.08% as at December 31, 2015. This compared to a gain of $12.7 million in 2014. Additionally, loss from equity method investments included $0.2 million loss from DWM, our 50% owned joint venture established in 2015 that as of December 31, 2015 provided management services to six vessels of our fleet.
Year ended December 31, 2014 compared to the year ended December 31, 2013
Time Charter Revenues. Time charter revenues increased by $11.6 million, or 7%, to $175.6 million in 2014, compared to $164.0 million in 2013. The increase was due to a 15% increase of our ownership days resulting from the delivery of the Myrto, at the end of January 2013; the Maia, in February 2013; the Baltimore, in June 2013; the Artemis, in August 2013; the Myrsini, in October 2013; the PSP. S. Palios, in December 2013, the Crystalia, in February 2014; the Atalandi, in May 2014 and the GPG. P. Zafirakis in August 2014. In 2014 we had total operating days of 13,564 and fleet utilization of 99.4%, compared to 11,944 total operating days and a fleet utilization of 99.3% in 2013. The increase was partly off-set by decreased revenues due to increased drydock days during the year for which our vessels did not earn revenue as they were not available for charter and by decreased time charter rates which resulted to a 7% decrease of our average charter rates from $12,959 in 2013 to $12,081 in 2014.
Voyage Expenses. Voyage expenses increased by $2.6 million, or 32%, to $10.7 million in 2014 compared to $8.1 million in 2013. This increase in voyage expenses is primarily attributable to the increase in commissions paid to unaffiliated ship brokers and in-house ship brokers associated with charterers. As commissions are a percentage of time charter revenues, they follow the same trend with time charter revenues. Also, voyage expenses increased due to a loss from bunkers which amounted to $2.0 million in 2014, compared to a gain of $0.1 million in 2013, which was the result of the different bunker prices at redelivery of our vessels that entered into new charters during the year.
Vessel Operating Expenses. Vessel operating expenses increased by $9.7 million, or 13%, to $86.9 million in 2014 compared to $77.2 million in 2013. The increase in operating expenses is primarily attributable to the 15% increase in ownership days resulting from the delivery of the new vessels to our fleet in 2014. The increase was also due to increased repairs and maintenance, taxes and environmental expenses and was partly offset by decreases in crew costs, insurances and other operating expenses. Daily operating expenses were $6,289 in 2014 compared to $6,408 in 2013, representing a 2% decrease.
Depreciation and Amortization of Deferred Charges. Depreciation and amortization of deferred charges increased by $5.8 million, or 9%, to $70.5 million in 2014, compared to $64.7 million 2013. This increase was due to the enlargement of our fleet. Additionally, the increase in depreciation and amortization was partly offset by decreased amortization of deferred drydocking costs, mainly due to the termination of the amortization period for several vessels during 2013 that did not exist in 2014.
General and Administrative Expenses. General and Administrative Expenses increased by $2.5 million, or 11%, to $26.2 million in 2014 compared to $23.7 million in 2013. The increase is mainly attributable to increased salaries due to the increase of office personnel.
Interest and Finance Costs. Interest and finance costs increased by $0.3 million, or 4%, to $8.4 million in 2014 compared to $8.1 million in 2013. The increase is primarily attributable to higher average interest rates on increased average long term debt outstanding during 2014 compared to 2013. Interest expense in 2014 amounted to $7.8 million compared to $7.6 million in 2013.
Interest and Other Income. Interest and other income increased by $1.8 million, or 100%, to $3.6 million in 2014 compared to $1.8 million in 2013. The increase is attributable to interest income and fees of $3.2 million in 2014 compared to $1.2 million in 2013, which derived from our loan agreement with Diana Containerships, dated May 20, 2013, pursuant to which $50.0 million werewas drawn by Diana Containerships on August 20, 2013. This increase was partly offset by decreased interest income on our cash at banks during 2014 mainly due to decreased levels of cash compared to last year.
Income / (loss) from Derivative Instruments. Income from derivative instruments was $0.1 million in 2014 compared to a loss of $0.1 million in 2013. The change was due to the decrease of realized loss in 2014 amounting to $0.3 million compared to $0.7 million in 2013 due to its maturity in May 2014. The unrealized gain was $0.4 million in 2014 compared to $0.6 million in 2013.
Income / (loss) from Investment in Diana Containerships Inc. Income from our investment in Diana Containerships Inc. amounted to $12.7 million in 2014 and was mainly due to the increase of our share ownership in Diana Containerships from 9.51% as at December 31, 2013 to 26.34% as at December 31, 2014, following our participation in a private offering in which we acquired additional shares for $40.0 million. This compared to a loss of $6.1 million in 2013, mainly due to impairment charges recorded by Diana Containerships during the previous year.
Year ended December 31, 2013 compared to the year ended December 31, 2012
Time Charter Revenues. Time charter revenues decreased by $56.8 million, or 26%, to $164.0 million in 2013, compared to $220.8 million in 2012. The decrease was due to a 39% decrease of our average charter rates in 2013 compared to 2012. The decrease was partly off-set by a 19% increase of our ownership days resulting from the delivery of the Los Angeles in February 2012; the Philadelphia and Melia, both delivered in May 2012; the Amphitrite, delivered in August 2012; the Polymnia, delivered in November 2012; the Myrto, delivered in January 2013; the Maia, delivered in February 2013; the Baltimore, delivered in June 2013; the Artemis, delivered in August 2013; the Myrsini, delivered in October 2013; and the PS Palios, delivered in December 2013. In 2013 we had total operating days of 11,944 and fleet utilization of 99.3%, compared to 9,865 total operating days and a fleet utilization of 98.7% in 2012.
Other Revenues. Other revenues decreased by $2.0 million, or 83%, to $0.4 million in 2013, compared to $2.4 million in 2012 and consist of the income derived from the management and administrative agreements between DSS and Diana Containerships. The decrease in 2013 was due to the termination of the agreements with Diana Containerships on March 1, 2013.
Voyage Expenses.Voyage expenses decreased by $0.2 million, or 2%, to $8.1 million in 2013 compared to $8.3 million in 2012. This decrease in voyage expenses is primarily attributable to the decrease of commissions paid to unaffiliated ship brokers and in-house ship brokers associated with charterers. As commissions are a percentage of time charter revenues, they follow the same trend with time charter revenues. This decrease was partly offset by the decrease of the gain from bunkers between the two periods, which amounted to $0.1 million in 2013, compared to $2.1 million in 2012, which was the result of the different bunker prices at the delivery and redelivery of our vessels that entered into new charters during the year.
Vessel Operating Expenses. Vessel operating expenses increased by $10.9 million, or 16%, to $77.2 million in 2013 compared to $66.3 million in 2012. The increase in operating expenses is primarily attributable to the 19% increase in ownership days resulting from the delivery of the new vessels to our fleet in 2013. The increase was also due to increased crew costs, insurances, taxes and other operating expenses and was partly offset by decreased stores, spares, repairs and maintenance costs. Daily operating expenses were $6,408 in 2013 compared to $6,551 in 2012, representing a 2% decrease.
Depreciation and Amortization of Deferred Charges. Depreciation and amortization of deferred charges increased by $2.7 million, or 4%, to $64.7 million in 2013, compared to $62.0 million 2012. This increase was due to the enlargement of our fleet and was partly offset by a decrease in depreciation expense of $2.9 million, or $0.04 per share, due to the increase in the scrap value of the vessels. Additionally, the increase in depreciation and amortization was partly offset by decreased amortization of deferred drydocking costs, mainly due to the termination of the amortization period for several vessels during 2013 and the fact that only one vessel was dry-docked at the end 2013.
General and Administrative Expenses. General and Administrative Expenses decreased by $1.2 million, or 5%, to $23.7 million in 2013 compared to $24.9 million in 2012. The decrease is mainly attributable to reduced bonuses, compensation cost on restricted stock awards to executive management and non-executive directors, and company promotion expenses.
Interest and Finance Costs. Interest and finance costs increased by $0.5 million, or 7%, to $8.1 million in 2013 compared to $7.6 million in 2012. The increase is primarily attributable to higher average interest rates on increased average long term debt outstanding during 2013 compared to 2012. Interest expense in 2013 amounted to $7.6 million compared to $7.0 million 2012.
Interest and Other Income. Interest and other income increased by $0.4 million, or 29%, to $1.8 million in 2013 compared to $1.4 million in 2012. The increase is attributable to interest income and fees of $1.2 million, which derived from our loan agreement with Diana Containerships, dated May 20, 2013, pursuant to which $50.0 million were drawn by Diana Containerships on August 20, 2013. This increase was partly offset by decreased interest income on our cash at banks during 2013 mainly due to decreased levels of cash compared to last year.
Loss from Derivative Instruments. Loss from derivative instruments decreased by $0.4 million, or 80%, to $0.1 million in 2013 compared to $0.5 million in 2012. The decrease is due to the unrealized gain of $0.6 million 2013 compared to gain of $36,495 in 2012. Realized loss in 2013 amounted to $0.7 million compared to $0.6 million in 2012.
Income / (loss) from Investment in Diana Containerships Inc. Loss from our investment in Diana Containerships Inc. amounted to $6.1 million in 2013 and was mainly due to impairment charges recorded by Diana Containerships during the year. This compared to a loss of $1.8 million in 2012, mainly due to the dilution of our ownership percentage in Diana Containerships from 14.5% to 10.4%, following a follow on offering of Diana Containerships.
Inflation
Inflation does not have a material effect on our expenses given current economic conditions. In the event that significant global inflationary pressures appear, these pressures would increase our operating, voyage, administrative and financing costs.
B.Liquidity and Capital Resources | B. | Liquidity and Capital Resources |
We have historically financed our capital requirements with cash flow from operations, equity contributions from shareholders and, long-term bank debt.debt and since May 2015 with our Notes. Our main uses of funds have been capital expenditures for the acquisition and construction of new vessels, expenditures incurred in connection with ensuring that our vessels comply with international and regulatory standards and repayments of bank loans. We will require capital to fund ongoing operations, the construction and acquisition of our new vessels, debt service and the payment of our preferred dividends. As at December 31, 20142015 and 2013,2014, working capital, which is current assets minus current liabilities, including the current portion of long-term debt, amounted to $140.1$156.1 million and $189.6$140.1 million, respectively.
We expect to fund the operations of our fleet, our working capital requirements, our payment of preferred dividends, and the construction cost of vessels under construction and the vessels we have agreed to acquire with internally generated cash flow and with additional debt or equity.
Cash Flow
Cash and cash equivalents were $193.2 million as at December 31, 2015 compared to $218.9 million as at December 31, 2014 compared to $240.6 million as at December 31, 2013.2014. We consider highly liquid investments such as time deposits and certificates of deposit with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents are primarily held in U.S. dollars. Cash and cash equivalents may also include compensating cash balances kept against the Company's loan facilities that are not deemed to be sufficiently material to require segregation on the balance sheet. As at December 31, 20142015 and 2013,2014, cash and cash equivalents also include $19.5$21.5 million and $18.0$19.5 million, respectively, of such compensating cash balances not deemed to be sufficiently material to require segregation on the balance sheet.
Net Cash Provided By Operating Activities
Net cash provided by operating activities decreased by $21.0 million, or 47%, to $23.9 million in 2015 compared to $44.9 million in 2014. The decrease was primarily attributable to the decrease in charter rates during the year, the increase in drydock and off-hire days during which our vessels could not earn revenue and the increase in expenses due to the enlargement of the fleet.
Net cash provided by operating activities decreased by $22.5 million, or 33%, to $44.9 million in 2014 compared to $67.4 million in 2013. The decrease was primarily attributable to the decrease in charter rates during the year, the increase in drydock days during which our vessels could not earn revenue and the increase in expenses due to the enlargement of the fleet.
Net cash provided by operating activities decreased by $52.5 million, or 44%, to $67.4 million in 2013 compared to $119.9 million in 2012. The decrease was primarily attributable to the decrease in revenues due to the decrease in average rates, despite the enlargement of the fleet, and increase in expenses due to the enlargement of theour fleet.
Net Cash Used In Investing Activities
Net cash used in investing activities was $155.6 million for 2015, which consists of $155.3 million paid for predelivery installments for our three vessels under construction, the balance price for the acquisition of the Santa Barbara, delivered in January 2015 and the acquisition of three vessels during the year; $0.2 million of dividends received from Diana Containerships during the year; a $0.3 million investment in DWM; and $0.2 million relating to the acquisition of property and equipment.
Net cash used in investing activities was $152.5 million for 2014, which consists of $111.7 million paid for predelivery installments for our three vessels under construction and the Crystalia and Atalandi, which were delivered in 2014, the acquisition of the GPG. P. Zafirakis during the year, and the advance for the acquisition of the Santa Barbara, delivered in January 2015; $40.0 million for the acquisition of additional interest in Diana Containerships in a private offering; $0.8 million of dividends received from Diana Containerships during the year; and $1.6 million relating to the acquisition of property and equipment.
Net cash used in investing activities was $245.2 million for 2013, which consists of $198.6 million paid for predelivery installments for four vessels under construction, the acquisition of five vessels during the year, and the delivery installment for the acquisition of the Myrto, delivered in January 2013; $50.0 million paid to Diana Containerships, pursuant to the respective loan agreement; $4.0 million of dividends received from Diana Containerships during the year; and $0.6 million relating to building improvements and purchases of furniture and equipment.
Net cash used in investing activities was $169.9 million in 2012, which consists of $171.2 million paid for the acquisition of six vessels during the year, the payment of a 10% advance for the acquisition of the Myrto and two predelivery installments for the construction of two vessels; $2.8 million of dividends received from Diana Containerships during the year and $1.6 million relating to property additions and purchases of furniture, equipment and software development costs.
Net Cash Used In / Provided By Financing Activities
Net cash provided by financing activities was $106.0 million for 2015, which consists of $441.2 million of proceeds drawn under new loan facilities and our Notes; $321.2 million of indebtedness that we repaid; and $5.5 million of financing costs we paid relating to our new loan agreements and our Notes; $5.8 million of dividends paid on our Series B Preferred Shares; and $2.7 million of payments to repurchase common stock.
Net cash provided by financing activities was $85.9 million for 2014, which consists of $101.5 million of proceeds drawn under new loan facilities; $48.6 million of indebtedness that we repaid; and $0.5 million of financing costs we paid relating to our new loan agreements; $62.7 million of proceeds from issuance of preferred stock, net of expenses; $3.9 million of dividends paid on the preferred stock;our Series B Preferred Shares; and $25.3 million of payments forto repurchase of common stock.
Net cash used in financing activities was $28.2 million for 2013, which consists of $18.0 million of proceeds drawn under our loan facility with Deutsche Bank AG for the vessels Maia and Myrto; $45.8 million of indebtedness that we repaid; and $0.4$0.5 million of financing costs we paid relating to our new loan agreements.
Net cash provided by financing activities was $80.0 million in 2012, which consists of $118.6 million of proceeds drawn under our loan facilities and $32.0 million of indebtedness that we repaid; $6.0 million that we paid to repurchase and retire our common stock pursuant to the relevant plan; and $0.6 million that we paid in financing costs relating to our new loan agreements.75
Loan Facilities and Senior Unsecured Notes
As at December 31, 2014,2015, we had $486.0$605.9 million of long term debt outstanding under our facilities and Notes, which as of the date of this annual report decreased to $492.4,$596.9 million, and consists of the balances of the below agreements.agreements described below.
Revolving credit facility
In February 2005, we entered into a $230.0 million secured revolving credit facility with the Royal Bank of Scotland, which was amended on May 24, 2006, to increase the facility amount to $300.0 million. The $300.0 million revolving credit facility was available in full until May 24, 2012. Since that date the available amount is reducingwas reduced in semi-annual amounts of $15.0 million with a final reduction of $165.0 million together with the last semi-annual reduction on May 24, 2016. The credit facility bearsbore interest ranging from 0.75% to 0.85% per annum over LIBOR.
The On July 24, 2015, the outstanding balance of the revolving credit facility is secured by a first priority or preferred ship mortgage on 18 vessels of our fleet, assignment of all freights, earnings, insurancesamounting to $195.0 million was voluntarily prepaid in full and requisition compensation. The lenders may also require additional security in the event we breach certain covenants under the credit facility, including a shortfall in the hull cover ratio. The credit facility contains covenants including restrictions as to changes in management and ownership of the vessels, additional indebtedness, as well as minimum requirements regarding hull cover ratio, minimum liquidity per each vessel in the fleet mortgaged under or financed through the credit facility and other financial covenants. Furthermore, the Company is not permitted to pay any dividends that would result in a breach of the financial covenants of the facility.
71
related agreement was then terminated.
Secured Term Loans:
InOn October 8, 2009, our wholly ownedwholly-owned subsidiary Bikini Shipping Company Inc. ("Bikini"), entered into a $40.0 million loan agreement with Deutsche Bank to partly finance the acquisition cost of the New York. The loan was repaid in full on March 10, 2015.
On October 22, 2009, our wholly-owned subsidiary Gala Properties Inc., entered into a $40.0 million loan agreement with Bremer Landesbank ("Bremer") to partly finance the acquisition cost of the Houston. The loan is repayable in 40 quarterly installments of $0.9 million plus one balloon installment of $4.0 million to be paid together with the last installment on November 19, 2019. The loan bears interest at LiborLIBOR plus a margin of 2.15% per annum.
InOn October 2009, our wholly owned subsidiary Bikini Shipping Company Inc., ("Bikini") entered into $40.0 million a loan agreement with Deutsche Bank AG ("Deutsche") to partly finance the acquisition cost of the New York. The loan was repaid in full on March 10, 2015 and was repayable in 19 quarterly installments of $0.6 million and a 20th installment of $28.6 million. The loan bore interest at Libor plus a margin of 2.40% per annum.
On June 18, 2013, two of our wholly-owned subsidiaries, Tuvalu Shipping Company Inc. and Jabat Shipping Company Inc., entered into a loan agreement with Deutsche for a loan facility of $18.0 million to finance part of the acquisition cost of the Maia and the Myrto which were cross-collateralized with the New York. The loan was prepaid in full on March 20, 2015 and was repayable in 20 consecutive equal quarterly installments of approximately $0.4 million and a balloon payment of $10.5 million payable together with the final quarterly installment on June 20, 2018. The loan bore interest at LIBOR plus a margin of 3.0%.
In October2, 2010, our wholly ownedwholly-owned subsidiaries Lae Shipping Company Inc. ("Lae") and Namu Shipping Company Inc., ("Namu") entered into a loan agreement with Export-Import Bank of China ("CEXIM") and DnB NOR Bank ASA ("CEXIM and DnB") to finance part of the acquisitionconstruction cost of the Los Angeles, and the Philadelphia, for an amount of up to $82.6 million, of which $72.1 million was drawn being 70% of the vessels' market value on delivery.
The Lae advance is repayable in 40 quarterly installments of approximately $0.6 million and a balloon of $ 12.3$12.3 million payable together with the last installment on February 15, 2022. The Namu advance is repayable in 40 quarterly installments of approximately $0.6 million and a balloon of $11.4 million payable together with the last installment on May 18, 2022. Each Bank has the right to demand repayment of the outstanding balance of any advance 72 months after the respective advance drawdown. Such demand shall be subject to written notification to be made no earlier than 54 months and not later than 60 months after the respective drawdown date for that advance. The loan bears interest at LIBOR plus a margin of 2.50% per annum.
On May 24, 2013, our wholly-owned subsidiaries, Erikub Shipping Company Inc. and Wotho Shipping Company Inc., entered into a loan agreement with CEXIM and DnB to finance part of the construction cost of Crystalia and Atalandi for an amount of up to $15.0 million for each vessel, drawn on May 22, 2014. Each advance is repayable in 19 quarterly installments of $250,000 and a balloon of $10.3 million payable together with the last installment on February 22, 2019. The loan bears interest at LIBOR plus a margin of 3.0% per annum.
On September 13, 2011, our wholly ownedwholly-owned subsidiary Bikar Shipping Company Inc. ("Bikar") entered into a loan agreement with Emporiki Bank of Greece S.A. ("Emporiki") for a loan of up to $15.0 million to refinance part of the acquisition cost of the Arethusa. On December 13, 2012, Bikar, the Company, DSS and Credit Agricole Corporate and Investment Bank ("Credit Agricole"), entered into a supplemental loan agreement to transfer the outstanding loan balance, the ISDA master swap agreement and the existing security documents from Emporiki to Credit Agricole. The loan is repayable in 20 equal semiannual installments of $0.5 million each and a balloon payment of $5.0 million to be paid together with the last installment on September 15, 2021. The loan bears interest at LIBOR plus a margin of 2.5% per annum, or 1% for such loan amount that is equivalently secured by cash pledge in favor of the bank.
On February 7, 2012, our wholly ownedwholly-owned subsidiary Jemo Shipping Company Inc., ("Jemo") entered into an agreement with Nordea Bank ("Nordea"),Finland Plc, which in December 2014 was replaced by Nordea Bank AB, London Branch, or Nordea, for a loan facility of $16.1 million drawn down in February 2012, to partly finance the acquisition cost of the Leto. On June 21, 2012, the agreement between Jemo and Nordea Bank Finland Plc, was restated and amended by a supplemental agreement in order to include Mandaringina Inc as a new borrower and increase the loan amount to up to $26.5 million for the purpose of financing part of the acquisition cost of the Melia. On March 19, 2015, we prepaid in full all outstanding indebtedness under the loan facility. The Leto advancefacility, which was repayable in 20 consecutive equal quarterly installments of $252,000 andrefinanced with a balloon payment of $11.1 million payable together with the final quarterly installment on February 7, 2017. The Melia advance of $10.3 million, drawn in June 2012, was repayable in 20 consecutive equal quarterly installments of $234,660 and a balloon of $5.6 million payable together with the last installment on May 7, 2017. The loan bore interest at LIBOR plus a margin of 2.5%.new agreement mentioned below.
On December 20, 2012, our wholly ownedwholly-owned subsidiaries Palau Shipping Company Inc. ("Palau") and Guam Shipping Company Inc., ("Guam") entered into a new loan agreement with Nordea Bank Finland Plc, replaced in December 2014 by Nordea, for an amount of $20.0 million, drawn down on December 21, 2012, to finance part of the acquisition cost of the Amphitrite and the Polymnia. On March 19, 2015, we prepaid in full all outstanding indebtedness under the loan facility, which was refinanced with a new agreement mentioned below.
On May 24, 2013, our wholly-owned subsidiaries Erikub Shipping Company Inc. ("Erikub") and Wotho Shipping Company Inc. ("Wotho"), entered into a loan agreement with CEXIM and DnB to finance part of the construction cost of Crystalia and Atalandi for an amount of up to $15.0 million for each vessel, drawn on May 22, 2014. Each advance is repayable in 20 consecutive19 quarterly installments of $312,500$250,000 and a balloon installment of $13.8$10.3 million payable together with the last installment on December 21, 2017.February 22, 2019. The loan borebears interest at LIBOR plus a margin of 2.9%.3.0% per annum.
On January 9, 2014, two ofJune 18, 2013, our wholly ownedwholly-owned subsidiaries TakaTuvalu Shipping Company Inc. ("Tuvalu"), and FayoJabat Shipping Company Inc. ("Jabat"), entered into a loan agreement with Deutsche Bank for a loan facility of up to $18.0 million to finance part of the acquisition cost of the Maia and the Myrto which were cross-collateralized with the New York. The loan was prepaid in full on March 20, 2015.
On January 9, 2014, our wholly-owned subsidiaries Taka Shipping Company Inc. ("Taka") and Fayo Shipping Company Inc. ("Fayo"), entered into a loan agreement with Commonwealth Bank of Australia, London Branch ("CBA"), for a loan facility of up to $18.0 million to finance part of the acquisition cost of the Melite and Artemis. The loan bears interest at LIBOR plus a margin of 2.25%. The loan was drawn in two tranches, one of $8.5 million assigned to Melite and one of $9.5 million assigned to Artemis. Tranche A is repayable in 24 equal consecutive quarterly installments of $195,833 each; and a balloon of $3.8 million payable January 13, 2020. Tranche B is repayable in 32 equal consecutive quarterly installments of $156,250 each and a balloon of $4.5 million payable on January 13, 2022.
On December 18, 2014, two of our wholly ownedwholly-owned subsidiaries Weno Shipping Company Inc., ("Weno") and Pulap Shipping Company Inc. ("Palau"), entered into a loan agreement with BNP Paribas ("BNP"), for a loan facility of up to $55.0 million to finance part of the acquisition cost of the GPG. P. Zafirakis and the PSP. S. Palios, of which $53.5 million was drawn. The loan bears interest at LIBOR plus a margin of 2%, and is repayable in 14 equal semi-annual installments of approximately $1.6 million and a balloon of $31.5 million, payable on November 30, 2021.
On March 17, 2015, weeight of our wholly-owned subsidiaries, entered into a loan facility with Nordea to refinance the existing agreements with the bank, described above, and to add additional vessels. On March 19, 2015, after repaying in full all outstanding indebtedness under the previous loan facilities with the bank, mentioned above, we drew down the amount of $93.1 million. The loan is repayable in 24 equal consecutive three-monthlyquarterly installments of approximately $1.9 million being 1/50 of the loan amount and a balloon of $48.4 million payable together with the last installment on March 19, 2021. The loan bears interest plus a margin of 2.1% of LIBOR.
On March 26, 2015, three of our wholly-owned subsidiaries entered into a loan agreement with ABN AMRO Bank N.V. for a secured term loan facility of up to $53.0 million, to refinance part of the acquisition cost of the vessels New York, Myrto and Maia of which $50.2 million was drawn on March 30, 2015. The loan is repayable in 24 equal consecutive quarterly installments of about $1.0 million and a balloon of $26.3 million payable together with the last installment on March 30, 2021. The loan bears interest at LIBOR plus a margin of 2.0%.
On April 29, 2015, our wholly-owned subsidiary Lelu Shipping Company Inc ("Lelu"), entered into a term loan agreement with Danish Ship Finance for a loan facility of $30.0 million, drawn on April 30, 2015 to partly finance the acquisition cost of the Santa Barbara, which was delivered in January 2015. The loan is repayable in 28 equal consecutive quarterly installments of $0.5 million each and a balloon of $16.0 million payable together with the last installment on April 30, 2022. The loan bears interest at LIBOR plus a margin of 2.15%.
On July 22, 2015, we entered into a term loan agreement with BNP Paribas for a loan of $165.0 million drawn on July 24, 2015. The loan is repayable in 20 consecutive quarterly installments, the first eight installments in an amount of $2.5 million, followed by four installments in an amount of $5.0 million; eight installments in an amount of $7.0 million; and a balloon installment of $69.0 million payable together with the last installment on July 24, 2020. The loan bears interest at LIBOR plus a margin of 2.35% per annum for the first two years; 2.3% per annum for the third year and 2.25% per annum until the final maturity of the loan.
On September 30, 2015, our wholly-owned subsidiaries, Ujae Shipping Company Inc. ("Ujae") and Rairok Shipping Company Inc. ("Rairok"), entered into a term loan agreement with ING Bank N.V. for a loan of up to $39.7 million, available in two advances to finance part of the acquisition cost of the New Orleans and the Medusa. Advance A of about $28.0 million was drawn on November 19, 2015 and is repayable in 28 consecutive quarterly installments of about $0.5 million and a balloon installment of about $15.0 million payable together with the last installment on November 19, 2022. Advance B of about $11.7 million was drawn on October 6, 2015 and is repayable in 28 consecutive quarterly installments of about $0.3 million and a balloon installment of about $3.5 million payable together with the last installment on October 6, 2022. The loan bears interest at LIBOR plus a margin of 1.65%.
On January 7, 2016, our three wholly-owned subsidiaries with vessels under construction, entered into a secured loan agreement with the CEXIM for a loan of up to $75.7 million in order to finance part of the construction cost of the vessels. The loan will be available for drawdown until March 12, 2017, or such later date as all the lenders may in their discretion agree and will mature by March 2032 at the latest.
Under the secured long term debt agreements mentioned above, we currently have 18loans outstanding as of December 31, 2015, 42 vessels of the Company's fleet were mortgaged with first preferred or second preferredpriority ship mortgage, as applicable.mortgages. Additional securities required by the banks include first priority assignment of all earnings, insurances, first assignment of time charter contracts with duration of more than 12 months,that exceeds a certain period, pledge over the shares of the borrowers, manager's undertaking and subordination and requisition compensation and either a corporate guarantee by DSI (the "Guarantor") or a guarantee by the ship owning companies (where applicable), financial covenants, as well as operating account assignments. The lenders may also require additional security in the future in the event the borrowers breach certain covenants under the loan agreements andagreements. The secured term loans generally include restrictions as to changes in management and ownership of the vessels, additional indebtedness, as well as minimum requirements regarding hull cover ratio and minimum liquidity per vessel owned by the borrowers, or the Guarantorguarantor, maintained in the bank accounts of the borrowers.borrowers, or the guarantor. Furthermore, certain of the Secured Term Loanssecured term loans contain cross default provisions and additionally the Company is not permitted to pay any dividends from the earnings of the vessel following the occurrence of an event of default.
Commitments
On February 27, 2015, we signed a commitment letter with Danish Ship Finance for a loan facility of $30.0 million to partly finance the acquisition cost of the Santa Barbara, delivered in January 2015 which will be available until June 1, 2015.
On March 12, 2015, ABN AMRO Bank NV offered a term sheet for a loan facility of up to $53.0 million to partly re-finance the acquisition cost of the New York, Maia, and Myrto, subject to signing the loan agreement by May 01, 2015.
Currently, all of our vessels, except for four, have been provided as collateral to secure our credit facilities.
As of December 31, 20142015 and currently, we believe we are in compliance with all covenants relating to our loan facilities other than as follows: As of December 31, 2015, we were not in compliance with the minimum required hull cover ratio of one of our term loan agreements, creating a shortfall of about $1.4 million. The Company received a waiver by the bank, which covers the period from December 31, 2015 up to and including December 31, 2016, amending the ratio to a lower level and with the requirement to provide updated valuations by July 31, 2016.
Currently, all of our vessels, except for two, have been provided as collateral to secure our loan facilities.
Senior Notes due 2020
On May 28, 2015, we issued $55.0 million aggregate principal amount of our 8.5% senior unsecured notes due 2020, or our Notes, in a registered public offering and on June 5, 2015, we issued an additional $8.25 million aggregate principal amount of the Notes, pursuant to the underwriters' option to purchase additional Notes. The Notes will mature on May 15, 2020, and may be redeemed in whole or in part at any time on or after May 15, 2017 at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Prior to May 15, 2017, we may redeem the Notes, in whole or in part, at a price equal to 100% of the principal amount plus a make-whole premium and accrued interest to, but excluding, the date of redemption. The Notes will bear interest at a rate of 8.500% per annum, payable quarterly on each February 15, May 15, August 15 and November 15, commencing on August 15, 2015. The Notes commenced trading on the NYSE on May 29, 2015 under the symbol "DSXN."
For additional information about our Notes, please see the section entitled "Description of Notes" in the final prospectus supplement related to the offering, filed with the SEC on May 22, 2015 and incorporated by reference herein.
