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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2005
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OR
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________to_____________________________
Commission File Number
000-51366
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EAGLE BULK SHIPPING INC.
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(Exact name of registrant as specified in its charter)
Republic of the Marshall Islands 98-0453513
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
29 Broadway, New York, New York 10006
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(Address of principal (Zip Code)
executive offices)
(212) 785-2500
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Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES |_| NO |X|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
YES |_| NO |X|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
Common Stock, par value $0.01 per share 27,150,000 shares
outstanding as of August 15, 2005.
EAGLE BULK SHIPPING INC.
INDEX
PART I: FINANCIAL INFORMATION Page
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Item 1- Financial Statements
Condensed Consolidated Balance Sheets
as of June 30, 2005 and March 31, 2005..................... 3
Condensed Consolidated Statements of Operations
(unaudited) for the three months ended June 30, 2005
and for the period from January 26, 2005 (inception)
to June 30, 2005........................................... 4
Condensed Consolidated Statement of Stockholders' Equity
(unaudited) for the period from January 26, 2005
(inception) to June 30, 2005............................... 5
Condensed Consolidated Statement of Cash Flows (unaudited)
for the period from January 26, 2005 (inception)
to June 30, 2005........................................... 6
Notes to Condensed Consolidated Financial
Statements (unaudited)..................................... 7
Item 2- Management's Discussion and Analysis of
Financial Condition and Results of Operation............... 17
Item 3- Quantitative and Qualitative Disclosures about
Market Risks............................................... 28
Item 4- Controls and Procedures....................................... 29
PART II: OTHER INFORMATION
Item 1- Legal Proceedings............................................. 30
Item 2- Unregistered Sales of Equity Securities and Use of Proceeds... 30
Item 3- Defaults upon Senior Securities............................... 31
Item 4- Submission of Matters to a Vote of Security Holders........... 31
Item 5- Other Information............................................. 31
Item 6- Exhibits...................................................... 31
SIGNATURES
Part 1 : FINANCIAL INFORMATION
Item 1 : Financial Statements
EAGLE BULK SHIPPING INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2005 March 31, 2005(1)
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(Unaudited)
ASSETS:
Current Assets:
Cash and cash equivalents .......................... $10,970,963 $4,187,084
Accounts Receivable ................................ 22,034 --
Prepaid Charter Revenue ............................ 1,284,000 --
Prepaid Expenses ................................... 186,373 19,124
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Total Current Assets ............................ 12,463,370 4,206,208
Fixed Assets:
Advances for Vessel Acquisitions ................... 7,018,100 36,518,100
Advances for Vessel Improvements ................... 640,000 --
Vessels at cost, net of Accumulated
Depreciation of $2,020,572 at June 30 ....... 292,563,221 150,927
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Total Fixed Assets .............................. 300,221,321 36,669,027
Restricted Cash ...................................... 4,000,000 --
Other Assets and Deferred Charges .................... 776,105 30,000
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Total Assets ......................................... $317,460,796 $40,905,235
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LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable ................................... $2,945,310 $237,717
Accrued Liabilities ................................ 666,759 651,453
Deferred Revenue ................................... 914,000 --
Unearned Charter Hire Revenue ...................... 1,790,082 --
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Total Current Liabilities ....................... 6,316,151 889,170
Long-term Debt ....................................... 88,500,000 --
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Total Liabilities .................................... 94,816,151 889,170
Commitment and Contingencies
Stockholders' Equity :
Preferred Stock, $.01 par value, 25,000,000 shares
Authorized, none issued .................... -- --
Common stock, $.01 par value, 100,000,000 shares
authorized, 27,150,000 and 12,750,000 shares
issued and outstanding, respectively ....... 271,500 127,500
Additional Paid-In Capital ......................... 234,742,299 40,716,162
Subscription Receivable ............................ -- (21,384)
Accumulated Deficit ................................ (12,894,757) (806,213)
Accumulated Other Comprehensive Income ............. 525,603 --
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Total Stockholders' Equity ...................... 222,644,645 40,016,065
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Total Liabilities & Stockholders' Equity ............. $317,460,796 $40,905,235
============= =============
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(1) The Balance Sheet at March 31, 2005 has been derived from the audited
balance sheet at that date.
The accompanying notes are an integral part of these
Condensed Consolidated Financial Statements.
EAGLE BULK SHIPPING INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Period from
Three Months January 26, 2005
ended June 30, (inception) to
2005 June 30, 2005
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Revenues, net of commissions ............... $10,615,879 $10,615,879
Vessel Expenses ............................ 3,066,188 3,115,399
Depreciation ............................... 2,020,572 2,020,572
General and Administrative Expenses ........ 663,034 1,420,036
Management and Other Fees to Affiliates .... 6,175,046 6,175,046
Non-cash Compensation Expense .............. 7,640,847 7,640,847
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Total Operating Expenses ................. 19,565,687 20,371,900
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Operating Loss ............................. (8,949,808) (9,756,021)
Interest Expense ........................... 3,233,596 3,233,596
Interest Income ............................ (94,860) (94,860)
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Net Interest Expense ..................... 3,138,736 3,138,736
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Net Loss ................................... $(12,088,544) $(12,894,757)
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Basic and Diluted Loss per Common Share .... $(0.87) $(0.96)
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Weighted Average Shares Outstanding ........ 13,857,692 13,396,154
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The accompanying notes are an integral part of these
Condensed Consolidated Financial Statements.