As of December 31, 2015, 2014 2013 and 20122013 and as of the date of this annual report, we did not and have not designated any financial instruments as accounting hedging instruments. In May 2009, we entered into a five-year zero cost collar agreement, novated in March 2012, with a floor at 1% and a cap at 7.8% of a notional amount of $100.0 million to manage our exposure to interest rate changes related to our borrowings. The collar agreement which was terminated in May 2014 was considered as an economic hedge agreement as it did not meet the criteria of hedge accounting; therefore, the change in its fair value is recognized in earnings. As of December 31, 2014 and 2013 the fair value of the swap was nil and $0.4 million, respectively. Also we incurred unrealized gain of $0.4 million in 2014, $0.6 million in 2013 and $36,495 in 2012. Realized loss was $0.3 million for 2014, $0.7 million for 2013 and $0.6 million for 2012.
Capital Expenditures
We make capital expenditures from time to time in connection with our vessel acquisitions and constructions, which we finance with cash from operations, debt under loan facilities that provide necessary funds at terms acceptable to us, or with funds from equity issuances. In Januaryissuances and, as of May 2015, we took delivery of Santa Barbara, a newly acquired vessel for a purchase price of $50.0 million. In March, 2015, we repaid $82.7 million of outstanding indebtedness under our loan agreements with Deutsche Bank and Nordea.Notes. Currently, we have contractual obligations of $100.0$13.5 million, relating to the acquisition of one vessel we agreed to acquire from a related party, which we expect to take delivery of in April 2016 and $83.5 million, relating to the construction of two Newcastlemax dry bulk vessels and one Kamsarmax dry bulk vessel, which we expect to take delivery of in 2016. We pay dividends on our preferred seriesSeries B sharesPreferred Shares amounting to approximately $5.8 million annually. We incur additional capital expenditures when our vessels undergo surveys. This process of recertification may require us to reposition these vessels from a discharging port to shipyard facilities, which will reduce our operating days during the period. The loss of earnings associated with the decrease in operating days together with the capital needs for repairs and upgrades resultsresult in increased cash flow needs.
We expect to cover our capital expenditures and cash flow needs with cash from operations and additional indebtedness. Currently, we have a commitment lettersecured loan agreement with the Export-Import Bank of China for a secured loan with Danish Ship Finance for $30.0of up to $75.7 million to finance part of the acquisition cost of Santa Barbara delivered in January 2015,our vessels under construction. We have also signed a commitment letter for a loan of $25.8 million to finance two of the three vessels we have agreed to acquire from a related party and we have been offered a term sheet by ABN AMRO Bank for $53.0 million, or 66%expect to incur additional indebtedness to finance the acquisition cost of the market values of the vessels New York, Myrto and Maia. Also, on March 19, 2015, we drew down $93.1 million underthird vessel. Additionally it is our new agreement with Nordea entered intointention to incur additional indebtedness for one vessel in March 17, 2015.our fleet that is not mortgaged.
C.Research and development, patents and licenses | C. | Research and development, patents and licenses |
We incur from time to time expenditures relating to inspections for acquiring new vessels that meet our standards. Such expenditures are insignificant and they are expensed as they incur.
Our results of operations depend primarily on the charter hire rates that we are able to realize, and the demand for dry bulk vessel services. The Baltic Dry Index, or the BDI, has long been viewed as the main benchmark to monitor the movements of the dry bulk vessel charter market and the performance of the entire dry bulk shipping market. The BDI declined 94% in 2008 from a peak of 11,793 in May 2008 to a low of 663 in December 2008 and has remained volatile since then. In 2012, the BDI ranged from a high of 1,624 in January to a low of 647 in February. In 2013, the BDI ranged from a low of 698 in January to a high of 2,337 in December 2013. In 2014, the BDI ranged from a high of 2,113 in January to a low of 723 in July. In 2015, the BDI ranged from a high of 1,222 in August to a low of 471 in December. The BDI recorded a 25-year record low of 509290 in February 2015 and has since increased to 591 as of March 20, 2015.2016.
79
The decline and volatility in charter rates in the dry bulk market reflects in part the fact that the supply of dry bulk vessels in the market has been increasing, and the number of newbuilding dry bulk vessels on order is high. Demand for dry bulk vessel services is influenced by global financial conditions. The recovery in China and India positively influenced the charter rates; however, global financial conditions remain volatile and demand for dry bulk services may decrease in the future. The combination of increasing dry bulk capacity (both current and expected) and decreasing demand or demand which is not offset by the increase in dry bulk capacity is likely tomay result in reductions in charter hire rates and, as a consequence, adversely affect our operating results.
Additionally, we believe we have structured our capital expenditure requirements, debt commitments and liquidity resources in a way that will provide us with financial flexibility (see "Item 5. Operating and Financial Review and Prospects — Prospects—B. Liquidity and Capital Resources" for more information).
E.Off-balance Sheet Arrangements | E. | Off-balance Sheet Arrangements |
We do not have any off-balance sheet arrangements.
F.Tabular Disclosure of Contractual Obligations | F. | Tabular Disclosure of Contractual Obligations |
The following table sets forth our contractual obligations, in thousands of U.S. dollars, and their maturity dates as of December 31, 2014:2015, as adjusted to reflect our agreement on February 4, 2016 to acquire three secondhand vessels from a related party for $39.8 million and the subsequent addenda dated March 4, 2016 reducing the purchase price to $39.3 million:
| | Payments due by period | | | Payments due by period | |
Contractual Obligations | | Total Amount | | | Less than 1 year | | | 2-3 years | | | 4-5 years | | | More than 5 years | | | Total Amount | | | Less than 1 year | | | 2-3 years | | | 4-5 years | | | More than 5 years | |
| | (in thousands of US dollars) | | | (in thousands of US dollars) | |
Loan Agreements (1) | | $ | 486,008 | | | $ | 79,288 | | | $ | 250,619 | | | $ | 66,234 | | | $ | 89,867 | | |
Estimated Interest Payments on Loan Agreements (1) | | | 28,326 | | | | 8,158 | | | | 10,763 | | | | 5,912 | | | | 3,493 | | |
Loan Agreements and Notes (1) | | | $ | 605,941 | | | $ | 42,450 | | | $ | 99,400 | | | $ | 266,762 | | | $ | 197,329 | |
Estimated Interest Payments on Loan Agreements and Notes (1) | | | | 79,400 | | | | 19,178 | | | $ | 34,688 | | | $ | 22,438 | | | $ | 3,096 | |
Construction contracts (2) | | | 107,291 | | | | 23,804 | | | | 83,487 | | | | - | | | | - | | | | 83,487 | | | | 83,487 | | | | - | | | | - | | | | - | |
Acquisition of vessels (3)(2) | | | 40,000 | | | | 40,000 | | | | - | | | | - | | | | - | | | | 39,265 | | | | 39,265 | | | | - | | | | - | | | | - | |
Broker services agreement (4)(3) | | | 312 | | | | 312 | | | | - | | | | - | | | | - | | | | 330 | | | | 330 | | | | - | | | | - | | | | - | |
Preferred dividends (5)(4) | | | 24,999 | | | | 5,769 | | | | 11,538 | | | | 7,692 | | | | - | | | | 19,230 | | | | 5,769 | | | | 11,538 | | | | 1,923 | | | | - | |
Total | | $ | 686,936 | | | $ | 157,331 | | | $ | 356,407 | | | $ | 79,838 | | | $ | 93,360 | | | $ | 827,653 | | | $ | 190,479 | | | $ | 145,626 | | | $ | 291,123 | | | $ | 200,425 | |
| (1) | As of December 31, 2014,2015, we had an aggregate principal amount of $486.0$605.9 million of indebtedness outstanding under our loan facilities.facilities and our Notes. Estimated interest payments represent projected interest payments on our long term debt, which are based on the weighted average LIBOR rate in 20142015 plus the margin of our loan agreements in 2014. As2015 and the fixed interest rate of our Notes. |
| (2) | We have agreed to acquire three vessels from a related party for an aggregate purchase price of $39.8 million, reduced to $39.3 million on March 4, 2016. We took delivery of two of the date of this report, we incurred additional indebtedness of $93.1 million under our loan facility with Nordea Bank entered intovessels in March 17, 20152016 for an aggregate purchase price of $25.8 million and repaid $83.2we expect to take delivery of the third vessel in April 2016. On March 11, 2016, we signed, through two wholly-owned subsidiaries, a commitment letter with ABN AMRO Bank N.V. for a loan of $25.8 million to finance the acquisition cost of indebtedness outstanding as at December 31, 2014,the two vessels delivered to terminate our loan agreements with Nordea and Deutsche Bank.us. The delivery of the third vessel is subject to obtaining bank financing from the sellers' existing lenders, for substantially all of the purchase price of the vessel. |
| (2) | In February 2015, we paid $7.3 million for the construction of one of our three vessels under construction, which we expect to take delivery of in 2016. |
| (3) | As at DecemberOur agreement with Diana Enterprises dated April 1, 2015, expires on March 31, 2014, we had paid an advance of $10.0 million, for the acquisition of Santa Barbara which we had agreed to acquire in December 2014 for $50.0 million and the balance of $40.0 million was paid in January 2015 when the vessel was delivered.2016. |
| (4) | On March 4, 2014, DSS entered into an agreement with Diana Enterprises, a related party company, for the provision of brokerage services for a monthly fee of $104,166 effective from January 1, 2014, which replaced the previous agreement dated March 15, 2013. The agreement will expire on March 31, 2015. |
| (5) | On February 24, 2014 we completed an offering of 2,600,000 shares of Series B Perpetual Preferred Stock, at the price of $25.0 per share, and dividends are payable at a rate equal to 8.875% per annum. At any time on or after February 14, 2019, the Series B Preferred Shares may be redeemed, in whole or in part, at a redemption price of $25.00 per share, plus an amount equal to all accumulated and unpaid dividends thereon to the date of redemption, whether or not declared. The table above presents our obligations for dividend payments until February 14, 2019. The table above does not include the payment for the redemption, which is at our option. |
See the section "forward looking statements"entitled "Forward-Looking Statements" at the beginning of this annual report.
| Item 6. | Directors, Senior Management and Employees |
A.Directors and Senior Management | A. | Directors and Senior Management |
Set forth below are the names, ages and positions of our directors and executive officers. Effective March 4, 2015, our Board of Directors of the Company increased its size from seven to nine members and Mr. Kyriacos Riris and Mrs. Semiramis Paliou were appointed to fill the resulting vacancies. Our board of directors is elected annually on a staggered basis, and each director elected holds office for a three yearthree-year term. Officers are appointed from time to time by our board of directors and hold office until a successor is appointed or their employment is terminated.
Name | | Age | | Position |
Simeon Palios | | 7374 | | Class I Director, Chief Executive Officer and Chairman |
Anastasios Margaronis | | 5960 | | Class I Director and President |
Ioannis Zafirakis | | 4344 | | Class I Director, Chief Operating Officer and Secretary |
Andreas Michalopoulos | | 4344 | | Chief Financial Officer and Treasurer |
Maria Dede | | 4243 | | Chief Accounting Officer |
William (Bill) Lawes | | 7172 | | Class II Director |
Konstantinos Psaltis | | 7677 | | Class II Director |
Kyriacos Riris | | 6566 | | Class II Director |
Boris Nachamkin | | 8182 | | Class III Director |
Apostolos Kontoyannis | | 6667 | | Class III Director |
Semiramis Paliou | | 4041 | | Class III Director |
The term of our Class I directors expires in 2015,2018, the term of our Class II directors expires in 20162019 and the term of our Class III directors expires in 2017.
81
The business address of each officer and director is the address of our principal executive offices, which are located at Pendelis 16, 175 64 Palaio Faliro, Athens, Greece.
Biographical information with respect to each of our directors and executive officers is set forth below.
Simeon P. Palios has served as the Chief Executive Officer and Chairman of Diana Shipping Inc. since February 21, 2005 and as a Director since March 9, 1999 and has served as the Chief Executive Officer and Chairman of Diana Containerships Inc. since January 13, 2010. Mr. Palios also serves currently as the President of Diana Shipping Services S.A., our management company. Prior to November 12, 2004, Mr. Palios was the Managing Director of Diana Shipping Agencies S.A. Since 1972, when he formed Diana Shipping Agencies S.A., Mr. Palios has had the overall responsibility of thefor its activities. Mr. Palios has experience in the shipping industry since 1969 and expertise in technical and operational issues. He has served as an ensign in the Greek Navy for the inspection of passenger boats on behalf of Ministry of Merchant Marine and is qualified as a naval architect and marine engineer. Mr. Palios is a member of various leading classification societies worldwide and he is a member of the board of directors of the United Kingdom Freight Demurrage and Defense Association Limited. He holds a bachelor's degree in Marine Engineering from Durham University.
Anastasios C. Margaronis has served as our President and as a Director since February 21, 2005 and has served as the Director and President of Diana Containerships Inc. since January 13, 2010. Mr. Margaronis also serves as an employeea Deputy-President of Diana Shipping Services S.A. Prior to February 21, 2005, Mr. Margaronis was employed by Diana Shipping Agencies S.A. and performed on our behalf the services he now performs as President. He joined Diana Shipping Agencies S.A. in 1979 and has been responsible for overseeing our insurance matters, including hull and machinery, protection and indemnity and war risks cover. Mr. Margaronis has experience in the shipping industry, including in ship finance and insurance, since 1980. He is a member of the Greek National Committee of the American Bureau of Shipping and a member of the board of directors of the United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited. He holds a bachelor's degree in Economics from the University of Warwick and a master's of science degree in Maritime Law from the Wales Institute of Science and Technology.
Ioannis G. Zafirakisserves as our Director, Chief Operating Officer and Secretary. He also serves as Director, Chief Operating Officer and Secretary of Diana Containerships Inc. HeIn addition, he is also the head of the Corporate Planning and Governance departmentChief Operating Officer of Diana Shipping Services S.A., where he also serves as Director and Treasurer. SinceFrom June 1997 and up to February 2005, Mr. Zafirakis was employed by Diana Shipping Agencies S.A. where he held a number of positions in its finance and accounting department. MrMr. Zafirakis is also a member of the Business Advisory Committee of the MSc in International Shipping and Finance at ICMA Centre, Henley Business School, University of Reading. He holds a bachelor's degree in Business Studies from City University Business School in London and a master's degree in International Transport from the University of Wales in Cardiff.
Andreas Michalopoulos has served as our Chief Financial Officer and Treasurer since March 8, 2006 and has served in these positions with Diana Containerships Inc. since January 13, 2010. Mr. Michalopoulos started his career in 1993 when he joined Merrill Lynch Private Banking in Paris. In 1995, he became an International Corporate Auditor with Nestle SA based in Vevey, Switzerland and moved in 1998 to the position of Trade Marketing and Merchandising Manager. From 2000 to 2002, he worked for McKinsey and Company in Paris, France as an Associate Generalist Consultant before joining a major Greek Pharmaceutical Group with U.S. R&D activity as a Vice President of International Business Development and Member of the Executive Committee in 2002 where he remained until 2005. From 2005 to 2006, he joined Diana Shipping Agencies S.A. as a Project Manager. Mr. Michalopoulos graduated from Paris IX Dauphine University with Honors in 1993 obtaining an MSc in Economics and a master's degree in Management Sciences specialized in Finance. In 1995, he also obtained a master's degree in Business Administration from Imperial College, University of London. Mr. Andreas Michalopoulos is married to the youngest daughter of Mr. Simeon Palios.
Maria Dede has served as our Chief Accounting Officer since September 1, 2005 during which time she has been responsible for all financial reporting requirements. Mrs. Dede has also served as an employee of Diana Shipping Services S.AS.A. since March 2005. In 2000 Mrs. Dede joined the Athens branch of Arthur Andersen, which merged with Ernst and Young (Hellas) in 2002, where she served as an external auditor of shipping companies until 2005. From 1996 to 2000 Mrs. Dede was employed by Venus Enterprises SA,S.A., a ship-management company, where she held a number of positions primarily in accounting and supplies. Mrs. Dede holds a bachelor'sBachelor's degree in Maritime Studies from the University of Piraeus and a master'sMaster's degree in business administrationBusiness Administration from ALBA.the ALBA Graduate Business School.
William (Bill) Lawes has served as a Director and the Chairman of our Audit Committee since March 2005. Mr. Lawes served as a Managing Director and a member of the Regional Senior Management Board of JPMorgan Chase (London)and its predecessor banks from 1987 until 2002. Prior to joining JPMorgan Chase, he was Global Head of Shipping Finance at Grindlays Bank. Since December 2007, he serveshas served as an independent member of the Board of Directors and Chairman of the Audit Committee of Teekay Tankers Ltd. In January 2014, MrMr. Lawes also joined the board as Chairman of the Audit Committee of Tanker Investments Ltd. Mr. Lawes is qualified as a member of the Institute of Chartered Accountants of Scotland.
Konstantinos Psaltis has served as a Director since March 2005. From 1981 to 2006, Mr. Psaltis has served as Managing Director of Ormos Compania Naviera S.A., a company that specializes in operating and managing multipurpose container vessels and as from 2006 tilluntil today as a President of the same company. Prior to joining Ormos Compania Naviera S.A., Mr. Psaltis simultaneously served as a technical manager in the textile manufacturing industry and as a shareholder of shipping companies managed by M.J. Lemos. From 1961 to 1964, he served as ensign in the Royal Hellenic Navy. Mr. Psaltis is a member of the Germanischer Lloyds Hellas Committee. He holds a degree in Mechanical Engineering from Technische Hochschule Reutlingen & Wuppertal and a bachelor's degree in Business Administration from Tubingen University in Germany.
Kyriacos Riris has served as a Director since March 2015. FromCommencing in 1998, Mr. Riris served in a series of positions in PricewaterhouseCoopers (PwC), Greece, including Senior Partner, Managing Partner of the Audit and the Advisory/Consulting Lines of Service. From 2009 to 2014, Mr. Riris served as Chairman of the Board of Directors of PricewaterhouseCoopers (PwC), Greece. Prior to its merger with PwC, Mr. Riris was employed at Grant Thornton, Greece, where in 1984 he became a Partner. From 1976 to 1982, Mr. Riris was employed at Arthur Young, Greece. Mr. Riris holds a degree from Birmingham Polytechnic (presently Birmingham City University) and completed his professional qualifications with the Association of Certified Chartered Accountants (ACCA) in the UK in 1975, becoming a Fellow of the Association of Certified Accountants in 1985.
Boris Nachamkin has served as a Director and as a member of our Compensation Committee since March 2005. Mr. Nachamkin was with Bankers Trust Company, New York, for 37 years, from 1956 to 1993 and was posted to London in 1968. Upon retirement in 1993, he acted as Managing Director and Global Head of Shipping at Bankers Trust. Mr. Nachamkin was also the UK Representative of Deutsche Bank Shipping from 1996 to 1998 and Senior Executive and Head of Shipping for Credit Agricole Indosuez, based in Paris, between 1998 and 2000. Previously, he was a Director of Mercur Tankers, a company which was listed on the Oslo Stock Exchange, and Ugland International, a shipping company. He also serves as Managing Director of Seatrust Shipping Services Ltd., a private consulting firm and as a U.K. Director of Marine Money, a U.S. - basedU.S.-based ship finance publication.
Apostolos Kontoyannis has served as a Director and as the Chairman of our Compensation Committee and a member of our Audit Committee effective since March 2005. Mr. Kontoyannis has over 35 years of experience in shipping finance and currently serves as financial consultant to various shipping companies. He was employed by Chase Manhattan Bank N.A. in Frankfurt (Corporate Bank), London (Head of Shipping Finance South Western European Region) and Piraeus (Manager, Ship Finance Group) from 1975 to 1987. He is an independent member of the Board of Directors of Excel Maritime Holding Company LLC. Mr. Kontoyannis holds a bachelor's degree in Finance and Marketing and a master's degree in business administration in Finance from Boston University.
Semiramis Paliou has served as a Director since March 2015. Mrs. Paliou has almost 19 years of experience in shipping operations, technical management and crewing. Mrs. Paliou began her career at Lloyd's Register of Shipping from 1996 to 1998 and she was then employed by Diana Shipping Agencies S.A. From 2007 to 2010 she was employed as a Director and President of Alpha Sigma Shipping Corp. SinceFrom February 2010 to November 2015 she iswas the head of the operations, technical and crew department of Diana Shipping Services S.A. where she currently serves as Vice President. Mrs. Paliou obtained her BSc in Mechanical Engineering from Imperial College, London and her MSc in Naval Architecture from University College, London. She is the daughter of Simeon Palios, our Chief Executive Officer and Chairman, and is a member of the Greek committee of Det Norske Veritas and a member of the Greek committee of Nippon Kaiji Kyokai.
Aggregate executive compensation (including amounts paid to Diana Enterprises pursuant to the BrokerBrokerage Services Agreements) for 2014, 2013 and 20122015 was $3.2 million, $3.8 million and $4.4 million, respectively.$3.1 million. Since June 1, 2010, DSS has provided brokerage services to us pursuant to Broker Services Agreements between DSS and Diana Enterprises, a related party, as described in "Item 7B. Related Party Transactions."Transactions" has provided to us brokerage services. Under these agreements,the Brokerage Services Agreements in effect during 2015, fees for 2014, 2013 and 20122015 amounted to $1.2 million, $2.5 million and $2.4 million, respectively.$1.3 million. We consider fees under these agreements to be part of our executive compensation due to the affiliation with Diana Enterprises. We expect such fees to remain at current levelsincrease in 2015.2016.
Non-employee directors receive annual feescompensation in the amount of $52,000 plus reimbursement of their out-of-pocket expenses, since January 1, 2009. Until then their annual fees amounted to $40,000.expenses. In addition, each non-executive serving as chairman or member of the committeesa committee receives annual feescompensation of $26,000 and $13,000, respectively, plus reimbursement of his/her out-of-pocket expenses since January 1, 2009 compared to $20,000. For 2015, 2014 and $10,000, respectively, plus reimbursement of his/her out-of-pocket expenses until 2008. For 2014, 2013 and 2012 fees and expenses of our non-executive directors amounted to $0.3$0.4 million, $0.3 million and $0.3 million, respectively.
Since 2008 and until the date of this annual report, our board of directors has awarded an aggregate amount of 6,415,2418,565,241 shares of restricted common stock, of which 5,260,1577,087,657 shares were awarded to senior management and 1,155,0841,477,584 shares were awarded to non-employee directors. All restricted shares vest ratably over three years, except for 600,000 shares awarded in 2008 which vested ratably over a period of six years until 2014 and 1,314,000 shares awarded in 2014 which will vest ratably over a period of six years until 2022. The restricted shares are subject to forfeiture until they become vested. Unless they forfeit their shares, grantees have the right to vote, to receive and retain all dividends paid and to exercise all other rights, powers and privileges of a holder of shares.
In 2014, 2013 and 2012,2015, compensation costcosts relating to the aggregate amount of restricted stock awards amounted to $7.7$8.3 million $8.2 million and $8.6 million, respectively..
We do not have a retirement plan for our officers or directors.
Equity Incentive Plan
In February 2005, we adopted an equity incentive plan (the "2005 Plan") for 2,800,000 common shares, which was amended and restated on October 21, 2008 and terminated in 2012 as all shares reserved had been issued. On May 2, 2011,November 2014, our board of directors approved, and the Diana Shipping Inc. 2011Company adopted the 2014 Equity Incentive Plan (the "2011"2014 Plan"), with substantially the same terms and provisions as the amended and restated 2005 Plan. Under the 2011 Plan, an aggregate offor 5,000,000 common shares, wereof which, currently, 4,234,759 shares remain reserved for issuance, of which 1,384,759 shares of common stock remain available for issuance as of the date of this report. In November 2014, we approved to adopt the Diana Shipping Inc. 2014 Equity Incentive Plan, for 5,000,000 additional common shares.
issuance.
Under the above plans2014 Plan, the Company's employees, officers and directors are entitled to receive options to acquire the Company's common stock andstock. The 2014 Plan is administered by the Compensation Committee of the Company's Board of Directors or such other committee of the Board as may be designated by the Board to administer the Plan.Board. Under the terms of the 2011 Plan and the 2014 Plan, the Company's Board of Directors is able to grant a) incentive stock options, b) non-qualified stock options, c) stock appreciation rights, d) dividend equivalent rights, e) restricted stock, f) unrestricted stock, g) restricted stock units, and h) performance shares. No options, stock appreciation rights or restricted stock units can be exercisable prior to the first anniversary or subsequent to the tenth anniversary of the date on which such award was granted. Under the 2011 Plan and the 2014 Plan, the Administrator may waive or modify the application of forfeiture of awards of restricted stock and performance shares in connection with cessation of service with the Company.
We have established an Audit Committee, comprised of two board members, which is responsible for reviewing our accounting controls, recommending to the board of directors the engagement of our independent auditors, and pre-approving audit and audit-related services and fees. Each member is an independent director.has been determined by our board of directors to be "independent" under the rules of the NYSE and the rules and regulations of the SEC. As directed by its written charter, the Audit Committee is responsible for appointing, and overseeing the work of the independent auditors, including reviewing and approving their engagement letter and all fees paid to our auditors, reviewing the adequacy and effectiveness of the Company's accounting and internal control procedures and reading and discussing with management and the independent auditors the annual audited financial statements.
In addition, we have established a Compensation Committee comprised of two members, which is responsible for establishing executive officers' compensation and benefits. The members of the Audit Committee are Mr. William Lawes (Chairman and financial expert) and Mr. Apostolos Kontoyannis (member and financial expert).
We have established a Compensation Committee comprised of two members, which, as directed by its written charter, is responsible for setting the compensation of executive officers of the Company, reviewing the Company's incentive and theequity-based compensation plans, and reviewing and approving employment and severance agreements. The members of the Compensation Committee are Mr. Apostolos Kontoyannis (Chairman) and Mr. Boris Nachamkin (member).
We have established a Nominating Committee comprised of two members, which, as directed by its written charter, is responsible for identifying, evaluating and making recommendations to the board of directors concerning individuals for selections as director nominees for the next annual meeting of stockholders or to otherwise fill board of director vacancies. The members of the Nominating Committee are Mr. Konstantinos Psaltis (Chairman) and Mr. Kyriacos Riris (member).
We have established an Executive Committee comprised of the three executive directors, Mr. Simeon Palios (Chairman), Mr. Anastasios Margaronis (member) and Mr. Ioannis Zafirakis.Zafirakis (member). The Executive Committee has, to the extent permitted by law, the powers of the Board of Directors in the management of the business and affairs of the Company.
We also maintain directors' and officers' insurance, pursuant to which we provide insurance coverage against certain liabilities to which our directors and officers may be subject, including liability incurred under U.S. securities law. Our executive directors have employment agreements, which, if terminated without cause, entitle them to continue receiving their basic salary through the date of the agreement's expiration.
D.Crewing and Shore Employees | D. | Crewing and Shore Employees |
We crew our vessels primarily with Greek officers and Filipino officers and seamen. Weseamen and may also employ seamen from Poland, Rumania and Ukraine. DSS and DWM are responsible for identifying our Greek officers, which are hired by our vessel owning subsidiaries. Our Filipinothe appropriate officers and seamen are referred to us by Crossworld Marine Services Inc., an independentmainly through crewing agency.agencies. The crewing agency handlesagencies handle each seaman's training, travel and payroll. WeThe management companies ensure that all our seamen have the qualifications and licenses required to comply with international regulations and shipping conventions. Additionally, our seafaring employees perform most commissioning work and supervise work at shipyards and drydock facilities. We typically man our vessels with more crew members than are required by the country of the vessel's flag in order to allow for the performance of routine maintenance duties.
85
The following table presents the number of shoreside personnel employed by our fleet managerDSS and the number of seafaring personnel employed by our vessel-owning subsidiaries as at December 31, 2015, 2014 2013 and 20122013.
| | Year Ended December 31, | | | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2015 | | | 2014 | | | 2013 | |
Shoreside | | | 94 | | | | 84 | | | | 82 | | | | 101 | | | | 94 | | | | 84 | |
Seafaring | | | 973 | | | | 848 | | | | 713 | | | | 993 | | | | 973 | | | | 848 | |
Total | | | 1,067 | | | | 932 | | | | 795 | | | | 1,094 | | | | 1,067 | | | | 932 | |
With respect to the total amount of common shares and Series B Preferred Shares owned by all of our officers and directors, individually and as a group, see Item 7 "Major Shareholders and Related Party Transactions".
Item 7. | Major Shareholders and Related Party Transactions |
The following table sets forth current information regarding ownership of our common stock of which we are aware as of March 28, 2016, for (i) thebeneficial owners of more than five percent of our common stock that we are aware of and (ii) the total amount of common stock owned by all of our officers and directors, individually and as a group. All of theour shareholders, including the shareholders listed in this table, are entitled to one vote for each share of common stock held.
Title of Class | | Identity of Person or Group | | Number of Shares Owned | | Percent of Class | | | Identity of Person or Group | | Number of Shares Owned | | Percent of Class | |
Common Stock, par value $0.01 | | Simeon Palios (1) | | 16,157,371 | | 19.6% | | | Simeon Palios (1) | | 18,823,331 | | 22.2% | |
| | Massachusetts Financial Services Company (2) | | 7,454,518 | | 9.0% | | | Massachusetts Financial Services Company (2) | | 4,719,789 | | 5.6% | |
| | | | | | | | | Franklin Resources Inc. (3) | | 11,022,582 | | 13.0% | |
| | All officers and directors as a group (3) | | 19,543,094 | | 23.7% | | | All officers and directors as a group (4) | | 21,611,429 | | 25.5% | |
| (1) | Currently, Mr. Simeon Palios beneficially owns 1,870,831 restricted common shares granted through the Company's Equity Incentive Plan and 14,286,540 shares indirectly through Corozal Compania Naviera S.A. ("Corozal") and Ironwood Trading Corp. ("Ironwood") over which Mr. Simeon Palios exercises sole voting and dispositive power. As of December 31, 2012, 2013, 2014, and 2014,2015, Mr. Simeon Palios owned directlyindirectly 18.4%, 19.3% and indirectly through Corozal and Ironwood, 18.4%, 18.4% and 19.3%20.6%, respectively, of our outstanding common stock. |
| (2) | Massachusetts Financial Services CompanyThis information is derived from a ("MFS") hasSchedule 13G/A filed with the SEC on February 10, 2016, and represents a decrease from the 8.9% ownership reported on a Schedule 13G filed with the SEC on February 6, 2015 and the 10.3% ownership reported on a Schedule 13G/A filed with the SEC on February 6, 2015 reporting their ownership of 9.1% of our outstanding common stock as of December 31, 2014, decreased from 10.3% as of December 31, 2013.13, 2014. |
| (3) | This information is derived from a Schedule 13G filed with the SEC on January 8, 2016. |
| (4) | Mr. Simeon Palios is our only director or officer that beneficially owns 5% or more of our outstanding common stock. Mr. Anastasios Margaronis, our President and a member of our board of directors and Mr. Ioannis Zafirakis, our Chief Operating Officer and a member of our board of directors, areis indirect shareholdersshareholder through ownership of stock held in Corozal Compania Naviera S.A., which is the registered owner of some of our common stock.and Ironwood Trading Corp. Mr. Margaronis and Mr. Zafirakis dodoes not have dispositive or voting power with regard to shares held by Corozal Compania S.A. and Ironwood Trading Corp. and, accordingly, areis not considered to be beneficial ownersowner of our common shares held through Corozal Compania Naviera S.A. and Ironwood Trading Corp. Mr. Anastasios Margaronis also owns 1.6%indirectly 2.2% of our outstanding common stock. Messrs. Lawes, Psaltis, Nachamkin and Kontoyannis, each a non-executive director of ours and Messrs. Zafirakis and Michalopoulos, each executive officers of ours, each ownowns less than 1% of our outstanding common stock. In addition, Mr. ZafirakisDiana Enterprises owns 40,000 Series B Preferred Shares,indirectly 140,390, or 1.5%5.4% of the outstanding Series B Preferred Shares and Mr. MichalopoulosAnastasios Margaronis owns 28,000 Series B Preferred Shares,indirectly 28,025, or 1.1% of the outstanding Series B Preferred Shares. All officers and directors as a group own 93,970 Series B Preferred Shares,172,775, or 3.6%6.6% of theour outstanding Series B Preferred Shares. |
As of March 23, 2015,24, 2016, we had 147146 shareholders of record, 131128 of which were located in the United States and held an aggregate of 63,114,21163,229,230 of our common shares, representing 89.12%74.65% of our outstanding common shares. However, one of the U.S. shareholders of record is CEDE & CO., a nominee of The Depository Trust Company, which held 63,093,11663,208,603 of our common shares as of March 23, 2015.24, 2016. Accordingly, we believe that the shares held by CEDE & CO. include common shares beneficially owned by both holders in the United States and non-U.S. beneficial owners. We are not aware of any arrangements the operation of which may at a subsequent date result in our change of control.
Holders of the Series B Preferred Shares generally have no voting rights except (1) in respect of amendments to the Articles of Incorporation which would adversely alter the preferences, powers or rights of the Series B Preferred Shares or (2) in the event that we propose to issue any parity stock if the cumulative dividends payable on outstanding Preferred Stock are in arrears or any senior stock. However, if and whenever dividends payable on the Series B Preferred Shares are in arrears for six or more quarterly periods, whether or not consecutive, holders of Series B Preferred Shares (voting together as a class with all other classes or series of parity stock upon which like voting rights have been conferred and are exercisable) will be entitled to elect one additional director to serve on our board of directors until such time as all accumulated and unpaid dividends on the Series B Preferred Shares have been paid in full.
B.Related Party Transactions | B. | Related Party Transactions |
Diana Enterprises Inc.
In February 2012, DSS entered into an agreement with Diana Enterprises, which replaced a previous one foran affiliated entity that is controlled by our Chief Executive Officer and Chairman of the provision ofBoard, Mr. Simeon Palios, provides to us brokerage services for an annual fee of $2.4 million applied retroactively from January 1, 2012 and the fees were paid quarterly in advance.pursuant to a Brokerage Services Agreement. In March 2013, the agreement between DSS and Diana Enterprises was terminated and was replaced by a new agreement with effect from March 1, 2013 until March 31, 2014 and for a monthly fee of $0.2 million payable quarterly in advance. On March 4, 2014, this agreement was terminated effective January 1, 2014 and the monthly fee payable to Diana Enterprises since that date was reduced to $104,166, payable quarterly in advance and until March 31, 2015. On April 9, 2014, this agreement was also replaced by a new agreement between Diana Shipping Inc. and Diana Enterprises with all other terms being the same, which became effective July 1, 2014. During 2014, 2013 and 20122015, brokerage fees amounted to $1.3 million, $2.5 million and $2.4 million, respectively.
million. The terms of this relationship are currently governed by a Brokerage Services Agreement dated April 1, 2015, due to expire on March 31, 2016.
Altair Travel Agency S.A.
Altair Travel Agency S.A., or Altair, an affiliated entity that is controlled by our Chairman and Chief Executive Officer and Chairman of the Board, Mr. Simeon Palios, provides us with travel related services. Travel related expenses in 2014, 2013 and 20122015, amounted to $2.8 million, $2.6 million and $3.0 million, respectively.$2.7 million. We believe that the amounts that we pay to Altair Travel Agency S.A. for acquiring tickets and other travel related services are no greater than fees we would pay to an unrelated third party for comparable services in an arm's length transaction.services.
Diana Containerships, Administrative Services Agreement and Non-Competition Agreement
On April 6, 2010, Diana Containerships entered into an Administrative Services Agreement with DSS, whereby DSS provided to it accounting, administrative, financial reporting and other services necessary for the operation of its business. Diana Containerships paid DSS a monthly fee of $10,000 for these administrative services. The initial term of the agreement was for a period of one year and automatically renewed for successive twelve month periods until its termination on March 1, 2013.
We and Diana Containerships had entered into a non-competition agreement whereby we agreed that, during the term of the Administrative Services Agreement and any vessel management agreements DSS entered into with Diana Containerships, and for six months thereafter, we would not acquire or charter any vessel, or otherwise operate in, the containership sector and Diana Containerships would not acquire or charter any vessel, or otherwise operate in, the dry bulk sector. On March 1, 2013, we entered into an amended and restated non-competition agreement with Diana Containerships, where we have agreed that, as long as any of our current or continuing executive officers also serves as an executive for Diana Containerships Inc., and for six months thereafter, we will not acquire or charter any vessel, or otherwise operate in, the containership sector and Diana Containerships will not acquire or charter any vessel, or otherwise operate in, the dry bulk sector.
Diana Containerships, Vessel Management Agreements
87
DSS also provided commercial and technical management services for Diana Containerships' vessels under separate vessel management agreements with Diana Containerships' vessel owning subsidiaries. The vessel management agreements were terminated on March 1, 2013. Commercial management included, among other things, negotiating charters for vessels, monitoring the performance of vessels under charter, and managing Diana Containerships' relationships with charterers, obtaining insurance coverage for Diana Containerships' vessels, as well as supervision of the technical management of the vessels. Technical management included managing day-to-day vessel operations, performing general vessel maintenance, ensuring regulatory and classification society compliance, supervising the maintenance and general efficiency of vessels, arranging the hire of qualified officers and crew, arranging and supervising drydocking and repairs, arranging for the purchase of supplies, spare parts and new equipment for vessels, appointing supervisors and technical consultants and providing technical support. Pursuant to each vessel management agreement, DSS received a commission of 1% of the gross hire and freight earned by each vessel and a technical management fee of $15,000 per vessel per month for vessels in operation.
Prior to the partial spin-off of Diana Containerships on January 18, 2011 and its consequent de-consolidation from our financial statements, such management fees received by DSS were eliminated from our consolidated financial statements as intercompany transactions. After the de-consolidation of Diana Containerships and until March 1, 2013, such fees constituted part of our revenues and have been included in Other revenues. For 2013 and 2012, Other revenues amounted to $0.4 million and $2.4 million, respectively.
Diana Containerships, Loan Agreement
On May 20, 2013, we entered into a loan agreement with Eluk Shipping Company Inc., a subsidiary of Diana Containerships, to provide to it an unsecured loan of up to $50.0 million to be used for general corporate purposes and working capital, which was drawn on August 20, 2013. The loan which was approved by the Independent Committee of the Board of Directors and the Board of Directors matures on the fourth anniversary of the draw down date, on August 20, 2017 and bearsbore interest at LIBOR plus a margin of 5% per annum. Under the agreement, we also receiveannum and a back-end fee equal to 1.25% per annum on the outstanding amount, receivable on the repayment date of such amount. On September 9, 2015, the agreement was amended, pursuant to which the loan maturity was extended to March 15, 2022; interest decreased to at LIBOR plus a margin of 3% per annum; the back-end fee accumulated up to and became payable on the date of the amendment; and the borrowers agreed to pay to the lender a fee of $0.2 million on the maturity date. In addition, the outstanding principal amount of the loan is repaid in amounts totalling $5.0 million per annum, but not to exceed $32.5 million in the aggregate. The unsecured loan is guaranteed by Diana Containerships, and Diana Containerships and its subsidiaries may not incur additional indebtedness during the term of the loan without our prior consent. Also, the loan is subordinated to Diana Containerships' loan with the Royal Bank of Scotland.
For 2014 and 2013, incomeIncome from interest and fees for 2015, amounted to $3.2 and $1.2, respectively,$2.7 million and is included in Interest and other income in the respective consolidated statements of operations. As at December 31, 20142015 and the date of this report, the loan receivable from Diana Containerships amounted to $50.0 million.$48.9 million and $47.5 million, respectively.
C.InterestsDiana Wilhelmsen Management Limited
Diana Wilhelmsen Management Limited, or DWM, is a 50/50 joint venture which provides management services to six vessels in our fleet for a fixed monthly fee and commercial services charged as a percentage of Expertsthe vessels' gross revenues. Management fees for the period from each vessel's delivery to the management of DWM to December 31, 2015, amounted to $0.4 million, whereas commercial fees amounted to about $43,000.
Acquisition of Three Panamax Vessels
On February 4, 2016, we entered into, through three separate wholly-owned subsidiaries, three Memoranda of Agreement to acquire from a related party three Panamax vessels for an aggregate purchase price of $39.8 million, reduced pursuant to addendum agreements dated March 4, 2016 to $39.3 million. One of the vessels was delivered on March 21, 2016 and Counselthe other two are expected to be delivered later in March and in April 2016. The Company has agreed to acquire the vessels from entities affiliated with Mrs. Semiramis Paliou and Mrs. Aliki Paliou, each of whom is a family member of the Company's Chief Executive Officer and Chairman of the Board. Mrs. Semiramis Paliou is also a director of the Company. The transaction was approved unanimously by a committee of the Board of Directors established for the purpose of considering the transaction and consisting of the Company's independent directors and each of its executive directors other than Mrs. Semiramis Paliou and Mr. Simeon Palios. The agreed upon purchase price of the vessels was based, among other factors, on independent third party broker valuations obtained by the Company. Consummation of the purchases is subject to the Company obtaining bank financing from the sellers' existing lenders for substantially all of the purchase price of the vessels, thereby resulting in little or no current cash outlay on the part of the Company.
On March 11, 2016, we signed, through two wholly-owned subsidiaries, a commitment letter with ABN AMRO Bank N.V. for a loan of up to $25.8 million to finance the acquisition cost of two of the three Panamax vessels mentioned above.
| C. | Interests of Experts and Counsel |
Not Applicable.
Item 8. | Financial information |
| A. | Consolidated statements and other financial information |
See Item 18.
Legal Proceedings
On August 8, 2013, DSS was found guilty on felony counts and on December 5, 2013 was sentenced by the United States District Court in Norfolk, Virginia to a fine of $1.1 million and a period of probation of three years and six months, as a result of a conviction in which DSS was held vicariously liable for the actions of the chief engineer and second assistant engineer of the M/V Thetis, who were found guilty by the Court of violating several U.S. statutes and regulations in failing to properly handle waste oils, maintain required records and for obstruction of justice. In addition, the sentence includes a requirement for the duration of the probation period to maintain an enhanced system subject to independent audit for managing waste oils on each vessel managed by DSS. We do not expect that the implementation of the enhanced monitoring system will result in a material increase in costs during the probation period of three years and six months.
Except as described above, we have not been involved in any legal proceedings which may have, or have had, a significant effect on our business, financial position, results of operations or liquidity, nor are we aware of any proceedings that are pending or threatened which may have a significant effect on our business, financial position, results of operations or liquidity. From time to time, we may be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. We expect that these claims would be covered by insurance, subject to customary deductibles. Those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources.
Dividend Policy
Our board of directors reviews and amends our dividend policy from time to time in light of our plans for future growth and other factors. As of November 2008, our board of directors has suspended the payment of dividends on our common shares, with the exception of a stock dividend of 2,667,015 shares of Diana Containerships, or 80% of our interest at that date, distributed to all shareholders on a pro-rata basis as a result of the partial spin-off of Diana Containerships, effective January 19, 2011.
We believe that the suspension of dividend payments has positioned us better in a deteriorating market and enhances our flexibility by permitting cash flow that would have been devoted to dividends to be used for opportunities that may arise in the current marketplace, such as funding our operations, acquiring vessels or servicing our debt.
Marshall Islands law generally prohibits the payment of dividends other than from surplus or when a company is insolvent or if the payment of the dividend would render the company insolvent. Also, our creditloan facilities prohibit the payment of dividends should an event of default arise.
We believe that, under current law, any dividends that we have paid and may pay in the future from earnings and profits constitute "qualified dividend income" and as such are generally subject to a 15%20% United States federal income tax rate with respect to non-corporate United States shareholders. Distributions in excess of our earnings and profits will be treated first as a non-taxable return of capital to the extent of a United States shareholder's tax basis in its common stock on a dollar-for-dollar basis and thereafter as capital gain. We note that legislation was previously introduced in the United States Congress, which, if enacted in its present form, would preclude dividends received after the date of enactment from qualifying as "qualified dividend income." Please see the section of this annual report entitled "Taxation" under Item 10.E for additional information relating to the tax treatment of our dividend payments.
Dividends on our Series B Preferred Shares accrue and are cumulative from the date the Series B Preferred Shares are originally issued and are payable on each January 15, April 15, July 15 and October 15, which we refer to as Dividend Payment Dates, when, as and if declared by our board of directors or any authorized committee thereof out of legally available funds for such purpose. The dividend rate for our Series B Preferred Shares is 8.875% per annum per $25.00 of liquidation preference per share (equal to $2.21875 per annum per share) and is not subject to adjustment. At any time on or after February 14, 2019, we may redeem, in whole or from time to time in part, the Series B Preferred Shares at a redemption price of $25.00 per share plus an amount equal to all accumulated and unpaid dividends thereon to the date of redemption, whether or not declared.
Marshall Islands law provides that we may pay dividends on and redeem the Series B Preferred Shares only to the extent that assets are legally available for such purposes. Legally available assets generally are limited to our surplus, which essentially represents our retained earnings and the excess of consideration received by us for the sale of shares above the par value of the shares. In addition, under Marshall Islands law we may not pay dividends on or redeem Series B Preferred Shares if we are insolvent or would be rendered insolvent by the payment of such a dividend or the making of such redemption.
There have been no significant changes since the date of the annual consolidated financial statements included in this annual report, other than those described in note 17 "Subsequent events" of our annual consolidated financial statements.
Item 9. | The Offer and Listing |
The trading market for shares of our common stock is the New York Stock Exchange, on which our shares trade under the symbol "DSX". The following table sets forth the required disclosure with respect to the high and low closing prices for shares of our common stock, as reported by the New York Stock Exchange:
| | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | |
Period | | High | | | Low | | | High | | | Low | | | High | | | Low | | | High | | | Low | | | High | | | Low | | | High | | | Low | | | High | | | Low | | | High | | | Low | | | High | | | Low | | | High | | | Low | | | High | | | Low | | | High | | | Low | |
Annual | | $ | 7.24 | | | $ | 6.31 | | | $ | 13.55 | | | $ | 6.31 | | | $ | 13.64 | | | $ | 7.47 | | | $ | 9.87 | | | $ | 6.31 | | | $ | 12.64 | | | $ | 6.93 | | | $ | 16.27 | | | $ | 11.19 | | | | | | | | | $ | 8.11 | | | $ | 3.58 | | | $ | 13.55 | | | $ | 6.31 | | | $ | 13.64 | | | $ | 7.47 | | | $ | 9.87 | | | $ | 6.31 | | | $ | 12.64 | | | $ | 6.93 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1st quarter | | | | | | | | | | $ | 13.55 | | | $ | 11.61 | | | $ | 10.71 | | | $ | 7.47 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 7.24 | | | $ | 6.12 | | | $ | 13.55 | | | $ | 11.61 | | | | | | | | | | | | | | | | | | | | | | | | | |
2nd quarter | | | | | | | | | | | 12.26 | | | | 10.68 | | | | 10.79 | | | | 9.12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7.75 | | | | 6.02 | | | | 12.26 | | | | 10.68 | | | | | | | | | | | | | | | | | | | | | | | | | |
3rd quarter | | | | | | | | | | | 11.13 | | | | 8.94 | | | | 12.83 | | | | 9.65 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 8.11 | | | | 6.08 | | | | 11.13 | | | | 8.94 | | | | | | | | | | | | | | | | | | | | | | | | | |
4th quarter | | | | | | | | | | | 9.03 | | | | 6.31 | | | | 13.64 | | | | 10.49 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7.13 | | | | 3.58 | | | | 9.03 | | | | 6.31 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
September | | | | | | | | | | $ | 10.61 | | | $ | 8.94 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 6.84 | | | $ | 6.08 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
October | | | | | | | | | | | 9.03 | | | | 8.04 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7.13 | | | | 6.21 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
November | | | | | | | | | | | 8.51 | | | | 7.48 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 6.45 | | | | 4.75 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
December | | | | | | | | | | | 7.09 | | | | 6.31 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4.50 | | | | 3.58 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
January | | $ | 6.80 | | | $ | 6.31 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 4.47 | | | $ | 2.15 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
February | | | 7.24 | | | | 6.63 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2.66 | | | | 2.02 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
March* | | | 7.02 | | | | 6.37 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3.49 | | | | 2.25 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
* For the period from March 1, 2015 until March 20, 2015. | | | | | | | | | | | | | | | | | | | | | | | | | | |
*For the period from March 1, 2016 until March 28, 2016. | | | | | | |
90
Our Series B Preferred Stock has been trading on the New York Stock Exchange under the symbol "DSXPRB" since February 21, 2014. The following table shows the high and low closing sales prices for our Series B Preferred Stock:
Period | | High | | | Low | |
| | | | | | |
2015 | | $ | 25.43 | | | $ | 24.08 | |
Period from January 1, 2015 to March 20, 2015 | | $ | 25.43 | | | $ | 24.08 | |
| | | | | | | | |
January 2015 | | $ | 25.43 | | | $ | 24.35 | |
February 2015 | | | 25.00 | | | | 24.08 | |
March 2015 | | | 25.38 | | | | 24.85 | |
| | | | | | | | |
2014 | | $ | 26.98 | | | $ | 22.76 | |
| | | | | | | | |
1st quarter 2014 | | $ | 25.35 | | | $ | 24.57 | |
2nd quarter 2014 | | | 26.98 | | | | 25.37 | |
3rd quarter 2014 | | | 26.89 | | | | 25.89 | |
4th quarter 2014 | | | 26.74 | | | | 22.76 | |
| | | | | | | | |
August 2014 | | $ | 26.39 | | | $ | 26.03 | |
September 2014 | | | 26.27 | | | | 25.89 | |
October 2014 | | | 26.74 | | | | 24.69 | |
November 2014 | | | 26.15 | | | | 25.48 | |
December 2014 | | | 25.45 | | | | 22.76 | |
| | 2016 | | | 2015 | | | 2014* | |
Period | | High | | | Low | | | High | | | Low | | | High | | | Low | |
Annual | | | | | | | | $ | 25.59 | | | $ | 10.80 | | | $ | 26.98 | | | $ | 22.76 | |
| | | | | | | | | | | | | | | | | | | | | | |
1st quarter | | | | | | | | $ | 25.59 | | | $ | 24.08 | | | $ | 25.35 | | | $ | 24.57 | |
2nd quarter | | | | | | | | | 25.59 | | | | 24.60 | | | | 26.98 | | | | 25.37 | |
3rd quarter | | | | | | | | | 25.14 | | | | 19.69 | | | | 26.89 | | | | 25.89 | |
4th quarter | | | | | | | | | 21.49 | | | | 10.80 | | | | 26.74 | | | | 22.76 | |
| | | | | | | | | | | | | | | | | | | | | | |
September | | | | | | | | | 23.60 | | | | 19.69 | | | | | | | | | |
October | | | | | | | | | 21.37 | | | | 19.98 | | | | | | | | | |
November | | | | | | | | | 21.49 | | | | 13.26 | | | | | | | | | |
December | | | | | | | | | 14.34 | | | | 10.80 | | | | | | | | | |
January | | $ | 14.70 | | | $ | 9.50 | | | | | | | | | | | | | | | | | |
February | | | 12.83 | | | | 10.33 | | | | | | | | | | | | | | | | | |
March** | | | 13.19 | | | | 10.95 | | | | | | | | | | | | | | | | | |
*Commencing on February 21, 2014. **For the period from March 1, 2016 until March 28, 2016. |
In addition, our 8.5% Senior Notes due 2020 have traded on the NYSE since May 29, 2015 under the symbol "DSXN."
Item 10. | Additional Information |
Not Applicable.
B.Memorandum and Articles of Association | B. | Memorandum and Articles of Association |
Our current amended and restated articles of incorporation have been filed as exhibit 1 to our Form 6-K filed with the Securities and Exchange CommissionSEC on May 29, 2008 with file number 001-32458, and our current amended and restated bylaws have been filed as exhibit 3.2 to our Form F-3 filed with the Securities and Exchange CommissionSEC on May 6, 2009 with file number 333-159016.333-159016. The information contained in these exhibits is incorporated by reference herein.
Information regarding the rights, preferences and restrictions attaching to each class of our common shares is described in the section entitled "Description of Capital Stock" in our Registration Statement on Form F-1 filed with the Securities and Exchange Commission on November 23, 2005 with file number 333-129726, provided that since the date of that Registration Statement, the number of our outstanding shares of common stock has currently increased to 81,859,821.84,696,017. For additional information about our Series B Preferred Shares, please see the section entitled "Description of Registrant's Securities to be Registered" of our registration statement on Form 8-A filed with the SEC on February 13, 2014 and incorporated by reference herein. We
Stockholders Rights Agreement
On January 15, 2016, we entered into a Stockholders Rights Agreement with Computershare Trust Company, N.A., as Rights Agent, to replace the Amended and Restated Stockholders Rights Agreement, dated October 7, 2008.
Under the Stockholders Rights Agreement, we declared a dividend payable of one preferred stock purchase right, or Right, for each share of common stock outstanding at the close of business on January 26, 2016. Each Right entitles the registered holder to purchase from us one one-thousandth of a share of Series A participating preferred stock, par value $0.01 per share, at an exercise price of $40.00 per share. The Rights will separate from the common stock and become exercisable only if a person or group acquires beneficial ownership of 18.5% or more of our common stock (including through entry into certain derivative positions) in a transaction not approved by our Board of Directors. In that situation, each holder of a Right (other than the acquiring person, whose Rights will become void and will not be exercisable) will have alsothe right to purchase, upon payment of the exercise price, a number of shares of our common stock having a then-current market value equal to twice the exercise price. In addition, if the Company is acquired in a merger or other business combination after an acquiring person acquires 18.5% or more of our common stock, each holder of the Right will thereafter have the right to purchase, upon payment of the exercise price, a number of shares of common stock of the acquiring person having a then-current market value equal to twice the exercise price. The acquiring person will not be entitled to exercise these Rights. Under the Stockholders Rights Agreement's terms, it will expire on January 14, 2026. A copy of the Stockholders Rights Agreement and a summary of its terms are contained in the Form 8-A12B filed with the Securities and Exchange Commission our amended and restated stockholders rights agreement as exhibit 4.5 to our Form 8-A12B/A filedSEC on October 7, 2008 and amended on October 10, 2008,January 15, 2016, with file number 001-32458.001-32458.
Attached as exhibits to this annual report are the contracts we consider to be both material and not entered into in the ordinary course of business.business, which (i) are to be performed in whole or in part on or after the filing date of this annual report or (ii) were entered into not more than two years before the filing date of this annual report. Other than these agreements, we have no material contracts, other than contracts entered into in the ordinary course of business, to which the Company or any member of the group is a party. A description of these is included in our description of our agreements generally: we refer you to Item 5.B for a discussion of our loan facilities, and Item 7.B for a discussion of our agreements with companies controlled by our Chairman and Chief Executive Officer and Chairman of the Board, Mr. Simeon Palios and Diana Containerships.Palios.
Under Marshall Islands, Panamanian, Cypriot and Greek law, there are currently no restrictions on the export or import of capital, including foreign exchange controls or restrictions that affect the remittance of dividends, interest or other payments to non-resident holders of our common stock.
The following is a discussion of the material Marshall Islands and U.S. federal income tax considerations of the ownership and disposition by a U.S. Holder and a Non-U.S. Holder, each as defined below, with respect to the common stock. This discussion does not purport to deal with the tax consequences of owning common stock to all categories of investors, some of which, such as dealers in securities or commodities, financial institutions, insurance companies, tax-exempt organizations, U.S. expatriates, persons liable for the alternative minimum tax, persons who hold common stock as part of a straddle, hedge, conversion transaction or integrated investment, U.S. Holders whose functional currency is not the United States dollar and investors that own, actually or under applicable constructive ownership rules, 10% or more of the Company's common stock, may be subject to special rules. This discussion deals only with holders who hold the common stock as a capital asset. You are encouraged to consult your own tax advisors concerning the overall tax consequences arising in your own particular situation under U.S. federal, state, local or foreign law of the ownership of common stock.
Marshall Islands Tax Considerations
The Company is incorporated in the Marshall Islands. Under current Marshall Islands law, the company is not subject to tax on income or capital gains, and no Marshall Islands withholding tax will be imposed upon payments of dividends by us to our shareholders.
United States Federal Income Taxation
The following discussion is based upon the provisions of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed U.S. Treasury Department regulations, (the "Treasury Regulations"), administrative rulings, pronouncements and judicial decisions, all as of the date of this Annual Report. This discussion assumes that we do not have an office or other fixed place of business in the United States. Unless the context otherwise requires, the reference to Company below shall be meant to refer to both the Company and its vessel owningvessel-owning and operating subsidiaries.
Taxation of the Company's Shipping Income
In General
The Company anticipates that it will derive substantially all of its gross income from the use and operation of vessels in international commerce and that this income will principally consist of freights from the transportation of cargoes, hire or lease from time or voyage charters and the performance of services directly related thereto, which the Company refers to as "Shipping Income."
Shipping Income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States will be considered to be 50% derived from sources within the United States. Shipping Income attributable to transportation that both begins and ends in the United States will be considered to be 100% derived from sources within the United States. The Company is not permitted by law to engage in transportation that gives rise to 100% U.S. source Shipping Income. Shipping Income attributable to transportation exclusively between non-U.S. ports will be considered to be 100% derived from sources outside the United States. Shipping Income derived from sources outside the United States will not be subject to U.S. federal income tax.
Based upon the Company's anticipated shipping operations, the Company's vessels will operate in various parts of the world, including to or from U.S. ports. Unless exempt from U.S. federal income taxation under Section 883 of the Code, the Company will be subject to U.S. federal income taxation, in the manner discussed below, to the extent its Shipping Income is considered derived from sources within the United States.
In the year ended December 31, 2014,2015, approximately 7.0%5.3% of the Company's shipping income was attributable to the transportation of cargoes either to or from a U.S. port. Accordingly, 3.5%2.6% of the Company's shipping income would be treated as derived from U.S. sources for the year ended December 31, 2014.2015. In the absence of exemption from U.S. federal income tax under Section 883 of the Code, the Company would have been subject to a 4% tax on its gross U.S. source Shipping Income, equal to approximately $246,000$166,000 for the year ended December 31, 2014.2015.
Application of Exemption under Section 883 of the Code
Under the relevant provisions of Section 883 of the Code and the final Treasury Regulations promulgated thereunder, a foreign corporation will be exempt from U.S. federal income taxation on its U.S. source Shipping Income if:
| (1) | It is organized in a qualified foreign country which, as defined, is one that grants an equivalent exemption from tax to corporations organized in the United States in respect of the Shipping Income for which exemption is being claimed under Section 883 of the Code, or the "Country of Organization Requirement"; and |
| (2) | It can satisfy any one of the following two stock ownership requirements: |
| · | more than 50% of its stock, in terms of value, is beneficially owned by qualified shareholders which, as defined, includes individuals who are residents of a qualified foreign country, or the "50% Ownership Test"; or |
| · | its stock is "primarily and regularly" traded on an established securities market located in the United States or a qualified foreign country, or the "Publicly Traded Test". |
The U.S. Treasury Department has recognized the Marshall Islands, Panama and Cyprus the countries of incorporation of each of the Company and its subsidiaries that earns Shipping Income, as a qualified foreign country. Accordingly, the Company and each of the subsidiaries satisfy the Country of Organization Requirement.
For the 20142015 taxable year, the Company believes that it is unlikely that the 50% Ownership Test was satisfied. Therefore, the eligibility of the Company and each subsidiary to qualify for exemption under Section 883 of the Code is wholly dependent upon the Company's ability to satisfy the Publicly Traded Test.
Under the Treasury Regulations, stock of a foreign corporation is considered "primarily traded" on an established securities market in a country if the number of shares of each class of stock that is traded during the taxable year on all established securities markets in that country exceeds the number of shares in each such class that is traded during that year on established securities markets in any other single country. The Company's common stock, which is the sole class of issued and outstanding stock, was "primarily traded" on the New York Stock Exchange, or "NYSE", during the 20142015 taxable year.
Under the Treasury Regulations, the Company's common stock will be considered to be "regularly traded" on the NYSE if: (1) more than 50% of its common stock, by voting power and total value, is listed on the NYSE, referred to as the "Listing Threshold", (2) its common stock is traded on the NYSE, other than in minimal quantities, on at least 60 days during the taxable year (or one-sixth of the days during a short taxable year), which is referred to as the "Trading Frequency Test"; and (3) the aggregate number of shares of its common stock traded on the NYSE during the taxable year is at least 10% of the average number of shares of its common stock outstanding during such taxable year (as appropriately adjusted in the case of a short taxable year), which is referred to as the "Trading Volume Test". The Trading Frequency Test and Trading Volume Test are deemed to be satisfied under the Treasury Regulations if the Company's common stock is regularly quoted by dealers making a market in the common stock.
The Company believes that its common stock has satisfied the Listing Threshold, as well as the Trading Frequency Test and Trading Volume Tests, during the 20142015 taxable year.
Notwithstanding the foregoing, the Treasury Regulations provide, in pertinent part, that stock of a foreign corporation will not be considered to be "regularly traded" on an established securities market for any taxable year during which 50% or more of such stock is owned, actually or constructively under specified stock attribution rules, on more than half the days during the taxable year by persons, or "5% Shareholders", who each own 5% or more of the value of such stock, or the "5% Override Rule." For purposes of determining the persons who are 5% Shareholders, a foreign corporation may rely on Schedules 13D and 13G filings with the U.S. Securities and Exchange Commission.
94
Based on Schedules 13D and 13G filings, during the 20142015 taxable year, less than 50% of the Company's common stock was owned by 5% Shareholders. Therefore, the Company believes that it is not subject to the 5% Override Rule and thus has satisfied the Publicly Traded Test for the 20142015 taxable year. However, there iscan be no assurance that the Company will continue to satisfy the Publicly Traded Test in future taxable years. For example, the Company could be subject to the 5% Override Rule if another 5% Shareholder in combination with the Company's existing 5% Shareholders were to own 50% or more of the Company's common stock. In such a case, the Company would be subject to the 5% Override Rule unless it could establish that, among the shares of the common stock owned by the 5% Shareholders, sufficient shares are owned by qualified shareholders, for purposes of Section 883 of the Code, to preclude non-qualified shareholders from owning 50% or more of the Company's common stock for more than half the number of days during the taxable year. The requirements of establishing this exception to the 5% Override Rule are onerous and there is no assurance the Company will be able to satisfy them.
Based on the foregoing, the Company believes that it satisfied the Publicly Traded Test and therefore believes that it was exempt from U.S. federal income tax under Section 883 of the Code, during the 20142015 taxable year, and intends to take this position on its 20142015 U.S. federal income tax returns.
Taxation in Absence of Exemption Under Section 883 of the Code
To the extent the benefits of Section 883 of the Code are unavailable with respect to any item of U.S. source Shipping Income, the Company and each of its subsidiaries would be subject to a 4% tax imposed on such income by Section 887 of the Code on a gross basis, without the benefit of deductions, which is referred to as the "4% Gross Basis Tax Regime". Since under the sourcing rules described above, no more than 50% of the Company's Shipping Income would be treated as being derived from U.S. sources, the maximum effective rate of U.S. federal income tax on the Company's Shipping Income would never exceed 2% under the 4% Gross Basis Tax Regime.
Based on its U.S. source Shipping Income for the 20142015 taxable year and in the absence of exemption under Section 883 of the Code, the Company would be subject to approximately $246,000 of U.S. federal income tax under the 4% Gross Basis Tax Regime.
The 4% Gross Basis Tax Regime would not apply to U.S. source Shipping Income to the extent considered to be "effectively connected" with the conduct of a U.S. trade or business. In the absence of exemption under Section 883 of the Code, such "effectively connected" U.S. source Shipping Income, net of applicable deductions, would be subject to U.S. federal income tax currently imposed at corporate rates of up to 35%. In addition, earnings "effectively connected" with the conduct of such U.S. trade or business, as determined after allowance for certain adjustments, and certain interest paid or deemed paid attributable to the conduct of the U.S. trade or business may be subject to U.S. federal branch profits tax imposed at a rate of 30%. The Company's U.S. source Shipping Income would be considered "effectively connected" with the conduct of a U.S. trade or business only if: (1) the Company has, or is considered to have, a fixed place or business in the United States involved in the earning of Shipping Income; and (2) substantially all of the Company's U.S. source Shipping Income is attributable to regularly scheduled transportation, such as the operation of a vessel that followed a published schedule with repeated sailings at regular intervals between the same points for voyages that begin or end in the United States, or, in the case of income from the chartering of a vessel, is attributable to a fixed place of business in the United States. We do not intend to have, or permit circumstances that would result in having a vessel operating to the United States on a regularly scheduled basis. Based on the foregoing and on the expected mode of our shipping operations and other activities, we believe that none of our U.S. source Shipping Income will be effectively connected with the conduct of a U.S. trade or business.
Gain on Sale of Vessels
Regardless of whether we qualify for exemption under Section 883 of the Code, we will not be subject to U.S. federal income taxation with respect to gain realized on a sale of a vessel, provided the sale is considered to occur outside of the United States under U.S. federal income tax principles. In general, a sale of a vessel will be considered to occur outside of the United States for this purpose if title to the vessel, and risk of loss with respect to the vessel, pass to the buyer outside of the United States. It is expected that any sale of a vessel by us will be considered to occur outside of the United States.
United States Taxation of U.S. Holders
The following is a discussion of the material U.S. federal income tax considerations relevant to an investment decision by a U.S. Holder, as defined below, with respect to our common stock. This discussion does not purport to deal with the tax consequences of owning our common stock to all categories of investors, some of which may be subject to special rules. You are encouraged to consult your own tax advisors concerning the overall tax consequences arising in your own particular situation under U.S. federal, state, local or foreign law of the ownership of our common stock.
As used herein, the term "U.S. Holder" means a beneficial owner of our common stock that (i) is a U.S. citizen or resident, a U.S. corporation or other U.S. entity taxable as a corporation, an estate, the income of which is subject to U.S. federal income taxation regardless of its source, or a trust if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust and (ii) owns the common stock as a capital asset, generally, for investment purposes.
If a partnership holds our common stock, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding our common stock, you are encouraged to consult your own tax advisor on this issue.
Distributions
Subject to the discussion of passive foreign investment companies below, any distributions made by the Company with respect to its common stock to a U.S. Holder will generally constitute dividends, which may be taxable as ordinary income or "qualified dividend income" as described in more detail below, to the extent of the Company's current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of the Company's earnings and profits will be treated first as a non-taxable return of capital to the extent of the U.S. Holder's tax basis in his common stock on a dollar-for-dollar basis and thereafter as capital gain. Because the Company is not a U.S. corporation, U.S. Holders that are corporations will not be entitled to claim a dividends-received deduction with respect to any distributions they receive from the Company.
Dividends paid to a U.S. Holder which is an individual, trust, or estate, referred to herein as a "U.S. Non-Corporate Holder," will generally be treated as "qualified dividend income" that is taxable to Holders at preferential U.S. federal income tax rates, provided that (1) the common stock is readily tradable on an established securities market in the United States (such as the NYSE on which the common stock is listed); (2) the Company is not a passive foreign investment company for the taxable year during which the dividend is paid or the immediately preceding taxable year (which the Company does not believe it is, has been or will be); (3) the U.S. Non-Corporate Holder has owned the common stock for more than 60 days in the 121-day period beginning 60 days before the date on which the common stock becomes ex-dividend; and (4) the U.S. Non-Corporate Holder is not under an obligation (whether pursuant to a short sale or otherwise) to make payments with respect to positions in substantially similar or related property. There is no assurance that any dividends paid on our common stock will be eligible for these preferential rates in the hands of a U.S. Non-Corporate Holder. Any dividends paid by the Company which are not eligible for these preferential rates will be taxed as ordinary income to a U.S. Non-Corporate Holder. Special rules may apply to any "extraordinary dividend," generally, a dividend paid by us in an amount which is equal to or in excess of ten percent of a U.S. Holder's adjusted tax basis, or fair market value in certain circumstances, in a share of our common stock. If we pay an "extraordinary dividend" on our common stock that is treated as "qualified dividend income," then any loss derived by a U.S. Individual Holder from the sale or exchange of such common stock will be treated as long-term capital loss to the extent of such dividend.
Sale,, Exchange or other Disposition of Common Stock
Subject to the discussion of the PFIC rules below, a U.S. Holder generally will recognize taxable gain or loss upon a sale, exchange or other disposition of the Company's common stock in an amount equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other disposition and the U.S. Holder's tax basis in such stock. Such gain or loss will be treated as long-term capital gain or loss if the U.S. Holder's holding period in the common stock is greater than one year at the time of the sale, exchange or other disposition. Long-term capital gain of a U.S. Non-Corporate Holder is taxable at preferential U.S. Federal income tax rates. A U.S. Holder's ability to deduct capital losses is subject to certain limitations.
3.8% Tax on Net Investment Income
For taxable years beginning after December 31, 2012, a U.S. Holder that is an individual, estate, or, in certain cases, a trust, will generally be subject to a 3.8% tax on the lesser of (1) the U.S. Holder's net investment income for the taxable year and (2) the excess of the U.S. Holder's modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals is between $125,000 and $250,000). A U.S. Holder's net investment income will generally include distributions made by the Company which constitute a dividend for U.S. federal income tax purposes and gain realized from the sale, exchange or other disposition of our common stock. This tax is in addition to any income taxes due on such investment income.
If you are a U.S. Holder that is an individual, estate or trust, you are encouraged to consult your tax advisors regarding the applicability of the 3.8% tax on net investment income to the ownership and disposition of our common stock.
PFIC Status and Significant Tax Consequences
Special U.S. federal income tax rules apply to a U.S. Holder that holds stock in a foreign corporation classified as a passive foreign investment company, or a "PFIC", for U.S. federal income tax purposes. In general, the Company will be treated as a PFIC with respect to a U.S. Holder if, for any taxable year in which such Holder held the Company's common stock, either:
| · | at least 75% of the Company's gross income for such taxable year consists of passive income (e.g., dividends, interest, capital gains and rents derived other than in the active conduct of a rental business), or |
| · | at least 50% of the average value of the assets held by the corporation during such taxable year produce, or are held for the production of, such passive income. |
For purposes of determining whether the Company is a PFIC, the Company will be treated as earning and owning its proportionate share of the income and assets, respectively, of any of its subsidiary corporations in which it owns at least 25% of the value of the subsidiary's stock. Income earned, or deemed earned, by the Company in connection with the performance of services would not constitute passive income. By contrast, rental income would generally constitute passive income unless the Company is treated under specific rules as deriving its rental income in the active conduct of a trade or business.
Based on the Company's current operations and future projections, the Company does not believe that it is, nor does it expect to become, a PFIC with respect to any taxable year. Although there is no legal authority directly on point, the Company's belief is based principally on the position that, for purposes of determining whether the Company is a PFIC, the gross income the Company derives or is deemed to derive from the time chartering and voyage chartering activities of its wholly-owned subsidiaries should constitute services income, rather than rental income. Correspondingly, the Company believes that such income does not constitute passive income, and the assets that the Company or its wholly-owned subsidiaries own and operate in connection with the production of such income, in particular, the vessels, do not constitute assets that produce or are held for the production of passive income for purposes of determining whether the Company is a PFIC. The Company believes there is substantial legal authority supporting its position consisting of case law and Internal Revenue Service, or the "IRS", pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, there is also authority which characterizes time charter income as rental income rather than services income for other tax purposes. It should be noted that in the absence of any legal authority specifically relating to the statutory provisions governing PFICs, the IRS or a court could disagree with this position. In addition, although the Company intends to conduct its affairs in a manner to avoid being classified as a PFIC with respect to any taxable year, there can be no assurance that the nature of its operations will not change in the future.
As discussed more fully below, if the Company were to be treated as a PFIC for any taxable year, a U.S. Holder would be subject to different U.S. federal income taxation rules depending on whether the U.S. Holder makes an election to treat the Company as a "Qualified Electing Fund," which election is referred to as a "QEF Election." As discussed below, as an alternative to making a QEF Election, a U.S. Holder should be able to make a "mark-to-market" election with respect to the common stock, which election is referred to as a "Mark-to-Market Election". If the Company were to be treated as a PFIC, a U.S. Holder would be required to file with respect to taxable years ending on or after December 31, 20142013 IRS Form 8621 to report certain information regarding the Company.
Taxation of U.S. Holders Making a Timely QEF Election
If a U.S. Holder makes a timely QEF Election, which U.S. Holder is referred to as an "Electing Holder", the Electing Holder must report each year for U.S. federal income tax purposes his pro rata share of the Company's ordinary earnings and net capital gain, if any, for the Company's taxable year that ends with or within the taxable year of the Electing Holder, regardless of whether or not distributions were received by the Electing Holder from the Company. The Electing Holder's adjusted tax basis in the common stock will be increased to reflect amounts included in the Electing Holder's income. Distributions received by an Electing Holder that had been previously taxed will result in a corresponding reduction in the adjusted tax basis in the common stock and will not be taxed again once distributed. An Electing Holder would generally recognize capital gain or loss on the sale, exchange or other disposition of the common stock.
Taxation of U.S. Holders Making a Mark-to-Market Election
Alternatively, if the Company were to be treated as a PFIC for any taxable year and, as anticipated, the common stock is treated as "marketable stock," a U.S. Holder would be allowed to make a Mark-to-Market Election with respect to the Company's common stock. If that election is made, the U.S. Holder generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of the common stock at the end of the taxable year over such Holder's adjusted tax basis in the common stock. The U.S. Holder would also be permitted an ordinary loss in respect of the excess, if any, of the U.S. Holder's adjusted tax basis in the common stock over its fair market value at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the Mark-to-Market Election. A U.S. Holder's tax basis in his common stock would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of the common stock would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of the common stock would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included by the U.S. Holder.
Taxation of U.S. Holders Not Making a Timely QEF Election or Mark-to-Market Election
Finally, if the Company were to be treated as a PFIC for any taxable year, a U.S. Holder who does not make either a QEF Election or a Mark-to-Market Election for that year, whom is referred to as a "Non-Electing Holder", would be subject to special U.S. federal income tax rules with respect to (1) any excess distribution (i.e., the portion of any distributions received by the Non-Electing Holder on the common stock in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing Holder in the three (3) preceding taxable years, or, if shorter, the Non-Electing Holder's holding period for the common stock), and (2) any gain realized on the sale, exchange or other disposition of the common stock. Under these special rules:
| · | the excess distribution or gain would be allocated ratably over the Non-Electing Holder's aggregate holding period for the common stock; |
| · | the amount allocated to the current taxable year and any taxable years before the Company became a PFIC would be taxed as ordinary income; and |
| · | the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed tax deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. |
These penalties would not apply to a pension or profit sharing trust or other tax-exempt organization that did not borrow funds or otherwise utilize leverage in connection with its acquisition of the common stock. If a Non-Electing Holder who is an individual dies while owning the common stock, such Holder's successor generally would not receive a step-up in tax basis with respect to such stock.
U.S. Federal Income Taxation of "Non-U.S. Holders"
A beneficial owner of our common stock that is not a U.S. Holder (other than a partnership) is referred to herein as a "Non-U.S. Holder."
Dividends on Common Stock
Non-U.S. Holders generally will not be subject to U.S. federal income or withholding tax on dividends received from us with respect to our common stock, unless that income is effectively connected with the Non-U.S. Holder's conduct of a trade or business in the United States. If the Non-U.S. Holder is entitled to the benefits of a U.S. income tax treaty with respect to those dividends, that income is taxable in the United States only if attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States.
Sale,, Exchange or Other Disposition of Common Stock
Non-U.S. Holders generally will not be subject to U.S. federal income or withholding tax on any gain realized upon the sale, exchange or other disposition of our common stock, unless:
| · | the gain is effectively connected with the Non-U.S. Holder's conduct of a trade or business in the United States. If the Non-U.S. Holder is entitled to the benefits of a U.S. income tax treaty with respect to that gain, the gain is taxable in the United States only if attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States; or |
| · | the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year of disposition and other conditions are met. |
If the Non-U.S. Holder is engaged in a U.S. trade or business for U.S. federal income tax purposes, the income from our common stock, including dividends and the gain from the sale, exchange or other disposition of the common stock, that is effectively connected with the conduct of that U.S. trade or business will generally be subject to U.S. federal income tax in the same manner as discussed in the previous section relating to the taxation of U.S. Holders. In addition, in the case of a corporate Non-U.S. Holder, such Holder's earnings and profits that are attributable to the effectively connected income, subject to certain adjustments, may be subject to an additional U.S. federal branch profits tax at a rate of 30%, or at a lower rate as may be specified by an applicable U.S. income tax treaty.
99
Backup Withholding and Information Reporting
In general, dividend payments, or other taxable distributions, made within the United States to a holder will be subject to U.S. federal information reporting requirements. Such payments will also be subject to U.S. federal "backup withholding" if paid to a non-corporate U.S. holder who:
| · | fails to provide an accurate taxpayer identification number; |
| · | is notified by the IRS that he has failed to report all interest or dividends required to be shown on his U.S. federal income tax returns; or |
| · | in certain circumstances, fails to comply with applicable certification requirements. |
Non-U.S. Holders may be required to establish their exemption from information reporting and backup withholding by certifying their status on an applicable IRS Form W-8.
If a holder sells his common stock to or through a U.S. office of a broker, the payment of the proceeds is subject to both backup withholding and information reporting unless the holder establishes an exemption. If a holder sells his common stock through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid to the holder outside the United States, then information reporting and backup withholding generally will not apply to that payment. However, information reporting requirements, but not backup withholding, will apply to a payment of sales proceeds, including a payment made to a holder outside the United States, if the holder sells his common stock through a non-U.S. office of a broker that is a U.S. person or has some other contacts with the United States.
Backup withholding is not an additional tax. Rather, a taxpayer generally may obtain a refund of any amounts withheld under backup withholding rules that exceed the taxpayer's U.S. federal income tax liability by filing a refund claim with the IRS.
Pursuant to recently enacted legislation, U.S. Holders who are individuals (and to the extent specified in applicable Treasury Regulations, certain U.S. entities) who hold "specified foreign financial assets" (as defined in Section 6038D of the Code) are required to file IRS Form 8938 with information relating to the asset for each taxable year in which the aggregate value of all such assets exceeds $75,000 at any time during the taxable year or $50,000 on the last day of the taxable year (or such higher dollar amount as prescribed by applicable Treasury Regulations). Specified foreign financial assets would include, among other assets, our common stock, unless the common stock is held through an account maintained with a U.S. financial institution. Substantial penalties apply to any failure to timely file IRS Form 8938, unless the failure is shown to be due to reasonable cause and not due to willful neglect. Additionally, in the event a U.S. Holder who is an individual (and to the extent specified in applicable Treasury regulations, a U.S. entity) that is required to file IRS Form 8938 does not file such form, the statute of limitations on the assessment and collection of U.S. federal income taxes of such holder for the related tax year may not close until three (3) years after the date that the required information is filed.
F.Dividends and paying agents | F. | Dividends and paying agents |
Not Applicable.
Not Applicable.
We file reports and other information with the SEC. These materials, including this annual report and the accompanying exhibits, may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549, or from the SEC's website http://www.sec.gov. You may obtain information on the operation of the public reference room by calling 1 (800) SEC-0330 and you may obtain copies at prescribed rates.
Not Applicable.
Item 11. | Quantitative and Qualitative Disclosures about Market Risk |
Interest Rates
We are exposed to market risks associated with changes in interest rates relating to our loan facilities, according to which we pay interest at LIBOR plus a margin; and as such increases in interest rates could affect our results of operations. An increase of 1% in the interest rates of our loan facilities bearing a variable interest rate during 20142015, could have increased our interest cost (including capitalized interest)interest and interest on our Notes) from $8.2$14.6 million to $12.8$19.9 million.
We will continue to have debt outstanding, which could impact our results of operations and financial condition. We expect to manage any exposure in interest rates through our regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments.
As of December 31, 2015, 2014 2013 and 20122013 and as of the date of this annual report, we did not and have not designated any financial instruments as accounting hedging instruments. In May 2009, we entered into a five-year zero cost collar agreement, novated in March 2012, with a floor at 1% and a cap at 7.8% of a notional amount of $100.0 million to manage our exposure to interest rate changes related to our borrowings. The collar agreement, which was terminatedmatured on May 27, 2014, was considered as an economic hedge agreement as it did not meet the criteria for hedge accounting; therefore, the change in its fair value was recognized in our results of operations. As of December 31, 2014 and 2013 the fair value of the swap was nil and $0.4 million, respectively. Also weWe incurred unrealized gain of $0.4 million and realized loss of $0.3 million in 2014 and unrealized gain of $0.6 million in 2013 and $36,495 in 2012. Realizedrealized loss was $0.3 million for 2014,of $0.7 million for 2013 and $0.6 million for 2012.
in 2013.
Currency and Exchange Rates
We generate all of our revenues in U.S. dollars but currently incur about half of our operating expenses (around 45% in 2015 and 51% in 2014 and 48% in 2013)2014) and a significant portion of our general and administrative expenses (around 49% in 2015 and 53% in 2014 and 40% in 2013)2014) in currencies other than the U.S. dollar, primarily the Euro. For accounting purposes, including throughout this annual report, expenses incurred in Euros are converted into U.S. dollars at the exchange rate prevailing on the date of each transaction. Because a significant portion of our expenses are incurred in currencies other than the U.S. dollar, our expenses may from time to time increase relative to our revenues as a result of fluctuations in exchange rates, particularly between the U.S. dollar and the Euro, which could affect our results of operations in future periods. Currently, we do not consider the risk from exchange rate fluctuations to be material for our results of operations, as during 2015 and 2014, and 2013, these non USnon-US dollar expenses represented 32%33% and 28%32%, respectively of our revenues and therefore, we are not engaged in extensive derivative instruments to hedge a considerable part of those expenses.
While we historically have not mitigated the risk associated with exchange rate fluctuations through the use of financial derivatives, we may determine to employ such instruments from time to time in the future in order to minimize this risk. Our use of financial derivatives would involve certain risks, including the risk that losses on a hedged position could exceed the nominal amount invested in the instrument and the risk that the counterparty to the derivative transaction may be unable or unwilling to satisfy its contractual obligations, which could have an adverse effect on our results.
Item 12. | Description of Securities Other than Equity Securities |
Not Applicable.
PART II
PART II
Item 13. | Defaults, Dividend Arrearages and Delinquencies |
None.
Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds |
None.
Please see the section of this annual report entitled "Item 10.B—Memorandum and Articles of Association—Stockholders Rights Agreement."
Item 15. | Controls and Procedures |
a) a) | Disclosure Controls and Procedures |
Management, including our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934)Act) as of the end of the period covered by this annual report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits to the SEC under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.
b) b) | Management's Annual Report on Internal Control over Financial Reporting |
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. The Company's internal control over financial reporting is a process designed under the supervision of the Company's Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States.U.S. GAAP.
Management has conducted an assessment of the effectiveness of the Company's internal control over financial reporting based on the framework established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on this assessment, management has determined that the Company's internal control over financial reporting as of December 31, 20142015 is effective.
The registered public accounting firm that audited the financial statements included in this annual report containing the disclosure required by this Item 15 has issued an attestation report on management's assessment of our internal control over financial reporting.
c) c) | Attestation Report of Independent Registered Public Accounting Firm |
The attestation report on the Company's internal control over financial reporting issued by the registered public accounting firm that audited the Company's consolidated financial statements, Ernst Young (Hellas) Certified Auditors Accountants S.A., appears under Item 18, and such report is incorporated herein by reference.on page F-3 of the financial statements filed as part of this annual report.
d) d) | Changes in Internal Control over Financial Reporting |
None.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Item 16A. | Audit Committee Financial Expert |
Our Board of Directors has determined that both the members of our Audit Committee, Mr. William Lawes and Mr. Apostolos Kontoyannis, qualify as "Audit Committee financial experts" and that they are both considered to be "independent" according to the SEC rules.
We have adopted a code of ethics that applies to officers, directors, employees and employees.agents. Our code of ethics is posted inon our website: website,http://www.dianashippinginc.com, under "Corporate Governance""About Us—Code of Ethics" and was filed as Exhibit 11.1 to the 2004our 2009 annual report on Form 20-F filed with the SecuritiesSEC on March 30, 2010 and Exchange Commission on June 29, 2005 with number 001-32458.incorporated by reference herein. Copies of our Codecode of Ethicsethics are available in print, free of charge, upon request to Diana Shipping Inc., Pendelis 16, 175 64 Palaio Faliro, Athens, Greece. We intend to satisfy any disclosure requirements regarding any amendment to, or waiver from, a provision of this Codecode of Ethicsethics by posting such information on our website.
Item 16C. | Principal Accountant Fees and Services |
Our principal Accountants,accountants, Ernst and Young (Hellas), Certified Auditors Accountants S.A., have billed us for audit services.
Audit fees in 20142015 and 20132014 amounted to € 465,000420,000 and € 373,000,420,000, or approximately $649,781$455,704 and $494,289,$587,183, respectively, and relate to audit services provided in connection with timely SAS 100 reviews, the audit of our consolidated financial statements, the audit of internal control over financial reporting, as well asreporting.
Audit related fees in 2015 and 2014 amounted to € 39,375 and € 45,000, or approximately $44,553 and $62,598, respectively, and relate to audit services forprovided in connection with the Company's filings with the SECSEC.
None.
During 2015, we received services for which fees amounted to $85,000 and relate to the calculation of Earnings and Profits of the Company. There were no such fees in 2014.
e) | Audit Committee's Pre-Approval Policies and Procedures |
Our Audit Committee is responsible for the appointment, replacement, compensation, evaluation and oversight of the work of theour independent auditors. As part of this responsibility, the Audit Committee pre-approves the audit and non-audit services performed by the independent auditors in order to assure that they do not impair the auditor's independence from the Company. The Audit Committee has adopted a policy which sets forth the procedures and the conditions pursuant to which services proposed to be performed by the independent auditors may be pre-approved.
f)Audit Work Performed by Other than Principal Accountant if Greater than 50%
Not applicable.
Item 16D. | Exemptions from the Listing Standards for Audit Committees |
Our Audit Committee consists of two independent members of our Board of Directors. Otherwise, our Audit Committee conforms to each other requirement applicable to audit committees as required by the applicable listing standards of the New York Stock Exchange.
Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
Issuer purchases of equity securities for the year ended December 31, 2015 | |
Period | | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plan or Programs |
Jan, 2015 | | 413,804 | | $6.46 | | 413,804 | | $71,978,289 |
Feb, 2015 | | - | | - | | - | | $71,978,289 |
Mar, 2015 | | - | | - | | - | | $71,978,289 |
Apr, 2015 | | - | | - | | - | | $71,978,289 |
May, 2015 | | - | | - | | - | | $71,978,289 |
Jun, 2015 | | - | | - | | - | | $71,978,289 |
Jul, 2015 | | - | | - | | - | | $71,978,289 |
Aug, 2015 | | - | | - | | - | | $71,978,289 |
Sep, 2015 | | - | | - | | - | | $71,978,289 |
Oct, 2015 | | - | | - | | - | | $71,978,289 |
Nov, 2015 | | - | | - | | - | | $71,978,289 |
Dec, 2015 | | - | | - | | - | | $71,978,289 |
| | | | - | | - | | |
Total | | 413,804 | | $6.46 | | 413,804 | | |
Issuer purchases of equity securities for the year ended December 31, 2014 | |
Period | | Total Number of Shares Purchased | | | Average Price Paid Per Share | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plan or Programs | |
January, 2014 | | | - | | | | - | | | | - | | | | - | |
February, 2014 | | | - | | | | - | | | | - | | | | - | |
March, 2014 | | | - | | | | - | | | | - | | | | - | |
April, 2014 | | | - | | | | - | | | | - | | | | - | |
May, 2014 | | | - | | | | - | | | | - | | | $ | 100,000,000 | |
June, 2014 | | | - | | | | - | | | | - | | | $ | 100,000,000 | |
July, 2014 | | | - | | | | - | | | | - | | | $ | 100,000,000 | |
August, 2014 | | | 606,782 | | | $ | 9.63 | | | | 606,782 | | | $ | 94,159,374 | |
September, 2014 | | | 431,863 | | | $ | 9.68 | | | | 431,863 | | | $ | 89,979,233 | |
October, 2014 | | | 1,760,488 | | | $ | 8.54 | | | | 1,760,488 | | | $ | 74,952,833 | |
November, 2014 | | | - | | | | - | | | | - | | | $ | 74,952,833 | |
December, 2014 | | | 46,416 | | | $ | 6.50 | | | | 46,416 | | | $ | 74,650,986 | |
| | | | | | | | | | | | | | | | |
Total | | | 2,845,549 | | | $ | 8.91 | | | | 2,845,549 | | | $ | 74,650,986 | |
104
On May 23, 2014, we announced that theour Board of Directors authorized a share repurchase plan for up to US$100$100 million of the Company's common shares. The plan does not have an expiration datedate. In January 2015, we purchased 413,804 shares at any average price of $6.46 per share. Since that purchase and as of the date of this report, we hadhave not made any additional purchases of 413,804 for $2.7 million and an average price of $6.46 per share.under the plan.
Item 16F. | Change in Registrant's Certifying Accountant |
Not applicable.
Item 16G. | Corporate Governance |
Statement of Significant Differences between Diana Shipping Inc.'s Corporate Governance Practices and the New York Stock Exchange, Inc. (the "NYSE") Corporate Governance Standards
Overview
Pursuant to an exception for foreign private issuers, Diana Shipping Inc.,we, as a Marshall Islands company, (the "Company") isare not required to comply with the corporate governance practices followed by U.S. companies under the NYSE listing standards. However, pursuant to Section 303.A.11 of the NYSE Listed Company Manual, we are required to state any significant differences between our corporate governance practices and the practices required by the NYSE. We believe that our established practices in the area of corporate governance are in line with the spirit of the NYSE standards and provide adequate protection to our shareholders. In fact, we have voluntarily adopted NYSE required practices, such as (a) having a majority of independent directors, (b) establishing audit, compensation and compensationnominating committees and (c) adopting a Code of Ethics. The significant differences between our corporate governance practices and the NYSE standards are set forth below.
Executive Sessions
The NYSE requires that non-management directors meet regularly in executive sessions without management. The NYSE also requires that all independent directors meet in an executive session at least once a year. As permitted under Marshall Islands law and our bylaws, our non-management directors do not regularly hold executive sessions without management and we do not expect them to do so in the future.
Nominating / Corporate Governance Committee
The NYSE requires that a listed company have a nominating/corporate governance committee of independent directors and a committee charter specifying the purpose, duties and evaluation procedures of the committee. As permitted under Marshall Islands law and our bylaws, we do not currently have a nominating or corporate governance committee.
Audit Committee
The NYSE requires, among other things, that a company have an audit committee with a minimum of three members. Our Audit Committee consists of two independent members of our Board of Directors. Our Audit Committee conforms to every other requirement applicable to audit committees set forth in the listing standards of the NYSE.
Shareholder Approval of Equity Compensation Plans
The NYSE requires listed companies to obtain prior shareholder approval to adopt or materially revise any equity compensation plan. As permitted under Marshall Islands law and our amended and restated bylaws, we do not need prior shareholder approval to adopt or revise equity compensation plans, including our equity incentive plan.
Corporate Governance Guidelines
The NYSE requires companies to adopt and disclose corporate governance guidelines. The guidelines must address, among other things: director qualification standards, director responsibilities, director access to management and independent advisers, director compensation, director orientation and continuing education, management succession and an annual performance evaluation. We are not required to adopt such guidelines under Marshall Islands law and we have not adopted such guidelines.
Item 16H. | Mine Safety Disclosure |
Not applicable.
PART III
Item 17. | Financial Statements |
See Item 18.
Item 18. | Financial Statements |
The following financial statements beginning on page F-1required by this Item 18 are filed as a part of this annual report.
report beginning on page F-1.
Note:
Exhibit Number | Description |
1.1 | Amended and Restated Articles of Incorporation of Diana Shipping Inc. (originally known as Diana Shipping Investment Corp.) (1) |
1.2 | Amended and Restated By-laws of the Company (2) |
1.32.1 | Form of Common Share Certificate |
2.2 | Statement of Designation of the 8.875% Series B Cumulative Redeemable Perpetual Preferred Shares (13)of the Company (3) |
2.12.3 | FormCertificate of Share Certificate (10)Designations of the Series A Participating Preferred Stock of the Company (4) |
2.4 | Base Indenture, dated May 28, 2015, by and between the Company and Deutsche Bank Trust Company Americas (5) |
2.5 | First Supplemental Indenture to the Base Indenture, dated May 28, 2015, by and between the Company and Deutsche Bank Trust Company Americas, as trustee, relating to the Company's 8.500% Senior Notes due 2020 (6) |
4.1 | Second Amended and Restated Stockholders Rights Agreement dated October 7, 2008 (4)January 15, 2016 (7) |
4.2 | Amended and Restated 2005 Stock2014 Equity Incentive Plan (6) |
4.3 | 2011 Stock Incentive Plan (11) |
4.4 | Form of Technical Manager Purchase Option Agreement (5)(8) |
4.54.4 | Form of Management Agreement (3) |
4.6 | Loan Agreement with Royal Bank of Scotland dated February 18, 2005 (5) |
4.7 | Amending and Restating Loan Agreement with Royal Bank of Scotland dated May 24, 2006 (8) |
4.8 | Supplemental Agreement with the Royal Bank of Scotland dated January 30, 2007 (7) |
4.9 | Sales Agency Financing Agreement dated April 23, 2008 (9) |
4.10 | Loan Agreement with Deutsche Bank dated October 8, 2009 (10) |
4.114.5 | Loan Agreement with Bremer Landesbank dated October 22, 2009 (10) |
4.124.6 | Loan Agreement with the Export-Import Bank of China and DnB Nor Bank ASA dated October 2, 2010 (10) |
4.134.7 | LoanFirst Supplemental Agreement, withby and between Bikar Shipping Company Inc., Diana Shipping Inc., DSS and Emporiki Bank of Greece S.A., dated September 13, 2011 (11)December 11, 2012 |
4.144.8 | LoanSecond Supplemental Agreement, with Nordea Bank Finland Plc dated February 7, 2012 (11) |
4.15 | Supplemental Loan Agreement with Nordea Bank Finland Plc dated June 21, 2012 (12) |
4.16 | Loan Agreement with Nordea Bank Finland Plc dated December 20, 2012 (12)
|
4.17 | Loan Agreement, dated June 18, 2013, by and among Tuvalubetween Bikar Shipping Company Inc., JabatDiana Shipping Company Inc., DSS and DeutscheCredit Agricole Corporate and Investment Bank, AG dated June 18, 2013 (14)December 13, 2012 |
4.184.9 | Loan Agreement, dated May 24, 2013, by and among Erikub Shipping Company Inc., Wotho Shipping Company Inc., DNB Bank ASA, and Export-Import Bank of China (14)(11) |
4.194.10 | Loan Agreement, dated January 9, 2014, by and among Taka Shipping Company Inc., Fayo Shipping Company Inc., and Commonwealth Bank of Australia (14)(11) |
4.204.11 | Loan Agreement, dated May 20, 2013, by and between Diana Shipping Inc., Eluk Shipping Company Inc. and Diana ShippingContainerships Inc. (14)(11) |
4.214.12 | First Amendment to Loan Agreement, dated May 20, 2013, by and between Diana Shipping Inc., Eluk Shipping Company Inc. and Diana Containerships Inc., dated July 28, 2014 |
4.13 | Second Amendment to Loan Agreement, dated May 20, 2013, by and between Diana Shipping Inc., Eluk Shipping Company Inc. and Diana Containerships Inc., dated September 9, 2015 |
4.14 | Loan Agreement, dated December 18, 2014, by and among Weno Shipping Company Inc., Pulap Shipping Company Inc., the Banks and Financial InsitutionsInstitutions listed therein and BNP Paribas (12) |
4.224.15 | Loan Agreement, dated March 17, 2015, by and among Knox Shipping Company Inc., Bokak Shipping Company Inc., Jemo Shipping Company Inc., Guam Shipping Company Inc., Palau Shipping Company Inc., Makur Shipping Company Inc., Mandaringina Inc., Vesta Commercial, S.A., the Banks and Financial Institutions listed therein, Nordea Bank Finland Plc and Nordea Bank AB, London Branch (12) |
4.234.16 | Administrative Services Agreement, dated October 1, 2013, by and between Diana Shipping Inc. and Diana Shipping Services S.A. (14)(11) |
4.24 | Brokerage Services Agreement, dated March 15, 2013, by and between Diana Shipping Services S.A. and Diana Enterprises Inc. (14) |
4.25 | Brokerage Services Agreement, dated March 4, 2014, by and between Diana Shipping Services S.A. and Diana Enterprises Inc. (14) |
4.264.17 | Brokerage Services Agreement, dated April 9, 2014, by and between Diana Shipping Inc. and Diana Enterprises Inc. (12) |
4.274.18 | Brokerage Services Agreement, dated April 1, 2015, by and between Diana Shipping Inc. and Diana Enterprises Inc. |
4.19 | Amended and Restated Non-Competition Agreement, dated as of March 1, 2013, by and between Diana Shipping Inc. and Diana Containerships Inc. (14)(11) |
4.20 | Loan Agreement with ABN AMRO Bank N.V., dated March 26, 2015 |
4.21 | Loan Agreement with Danish Ship Finance, dated April 29, 2015 |
4.22 | Joint Venture and Subscription Agreement with Wilhelmsen Ship Management, dated January 16, 2015 |
4.23 | Loan Agreement with BNP Paribas, dated July 22, 2015 |
4.24 | Loan Agreement with ING Bank N.V., dated September 30, 2015 |
4.25 | Loan Agreement with The Export-Import Bank of China, dated January 7, 2016 |
8.1 | Subsidiaries of the Company |
11.1 | Code of Ethics (10) |
12.1 | Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer |
12.2 | Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer |
13.1 | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
13.2 | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
15.1 | Consent of Independent Registered Public Accounting Firm |
101 | The following materials from the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2014,2015, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets as of December 31, 20132014 and 2014;2015; (ii) Consolidated Statements of Operations for the years ended December 31, 2012, 2013, 2014 and 2014;2015; (iii) Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 31, 2012, 2013, 2014 and 2014;2015; (iv) Consolidated Statements of Stockholders' Equity for the years ended December 31, 2012, 2013, 2014 and 2014;2015; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2013, 2014 and 2014;2015; and (v) the Notes to Consolidated Financial Statements |
(1) | Filed as Exhibit 1 to the Company's Form 6-K filed on May 29, 2008. |
(2) | Filed as Exhibit 3.1 to the Company's Form 6-K filed on February 13, 2014. |
(3) | Filed as an Exhibit 3.3 to the Company's Amended Registration Statement (File No. 123052)Form 8-A filed on March 15, 2005.February 13, 2014. |
(4) | Filed as Exhibit 4.53.1 to the Company's Form 8-A12B/A filed on October 7, 2008 and amended on October 10, 2008 (File No. 001-32458).January 15, 2016. |
(5) | Filed as Exhibit 4.1 to the Company's Form 6-K filed on May 28, 2015. |
(6) | Filed as Exhibit 4.2 to the Company's Form 6-K filed on May 28, 2015. |
(7) | Filed as Exhibit 4.1 to the Company's Form 8-A12B/A filed on January 15, 2016. |
(8) | Filed as an Exhibit to the Company's Registration Statement (File No. 123052) on March 1, 2005. |
(6) | Filed as Exhibit 1 to the Company's Form 6-K filed on October 27, 2008. |
(7) | Filed as Exhibit VI to the Company's Form 6-K filed on March 19, 2007. |
(8) | Filed as Exhibit 4.10 to the Company's 2007 Annual Report on Form 20-F (File No. 001-32458) on March 14, 2008. |
(9) | Filed as an Exhibit 2 to the Company's Form 6-K filedAmended Registration Statement (File No. 123052) on April 24, 2008.March 15, 2005. |
(10) | Filed as an Exhibit to the Company's Annual Report filed on Form 20-F on March 30, 2010. |
(11) | Filed as an Exhibit to the Company's Annual Report filed on Form 20-F on April 20, 2012.March 27, 2014. |
(12) | Filed as an Exhibit to the Company'sCompany' Annual Report filed on Form 20-F on March 22, 2013. |
(13) | Filed as an Exhibit 3.3 to the Company's Form 8-A filed on February 13, 2014. |
(14) | Filed as an Exhibit to the Company's Annual Report filed on Form 20-F on March 27, 2014.25, 2015. |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized the undersigned to sign this annual report on its behalf.
DIANA SHIPPING INC.
/s/ Andreas Michalopoulos
Andreas Michalopoulos
Chief Financial Officer
Dated: March 24, 201528, 2016
DIANA SHIPPING INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| | Page |
Report of Independent Registered Public Accounting Firm | | F-2 |
Report of Independent Registered Public Accounting Firm | | F-2F-3 |
| | |
Report of Independent Registered Public Accounting Firm | | F-3 |
| | |
Consolidated Balance Sheets as of December 31, 20142015 and 20132014 | | F-4 |
| | |
Consolidated Statements of Operations for the years ended December 31, 2015, 2014 2013 and 20122013 | | F-5 |
| | |
Consolidated Statements of Comprehensive Income / (Loss) for the years ended December 31, 2015, 2014 2013 and 20122013 | | F-5 |
| | |
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2015, 2014 2013 and 20122013 | | F-6 |
| | |
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 2013 and 20122013 | | F-7 |
| | |
Notes to Consolidated Financial Statements | | F-8 |
| | |
| | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of Diana Shipping Inc.
We have audited the accompanying consolidated balance sheets of Diana Shipping Inc. (the "Company") as of December 31, 20142015 and 2013,2014, and the related consolidated statements of operations, comprehensive income/ (loss), stockholders' equity and cash flows for each of the three years in the period ended December 31, 2014.2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Diana Shipping Inc. at December 31, 20142015 and 2013,2014, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2014,2015, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Diana Shipping Inc.'s internal control over financial reporting as of December 31, 2014,2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 24, 201528, 2016 expressed an unqualified opinion thereon.
/s/ Ernst & Young (Hellas) Certified Auditors-Accountants S.A.
Athens, Greece
March 24, 201528, 2016
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of Diana Shipping Inc.
We have audited Diana Shipping Inc.'s (the "Company") internal control over financial reporting as of December 31, 2014,2015, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Diana Shipping Inc.'s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company'scompany's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Diana Shipping Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014,2015, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Diana Shipping Inc. as of December 31, 20142015 and 20132014, and the related consolidated statements of operations, comprehensive income/ (loss), stockholders' equity and cash flows for each of the three years in the period ended December 31, 20142015 of Diana Shipping Inc. and our report dated March 24, 201528, 2016, expressed an unqualified opinion thereon.
/s/ Ernst & Young (Hellas) Certified Auditors-Accountants S.A.
Athens, Greece
March 24, 2015
DIANA SHIPPING INC. | | | | | | |
CONSOLIDATED BALANCE SHEETS | | | | | | |
December 31, 2014 and 2013 | | | | | | |
(Expressed in thousands of U.S. Dollars – except for share and per share data) | | | | | | |
| | | | | | |
| | 2014 | | | 2013 | |
ASSETS | | | | | | |
CURRENT ASSETS: | | | | | | |
Cash and cash equivalents (Note 2(e)) | | $ | 218,901 | | | $ | 240,633 | |
Accounts receivable, trade (Note 2(f)) | | | 6,383 | | | | 701 | |
Due from related parties (Notes 2(g) and 4(b)) | | | 57 | | | | 86 | |
Inventories (Note 2(h)) | | | 7,313 | | | | 5,959 | |
Prepaid expenses and other assets | | | 5,580 | | | | 4,489 | |
Total current assets | | | 238,234 | | | | 251,868 | |
| | | | | | | | |
FIXED ASSETS: | | | | | | | | |
Advances for vessels under construction and acquisitions and other vessel costs (Note 5) | | | 29,500 | | | | 38,862 | |
| | | | | | | | |
Vessels (Note 6) | | | 1,807,654 | | | | 1,686,590 | |
Accumulated depreciation (Note 6) | | | (434,521 | ) | | | (366,215 | ) |
Vessels' net book value (Note 6) | | | 1,373,133 | | | | 1,320,375 | |
Property and equipment, net (Note 7) | | | 23,887 | | | | 22,826 | |
Total fixed assets | | | 1,426,520 | | | | 1,382,063 | |
OTHER NON-CURRENT ASSETS: | | | | | | | | |
Due from related parties, non-current (Notes 2(g) and 4(b)) | | | 50,866 | | | | 50,233 | |
Investment in Diana Containerships Inc. (Note 3) | | | 67,546 | | | | 15,640 | |
Other non-current assets | | | - | | | | 793 | |
Deferred charges, net | | | 3,956 | | | | 1,384 | |
Total assets | | $ | 1,787,122 | | | $ | 1,701,981 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
CURRENT LIABILITIES: | | | | | | | | |
Current portion of long-term debt, net of deferred financing costs, current (Note 9) | | $ | 78,734 | | | $ | 46,077 | |
Accounts payable, trade and other | | | 9,702 | | | | 7,409 | |
Due to related parties (Note 4) | | | 281 | | | | 221 | |
Accrued liabilities | | | 6,012 | | | | 4,805 | |
Deferred revenue | | | 3,279 | | | | 3,278 | |
Fair value of derivative instruments (Note 16) | | | - | | | | 378 | |
Other current liabilities | | | 84 | | | | 129 | |
Total current liabilities | | | 98,092 | | | | 62,297 | |
| | | | | | | | |
Long-term debt, net of current portion and deferred financing costs, non-current (Note 9) | | | 405,522 | | | | 385,480 | |
Other non-current liabilities | | | 1,282 | | | | 812 | |
Commitments and contingencies (Note 10) | | | - | | | | - | |
| | | | | | | | |
STOCKHOLDERS' EQUITY: | | | | | | | | |
Preferred stock (Note 11(a)) | | | 26 | | | | - | |
Common stock, $0.01 par value; 200,000,000 shares authorized and 81,859,821 and 82,841,370 issued and outstanding at 2014 and 2013, respectively (Note 11(b)) | | | 819 | | | | 828 | |
Additional paid-in capital | | | 971,280 | | | | 926,204 | |
Accumulated other comprehensive income / (loss) | | | (747 | ) | | | 164 | |
Retained earnings | | | 310,848 | | | | 326,196 | |
Total stockholders' equity | | | 1,282,226 | | | | 1,253,392 | |
| | | | | | | | |
Total liabilities and stockholders' equity | | $ | 1,787,122 | | | $ | 1,701,981 | |
The accompanying notes are an integral part of these consolidated financial statements. | |
DIANA SHIPPING INC. | | | | | | |
CONSOLIDATED BALANCE SHEETS | | | | | | |
December 31, 2015 and 2014 | | | | | | |
(Expressed in thousands of U.S. Dollars – except for share and per share data) | | | | | | |
| | | | | | |
| | 2015 | | | 2014 | |
ASSETS | | | | | | |
CURRENT ASSETS: | | | | | | |
Cash and cash equivalents (Note 2(e)) | | $ | 193,218 | | | $ | 218,901 | |
Accounts receivable, trade (Note 2(f)) | | | 4,512 | | | | 6,383 | |
Due from related parties (Notes 2(g) and 4(b)) | | | 5,103 | | | | 57 | |
Inventories (Note 2(h)) | | | 6,251 | | | | 7,313 | |
Prepaid expenses and other assets | | | 5,929 | | | | 5,580 | |
Total current assets | | | 215,013 | | | | 238,234 | |
| | | | | | | | |
FIXED ASSETS: | | | | | | | | |
Advances for vessels under construction and acquisitions and other vessel costs (Note 5) | | | 44,514 | | | | 29,500 | |
Vessels (Note 6) | | | 1,947,992 | | | | 1,807,654 | |
Accumulated depreciation (Note 6) | | | (507,189 | ) | | | (434,521 | ) |
Vessels' net book value (Note 6) | | | 1,440,803 | | | | 1,373,133 | |
Property and equipment, net (Note 7) | | | 23,489 | | | | 23,887 | |
Total fixed assets | | | 1,508,806 | | | | 1,426,520 | |
OTHER NON-CURRENT ASSETS: | | | | | | | | |
Due from related parties, non-current (Notes 2(g) and 4(b)) | | | 43,750 | | | | 50,866 | |
Equity method investments (Note 3) | | | 62,487 | | | | 67,546 | |
Deferred charges, net | | | 6,909 | | | | 3,956 | |
Total assets | | $ | 1,836,965 | | | $ | 1,787,122 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
CURRENT LIABILITIES: | | | | | | | | |
Current portion of long-term debt, net of deferred financing costs, current (Note 9) | | $ | 40,984 | | | $ | 78,734 | |
Accounts payable, trade and other | | | 8,963 | | | | 9,702 | |
Due to related parties (Note 4) | | | 64 | | | | 281 | |
Accrued liabilities | | | 6,449 | | | | 6,012 | |
Deferred revenue | | | 2,414 | | | | 3,279 | |
Other current liabilities | | | 15 | | | | 84 | |
Total current liabilities | | | 58,889 | | | | 98,092 | |
| | | | | | | | |
Long-term debt, net of current portion and deferred financing costs, non-current (Note 9) | | | 559,087 | | | | 405,522 | |
Other non-current liabilities | | | 623 | | | | 1,282 | |
Commitments and contingencies (Note 10) | | | | | | | | |
| | | | | | | | |
STOCKHOLDERS' EQUITY: | | | | | | | | |
Preferred stock (Note 11(a)) | | | 26 | | | | 26 | |
Common stock, $0.01 par value; 200,000,000 shares authorized and 82,546,017 and 81,859,821 issued and outstanding at December 31, 2015 and 2014, respectively (Note 11(b)) | | | 825 | | | | 819 | |
Additional paid-in capital | | | 976,880 | | | | 971,280 | |
Accumulated other comprehensive income/(loss) | | | 269 | | | | (747 | ) |
Retained earnings | | | 240,366 | | | | 310,848 | |
Total stockholders' equity | | | 1,218,366 | | | | 1,282,226 | |
| | | | | | | | |
Total liabilities and stockholders' equity | | $ | 1,836,965 | | | $ | 1,787,122 | |
The accompanying notes are an integral part of these consolidated financial statements. | |
DIANA SHIPPING INC. | | | | | | |
CONSOLIDATED STATEMENTS OF OPERATIONS | | | | |
For the year ended December 31, 2015, 2014 and 2013 | | |
(Expressed in thousands of U.S. Dollars – except for share and per share data) | | | | |
| | 2015 | | | 2014 | | | 2013 | |
REVENUES: | | | | | | | | | |
Time charter revenues | | $ | 157,712 | | | $ | 175,576 | | | $ | 164,005 | |
Other revenues (Note 4(b)) | | | - | | | | - | | | | 447 | |
| | | | | | | | | | | | |
EXPENSES: | | | | | | | | | | | | |
Voyage expenses (Notes 4(d) and 12) | | | 15,528 | | | | 10,665 | | | | 8,119 | |
Vessel operating expenses (Note 12) | | | 88,272 | | | | 86,923 | | | | 77,211 | |
Depreciation and amortization of deferred charges (Notes 2(m) and 2(n)) | | | 76,333 | | | | 70,503 | | | | 64,741 | |
General and administrative expenses | | | 25,335 | | | | 26,217 | | | | 23,724 | |
Management fees to related party (Notes 3(b) and 4(d)) | | | 405 | | | | - | | | | - | |
Foreign currency gain | | | (984 | ) | | | (528 | ) | | | (690 | ) |
Operating loss | | $ | (47,177 | ) | | $ | (18,204 | ) | | $ | (8,653 | ) |
| | | | | | | | | | | | |
OTHER INCOME / (EXPENSES): | | | | | | | | | | | | |
Interest and finance costs (Note 13) | | | (15,555 | ) | | | (8,427 | ) | | | (8,140 | ) |
Interest and other income (Note 4(b)) | | | 3,152 | | | | 3,627 | | | | 1,800 | |
Income/(loss) from derivative instruments (Note 16) | | | - | | | | 68 | | | | (118 | ) |
Income/(loss) from equity method investments (Note 3) | | | (5,133 | ) | | | 12,668 | | | | (6,094 | ) |
Total other income / (expenses), net | | $ | (17,536 | ) | | $ | 7,936 | | | $ | (12,552 | ) |
| | | | | | | | | | | | |
Net loss | | $ | (64,713 | ) | | $ | (10,268 | ) | | $ | (21,205 | ) |
| | | | | | | | | | | | |
Dividends on series B preferred shares (Notes 11(a) and 14) | | | (5,769 | ) | | | (5,080 | ) | | | - | |
| | | | | | | | | | | | |
Net loss attributed to common stockholders | | $ | (70,482 | ) | | $ | (15,348 | ) | | $ | (21,205 | ) |
| | | | | | | | | | | | |
Loss per common share, basic and diluted (Note 14) | | $ | (0.89 | ) | | $ | (0.19 | ) | | $ | (0.26 | ) |
| | | | | | | | | | | | |
Weighted average number of common shares, basic and diluted (Note 14) | | | 79,518,009 | | | | 81,292,290 | | | | 81,328,390 | |
DIANA SHIPPING INC. | | | | | | | | | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | | | | | | | |
For the year ended December 31, 2015, 2014 and 2013 | | | | |
(Expressed in thousands of U.S. Dollars) | | | | | | | |
| | 2015 | | | 2014 | | | 2013 | |
Net loss | | $ | (64,713 | ) | | $ | (10,268 | ) | | $ | (21,205 | ) |
| | | | | | | | | | | | |
Other comprehensive income / (loss) (Actuarial gain / (loss)) | | | 1,016 | | | | (911 | ) | | | (30 | ) |
| | | | | | | | | | | | |
Comprehensive loss | | $ | (63,697 | ) | | $ | (11,179 | ) | | $ | (21,235 | ) |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
DIANA SHIPPING INC. | | | | | | |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | | | | |
For the year ended December 31, 2015, 2014 and 2013 | | |
(Expressed in thousands of U.S. Dollars – except for share and per share data) | | | | |
| | | | | | | | | | | | | | | | | | |
| | Preferred Stock | | | Common Stock | | | | | | | | | | | | | |
| | # of Shares | | | Par Value | | | # of Shares | | | Par Value | | | Additional Paid-in Capital | | | Other Comprehensive Income / (Loss) | | | Retained Earnings | | | Total Equity | |
BALANCE, December 31, 2012 | | | - | | | | - | | | | 82,233,424 | | | $ | 822 | | | $ | 918,007 | | | $ | 194 | | | $ | 347,401 | | | $ | 1,266,424 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loss | | | - | | | | - | | | | - | | | $ | - | | | $ | - | | | $ | - | | | $ | (21,205 | ) | | $ | (21,205 | ) |
Issuance of restricted stock and compensation cost | | | - | | | | - | | | | 607,946 | | | | 6 | | | | 8,197 | | | | - | | | | - | | | | 8,203 | |
Other comprehensive loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (30 | ) | | | - | | | | (30 | ) |
BALANCE, December 31, 2013 | | | - | | | | - | | | | 82,841,370 | | | $ | 828 | | | $ | 926,204 | | | $ | 164 | | | $ | 326,196 | | | $ | 1,253,392 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loss | | | - | | | | - | | | | - | | | $ | - | | | $ | - | | | $ | - | | | $ | (10,268 | ) | | $ | (10,268 | ) |
Issuance of series B preferred stock | | | 2,600,000 | | | | 26 | | | | - | | | | - | | | | 62,672 | | | | - | | | | - | | | | 62,698 | |
Issuance of restricted stock and compensation cost | | | - | | | | - | | | | 1,864,000 | | | | 19 | | | | 7,725 | | | | - | | | | - | | | | 7,744 | |
Dividends on series B preferred stock | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (5,080 | ) | | | (5,080 | ) |
Stock repurchased and retired | | | - | | | | - | | | | (2,845,549 | ) | | | (28 | ) | | | (25,321 | ) | | | - | | | | - | | | | (25,349 | ) |
Other comprehensive loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (911 | ) | | | - | | | | (911 | ) |
BALANCE, December 31, 2014 | | | 2,600,000 | | | $ | 26 | | | | 81,859,821 | | | $ | 819 | | | $ | 971,280 | | | $ | (747 | ) | | $ | 310,848 | | | $ | 1,282,226 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loss | | | - | | | $ | - | | | | - | | | $ | - | | | $ | - | | | $ | - | | | $ | (64,713 | ) | | $ | (64,713 | ) |
Issuance of restricted stock and compensation cost (Note 11(c)) | | | | | | | | | | | 1,100,000 | | | | 10 | | | | 8,269 | | | | - | | | | - | | | | 8,279 | |
Dividends on series B preferred stock (Note 11(a)) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (5,769 | ) | | | (5,769 | ) |
Stock repurchased and retired (Note 11(d)) | | | - | | | | - | | | | (413,804 | ) | | | (4 | ) | | | (2,669 | ) | | | - | | | | - | | | | (2,673 | ) |
Other comprehensive income | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,016 | | | | - | | | | 1,016 | |
BALANCE, December 31, 2015 | | | 2,600,000 | | | $ | 26 | | | | 82,546,017 | | | $ | 825 | | | $ | 976,880 | | | $ | 269 | | | $ | 240,366 | | | $ | 1,218,366 | |
The accompanying notes are an integral part of these consolidated financial statements.
DIANA SHIPPING INC. | | | | | | | | | |
CONSOLIDATED STATEMENTS OF OPERATIONS | | | | | | | |
For the years ended December 31, 2014, 2013 and 2012 | | | | |
(Expressed in thousands of U.S. Dollars – except for share and per share data) | | | | | | | |
| | | | | | | | | |
| | 2014 | | | 2013 | | | 2012 | |
REVENUES: | | | | | | | | | |
Time charter revenues | | $ | 175,576 | | | $ | 164,005 | | | $ | 220,785 | |
Other revenues (Note 4(b)) | | | - | | | | 447 | | | | 2,447 | |
| | | | | | | | | | | | |
EXPENSES: | | | | | | | | | | | | |
Voyage expenses (Note 12) | | | 10,665 | | | | 8,119 | | | | 8,274 | |
Vessel operating expenses (Note 12) | | | 86,923 | | | | 77,211 | | | | 66,293 | |
Depreciation and amortization of deferred charges (Notes 2(m) and 2(n)) | | | 70,503 | | | | 64,741 | | | | 62,010 | |
General and administrative expenses | | | 26,217 | | | | 23,724 | | | | 24,913 | |
Foreign currency gain | | | (528 | ) | | | (690 | ) | | | (1,374 | ) |
Operating income / (loss) | | $ | (18,204 | ) | | $ | (8,653 | ) | | $ | 63,116 | |
| | | | | | | | | | | | |
OTHER INCOME / (EXPENSES): | | | | | | | | | | | | |
Interest and finance costs (Note 13) | | | (8,427 | ) | | | (8,140 | ) | | | (7,618 | ) |
Interest and other income (Note 4(b)) | | | 3,627 | | | | 1,800 | | | | 1,432 | |
Income / (loss) from derivative instruments (Note 16) | | | 68 | | | | (118 | ) | | | (518 | ) |
Income / (loss) from investment in Diana Containerships Inc. (Note 3) | | | 12,668 | | | | (6,094 | ) | | | (1,773 | ) |
Total other income / (expenses), net | | $ | 7,936 | | | $ | (12,552 | ) | | $ | (8,477 | ) |
| | | | | | | | | | | | |
Net income / (loss) | | $ | (10,268 | ) | | $ | (21,205 | ) | | $ | 54,639 | |
| | | | | | | | | | | | |
Dividends on series B preferred shares (Notes 11(a) and 14) | | | (5,080 | ) | | | - | | | | - | |
| | | | | | | | | | | | |
Net income / (loss) attributed to common stockholders | | $ | (15,348 | ) | | $ | (21,205 | ) | | $ | 54,639 | |
| | | | | | | | | | | | |
Earnings / (loss) per common share, basic and diluted (Note 14) | | $ | (0.19 | ) | | $ | (0.26 | ) | | $ | 0.67 | |
| | | | | | | | | | | | |
Weighted average number of common shares, basic and diluted (Note 14) | | | 81,292,290 | | | | 81,328,390 | | | | 81,083,485 | |
| | | | | | | | | | | | |
DIANA SHIPPING INC. | | | | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | | |
For the year ended December 31, 2015, 2014 and 2013 | | |
(Expressed in thousands of U.S. Dollars) | | | |
Cash Flows from Operating Activities: | | 2015 | | | 2015 | | | 2015 | |
| | | | | | | | | |
Net loss | | $ | (64,713 | ) | | $ | (10,268 | ) | | $ | (21,205 | ) |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | | | | | | | |
Depreciation and amortization of deferred charges | | | 76,333 | | | | 70,503 | | | | 64,741 | |
Amortization of financing costs (Note 13) | | | 1,364 | | | | 519 | | | | 473 | |
Amortization of free lubricants benefit | | | (85 | ) | | | (129 | ) | | | (98 | ) |
Compensation cost on restricted stock (Note 11(c)) | | | 8,279 | | | | 7,744 | | | | 8,203 | |
Actuarial gain / (loss) | | | 1,016 | | | | (911 | ) | | | (30 | ) |
Change in fair value of derivative instruments | | | - | | | | (378 | ) | | | (616 | ) |
(Income) / loss from equity method investments, net of dividends (Note 3) | | | 5,133 | | | | (12,668 | ) | | | 5,094 | |
(Increase) / Decrease in: | | | | | | | | | | | | |
Receivables | | | 1,871 | | | | (5,682 | ) | | | 5,889 | |
Due from related parties | | | 2,070 | | | | (604 | ) | | | 294 | |
Inventories | | | 1,062 | | | | (1,354 | ) | | | (684 | ) |
Prepaid expenses and other assets | | | (349 | ) | | | (1,091 | ) | | | 345 | |
Prepaid charter revenue (Notes 2(k) and 8) | | | - | | | | - | | | | 5,353 | |
Other non-current assets | | | - | | | | 793 | | | | (793 | ) |
Increase / (Decrease) in: | | | | | | | | | | | | |
Accounts payable | | | (739 | ) | | | 2,293 | | | | 416 | |
Due to related parties | | | (217 | ) | | | 60 | | | | (43 | ) |
Accrued liabilities, net of accrued preferred dividends | | | 437 | | | | (11 | ) | | | (479 | ) |
Deferred revenue | | | (865 | ) | | | 1 | | | | 451 | |
Other liabilities | | | (643 | ) | | | 554 | | | | 135 | |
Drydock costs | | | (6,009 | ) | | | (4,461 | ) | | | (46 | ) |
Net cash provided by Operating Activities | | $ | 23,945 | | | $ | 44,910 | | | $ | 67,400 | |
| | | | | | | | | | | | |
Cash Flows from Investing Activities: | | | | | | | | | | | | |
Payments for vessel acquisitions, improvements and construction (Notes 5 and 6) | | | (155,352 | ) | | | (111,702 | ) | | | (198,581 | ) |
Acquisition of additional interest in Diana Containerships Inc. (Note 3(a)) | | | - | | | | (40,000 | ) | | | - | |
Cash dividends from investment in Diana Containerships Inc. (Note 3(a)) | | | 193 | | | | 763 | | | | 4,000 | |
Loan to Diana Containerships Inc. (Note 4(b)) | | | - | | | | - | | | | (50,000 | ) |
Joint venture investment (Note 3(b)) | | | (267 | ) | | | - | | | | - | |
Payments for plant, property and equipment (Note 7) | | | (211 | ) | | | (1,574 | ) | | | (575 | ) |
Net cash used in Investing Activities | | $ | (155,637 | ) | | $ | (152,513 | ) | | $ | (245,156 | ) |
| | | | | | | | | | | | |
Cash Flows from Financing Activities: | | | | | | | | | | | | |
Proceeds from long-term debt (Note 9) | | | 441,173 | | | | 101,500 | | | | 18,000 | |
Proceeds from issuance of preferred stock, net of expenses (Note 11(a)) | | | - | | | | 62,698 | | | | - | |
Cash dividends on preferred stock | | | (5,769 | ) | | | (3,862 | ) | | | - | |
Payments for repurchase of common stock (Note 11(d)) | | | (2,673 | ) | | | (25,349 | ) | | | - | |
Financing costs | | | (5,482 | ) | | | (527 | ) | | | (452 | ) |
Loan payments (Note 9) | | | (321,240 | ) | | | (48,589 | ) | | | (45,783 | ) |
Net cash provided by / (used in) Financing Activities | | $ | 106,009 | | | $ | 85,871 | | | $ | (28,235 | ) |
| | | | | | | | | | | | |
Net decrease in cash and cash equivalents | | | (25,683 | ) | | | (21,732 | ) | | | (205,991 | ) |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of the year | | | 218,901 | | | | 240,633 | | | | 446,624 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of the year | | $ | 193,218 | | | $ | 218,901 | | | $ | 240,633 | |
| | | | | | | | | | | | |
SUPPLEMENTAL CASH FLOW INFORMATION | | | | | | | | | | | | |
Cash paid during the year for: | | | | | | | | | | | | |
Interest, net of amounts capitalized | | $ | 13,048 | | | $ | 8,180 | | | $ | 7,169 | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
DIANA SHIPPING INC. | | | | | | | | | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME / (LOSS) | | | | | | | |
For the years ended December 31, 2014, 2013 and 2012 | | | | |
(Expressed in thousands of U.S. Dollars) | | | | | | | |
| | 2014 | | | 2013 | | | 2012 | |
Net income / (loss) | | $ | (10,268 | ) | | $ | (21,205 | ) | | $ | 54,639 | |
| | | | | | | | | | | | |
Other comprehensive income / (loss) (Actuarial gain / (loss)) | | | (911 | ) | | | (30 | ) | | | 306 | |
| | | | | | | | | | | | |
Comprehensive income / (loss) | | $ | (11,179 | ) | | $ | (21,235 | ) | | $ | 54,945 | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. | |
DIANA SHIPPING INC. | | | | | | | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | | | | |
For the years ended December 31, 2014, 2013 and 2012 | | | | |
(Expressed in thousands of U.S. Dollars) | | | | | | | |
| | 2014 | | | 2013 | | | 2012 | |
Cash Flows from Operating Activities: | | | | | | | | | |
Net income / (loss) | | $ | (10,268 | ) | | $ | (21,205 | ) | | $ | 54,639 | |
Adjustments to reconcile net income / (loss) to net cash provided by operating activities: | | | | | | | | | | | | |
Depreciation and amortization of deferred charges | | | 70,503 | | | | 64,741 | | | | 62,010 | |
Amortization of financing costs (Note 13) | | | 519 | | | | 473 | | | | 379 | |
Amortization of free lubricants benefit | | | (129 | ) | | | (98 | ) | | | (180 | ) |
Compensation cost on restricted stock (Note 11(c)) | | | 7,744 | | | | 8,203 | | | | 8,645 | |
Actuarial gain / (loss) | | | (911 | ) | | | (30 | ) | | | 306 | |
Change in fair value of derivative instruments | | | (378 | ) | | | (616 | ) | | | (36 | ) |
(Income) / loss from investment in Diana Containerships Inc., net of dividends (Note 3) | | | (12,668 | ) | | | 5,094 | | | | 2,273 | |
(Increase) / Decrease in: | | | | | | | | | | | | |
Receivables | | | (5,682 | ) | | | 5,889 | | | | (1,022 | ) |
Due from related parties | | | (604 | ) | | | 294 | | | | (350 | ) |
Inventories | | | (1,354 | ) | | | (684 | ) | | | (467 | ) |
Prepaid expenses and other assets | | | (1,091 | ) | | | 345 | | | | (2,514 | ) |
Prepaid charter revenue (Notes 2(k) and 8) | | | - | | | | 5,353 | | | | 3,056 | |
Other non-current assets | | | 793 | | | | (793 | ) | | | - | |
Increase / (Decrease) in: | | | | | | | | | | | | |
Accounts payable | | | 2,293 | | | | 416 | | | | (134 | ) |
Due to related parties | | | 60 | | | | (43 | ) | | | 38 | |
Accrued liabilities, net of accrued preferred dividends | | | (11 | ) | | | (479 | ) | | | 533 | |
Deferred revenue | | | 1 | | | | 451 | | | | (5,309 | ) |
Other liabilities | | | 554 | | | | 135 | | | | 99 | |
Drydock costs | | | (4,461 | ) | | | (46 | ) | | | (2,080 | ) |
Net Cash provided by Operating Activities | | $ | 44,910 | | | $ | 67,400 | | | $ | 119,886 | |
| | | | | | | | | | | | |
Cash Flows from Investing Activities: | | | | | | | | | | | | |
Payments for vessel acquisitions, improvements and construction (Notes 5 and 6) | | | (111,702 | ) | | | (198,581 | ) | | | (171,195 | ) |
Acquisition of additional interest in Diana Containerships Inc. (Note 3) | | | (40,000 | ) | | | - | | | | - | |
Cash dividends from investment in Diana Containerships Inc. (Note 3) | | | 763 | | | | 4,000 | | | | 2,835 | |
Loan to Diana Containerships Inc. (Note 4(b)) | | | - | | | | (50,000 | ) | | | - | |
Payments for plant, property and equipment (Note 7) | | | (1,574 | ) | | | (575 | ) | | | (1,553 | ) |
Net Cash used in Investing Activities | | $ | (152,513 | ) | | $ | (245,156 | ) | | $ | (169,913 | ) |
| | | | | | | | | | | | |
Cash Flows from Financing Activities: | | | | | | | | | | | | |
Proceeds from long-term debt (Note 9) | | | 101,500 | | | | 18,000 | | | | 118,550 | |
Proceeds from issuance of preferred stock, net of expenses (Note 11(a)) | | | 62,698 | | | | - | | | | - | |
Cash dividends on preferred stock | | | (3,862 | ) | | | - | | | | - | |
Payments for repurchase of common stock (Note 11(d)) | | | (25,349 | ) | | | - | | | | (6,044 | ) |
Financing costs | | | (527 | ) | | | (452 | ) | | | (557 | ) |
Loan payments (Note 9) | | | (48,589 | ) | | | (45,783 | ) | | | (31,972 | ) |
Net Cash provided by / (used in) Financing Activities | | $ | 85,871 | | | $ | (28,235 | ) | | $ | 79,977 | |
| | | | | | | | | | | | |
Net increase / (decrease) in cash and cash equivalents | | | (21,732 | ) | | | (205,991 | ) | | | 29,950 | |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of the year | | | 240,633 | | | | 446,624 | | | | 416,674 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of the year | | $ | 218,901 | | | $ | 240,633 | | | $ | 446,624 | |
| | | | | | | | | | | | |
SUPPLEMENTAL CASH FLOW INFORMATION | | | | | | | | | | | | |
Cash paid during the year for: | | | | | | | | | | | | |
Interest, net of amounts capitalized | | $ | 8,180 | | | $ | 7,169 | | | $ | 6,709 | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. | |
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20142015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
1. | Basis of Presentation and General Information |
The accompanying consolidated financial statements include the accounts of Diana Shipping Inc. ("Diana" or(or "DSI") and its wholly-owned and beneficially-owned subsidiaries (collectively, the "Company"). DianaDSI was formed on March 8, 1999 as Diana Shipping Investment Corp. under the laws of the Republic of Liberia. In February 2005, the Company's articles of incorporation were amended. Under the amended articles of incorporation, the Company was renamed Diana Shipping Inc. and was re-domiciled from the Republic of Liberia to the Republic of the Marshall Islands.
The Company is engaged in the ocean transportation of dry bulk cargoes worldwide mainly through the ownership of dry bulk carrier vessels. The Company also operates the majority of its own fleet through Diana Shipping Services S.A. (or "DSS"), a whollywholly-owned subsidiary and a limited number of vessels through a 50% owned subsidiary.joint venture (Notes 3 and 4). As at December 31, 2014,2015, the following are wholly-owned subsidiaries with operations that are included in the consolidation:
a/a | Company | Vessel | Flag | Dwt | Date Built | Date Acquired | Place of Incorporation |
PANAMAX VESSELS |
1 | Panama Compania Armadora SA | Oceanis | Bahamas | 75,211 | May 2001 | May 2001 | Panama |
2 | Husky Trading SA | Triton | Bahamas | 75,336 | Mar 2001 | Mar 2001 | Panama |
3 | Changame Compania Armadora SA | Thetis | Bahamas | 73,583 | Aug 2004 | Nov 2005 | Panama |
4 | Buenos Aires Compania Armadora SA | Alcyon | Bahamas | 75,247 | Feb 2001 | Feb 2001 | Panama |
5 | Skyvan Shipping Company SA | Nirefs | Bahamas | 75,311 | Jan 2001 | Jan 2001 | Panama |
6 | Cypres Enterprises Corp. | Protefs | Bahamas | 73,630 | Aug 2004 | Aug 2004 | Panama |
7 | Urbina Bay Trading SA | Erato | Bahamas | 74,444 | Aug 2004 | Nov 2005 | Panama |
8 | Chorrera Compania Armadora SA | Dione | Greek | 75,172 | Jan 2001 | May 2003 | Panama |
9 | Darien Compania Armadora SA | Calipso | Bahamas | 73,691 | Feb 2005 | Feb 2005 | Panama |
10 | Texford Maritime SA | Clio | Bahamas | 73,691 | May 2005 | May 2005 | Panama |
11 | Eaton Marine SA | Danae | Greek | 75,106 | Jan 2001 | Jul 2003 | Panama |
12 | Vesta Commercial SA | Coronis | Marshall Islands | 74,381 | Jan 2006 | Jan 2006 | Panama |
13 | Ailuk Shipping Company Inc. | Naias | Marshall Islands | 73,546 | Jun 2006 | Aug 2006 | Marshall Islands |
14 | Taka Shipping Company Inc. | Melite | Marshall Islands | 76,436 | Oct 2004 | Jan 2010 | Marshall Islands |
15 | Bikar Shipping Company Inc. | Arethusa | Greek | 73,593 | Jan 2007 | Jul 2011 | Marshall Islands |
16 | Mandaringina Inc. | Melia | Marshall Islands | 76,225 | Feb 2005 | May 2012 | Marshall Islands |
17 | Jemo Shipping Company Inc. | Leto | Marshall Islands | 81,297 | Feb 2010 | Jan 2012 | Marshall Islands |
18 | Fayo Shipping Company Inc. | Artemis | Marshall Islands | 76,942 | Sep 2006 | Aug 2013 | Marshall Islands |
19 | Erikub Shipping Company Inc. (Note 6) | Crystalia | Greek | 77,525 | Feb 2014 | Feb 2014 | Marshall Islands |
20 | Wotho Shipping Company Inc. (Note 6) | Atalandi | Greek | 77,529 | May 2014 | May 2014 | Marshall Islands |
KAMSARMAX VESSELS |
21 | Tuvalu Shipping Company Inc. | Myrto | Marshall Islands | 82,131 | Jan 2013 | Jan 2013 | Marshall Islands |
22 | Jabat Shipping Company Inc. | Maia | Marshall Islands | 82,193 | Aug 2009 | Feb 2013 | Marshall Islands |
23 | Makur Shipping Company Inc. | Myrsini | Marshall Islands | 82,117 | Mar 2010 | Oct 2013 | Marshall Islands |
POST-PANAMAX VESSELS |
24 | Majuro Shipping Company Inc. | Alcmene | Marshall Islands | 93,193 | Jan 2010 | Nov 2010 | Marshall Islands |
25 | Guam Shipping Company Inc | Amphitrite | Marshall Islands | 98,697 | Aug 2012 | Aug 2012 | Marshall Islands |
26 | Palau Shipping Company Inc. | Polymnia | Marshall Islands | 98,704 | Nov 2012 | Nov 2012 | Marshall Islands |
a/a | Company | Vessel | Flag | Date Built | Date Acquired | Place of Incorporation |
PANAMAX VESSELS |
1 | Panama Compania Armadora SA | Oceanis | Bahamas | May 2001 | May 2001 | Panama |
2 | Husky Trading SA | Triton | Bahamas | Mar 2001 | Mar 2001 | Panama |
3 | Changame Compania Armadora SA | Thetis | Bahamas | Aug 2004 | Nov 2005 | Panama |
4 | Buenos Aires Compania Armadora SA | Alcyon | Bahamas | Feb 2001 | Feb 2001 | Panama |
5 | Skyvan Shipping Company SA | Nirefs | Bahamas | Jan 2001 | Jan 2001 | Panama |
6 | Cypres Enterprises Corp. | Protefs | Bahamas | Aug 2004 | Aug 2004 | Panama |
7 | Urbina Bay Trading SA | Erato | Bahamas | Aug 2004 | Nov 2005 | Panama |
8 | Chorrera Compania Armadora SA | Dione | Greek | Jan 2001 | May 2003 | Panama |
9 | Darien Compania Armadora SA | Calipso | Bahamas | Feb 2005 | Feb 2005 | Panama |
10 | Texford Maritime SA | Clio | Bahamas | May 2005 | May 2005 | Panama |
11 | Eaton Marine SA | Danae | Greek | Jan 2001 | Jul 2003 | Panama |
12 | Vesta Commercial SA | Coronis | Marshall Islands | Jan 2006 | Jan 2006 | Panama |
13 | Ailuk Shipping Company Inc. | Naias | Marshall Islands | Jun 2006 | Aug 2006 | Marshall Islands |
14 | Taka Shipping Company Inc. | Melite | Marshall Islands | Oct 2004 | Jan 2010 | Marshall Islands |
15 | Bikar Shipping Company Inc. | Arethusa | Greek | Jan 2007 | Jul 2011 | Marshall Islands |
16 | Mandaringina Inc. | Melia | Marshall Islands | Feb 2005 | May 2012 | Marshall Islands |
17 | Jemo Shipping Company Inc. | Leto | Marshall Islands | Feb 2010 | Jan 2012 | Marshall Islands |
18 | Fayo Shipping Company Inc. | Artemis | Marshall Islands | Sep 2006 | Aug 2013 | Marshall Islands |
19 | Erikub Shipping Company Inc. (Note 6) | Crystalia | Greek | Feb 2014 | Feb 2014 | Marshall Islands |
20 | Wotho Shipping Company Inc. (Note 6) | Atalandi | Greek | May 2014 | May 2014 | Marshall Islands |
KAMSARMAX VESSELS |
21 | Tuvalu Shipping Company Inc. | Myrto | Marshall Islands | Jan 2013 | Jan 2013 | Marshall Islands |
22 | Jabat Shipping Company Inc. | Maia | Marshall Islands | Aug 2009 | Feb 2013 | Marshall Islands |
23 | Makur Shipping Company Inc. | Myrsini | Marshall Islands | Mar 2010 | Oct 2013 | Marshall Islands |
24 | Rairok Shipping Company Inc. (Note 6) | Medusa | Marshall Islands | Apr 2010 | Jun 2015 | Marshall Islands |
POST-PANAMAX VESSELS |
25 | Majuro Shipping Company Inc. | Alcmene | Marshall Islands | Jan 2010 | Nov 2010 | Marshall Islands |
26 | Guam Shipping Company Inc | Amphitrite | Marshall Islands | Aug 2012 | Aug 2012 | Marshall Islands |
27 | Palau Shipping Company Inc. | Polymnia | Marshall Islands | Nov 2012 | Nov 2012 | Marshall Islands |
F-8
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20142015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
CAPESIZE VESSELS |
27 | Jaluit Shipping Company Inc. | Sideris GS | Marshall Islands | 174,186 | Nov 2006 | Nov 2006 | Marshall Islands |
28 | Bikini Shipping Company Inc. | New York | Marshall Islands | 177,773 | Mar 2010 | Mar 2010 | Marshall Islands |
29 | Gala Properties Inc. | Houston | Marshall Islands | 177,729 | Oct 2009 | Oct 2009 | Marshall Islands |
30 | Kili Shipping Company Inc. | Semirio | Marshall Islands | 174,261 | Jun 2007 | Jun 2007 | Marshall Islands |
31 | Knox Shipping Company Inc. | Aliki | Marshall Islands | 180,235 | Mar 2005 | Apr 2007 | Marshall Islands |
32 | Lib Shipping Company Inc. | Boston | Marshall Islands | 177,828 | Nov 2007 | Nov 2007 | Marshall Islands |
33 | Marfort Navigation Company Ltd. | Salt Lake City | Cyprus | 171,810 | Sep 2005 | Dec 2007 | Cyprus |
34 | Silver Chandra Shipping Company Ltd. | Norfolk | Cyprus | 164,218 | Aug 2002 | Feb 2008 | Cyprus |
35 | Bokak Shipping Company Inc. | Baltimore | Marshall Islands | 177,243 | Mar 2005 | Jun 2013 | Marshall Islands |
36 | Pulap Shipping Company Inc. | PS Palios | Marshall Islands | 179,134 | Jan 2013 | Dec 2013 | Marshall Islands |
37 | Weno Shipping Company Inc. (Note 6) | GP Zafirakis | Marshall Islands | 179,492 | Aug 2014 | Aug 2014 | Marshall Islands |
38 | Lelu Shipping Company Inc. (Notes 5, 10 and 17) | Santa Barbara | Marshall Islands | 179,426 | Jan 2015 | Jan 2015 | Marshall Islands |
NEWCASTLEMAX VESSELS |
39 | Lae Shipping Company Inc. | Los Angeles | Marshall Islands | 206,104 | Feb 2012 | Feb 2012 | Marshall Islands |
40 | Namu Shipping Company Inc. | Philadelphia | Marshall Islands | 206,040 | May 2012 | May 2012 | Marshall Islands |
UNDER CONSTRUCTION |
41 | Aster Shipping Company Inc. (Notes 5, 10 and 17) | H2548 | - | 208,500 | - | Expected in 2016 | Marshall Islands |
42 | Aerik Shipping Company Inc. (Notes 5 and 10) | H2549 | - | 208,500 | - | Expected in 2016 | Marshall Islands |
43 | Houk Shipping Company Inc. (Notes 5 and 10) | DY6006 | - | 82,000 | - | Expected in 2016 | Marshall Islands |
OTHER SUBSIDIARIES |
44 | Diana Shipping Services SA | Management company | | | | | Panama |
45 | Bulk Carriers (USA) LLC | Company's representative in the US | Delaware - USA |
a/a | Company | Vessel | Flag | Date Built | Date Acquired | Place of Incorporation |
CAPESIZE VESSELS |
28 | Jaluit Shipping Company Inc. | Sideris GS | Marshall Islands | Nov 2006 | Nov 2006 | Marshall Islands |
29 | Bikini Shipping Company Inc. | New York | Marshall Islands | Mar 2010 | Mar 2010 | Marshall Islands |
30 | Gala Properties Inc. | Houston | Marshall Islands | Oct 2009 | Oct 2009 | Marshall Islands |
31 | Kili Shipping Company Inc. | Semirio | Marshall Islands | Jun 2007 | Jun 2007 | Marshall Islands |
32 | Knox Shipping Company Inc. | Aliki | Marshall Islands | Mar 2005 | Apr 2007 | Marshall Islands |
33 | Lib Shipping Company Inc. | Boston | Marshall Islands | Nov 2007 | Nov 2007 | Marshall Islands |
34 | Marfort Navigation Company Ltd. | Salt Lake City | Cyprus | Sep 2005 | Dec 2007 | Cyprus |
35 | Silver Chandra Shipping Company Ltd. | Norfolk | Cyprus | Aug 2002 | Feb 2008 | Cyprus |
36 | Bokak Shipping Company Inc. | Baltimore | Marshall Islands | Mar 2005 | Jun 2013 | Marshall Islands |
37 | Pulap Shipping Company Inc. | PS Palios | Marshall Islands | Jan 2013 | Dec 2013 | Marshall Islands |
38 | Weno Shipping Company Inc. (Note 6) | GP Zafirakis | Marshall Islands | Aug 2014 | Aug 2014 | Marshall Islands |
39 | Lelu Shipping Company Inc. (Note 5) | Santa Barbara | Marshall Islands | Jan 2015 | Jan 2015 | Marshall Islands |
40 | Ujae Shipping Company Inc. (Note 6) | New Orleans | Marshall Islands | Nov 2015 | Nov 2015 | Marshall Islands |
41 | Toku Shipping Company Inc. (Notes 6) | Seattle | Marshall Islands | Apr 2011 | Nov 2015 | Marshall Islands |
NEWCASTLEMAX VESSELS |
41 | Lae Shipping Company Inc. | Los Angeles | Marshall Islands | Feb 2012 | Feb 2012 | Marshall Islands |
42 | Namu Shipping Company Inc. | Philadelphia | Marshall Islands | May 2012 | May 2012 | Marshall Islands |
UNDER CONSTRUCTION |
43 | Aster Shipping Company Inc. (Notes 5 and 10) | H2548 | - | - | Expected in 2016 | Marshall Islands |
44 | Aerik Shipping Company Inc. (Notes 5 and 10) | H2549 | - | - | Expected in 2016 | Marshall Islands |
45 | Houk Shipping Company Inc. (Notes 5 and 10) | DY6006 | - | - | Expected in 2016 | Marshall Islands |
OTHER SUBSIDIARIES |
46 | Diana Shipping Services SA | Management company | | | Panama |
47 | Bulk Carriers (USA) LLC | Company's representative in the US | | | Delaware - USA |
48 | Diana Ship Management Inc. (Note 3(b)) | Intermediate holding company | | | Marshall Islands |
Diana Shipping Services S.A. (the "Manager", or "DSS")DSS, provides the Company and its vessels with management services since November 12, 2004, pursuant to management agreements and since October 1, 2013 administrative services with regards to services related to the holding company'sDSI's operations and its subsidiaries. Such costs are eliminated in consolidation. Since April 2010 and until February 28, 2013, DSS provided to Diana Containerships Inc. (or "Diana Containerships") and its vessels, administrative services and since June 2010 and until February 28, 2013, technical and commercial services (Note 4(b)).
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Gradually from August 2015 and until December 31, 2014
(Expressed2015, DSS does not provide management services to six vessels in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
the Company's fleet whose management has been transferred to Diana Wilhelmsen Management Limited (Notes 3(b) and 4(d)).
During 2015, 2014 and 2013, and 2012 charterers that individually accounted for 10% or more of the Company's time charter revenues were as follows:
Charterer | | 2014 | | | 2013 | | | 2012 | | | 2015 | | 2014 | | 2013 |
A | | | 18 | % | | | 17 | % | | | 18 | % | | 24% | | 10% | | |
B | | | 15 | % | | | 19 | % | | | 10 | % | | 20% | | | | |
C | | | 12 | % | | | | | | | | | | 12% | | 12% | | |
D | | | 10 | % | | | | | | | | | | 10% | | 15% | | 19% |
E | | | | | | | 11 | % | | | | | | | | 18% | | 17% |
F | | | | | | | 11 | % | | | | | | | | | | 11% |
G | | | | | | | | | | | 12 | % | | | | | | 11% |
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
2. | Significant Accounting Policies |
(a) | Principles of Consolidation: The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, and include the accounts of Diana Shipping Inc. and its wholly-owned subsidiaries referred to in Note 1 above. All intercompany balances and transactions have been eliminated upon consolidation. |
(b) | Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
(c) | Other Comprehensive Income / (loss): The Company separately presents certain transactions, which are recorded directly as components of stockholders' equity. Other Comprehensive Income / (Loss) is presented in a separate statement. |
(d) | Foreign Currency Translation: The functional currency of the Company is the U.S. Dollardollar because the Company's vessels operate in international shipping markets, and therefore primarily transact business in U.S. Dollars.dollars. The Company's accounting records are maintained in U.S. Dollars.dollars. Transactions involving other currencies during the year are converted into U.S. Dollarsdollars using the exchange rates in effect at the time of the transactions. At the balance sheet dates, monetary assets and liabilities which are denominated in other currencies are translated into U.S. Dollarsdollars at the year-end exchange rates. Resulting gains or losses are reflected separately in the accompanying consolidated statements of operations. |
(e) | Cash and Cash Equivalents: The Company considers highly liquid investments such as time deposits, certificates of deposit and their equivalents with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents may also include compensating cash balances kept against the Company's loan facilities that are not deemed to be sufficiently material to require segregation on the balance sheet. Such balances at December 31, 20142015 and 20132014 amounted to $19,500$21,500 and $18,000$19,500 in the aggregate and consisted of minimum cash deposits required to be maintained at all times under the Company's loan facilities (Note 9). |
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
(f) | Accounts Receivable, Trade: The amount shown as accounts receivable, trade, at each balance sheet date, includes receivables from charterers for hire, ballast bonus billings, if any, hold cleanings and extra voyage insurance, net of any provision for doubtful accounts. At each balance sheet date, all potentially uncollectible accounts are assessed individually for purposes of determining the appropriate provision for doubtful accounts. No provision for doubtful accounts was established as of December 31, 20142015 and 2013.2014. |
(g) | Loan Receivable from Related Parties: The amounts shown as Due from related parties, current and non-current, in the consolidated balance sheet as at December 31, 20142015 and 2013,2014, (Note 4(b)) represent amounts receivable from Diana Containerships Inc. with respect to a loan agreement with a wholly owned subsidiary of Diana Containerships Inc., net of any provision for credit losses. Interest income and fees, deriving from the agreement are recorded in the accounts as incurred. Costs incurred for the loan documentation were expensed as incurred. At each balance sheet date, amounts due under the aforementioned loan agreement are assessed for purposes of determining the appropriate provision for credit losses. In order to estimate the allowance for credit losses, the Company assesses at each period end the ability of Diana Containerships to meet its obligations under the loan agreement by taking into consideration existing economic conditions, the current financial condition of Diana Containerships Inc. and historical losses, if any, and any other risks/factors that may affect its future financial condition and its ability to meet its obligations. No provision for credit losses was established as of December 31, 20142015 and 2013,2014, since there was no indication that Diana Containerships Inc. will not be able to meet its obligations under the loan agreement. |
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
(h) | Inventories: Inventories consist of lubricants and victualling which are stated at the lower of cost or market. Cost is determined by the first in, first out method. Inventories may also consist of bunkers when on the balance sheet date a vessel remains idle. Bunkers are also stated at the lower of cost or market and cost is determined by the first in, first out method. |
(i) | Vessel Cost: Vessels are stated at cost which consists of the contract price and any material expenses incurred upon acquisition or during construction. Expenditures for conversions and major improvements are also capitalized when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the vessels; otherwise these amounts are charged to expense as incurred. Interest cost incurred during the assets' construction periods that theoretically could have been avoided if expenditure for the assets had not been made is also capitalized. The capitalization rate, applied on accumulated expenditures for the vessel, is based on interest rates applicable to outstanding borrowings of the period. |
(j) | Property and equipment: The Company owns the land and building where its offices are located. Land is presented in its fair value on the date of acquisition and it is not subject to depreciation. The building has an estimated useful life of 55 years with no residual value. Depreciation is calculated on a straight-line basis. Equipment consists of office furniture and equipment, computer software and hardware and vehicles which consist of motor scooters and a car. The useful life of the car is 10 years, of the office furniture, equipment and the scooters is 5 years; and of the computer software and hardware is 3 years. Depreciation is calculated on a straight-line basis. |
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
(k) | Prepaid Charter Revenue: When the Company acquires a vessel with a time charter attached and the present value of the contractual cash flows of the time charter assumed is greater than its current fair value with reference to market data, the difference, capped to the vessel's fair value on a charter free basis, is recorded as prepaid charter revenue. Prepaid charter revenue is amortized to revenue over the period of the time charter assumed and is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.recoverable (Note 8). |
(l) | Impairment of Long-Lived Assets: Long-lived assets (vessels, land, and building) and certain identifiable intangibles held and used by an entity are reviewed for impairment whenever events or changes in circumstances (such as market conditions, obsolesce or damage to the asset, potential sales and other business plans) indicate that the carrying amount of the assets may not be recoverable. When the estimate of undiscounted projected net operating cash flows, excluding interest charges, expected to be generated by the use of the asset over its remaining useful life and its eventual disposition is less than its carrying amount, the Company should evaluate the asset for an impairment loss. Measurement of the impairment loss is based on the fair value of the asset. The Company determines the fair value of its assets based on management estimates and assumptions and by making use of available market data and taking into consideration third party valuations. |
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
With respect to the vessels, the Company determines undiscounted projected net operating cash flows for each vessel by considering the historical and estimated vessels' performance and utilization, assuming (i) future revenues calculated for the fixed days, using the fixed charter rate of each vessel from existing time charters and for the unfixed days, the most recent 10 year average of historical 1 year time charter rates available for each type of vessel over the remaining estimated life of each vessel, net of brokerage commissions. Historical ten-year blended average one-year time charter rates are in line with the Company's overall chartering strategy, they reflect the full operating history of vessels of the same type and particulars with the Company's operating fleet and they cover at least a full business cycle; (ii) expected outflows for scheduled vessels' maintenance; (iii) vessel operating expenses increasing annually by an annual inflation rate of 3%, which approximates current projections for global inflation rate; (iv) effective fleet utilization of 98% taking into account the period each vessel is expected to remain off hire for scheduled maintenance (dry docking and special surveys) and 1% off hire days (other than for dry docking and special surveys) each year, assumptions in line with the Company's historical performance and its expectations for future fleet utilization under its current fleet deployment strategy.
The Company concluded based on this exercise that step two of the impairment analysis was not required and has not identified any facts or circumstances that would require the write down of vessel values as at December 31, 20142015 or in the near future and no impairment loss has been identified or recorded for 2015, 2014 2013 and 2012.2013.
With respect to the land and building, the Company determines undiscounted projected net operating cash flows by considering an estimated monthly rent the Company would have to pay in order to lease a similar property, during the useful life of the building. As at December 31, 2015, 2014 2013 and 2012,2013, no impairment loss was identified or recorded and the Company has not identified any other facts or circumstances that would require the write down of the value of its land or building in the near future.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
(m) | Vessel Depreciation: Depreciation is computed using the straight-line method over the estimated useful life of the vessels, after considering the estimated salvage (scrap) value. Each vessel's salvage value is equal to the product of its lightweight tonnage and estimated scrap rate. Management estimates the useful life of the Company's vessels to be 25 years from the date of initial delivery from the shipyard. Second hand vessels are depreciated from the date of their acquisition through their remaining estimated useful life. When regulations place limitations over the ability of a vessel to trade on a worldwide basis, its remaining useful life is adjusted at the date such regulations are adopted. |
(n) | Accounting for Dry-Docking Costs: The Company follows the deferral method of accounting for dry-docking costs whereby actual costs incurred are deferred and are amortized on a straight-line basis over the period through the date the next dry-docking is scheduled to become due. Unamortized dry-docking costs of vessels that are sold are written off and included in the calculation of the resulting gain or loss in the year of the vessel's sale. |
(o) | Financing Costs: Fees paid to lenders for obtaining new loans or refinancing existing ones are deferred and recorded as a contra to debt. Other fees paid for obtaining loan facilities not used at the balance sheet date are capitalized as deferred financing costs. Fees relating to drawn loan facilities are amortized to interest and finance costs over the life of the related debt using the effective interest method and fees incurred for loan facilities not used at the balance sheet date are amortized using the straight line method according to their availability terms. Unamortized fees relating to loans repaid or refinanced as debt extinguishment are expensed as interest and finance costs in the period the repayment or extinguishment is made. Loan commitment fees are charged to expense in the period incurred, unless they relate to loans obtained to finance vessels under construction, in which case they are capitalized to the vessels' cost. An amount of $455, representing the current portion of deferred financing costs as at December 31, 2013 was reclassified to the Current portion of long-term debt of the respective year, for comparability purposes with the December 31, 2014 consolidated balance sheet. |
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
(p) | Concentration of Credit Risk: Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash, trade accounts receivable and the loan receivable from a related party. The Company places its temporary cash investments, consisting mostly of deposits, with various qualified financial institutions and performs periodic evaluations of the relative credit standing of those financial institutions that are considered in the Company's investment strategy. The Company limits its credit risk with accounts receivable by performing ongoing credit evaluations of its customers' financial condition and generally does not require collateral for its accounts receivable and does not have any agreements to mitigate credit risk. The Company limits its credit risk with the loan receivable by performing ongoing credit evaluations of Diana Containerships' financial condition. The loan agreement is guaranteed by Diana Containerships but does not have any collateral and the Company has not entered into any agreement to mitigate credit risk. |
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
(q) | Accounting for Revenues and Expenses: Revenues are generated from time charter agreements and are usually paid fifteen days in advance. Time charter agreements with the same charterer are accounted for as separate agreements according to the terms and conditions of each agreement. Time charter revenues are recorded over the term of the charter as service is provided. Income representing ballast bonus payments by the charterer to the vessel owner is recognized in the period earned. Revenues from time charter agreements providing for varying annual rates over their term are accounted for on a straight line basis. Compensation due to earlier redelivery than the minimum period agreed in the charter party is recognized in the period earned. Deferred revenue includes cash received prior to the balance sheet date for which all criteria to recognize as revenue have not been met. Deferred revenue may also include deferred revenue resulting from charter agreements providing for varying annual rates, which are accounted for on a straight line basis, or the unamortized balance of the liability associated with the acquisition of second-hand vessels with time charters attached which were acquired at values below fair market value at the date the acquisition agreement is consummated. Voyage expenses, primarily consisting of commissions, port, canal and bunker expenses that are unique to a particular charter, are paid for by the charterer under time charter arrangements, except for commissions, which are always paid for by the Company, regardless of charter type. All voyage and vessel operating expenses are expensed as incurred, except for commissions. Commissions are deferred over the related voyage charter period to the extent revenue has been deferred since commissions are due as the Company's revenues are earned. |
(r) | Repairs and Maintenance: All repair and maintenance expenses including underwater inspection expenses are expensed in the year incurred. Such costs are included in vessel operating expenses in the accompanying consolidated statements of operations. |
(s) | Earnings / (loss) per Common Share: Basic earnings / (loss) per common share are computed by dividing net income / (loss) available to common stockholders by the weighted average number of common shares outstanding during the year. Diluted earnings per common share, reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised. |
(t) | Segmental Reporting: The Company has determined that it operates under one reportable segment, relating to its operations of the dry-bulk vessels. The Company reports financial information and evaluates the operations of the segment by charter revenues and not by the length of ship employment for its customers, i.e. spot or time charters. The Company does not use discrete financial information to evaluate the operating results for each such type of charter. Although revenue can be identified for these types of charters, management cannot and does not identify expenses, profitability or other financial information for these charters. As a result, management, including the chief operating decision maker, reviews operating results solely by revenue per day and operating results of the fleet. Furthermore, when the Company charters a vessel to a charterer, the charterer is free to trade the vessel worldwide and, as a result, the disclosure of geographic information is impracticable. |
(u) | Variable Interest Entities: The Company evaluates financial instruments, service contracts, and other arrangements to determine if any variable interests relating to an entity exist, as the primary beneficiary would be required to include assets, liabilities, and the results of operations of the variable interest entity in its financial statements. As of December 31, 2014 and 2013, no such interests were identified. |
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20142015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
(v)(u) | Fair Value Measurements: The Company classifies and discloses its assets and liabilities carried at the fair value in one of the following categories: |
| Level 1: | Quoted market prices in active markets for identical assets or liabilities; |
| Level 2: | Observable market based inputs or unobservable inputs that are corroborated by market data; |
| Level 3: | Unobservable inputs that are not corroborated by market data. |
(w)(v) | Share Based Payments: The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. Employee share purchase plans will not result in recognition of compensation cost if certain conditions are met. The Company initially measures the cost of employee services received in exchange for an award or liability instrument based on its current fair value; the fair value of that award or liability instrument is re-measured subsequently at each reporting date through the settlement date. Changes in fair value during the requisite service period are recognized as compensation cost over that period with the exception of awards granted in the form of restricted shares which are measured at their grant date fair value and are not subsequently re-measured. The grant-date fair value of employee share options and similar instruments are estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available). If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. |
(x)(w) | Derivatives: The Company is exposed to interest rate fluctuations associated with its variable rate borrowings and its objective is to manage the impact of such fluctuations on earnings and cash flows of its borrowings. In this respect, in May 2009, the Company entered into a five-year zero cost collar agreement, novated in March 2012, and terminated in May 2014, to manage its exposure to interest rate changes related to its borrowings. The collar agreement was considered as an economic hedge agreement as it did not meet the criteria of hedge accounting; therefore, the changes in its fair value were recognized in earnings (Note 16). |
(y)(x) | Equity method investments: Investments in common stock in entities over which the Company exercises significant influence, but does not exercise control are accounted for by the equity method of accounting. Under this method, the Company records such an investment at cost and adjusts the carrying amount for its share of the earnings or losses of the entity subsequent to the date of investment and reports the recognized earnings or losses in income. The Company also evaluates whether a loss in value of an investment that is other than a temporary decline should be recognized. Evidence of a loss in value might include absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. Dividends received reduce the carrying amount of the investment. When the Company's share of losses in an entity accounted for by the equity method equals or exceeds its interest in the entity, the Company does not recognize further losses, unless the Company has made advances, incurred obligations and made payments on behalf of the entity. |
F-15F-14
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20142015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
(y) | Variable Interest Entities: The Company evaluates financial instruments, service contracts, and other arrangements to determine if any variable interests relating to an entity exist, as the primary beneficiary would be required to include assets, liabilities, and the results of operations of the variable interest entity in its financial statements. The Company's evaluation did not result in an identification of variable interest entities as of December 31, 2015 and 2014. |
Recent Accounting Pronouncements
(a) | In August 2014, the FASB issued Accounting Standards Update ("ASU" or "Update") No. 2014-15 – Presentation of Financial Statements - Going Concern. ASU 2014-15 provides guidance about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 requires an entity's management to evaluate at each reporting period based on the relevant conditions and events that are known at the date of financial statements are issued, whether there are conditions or events, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued and to disclose the necessary information. ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. |
(b) | In February 2015, the FASB issued the ASU 2015-02, "Consolidation (Topic 810)—Amendments to the Consolidation Analysis", which amends the criteria for determining which entities are considered VIEs, amends the criteria for determining if a service provider possesses a variable interest in a VIE and ends the deferral granted to investment companies for application of the VIE consolidation model. The ASU is effective for interim and annual periods beginning after December 15, 2015. Early application is permitted. Management does not expect the adoption of this ASU to have a material impact on Company's results of operations, financial position or cash flows. |
(c) | In July 2015, the FASB issued ASU No. 2015-11 –Inventory. ASU 2015-11 is part of FASB Simplification Initiative. Current guidance requires an entity to measure inventory at the lower of cost or market. Market could be the replacement cost, net realizable value or net realizable value less an approximately normal profit margin. Under this Update, the entities will be required to measure inventory at the lower of cost or net realizable value. Net realizable value is defined as estimate selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The amendments under the Update more closely align measurement of inventory in US GAAP with the measurement of inventory in IFRS. For public entities, the amendments of this Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The amendments of this Update should be applied prospectively with early application permitted. Management does not expect the adoption of this ASU to have a material impact on Company's results of operations, financial position or cash flows. |
(d) | In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842) which provides new guidance related to accounting for leases and supersedes existing U.S. GAAP on lease accounting. The ASU will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases, unless the lease is a short term lease. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted for all public business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. Management is in the process of assessing the impact of the new standard on the Company's consolidated financial position and performance. |
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
(e) | In March 2016, the FASB issued ASU No. 2016-07 "Investments—Equity Method and Joint Ventures" to simplify the accounting for equity method investments. The amendments in the Update eliminate the requirement in Topic 323 that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. For public companies, the new standard is effective for interim and annual periods beginning after December 15, 2016. Early adoption is permitted. Management does not believe that the adoption of the new standard will have any impact on its consolidated financial position, results of operations or cash flows and relevant disclosures. |
3. Investment in Diana Containerships Inc. Equity Method Investments
As at December 31, 2013, the Company owned 9.51% of the share capital of a) | Diana Containerships Inc. ("Diana Containerships") and its investment has been accounted for under the equity method on the basis of the significant influence that was exercised over Diana Containerships through its shareholding, its common executive Board, until March 1, 2013 through Diana Shipping Services and since May 2013 through a loan agreement (Note 4(b)): On July 29, 2014, DSI invested $40,000 in Diana Containerships and acquired 15,936,255 additional shares increasing its ownership as at December 31, 2014 to 26.34%. On July 29, 2014, the Company purchased through a Securities Purchase Agreement 15,936,255 additional shares for $40,000, increasing its ownership in the share capital of Diana Containerships as at December 31, 2014 to 26.34%.
As at December 31, 2015, DSI owned 26.08% of the share capital of Diana Containerships. As at December 31, 2015 and 2014, the investment in Diana Containerships amounted to $62,376 and $67,546, respectively, and is included in "Equity method investments" in the accompanying consolidated balance sheets. As at December 31, 2015, the market value of the investment was $15,416 based on Diana Containerships' closing price on Nasdaq of $0.80. |
For 2015, 2014, and 2013, the investment in Diana Containerships amounted to $67,546 and $15,640, respectively, and is separately reflected in Investment in Diana Containerships Inc. in the accompanying consolidated balance sheets. As at December 31, 2014, the market value of the investment was $36,227 based on Diana Containerships' closing price on Nasdaq of $1.88.
For 2014, 2013, and 2012, the investment in Diana Containerships resulted in a gainloss of $4,977, income of $12,668, and loss of $6,094, and $1,773, respectively, which are separately presentedis included in Income/"Income/(loss) from investment in Diana Containerships Inc.equity method investments" in the accompanying consolidated statements of operations. Also duringfor 2015, 2014, and 2013, and 2012, the CompanyDSI received dividends from Diana Containerships amounting to $193, $763 and $4,000, and $2,835, respectively.
b) | Diana Wilhelmsen Management Limited ("DWM"): DWM is a joint venture which was established on May 7, 2015 by Diana Ship Management Inc., a wholly owned subsidiary of DSI, and Wilhelmsen Ship Management Holding Limited, an unaffiliated third party, each holding 50% of DWM. As at December 31, 2015, DWM provided management services to six vessels of the Company's fleet (Note 4(d)). The DWM office is located in Limassol, Cyprus. As at December 31, 2015, the investment in DWM amounted to $111 and is included in "Equity method investments" in the accompanying 2015 consolidated balance sheet. From DWM's formation until December 31, 2015, loss from investment amounted to $156 and is included in "Income/(loss) from equity method investments" in the accompanying 2015 consolidated statement of operations. |
4. | Transactions with Related Parties |
(a) | Altair Travel Agency S.A. ("Altair"): The Company uses the services of an affiliated travel agent, Altair, which is controlled by the Company's CEO and Chairman.Chairman of the Board. Travel expenses for 2015, 2014 2013, and 2012,2013 amounted to $2,685, $2,765 $2,640, and $2,957,$2,640, respectively, and are mainly included in Vessels, Advances"Vessels", "Advances for vessels under construction and acquisitions and other vessel costs, Vesselcosts", "Vessel operating expensesexpenses" and General"General and administrative expensesexpenses" in the accompanying consolidated financial statements. At December 31, 20142015 and 2013,2014, an amount of $281$62 and $196,$281, respectively, was payable to Altair and is included in Due"Due to related partiesparties" in the accompanying consolidated balance sheets. |
F-16
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20142015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
(b) | Diana Containerships Inc. ("Diana Containerships"):Until February 28, 2013, DSS received from Diana Containerships management fees of $15 per month for each vessel in operation and $20 per month for each laid-up vessel, 1% commissions on the gross hire and freight earned by each vessel and $10 per month for administrative fees pursuant to management and administrative services agreements between Diana Containerships, its vessel owning companies, and DSS, which were terminated on March 1, 2013. For 2014,DSS. During 2013, and 2012, revenuesrevenue derived from thethese agreements with Diana Containershipsuntil their termination, amounted to $0, $447 and $2,447, respectively, and they areis separately presented as Other revenues"Other revenues" in the accompanying 2013 consolidated statementsstatement of operations. As at December 31, 2014 and 2013, there was no amount due to or from Diana Containerships and its vessels, relating to these management agreements. |
On May 20, 2013, the Company'sDSI's Independent Committee of the Board of Directors and the Board of Directors approved to provide to Eluk Shipping Company Inc., a subsidiary of Diana Containerships, ana five year unsecured loan of up to $50,000 to be used for general corporate purposes and working capital, which was drawn on August 20, 2013. The loan, matures onuntil the fourth anniversary of the draw down date, or on August 20, 2017, bearsamendment discussed below, bore interest at LIBOR plus a margin of 5% per annum. The loan also bearsand a back-end fee equal to 1.25% per annum on the outstanding amount receivableof the loan payable by the borrower on the repayment date of such amount. The unsecuredthe loan. On July 30, 2015, DSI's Independent Committee of the Board of Directors and the Board of Directors approved an amendment to the loan, is guaranteed by Diana Containerships,pursuant to which as of September 9, 2015, the date of the amendment, the loan matures on March 15, 2022; bears interest at LIBOR plus a margin of 3% per annum; the back-end fee would accumulate up to and Diana Containershipsbecame payable on the date of the amendment; and its subsidiaries may not incur additional indebtedness during the termborrower will pay to the lender a fee of $200 on the maturity date. In addition, the borrower agreed to repay the principal amount of the loan withouton the prior consentlast day of each interest period in amounts totalling $5,000 per annum, but not to exceed $32,500 in the Company.aggregate. The loan is subordinated to Diana Containerships' loan with the Royal Bank of Scotland.
As at December 31, 2014,2015, there was an amount of $57 of interest$5,103 due from Diana Containerships included in "Due from related parties, current" and $50,866 of loan and fees$43,750 due from Diana Containerships, separately presented in Due"Due from related parties, current and non-current, respectively,non-current", in the related accompanying consolidated balance sheet. As at December 31, 2013,2014, similarly, there was an amount of $86 of interest$57 and $50,233 of loan and fees$50,866 due from Diana Containerships.Containerships current and non-current, respectively.
ForDuring 2015, 2014 and for the period from August 20, 2013 (drawdown date) to December 31, 2013 income from interest and fees amounted to $2,745, $3,246 and $1,196, respectively, and is included in Interest"Interest and other incomeincome" in the accompanying consolidated statements of operations.
(c) | Diana Enterprises Inc. ("Diana Enterprises"):Diana Enterprises is a company controlled by the Company's CEO and Chairman. On March 4, 2014 DSS entered into an agreement with Diana Enterprises to provideChairman of the Board which provides brokerage services to DSI pursuant to a Brokerage Services Agreement for a monthly fee of $104, payable quarterly in advance, effective from January 1,fixed fee. During 2015, 2014 and until March 31, 2015, which however was terminated on June 30, 2014, as on April 9, 2014, an agreement between Diana Shipping Inc and Diana Enterprises, was signed to replace the previous one, with all other terms being the same, and which became effective on July 1, 2014. Previously, an agreement dated March 15, 2013 was in effect, with a monthly fee of $208, payable quarterly in advance from March 1, 2013 (effective date) until its termination on January 1, 2014. Prior to that, there was an agreement in effect since February 22, 2012, having an annual fee of $2,834. For 2014, 2013, and 2012, brokerage fees amounted to $1,302, $1,250 $2,481, and $2,384$2,481, respectively, and are included in General"General and administrative expensesexpenses" in the accompanying consolidated statements of operations. AtAs of December 31, 20142015 and 2013,2014, there was anno amount of $0 and $25, respectively, due to Diana Enterprises included in Due to related parties, in the accompanying consolidated balance sheets. Until March 1, 2013, DSS had an agreement with Diana Enterprises to provide brokerage services to Diana Containerships, which was terminated when DSS ceased from being the management company of the Diana Containerships' group. |
(d) | Diana Wilhelmsen Management Limited ("DWM"): As of December 31, 2015, DWM provided management services to six vessels of the Company's fleet for a fixed monthly fee and commercial services charged as a percentage of the vessels' gross revenues. Management fees for the period from each vessel's delivery to the management of DWM to December 31, 2015, amounted to $405 and are separately presented as "Management fees to related party" in the 2015 accompanying consolidated statement of operations whereas commercial fees amounted to $43 and are included in "Voyage expenses" (Note 12). As at December 31, 2015, there was an amount of $2 due to DWM, included in "Due to related parties" in the related accompanying consolidated balance sheet. |
F-17
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20142015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
5. | Advances for Vessels under Construction and Acquisitions and Other Vessel Costs |
In May 2013, Aster Shipping Company Inc. and Aerik Shipping Company Inc., each entered into a shipbuilding contract with unrelated third parties for the construction of a Newcastlemax dry bulk carrier for the aggregate price of $97,400. The vessels are expected to be delivered in 2016.
In January 2014, Houk Shipping Company Inc., entered into a shipbuilding contract with unrelated third parties for the construction of a Kamsarmax dry bulk carrier for a contract price of $28,825. The vessel is expected to be delivered in 2016.
In December 2014, Lelu Shipping Company Inc. entered into a memorandum of agreement with an unrelated third party to acquire a newbuilding Capesize dry bulk carriervessel, named Santa Barbara, for thea purchase price of $50,000. As at December 31, 2014, the Company had paid an amount of $10,066, including the advance to the seller and additional acquisition costs. The vessel was delivered in January 2015 (Note 17)6).
As at December 31, 2014,2015, the remaining contractual obligations for all of the above contracts amounted to $147,291$83,487 (Note 10).
The amounts in the accompanying consolidated balance sheets include payments to sellers of vessels or, in the case of vessels under construction, to the shipyards and other costs capitalized in accordance with the Company's related accounting policy as discussed in Note(Note 2(i)). The movement of the account during 20142015 and 20132014 was as follows:
| | 2014 | | | 2013 | | | 2015 | | | 2014 | |
Beginning balance | | $ | 38,862 | | | $ | 11,502 | | | $ | 29,500 | | | $ | 38,862 | |
- Advances for vessels under construction and other vessel costs | | | 43,160 | | | | 30,053 | | | | 25,080 | | | | 43,160 | |
- Advances for vessel acquisitions and other vessel costs | | | 10,066 | | | | 23,983 | | | | 40,105 | | | | 10,066 | |
- Transferred to vessel cost (Note 6) | | | (62,588 | ) | | | (26,676 | ) | | | (50,171 | ) | | | (62,588 | ) |
Ending balance | | $ | 29,500 | | | $ | 38,862 | | | $ | 44,514 | | | $ | 29,500 | |
The amounts in the accompanying consolidated balance sheets are analyzed as follows:
| | Vessel Cost | | | Accumulated Depreciation | | | Net Book Value | | | Vessel Cost | | | Accumulated Depreciation | | | Net Book Value | |
| | | | | | | | | | | | | | | | | | |
Balance, December 31, 2012 | | $ | 1,515,370 | | | $ | (304,232 | ) | | $ | 1,211,138 | | |
| | | | | | | | | | | | | |
- Transfer from advances for vessels under construction and acquisition and other vessel costs (Note 5) | | | 26,676 | | | | - | | | | 26,676 | | |
- Acquisition, improvements and other vessel costs | | | 144,544 | | | | - | | | | 144,544 | | |
- Depreciation for the year | | | - | | | | (61,983 | ) | | | (61,983 | ) | |
Balance, December 31, 2013 | | $ | 1,686,590 | | | $ | (366,215 | ) | | $ | 1,320,375 | | | $ | 1,686,590 | | | $ | (366,215 | ) | | $ | 1,320,375 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
- Transfer from advances for vessels under construction and acquisition and other vessel costs (Note 5) | | | 62,588 | | | | - | | | | 62,588 | | | | 62,588 | | | | - | | | | 62,588 | |
- Acquisitions, improvements and other vessel costs | | | 58,476 | | | | - | | | | 58,476 | | | | 58,476 | | | | - | | | | 58,476 | |
- Depreciation for the year | | | - | | | | (68,306 | ) | | | (68,306 | ) | | | - | | | | (68,306 | ) | | | (68,306 | ) |
Balance, December 31, 2014 | | $ | 1,807,654 | | | $ | (434,521 | ) | | $ | 1,373,133 | | | $ | 1,807,654 | | | $ | (434,521 | ) | | $ | 1,373,133 | |
| | | | | | | | | | | | | |
- Transfer from advances for vessels under construction and acquisition and other vessel costs (Note 5) | | | | 50,171 | | | | - | | | | 50,171 | |
- Acquisitions, improvements and other vessel costs | | | | 90,167 | | | | - | | | | 90,167 | |
- Depreciation for the period | | | | - | | | | (72,668 | ) | | | (72,668 | ) |
Balance, December 31, 2015 | | | $ | 1,947,992 | | | $ | (507,189 | ) | | $ | 1,440,803 | |
F-18
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20142015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
In January 2013, the vessel Myrto was delivered to the Company from an unrelated third party for the purchase price of $26,500 according to a memorandum of agreement that Tuvalu had entered in 2012.
During 2013, the Company, through subsidiaries entered into memoranda of agreement to purchase from unaffiliated third parties five vessels, one Panamax, two Kamsarmaxes and two Capesize vessels for an aggregate price of $141,423.
During 2014, the Company took delivery of "Crystalia" and "Atalandi", which until then were under construction and additionally acquired the Capesize dry bulk carrier "GP Zafirakis" for $58,000, which was delivered in August 2014.
On April 20, 2015, Ujae Shipping Company Inc., entered into an agreement to acquire from an unrelated third party a new-building Capesize dry bulk vessel, named New Orleans, for a purchase price of $43,000. The vessel was delivered on November 10, 2015.
On April 27, 2015, Rairok Shipping Company Inc. entered into a memorandum of agreement with an unrelated third party to acquire a Kamsarmax dry bulk vessel, renamed to Medusa, for a purchase price of $18,050. The vessel was delivered in June 2015.
On November 2, 2015, Toku Shipping Company Inc. entered into a memorandum of agreement with an unrelated third party to acquire a Capesize dry bulk vessel, named Seattle, for a purchase price of $28,500. The vessel, was delivered in November 2015.
7. | Property and equipment, net |
The amounts in the accompanying consolidated balance sheets are analyzed as follows:
| | Property and Equipment | | | Accumulated Depreciation | | | Net Book Value | | | Property and Equipment | | | Accumulated Depreciation | | | Net Book Value | |
| | | | | | | | | | | | | | | | | | |
Balance, December 31, 2012 | | $ | 24,105 | | | $ | (1,331 | ) | | $ | 22,774 | | |
| | | | | | | | | | | | | |
- Additions in equipment and building improvements | | | 575 | | | | - | | | | 575 | | |
- Depreciation for the year | | | - | | | | (523 | ) | | | (523 | ) | |
Balance, December 31, 2013 | | $ | 24,680 | | | $ | (1,854 | ) | | $ | 22,826 | | | $ | 24,680 | | | $ | (1,854 | ) | | $ | 22,826 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
- Write off of fully depreciated assets | | | (100 | ) | | | 100 | | | | - | | | | (100 | ) | | | 100 | | | | - | |
- Additions in property and equipment | | | 1,574 | | | | - | | | | 1,574 | | | | 1,574 | | | | - | | | | 1,574 | |
- Depreciation for the year | | | - | | | | (513 | ) | | | (513 | ) | | | - | | | | (513 | ) | | | (513 | ) |
Balance, December 31, 2014 | | $ | 26,154 | | | $ | (2,267 | ) | | $ | 23,887 | | | $ | 26,154 | | | $ | (2,267 | ) | | $ | 23,887 | |
| | | | | | | | | | | | | |
- Additions in property and equipment | | | | 211 | | | | - | | | | 211 | |
- Depreciation for the period | | | | - | | | | (609 | ) | | | (609 | ) |
Balance, December 31, 2015 | | | $ | 26,365 | | | $ | (2,876 | ) | | $ | 23,489 | |
In December 2014, DSS acquired jointly with two other related entities, from unrelated individuals, a plot of land for an aggregate purchase price of €2.0 million or $2,489 (based on the exchange rate of $the U.S. dollar to Euro as of the date of acquisition). DSS paid 1/3 of the purchase price amounting to $886, including additional purchase costs incurred. The plot is under the common ownership of the joint purchasers.
8. | Prepaid charter revenue |
In May 2009, on the acquisition of the vessel "Houston", Gala Properties Inc. paid an amount in excess of the predelivery installments for the construction of the vessel, which was recognized in assets as Prepaid charter revenue. This amount had been amortized in revenues since the delivery of the vessel to the time charterers. On November 26, 2013, the charterers terminated the charter earlier than the termination date determined under the terms of the charter party and redelivered the vessel to the owners, who started arbitration proceedings against the charterers seeking to mitigate their losses as a result of the early termination. As a result of this earlier termination of the charter party, the unamortized balance of prepaid charter revenue amounting to $5,353 was fully amortized against Time charter revenues during 2013.
The amortization of prepaid charter revenue for 2013 (from January 1, until termination) and 2012 amounted to $5,353, and $3,056, respectively, and is included in Time charter revenues in the accompanying consolidated statements of operations.
F-19
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20142015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
9.Long-term debt, current and non-current9. | Long-term debt, current and non-current |
The amount of long-term debt shown in the accompanying consolidated balance sheets is analyzed as follows:
| | 2014 | | | 2013 | | | 2015 | | | 2014 | |
Revolving credit facility | | $ | 210,000 | | | $ | 240,000 | | |
Secured term loans | | | 276,008 | | | | 193,096 | | |
Revolving Credit Facility | | | $ | - | | | $ | 210,000 | |
8.5% Senior Unsecured Notes | | | | 63,250 | | | | - | |
Secured Term Loans | | | | 542,691 | | | | 276,008 | |
Total debt outstanding | | $ | 486,008 | | | $ | 433,096 | | | $ | 605,941 | | | $ | 486,008 | |
Less related deferred financing costs | | | (1,752 | ) | | | (1,539 | ) | | | (5,870 | ) | | | (1,752 | ) |
Total debt, net of deferred financing costs | | $ | 484,256 | | | $ | 431,557 | | | $ | 600,071 | | | $ | 484,256 | |
Less: Current portion of long term debt, net of deferred financing costs current | | | (78,734 | ) | | | (46,077 | ) | | | (40,984 | ) | | | (78,734 | ) |
Long-term debt, net of current portion and deferred financing costs, non-current | | $ | 405,522 | | | $ | 385,480 | | | $ | 559,087 | | | $ | 405,522 | |
Revolving credit facility: On February 18, 2005, the Company entered into a secured revolving credit facility with the Royal Bank of Scotland for $230,000 which was increased to $300,000 on May 24, 2006 with an amended agreement. The amendedOn July 22, 2015 the Company entered into a term loan agreement with BNP Paribas in order to refinance the outstanding balance of the revolving credit facility. In this respect on July 24, 2015, the outstanding balance of the revolving credit facility amounting to $195,000 was availablevoluntarily prepaid in full until May 24, 2012. Since that date,and the available amount isrelated agreement was then terminated. Until its full prepayment, the credit facility was reducing in semi-annual amounts of $15,000 with a final reduction of $165,000 together with the last semi-annual reduction on May 24, 2016. The credit facility bearsbore interest at LIBOR plus a margin ranging from 0.75% to 0.85%. The weighted average interest rate of the facility as atof December 31, 2015 and 2014 was 0.90% and 2013 was 0.95% and 1.08%, respectively.
The credit facility is secured by a first priority or preferred ship mortgage on 18 vessels of the Company's fleet, assignment of all freights, earnings, insurances and requisition compensation. The lenders may also require additional security in the event the Company breaches certain covenants under the credit facility, including a shortfall in the hull cover ratio.
The credit facility contains covenants including restrictions as to changes in management and ownership of the vessels, additional indebtedness, minimum liquidity for each vessel mortgaged under or financed through the credit facility and other financial covenants. As at December 31, 2014 and 2013, the minimum liquidity requirement amounted to $7,600 and $7,600, respectively. Furthermore, the Company is not permitted to pay any dividends that would result in a breach of the financial covenants of the facility.
Secured Term Loans: The Company, through its subsidiaries, has entered into various long term loan agreements with bank institutions to partly finance or, as the case may be, refinance part of the acquisition cost of certain of its fleet vessels. The loan agreements are repayable in quarterly or semi-annual installments plus one balloon installment per loan agreement to be paid together with the last installment and bear interest at LIBOR plus margin ranging from 1% to 3%. The weighted average interest rate of the Secured Term Loans as at December 31, 2015 and 2014 was 2.47% and 2013 was 2.68% and 2.67%, respectively. Their maturities range from February 2019 to November 2022.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
Their maturities start from March 10,During 2014 and 2015, the earliest to May 18, 2022 the latest.
On June 18, 2013, Tuvalu and Jabat,Company entered into a loan agreement with Deutsche for a loan facility of $18,000 to finance part of the acquisition cost of the vessels "Maia" and "Myrto", drawn on June 20, 2013. The loan is repayable in 20 consecutive equal quarterly installments of $375 and a balloon payment of $10,500 payable together with the final quarterly installment on June 20, 2018. The loan bears interest at LIBOR plus a margin of 3.0%.
On May 24, 2013, Erikub and Wotho entered into a loan agreement with Export-Import Bank of China and DnB to finance part of the construction cost of the "Crystalia" and the "Atalandi", for an amount of up to $15,000 for each vessel, drawn on May 22, 2014. Each advance is repayable in 19 quarterly installments of $250 and a balloon of $10,250 payable together with the last installment on February 22, 2019. The loan bears interest at LIBOR plus a margin of 3.0% per annum.following agreements:
On January 9, 2014, Taka and Fayothe Company, through two separate wholly-owned subsidiaries, entered into a loan agreement with Commonwealth Bank of Australia, London Branch, for a loan facility of up to $18,000, drawn on January 13, 2014, to finance part of the acquisition cost of the "Melite"Melite and "Artemis"Artemis. The loan bears interest at LIBOR plus a margin of 2.25%. The loan was drawn in Tranche A of $8,500 and Tranche B of $9,500. Tranche A is repayable in 24 equal consecutive quarterly installments of about $196 each and a balloon of $3,800 payable together with the last installment on January 13, 2020. Tranche B is repayable in 32 equal consecutive quarterly installments of about $156 each and a balloon of $4,500 payable on together with the last installment on January 13, 2022.
On December 18, 2014, Pulap and Wenothe Company, through two separate wholly-owned subsidiaries, entered into a loan agreement with BNP Paribas, for a loan facility of up to $55,000, of which $53,500 was drawn on December 19, 2014. The loan bears interest at LIBOR plus a margin of 2% and is repayable in 14 equal semi-annual installments of approximatelyabout $1,574 and a balloon of $31,464about $31,466 payable on November 30, 2021.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
On March 17, 2015, the Company, through eight separate wholly-owned subsidiaries, entered into a loan agreement with Nordea Bank AB, London Branch for a secured term loan facility of up to $110,000, to refinance the existing indebtedness with the bank and for general corporate and working capital purposes. On March 19, 2015, the Company drew down $93,080 and repaid the then existing indebtedness with the bank amounting to $38,345. The loan is repayable in 24 equal consecutive quarterly installments of about $1,862 and a balloon of about $48,402 payable together with the last installment on March 19, 2021. The loan bears interest at LIBOR plus a margin of 2.1%.
On March 10, 2015, the Company repaid in full the then outstanding indebtedness with Deutsche Bank for the vessel New York amounting to $28,600. In addition on March 20, 2015 the Company prepaid the then outstanding indebtedness with Deutsche Bank for the vessels Myrto and Maia amounting to $15,750 and the agreement was terminated.
On March 26, 2015, the Company, through three wholly-owned subsidiaries, entered into a loan agreement with ABN AMRO Bank N.V. for a secured term loan facility of up to $53,000, to refinance part of the acquisition cost of the vessels New York, Myrto and Maia. On March 30, 2015, the Company drew down the amount of $50,160 under the loan facility, which is repayable in 24 equal consecutive quarterly installments of about $994 and a balloon of $26,310 payable together with the last installment on March 30, 2021. The loan bears interest at LIBOR plus a margin of 2.0%.
On April 29, 2015, the Company, through one wholly-owned subsidiary, entered into a term loan agreement with Danish Ship Finance A/S for a loan facility of $30,000, drawn on April 30, 2015 to partly finance the acquisition cost of the Santa Barbara, which was delivered in January 2015. The loan is repayable in 28 equal consecutive quarterly installments of $500 each and a balloon of $16,000 payable together with the last installment on April 30, 2022. The loan bears interest at LIBOR plus a margin of 2.15%.
On July 22, 2015, the Company entered into a term loan agreement with BNP Paribas for a loan of $165,000 drawn on July 24, 2015. The loan is repayable in 20 consecutive quarterly installments, the first eight installments in an amount of $2,500, followed by four installments in an amount of $5,000; eight installments in an amount of $7,000; and a balloon installment of $69,000 payable together with the last installment on July 24, 2020.The loan bears interest at LIBOR plus a margin of 2.35% per annum for the first two years; 2.3% per annum for the third year and 2.25% per annum until the final maturity of the loan.
On September 30, 2015, the Company, through two wholly-owned subsidiaries, entered into a term loan agreement with ING Bank N.V. for a loan of up to $39,683, available in two advances to finance part of the acquisition cost of the New Orleans and the Medusa. Advance A of $27,950 was drawn on November 19, 2015 and is repayable in 28 consecutive quarterly installments of about $466 and a balloon installment of about $14,907 payable together with the last installment on November 19, 2022. Advance B of $11,733 was drawn on October 6, 2015 and is repayable in 28 consecutive quarterly installments of about $293 and a balloon installment of about $3,520 payable together with the last installment on October 6, 2022. The loan bears interest at LIBOR plus a margin of 1.65%.
Under the secured long term debt agreements mentioned above, 17loans outstanding as of December 31, 2015, 42 vessels of the Company's fleet are mortgaged with first preferred or second preferredpriority ship mortgage,mortgages, where applicable. Additional securities required by the banks include first priority assignment of all earnings, insurances, first assignment of time charter contracts with duration of more than 12 months,that exceed a certain period, pledge over the shares of the borrowers, manager's undertaking and subordination and requisition compensation and either a corporate guarantee by DSI (the "Guarantor") or a guarantee by the ship owning companies (where applicable), financial covenants, as well as operating account assignments. The lenders may also require additional security in the future in the event the borrowers breach certain covenants under the loan agreements andagreements. The secured term loans generally include restrictions as to changes in management and ownership of the vessels, additional indebtedness, as well as minimum requirements regarding hull cover ratio and minimum liquidity per vessel owned by the borrowers, or the Guarantorguarantor, maintained in the bank accounts of the borrowers.borrowers, or the guarantor. Furthermore, certain of the Secured Term Loanssecured term loans contain cross default provisions and additionally the Company is not permitted to pay any dividends from the earnings of the vessel following the occurrence of an event of default. As of December 31, 2015, the Company was not in compliance with the minimum required hull cover ratio of one of its term loan agreements, creating a shortfall of $1,419. The Company received a waiver by the bank, which covers the period from December 31, 2015 up to and including December 31, 2016, amending the ratio to a lower level and with the requirement to provide updated valuations by July 31, 2016.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
Commitment Letter: The Company has accepted a commitment letter from the Export-Import Bank of China to provide a loan to the three vessels under construction expected to be delivered in 2016 (Note 5) for an amount of up to $75,735 (Note 17).
8.5% Unsecured Senior Notes: On May 20, 2015, the Company offered $63,250 aggregate principal amount of 8.5% Senior Notes due 2020 (the "Notes"), including an overallotment, at the price of $25.0 per Note, pursuant to an approval obtained by a special committee of the Board of Directors. As part of the offering, the underwriters sold $12,750 aggregate principal amount of the Notes to, or to entities affiliated with, the Company's chief executive officer, Mr. Simeon Palios, and other executive officers and certain directors of the Company at the public offering price. The proceeds, net of underwriting discount and offering expenses, amounting to $61,180, are included in "Long-term debt, net of deferred financing costs, non-current" in the related consolidated balance sheet. As of May 29, 2015, the Notes are trading on the NYSE under the ticker symbol "DSXN".
The Notes bear interest from May 28, 2015 at a rate of 8.5% per year and will mature on May 15, 2020. Interest is payable quarterly in arrears on the 15th day of February, May, August and November of each year, commencing on August 15, 2015. The Company may redeem the Notes at its option, in whole or in part, at any time on or after May 15, 2017 at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. The Notes include financial and other covenants, including maximum net borrowings and minimum tangible net worth.
As at December 31, 2014, part of2015, the Company's fleet, (except of vessels Coronis, Alikiexcept for ,Seattle Baltimore, Myrsini), having an aggregate carrying value of $1,222,877$1,412,382 has been provided as collateral to secure the debt facilities.
As at December 31, 20142015 and 2013,2014, the maximum amount required by the banks as compensating cash balance amounted to $21,500 and $19,500, and $18,000, respectively.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
The maturities of the Company's debt facilities described above, as at December 31, 2014,2015, and throughout their term, are as follows, and doshown in the table below. The table does not include the right of lenders of a secured term loan to demand repayment of the balance of the loan outstanding within the first semester of 2018, subject however to written notification by the lender(s) to the borrower(s) no earlier than within calendar year 2016 and not later than within calendar year 2017:
Period | | Principal Repayment | |
January 1, 2016 to December 31, 2016 | | $ | 42,450 | |
January 1, 2017 to December 31, 2017 | | | 44,950 | |
January 1, 2018 to December 31, 2018 | | | 54,450 | |
January 1, 2019 to December 31, 2019 | | | 83,450 | |
January 1, 2020 to December 31, 2020 | | | 183,312 | |
January 1, 2021 and thereafter | | | 197,329 | |
Total | | $ | 605,941 | |
F-22
Period | | Principal Repayment | |
January 1, 2015 to December 31, 2015 | | $ | 79,288 | |
January 1, 2016 to December 31, 2016 | | | 200,689 | |
January 1, 2017 to December 31, 2017 | | | 49,930 | |
January 1, 2018 to December 31, 2018 | | | 27,242 | |
January 1, 2019 to December 31, 2019 | | | 38,992 | |
January 1, 2020 and thereafter | | | 89,867 | |
Total | | $ | 486,008 | |
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
10. | Commitments and Contingencies |
| a) | Various claims, suits, and complaints, including those involving government regulations and product liability, arise in the ordinary course of the shipping business. In addition, losses may arise from disputes with charterers, agents, insurance and other claims with suppliers relating to the operations of the Company's vessels. The Company accrues for the cost of environmental and other liabilities when management becomes aware that a liability is probable and is able to reasonably estimate the probable exposure. The Company's vessels are covered for pollution in the amount of $1 billion per vessel per incident, by the P&I Association in which the Company's vessels are entered. The Company's vessels are subject to calls payable to their P&I Association and may be subject to supplemental calls which are based on estimates of premium income and anticipated and paid claims. Such estimates are adjusted each year by the Board of Directors of the P&I Association until the closing of the relevant policy year, which generally occurs within three years from the end of the policy year. Supplemental calls, if any, are expensed when they are announced and according to the period they relate to. The Company is not aware of any supplemental calls in respect of any policy year that should be recorded in its consolidated financial statements. |
The Company's vessels are covered for pollution in the amount of $1 billion per vessel per incident, by the P&I Association in which the Company's vessels are entered. The Company's vessels are subject to calls payable to their P&I Association and may be subject to supplemental calls which are based on estimates of premium income and anticipated and paid claims. Such estimates are adjusted each year by the Board of Directors of the P&I Association until the closing of the relevant policy year, which generally occurs within three years from the end of the policy year. Supplemental calls, if any, are expensed when they are announced and according to the period they relate to. The Company is not aware of any supplemental calls in respect of any policy year that should be recorded in its consolidated financial statements.
| b) | The Company has shipbuilding contracts for the construction of two Newcastlemax dry bulk carriers and one Kamsarmax dry bulk carrier and a contract to acquire a Capesize dry bulk carrier (Note 5). As at December 31, 2014,2015, the total obligations under these contracts amounted to $147,291, which subsequently were reduced (Note 17).$83,487. |
| c) | As at December 31, 2014,2015, the minimum contractual gross charter revenues expected to be generated from fixed and non-cancelable time charter contracts existing as at December 31, 20142015 and until their expiration were as follows: |
Period | | Amount | |
Year 1 | | $ | 100,652 | |
Year 2 | | | 11,854 | |
Total | | $ | 112,506 | |
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
Period | | Amount | |
Year 1 | | $ | 69,036 | |
Year 2 | | | 3,980 | |
Total | | $ | 73,016 | |
11. | Capital Stock and Changes in Capital Accounts |
| (a) | Preferred stock: As at December 31, 20142015 and 2013,2014, the Company's authorized preferred stock consists of 25,000,000 shares (all in registered form) of preferred stock, par value $0.01 per share, of which as at December 31, 2014, 1,000,000 wereare designated as Series A Participating Preferred Shares; and 5,000,000 wereare designated as Series B Preferred Shares. |
On February 24, 2014, the Company completed a public offering of 2,600,000 shares of Series B Cumulative Redeemable Perpetual Preferred Shares, par value $0.01 per share, at $25.00$25.0 per share and with liquidation preference at $25.0 per share. The net proceeds from the offering (after the underwriting discount and other offering expenses payable by the Company) were $62,698.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
Holders of series B preferred shares have no voting rights other than the ability, subject to certain exceptions, to elect one director if dividends for six quarterly dividend periods (whether or not consecutive) are in arrears and certain other limited protective voting rights. Also, holders of series B preferred shares, rank prior to the holders of common shares with respect to dividends, distributions and payments upon liquidation. As at December 31, 20142015 and 2013,2014, the Company had 2,600,000 and none, respectively, of Series B Preferred Shares issued and outstanding and none issued and outstanding of Series A Preferred Shares.
Dividends on the Series B preferred shares are cumulative from the date of original issue and are payable on the 15th day of January, April, July and October of each year at the dividend rate of 8.875% per annum,, or $2.21875 per annumshare per share. As at December 31,annum. For 2015 and 2014, dividends on Series B preferred shares both accrued and paid amounted to $5,080.$5,769 and $5,080, respectively. At any time on or after February 14, 2019, the Company may redeem, in whole or in part, the series B preferred shares at a redemption price of $25.00 per share plus an amount equal to all accumulated and unpaid dividends thereon to the date of redemption, whether or not declared.
| (b) | Common Stock: The Company's authorized capital stock consists of 200,000,000 shares (all in registered form) of common stock, par value $0.01 per share. The holders of the common shares are entitled to one vote on all matters submitted to a vote of stockholders and to receive all dividends, if any. |
| (c) | Incentive plan: In February 2005, the Company adopted an equity incentive plan (the "Plan") for 2,800,000 common shares, which was amended and restated on October 21, 2008 and terminated in 2012 as all shares reserved had been issued. In May 2011, the Company's board of directors approved to adopt the Diana Shipping Inc. 2011 Equity Incentive Plan, with substantially the same terms and provisions as the Company's Amended and Restated 2005 Equity Incentive Plan. Under the 2011 Equity Incentive Plan, an aggregate of 5,000,000 common shares were reserved for issuance, of which as at December 31, 2014 2,484,7592015 1,384,759 remained reserved for issuance. In November 2014, the Company's board of directors approved to adopt the Diana Shipping Inc. 2014 Equity Incentive Plan, for 5,000,000 additional shares.shares, all of which have been reserved for issuance. |
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
The plan entitlesplans entitle the Company's employees, officers and directors to receive options to acquire the Company's common stock and is administered by the Compensation Committee of the Company's Board Directors or such other committee of the Board as may be designated by the Board to administer the Plan. Under the terms of the plan,plans, the Company's Board of Directors is able to grant a) incentive stock options, b) non-qualified stock options, c) stock appreciation rights, d) dividend equivalent rights, e) restricted stock, f) unrestricted stock, g) restricted stock units, and h) performance shares. No options, stock appreciation rights or restricted stock units can be exercisable prior to the first anniversary or subsequent to the tenth anniversary of the date on which such award was granted.
The Company follows the provisions in ASC 718 "Compensation – Stock Compensation", for purposes of accounting for such share-based payments. All share-based compensation provided to employees is recognized in accordance with the relevant guidance, and is included in General and administrative expenses in the accompanying consolidated statements of operations.
Restricted stock during the years ended December 31,2015, 2014 2013 and 20122013 is analysed as follows:
| | Number of Shares | | | Weighted Average Grant Date Price | |
Outstanding at December 31, 2011 | | | 1,384,062 | | | $ | 14.07 | |
Granted | | | 667,614 | | | | 9.13 | |
Vested | | | (600,051 | ) | | | 13.83 | |
Outstanding at December 31, 2012 | | | 1,451,625 | | | $ | 11.90 | |
Granted | | | 607,946 | | | | 9.06 | |
Vested | | | (701,198 | ) | | | 12.64 | |
Outstanding at December 31, 2013 | | | 1,358,373 | | | | 10.25 | |
Granted | | | 1,864,000 | | | | 9.38 | |
Vested | | | (730,539 | ) | | | 11.25 | |
Outstanding at December 31, 2014 | | | 2,491,834 | | | $ | 9.30 | |
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
| | Number of Shares | | | Weighted Average Grant Date Price | |
Outstanding at December 31, 2012 | | | 1,451,625 | | | $ | 11.90 | |
Granted | | | 607,946 | | | | 9.06 | |
Vested | | | (701,198 | ) | | | 12.64 | |
Outstanding at December 31, 2013 | | | 1,358,373 | | | $ | 10.25 | |
Granted | | | 1,864,000 | | | | 9.38 | |
Vested | | | (730,539 | ) | | | 11.25 | |
Outstanding at December 31, 2014 | | | 2,491,834 | | | $ | 9.30 | |
Granted | | | 1,100,000 | | | | 6.91 | |
Vested | | | (827,522 | ) | | | 9.57 | |
Outstanding at December 31, 2015 | | | 2,764,312 | | | $ | 8.27 | |
The fair value of the restricted shares has been determined with reference to the closing price of the Company's stock on the date the agreements were signed. The aggregate compensation cost is being recognized ratably in the consolidated statement of operations over the respective vesting periods. For 2015, 2014 2013, and 2012,2013, an amount of $8,279, $7,744, $8,203, and $8,645,$8,203, respectively, was recognized in General"General and administrative expensesexpenses" presented in the accompanying consolidated statements of operations.
At December 31, 20142015 and 2013,2014, the total unrecognized cost relating to restricted share awards was $17,698$17,021 and $7,966,$17,698, respectively. At December 31, 2014,2015, the weighted-average period over which the total compensation cost related to non-vested awards not yet recognized is expected to be recognized is 2.151.70 years.
| (d) | Share Repurchase Agreement: On May 22, 2014, the Company's Board of Directors authorized a share repurchase plan for up to $100,000 worth of shares of the Company's common stock, under which, as at December 31,during 2015 and 2014, the Company had repurchased and retired 413,804 shares at an aggregate cost of approximately $2,673 and 2,845,549 shares at an aggregate cost of approximately $25,349, (Note 17).respectively. |
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
12. | Voyage and Vessel Operating Expenses |
The amounts in the accompanying consolidated statements of operations are analyzed as follows:
| | 2014 | | | 2013 | | | 2012 | | | 2015 | | | 2014 | | | 2013 | |
Voyage Expenses | | | | | | | | | | | | | | | | | | |
Bunkers | | $ | 2,026 | | | $ | (62 | ) | | $ | (2,149 | ) | | $ | 7,522 | | | $ | 2,026 | | | $ | (62 | ) |
Commissions charged by third parties | | | 8,245 | | | | 7,939 | | | | 10,273 | | | | 7,632 | | | | 8,245 | | | | 7,939 | |
Commissions charged by a related party (Note 4(d)) | | | | 43 | | | | - | | | | - | |
Miscellaneous | | | 394 | | | | 242 | | | | 150 | | | | 331 | | | | 394 | | | | 242 | |
Total | | $ | 10,665 | | | $ | 8,119 | | | $ | 8,274 | | | $ | 15,528 | | | $ | 10,665 | | | $ | 8,119 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Vessel Operating Expenses | | | | | | | | | | | | | | | | | | | | | | | | |
Crew wages and related costs | | $ | 50,442 | | | $ | 45,451 | | | $ | 37,351 | | | $ | 50,494 | | | $ | 50,442 | | | $ | 45,451 | |
Insurance | | | 6,723 | | | | 6,438 | | | | 4,747 | | | | 6,778 | | | | 6,723 | | | | 6,438 | |
Spares and consumable stores | | | 17,106 | | | | 14,825 | | | | 14,996 | | | | 16,913 | | | | 17,106 | | | | 14,825 | |
Repairs and maintenance | | | 8,379 | | | | 5,548 | | | | 6,609 | | | | 9,094 | | | | 8,379 | | | | 5,548 | |
Tonnage taxes (Note 15) | | | 2,109 | | | | 1,040 | | | | 361 | | | | 2,144 | | | | 2,109 | | | | 1,040 | |
Environmental costs | | | 1,314 | | | | 2 | | | | - | | | | 1,727 | | | | 1,314 | | | | 2 | |
Other operating expenses | | | 850 | | | | 3,907 | | | | 2,229 | | | | 1,122 | | | | 850 | | | | 3,907 | |
Total | | $ | 86,923 | | | $ | 77,211 | | | $ | 66,293 | | | $ | 88,272 | | | $ | 86,923 | | | $ | 77,211 | |
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
13. | Interest and Finance Costs |
The amounts in the accompanying consolidated statements of operations are analyzed as follows:
| | | | | | | | | | |
| | 2014 | | | 2013 | | | 2012 | | | 2015 | | | 2014 | | | 2013 | |
Interest expense | | $ | 7,815 | | | $ | 7,600 | | | $ | 7,021 | | | $ | 13,922 | | | $ | 7,815 | | | $ | 7,600 | |
Amortization of financing costs | | | 519 | | | | 473 | | | | 379 | | | | 1,364 | | | | 519 | | | | 473 | |
Commitment fees and other costs | | | 93 | | | | 67 | | | | 218 | | | | 269 | | | | 93 | | | | 67 | |
Total | | $ | 8,427 | | | $ | 8,140 | | | $ | 7,618 | | | $ | 15,555 | | | $ | 8,427 | | | $ | 8,140 | |
Total interest incurred on long-term debt for 2015, 2014 2013 and 20122013 amounted to $14,622, $8,221 and $8,068, respectively, of which $700, $406 and $7,342, respectively. Of the above amounts, $406 in 2014, $468 in 2013 and $321 in 2012,respectively, were capitalized and included in Vessels"Vessels" and in Advances"Advances for vessels under construction and acquisitions and other vessel costs.costs".
14. | Earnings / (loss)Loss per Share |
All common shares issued (including the restricted shares issued under the Company's 2011 Incentive Plan) are the Company's common stock and have equal rights to vote and participate in dividends upon their vesting. The calculation of basic earnings/(loss) per share does not treat the non-vested shares (not considered participating securities) as outstanding until the time/service-based vesting restriction has lapsed. For the purpose of calculating diluted earnings per share the weighted average number of diluted shares outstanding includes the incremental shares assumed issued determined in accordance with the treasury stock method. For 2015, 2014 and 2013, and on the basis that the Company incurred losses, the effect of incremental shares would be anti-dilutive and therefore basic and diluted loss per share was the same.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
For 2012, there were no incremental shares assumed issued under the treasury stock method weighted for the periods the non-vested shares were outstanding.
Profit or loss attributable to common equity holders is adjusted by the amount of dividends paid and accrued on Series B Preferred Stock which for 2014 amounted to $5,080.as follows:
| | 2014 | | | 2013 | | | 2012 | |
| | | | | | | | | |
Net income / (loss) | | $ | (10,268 | ) | | $ | (21,205 | ) | | $ | 54,639 | |
Less dividends on series B preferred shares | | $ | (5,080 | ) | | $ | - | | | $ | - | |
Net income / (loss) attributed to common stockholders | | | (15,348 | ) | | | (21,205 | ) | | | 54,639 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Weighted average number of common shares, basic and diluted | | | 81,292,290 | | | | 81,328,390 | | | | 81,083,485 | |
| | | | | | | | | | | | |
Earnings / (loss) per share, basic and diluted | | $ | (0.19 | ) | | $ | (0.26 | ) | | $ | 0.67 | |
| | | | | | | | | | | | |
| | 2015 | | | 2014 | | | 2013 | |
| | | | | | | | | |
Net loss | | $ | (64,713 | ) | | $ | (10,268 | ) | | $ | (21,205 | ) |
Less dividends on series B preferred shares | | $ | (5,769 | ) | | $ | (5,080 | ) | | $ | - | |
Net loss attributed to common stockholders | | | (70,482 | ) | | | (15,348 | ) | | | (21,205 | ) |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Weighted average number of common shares, basic and diluted | | | 79,518,009 | | | | 81,292,290 | | | | 81,328,390 | |
| | | | | | | | | | | | |
Loss per share, basic and diluted | | $ | (0.89 | ) | | $ | (0.19 | ) | | $ | (0.26 | ) |
| | | | | | | | | | | | |
Under the laws of the countries of the companies' incorporation and / or vessels' registration, the companies are not subject to tax on international shipping income; however, they are subject to registration and tonnage taxes, which are included in vessel operating expenses in the accompanying consolidated statements of operations (Note 12).
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
Pursuant to the Internal Revenue Code of the United States (the "Code"), U.S. source income from the international operations of ships is generally exempt from U.S. tax if the company operating the ships meets both of the following requirements, (a) the Company is organized in a foreign country that grants an equivalent exception to corporations organized in the United States and (b) either (i) more than 50% of the value of the Company's stock is owned, directly or indirectly, by individuals who are "residents" of the Company's country of organization or of another foreign country that grants an "equivalent exemption" to corporations organized in the United States (50% Ownership Test) or (ii) the Company's stock is "primarily and regularly traded on an established securities market" in its country of organization, in another country that grants an "equivalent exemption" to United States corporations, or in the United States (Publicly‑Traded Test).
Notwithstanding the foregoing, the regulations provide, in pertinent part, that each class of the Company's stock will not be considered to be "regularly traded" on an established securities market for any taxable year in which 50% or more of the vote and value of the outstanding shares of such class are owned, actually or constructively under specified stock attribution rules, on more than half the days during the taxable year by persons who each own 5% or more of the value of such class of the Company's outstanding stock, ("5 Percent Override Rule").
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
The Company and each of its subsidiaries expects to qualify for this statutory tax exemption for the 2015, 2014 2013 and 20122013 taxable years, and the Company takes this position for United States federal income tax return reporting purposes. However, there are factual circumstances beyond the Company's control that could cause it to lose the benefit of this tax exemption in future years and thereby become subject to United States federal income tax on its United States source income such as if, for a particular taxable year, other shareholders with a five percent or greater interest in the Company's stock were, in combination with the Company's existing 5% shareholders, to own 50% or more of the Company's outstanding shares of its stock on more than half the days during the taxable year.
The Company estimates that since no more than the 50% of its shipping income would be treated as being United States source income, the effective tax rate is expected to be 2% and accordingly it anticipates that the impact on its results of operations will not be material. The Company believes that it satisfies the Publicly-Traded Test and all of its United States source shipping income is exempt from U.S. federal income tax. Based on its U.S. source Shipping Income for 2015, 2014 2013 and 2012,2013, the Company would be subject to U.S. federal income tax of approximately $166, $246 $238 and $289,$238, respectively, in the absence of an exemption under Section 883.
The carrying values of temporary cash investments, accounts receivable and accounts payable approximate their fair value due to the short-term nature of these financial instruments. The fair values of long-term bank loans approximate the recorded values, due to their variable interest rates. The fair value of long-term loan receivable from Diana Containerships also approximates its recorded value, due to its variable interest rate. The fair value of the Senior Unsecured Notes (Note 9) having a fixed interest rate amounted $48,146 as of December 31, 2015, and was determined through the Level 1 input of the fair value hierarchy as defined in FASB guidance for Fair Value Measurements based on the quoted price of the instrument as of December 31, 2015 as stated under the ticker Symbol "DSXN" on the NYSE.
The Company is exposed to interest rate fluctuations associated with its variable rate borrowings and its objective is to manage the impact of such fluctuations on earnings and cash flows of its borrowings. In May 2009 the Company entered into a five-year zero cost collar agreement (novated in March 2012), with a floor at 1% and a cap at 7.8% of a notional amount of $100,000 to manage its exposure to interest rate changes related to its borrowings. The collar agreement, which matured on May 27, 2014, was used as an economic hedge agreement and did not meet the criteria for hedge accounting; therefore, the changes in its fair value were recognized in earnings.
As at December 31, During 2014 and 2013, the fair value of the swap was $0 and $378, respectively, both separately presented in the accompanying consolidated balance sheets. For 2014, 2013, and 2012, the Company incurred from the swap gainincome of $68 and loss of $118, and $518, respectively, and is separately presented as Income / "Income/(loss) from derivative instrumentsinstruments" in the related accompanying consolidated statements of operations. The fair value of the collar agreement determined through Level 2 inputs of the fair value hierarchy as defined in ASC 820-10-35-47 Fair Value Measurements and Disclosure, Subsequent Re-measurement of FASB Accounting Standard Codification (ASC), is derived principally from or corroborated by observable market data. Inputs include interest rates, yield curves and other items that allow value to be determined.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20142015
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
| (a) | Delivery of vessel and payment of construction installment:New loan agreement: On January 12, 2015,7, 2016, the Company, took deliverythrough the three wholly owned subsidiaries with vessels under construction, entered into a secured loan agreement with the Export-Import Bank of Santa Barbara,China for a vessel that Lelu had agreedloan of up to acquire. In addition, on February 2, 2015, the Company paid an installment for$75,735 (Note 9) in order to finance part of the construction cost of hull H2548 owned by Asterthe vessels (Note 5). As a result ofThe loan will be available for drawdown until March 12, 2017, or such later date as all the two events, the Company's purchase obligations for the acquisitionlenders may in their discretion agree and or construction of vessels (Note 10), subsequently to December 31, 2014 reduced to $99,986.will mature latest by March 2032. |
| (b) | Series B Preferred Stock Dividends:On January 15, 2015,2016, the Company paid a dividend on its series B preferred stock, amounting to $0.5546875 per share, or $1,442, to its stockholders of record as of January 14, 2015.2016. |
| (c) | Repurchase and Retirement of Common Stock:Vessels' acquisition: Under the repurchase program (Note 11),On February 4, 2016, the Company, subsequentlythrough three separate wholly-owned subsidiaries, entered into three Memoranda of Agreement to December 31, 2014, repurchased and retired an additional number of 413,804 sharesacquire from a related party three Panamax vessels for an aggregate costpurchase price of $2,673.$39,800, further reduced to $39,265 on March 4, 2016. The Company has agreed to acquire the vessels from entities affiliated with Mrs. Semiramis Paliou and Mrs. Aliki Paliou, each of whom is a family member of the Company's Chief Executive Officer and Chairman of the Board. Mrs. Semiramis Paliou is also a director of the Company. The transaction was approved unanimously by a committee of the Board of Directors established for the purpose of considering the transaction and consisting of the Company's independent directors and each of its executive directors other than Mrs. Semiramis Paliou and Mr. Simeon Palios. The agreed upon purchase price of the vessels was based, among other factors, on independent third party broker valuations obtained by the Company. Consummation of the purchases is subject to the Company obtaining bank financing from the sellers' existing lenders for substantially the entire purchase price of the vessels, thereby resulting in little or no current cash outlay on the part of the Company. Two of the vessels were delivered in March 2016 and the third is expected to be delivered later in April 2016. |
| (d) | New Loan Agreements: On March 17, 2015, the Company, through eight separate wholly owned subsidiaries, entered into a loan agreement with Nordea Bank for a secured term loan facility of up to $110,000, to refinance the existing indebtedness with the bank and for general corporate and working capital purposes. On March 19, 2015, we drew down $93,080 and we repaid the then existing indebtedness with the bank amounting to $38,345. |
| (e) | Termination of Loan Agreements: On March 10 and on March 20, 2015, the Company repaid in full the then outstanding indebtedness with Deutsche Bank for the vessels i) "New York" and ii) "Myrto" and "Maia", respectively, and the related agreements were terminated. |
| (f) | Loan Commitment: On February 27, 2015, the Company entered into a commitment letter with Danish Ship Finance for a loan facility of $30,000 to finance the acquisition cost of the vessel "Santa Barbara". On March 12, 2015, the Company was offered a term sheet from ABN AMRO Bank NV for a loan facility of up to $53,000 to re-finance the acquisition cost of the vessels "New York", "Myrto" and "Maia", subject to signing the loan agreement by May 01, 2015. |
| (g) | Annual Incentive BonusBonus: : On March 3, 2015February 23, 2016 the Company's Board of Directors approved a cash bonus of about $1,714$775 to all employees and executive management of the Company, which had been accrued as at December 31, 2014,net of taxes and 1,100,000other charges and 2,150,000 shares of restricted common stock awards to executive management and non-executive directors, pursuant to the Company's 2011 equity incentive plan.plans. The fair value of the restricted shares based on the closing price on the date of the Board of Directors' approval was $7,601$4,859 and will be recognized in income ratably over the restricted shares vesting period which will be 3 years. |
(e) | New Commitment Letter: On March 11, 2016, the Company through two wholly-owned subsidiaries signed a commitment letter with ABN AMRO for a loan of up to $25,755 to finance the acquisition cost of two of the vessels mentioned under (c) above. |
F-28