EAGLE BULK SHIPPING INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FROM JANUARY 26, 2005 (INCEPTION) TO JUNE 30, 2005
(UNAUDITED)
Additional Other Total
Common Paid-In Subscription Accumulated Comprehensive Stockholders'
Shares Capital Receivable Deficit Income Equity
-------- ------------ ------------ ------------ ------------- -------------
Balance at January 26, 2005 $-- $-- $-- $-- $-- $--
Comprehensive Income (Loss):
Net Loss ............. -- -- -- (12,894,757) -- (12,894,757)
Net Unrealized gains on
derivatives ............. -- -- -- -- 525,603 525,603
Issuance of Common Stock and
Capital Contributions .... 127,500 40,716,162 (21,384) -- -- 40,822,278
Initial Public Offering, net
of issuance costs ........ 144,000 186,385,290 -- -- -- 186,529,290
Capital Contributions ...... -- -- 21,384 -- -- 21,384
Non-cash Compensation ...... -- 7,640,847 -- -- -- 7,640,847
-------- ------------ ----------- ------------ ------------- ------------
Balance at June 30, 2005 ... $271,500 $234,742,299 $-- $(12,894,757) $525,603 $222,644,645
======== ============ =========== ============ ============= ============
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The accompanying notes are an integral part of these
Condensed Consolidated Financial Statements.
EAGLE BULK SHIPPING INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FROM JANUARY 26, 2005 (INCEPTION) TO JUNE 30, 2005
(UNAUDITED)
Cash Flows from Operating Activities
Net Loss .................................................... $(12,894,757)
Adjustments to Reconcile Net Loss to Net Cash
provided by Operating Activities:
Items included in net income not affecting cash flows:
Depreciation ............................................. 2,020,572
Amortization of Deferred Financing Costs ................. 1,130,713
Amortization of Prepaid Charter Revenue .................. 205,000
Non-cash Compensation Expense ............................ 7,640,847
Changes in Operating Assets and Liabilities:
Accounts Receivable ...................................... (22,034)
Prepaid Revenue .......................................... (1,489,000)
Prepaid Expenses ......................................... (186,373)
Accounts Payable ......................................... 1,823,761
Accrued Expenses ......................................... 666,759
Deferred Revenue ......................................... 914,000
Unearned Charter Hire Revenue ............................ 1,790,082
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Net Cash Provided by Operating Activities ................... 1,599,570
Cash Flows from Investing Activities
Advances for Vessel Acquisition .......................... (7,018,100)
Advances for Vessel Improvements ......................... (640,000)
Purchase of Vessels ...................................... (294,583,793)
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Net Cash Used in Investing Activities ....................... (302,241,893)
Cash Flows from Financing Activities
Capital Contribution ..................................... 40,843,662
Issuance of Common Stock in initial public offering ...... 201,600,000
Equity Issuance Costs .................................... (13,949,161)
Bank Borrowings .......................................... 214,450,000
Repayment of Bank Debt ................................... (125,950,000)
Increase in Restricted Cash .............................. (4,000,000)
Deferred Financing Costs ................................. (1,381,215)
Borrowings from Eagle Ventures LLC ....................... 58,730,434
Repayment of Eagle Ventures LLC Note .................... (58,730,434)
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Net Cash Provided by Financing Activities ................... 311,613,286
Net Increase in Cash ........................................ 10,970,963
Cash at Beginning of Period ................................. --
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Cash at End of Period ....................................... $10,970,963
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Supplemental Cash Flow Information:
Cash paid during the period for Interest (including Fees) $1,671,899
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The accompanying notes are an integral part of these
Condensed Consolidated Financial Statements.
EAGLE BULK SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation and General Information:
The accompanying condensed consolidated financial statements include the
accounts of Eagle Bulk Shipping Inc. and its wholly-owned subsidiaries
(collectively, the "Company"). The Company is engaged in the ocean
transportation of dry bulk cargoes worldwide through the ownership and operation
of dry bulk vessels. The Company's fleet is comprised of Handymax bulk carriers
and the Company operates its business in one business segment.
The Company is a holding company incorporated on March 23, 2005, under the
laws of the Republic of the Marshall Islands. Following incorporation, the
Company merged with Eagle Holdings LLC, a Marshall Islands limited liability
company formed on January 26, 2005, and became a wholly-owned subsidiary of
Eagle Ventures LLC, a Marshall Islands limited liability company. Eagle Ventures
LLC is owned by Kelso Investments Associates VII, L.P. and KEP VI, LLC, both
affiliates of Kelso & Company, L.P., members of management and outside
investors. The merger was accounted for as a reorganization of entities under
common control. Immediately following the completion of the Company's initial
public offering, Eagle Ventures LLC owned approximately 47% of the Company's
outstanding common stock. Eagle Ventures LLC is 92.6% owned by affiliates of
Kelso & Company, L.P. ("Kelso").
On March 31, 2005, in connection with its formation, the Company sold 250
shares of its common stock, par value $.01 per share, to Eagle Ventures LLC for
an aggregate purchase price of $250. On March 31, 2005, in connection with the
merger of Eagle Holdings LLC with and into the Company, all of the issued and
outstanding membership interests in Eagle Holdings LLC (which were held by Eagle
Ventures LLC) were converted into and exchanged for, and the Company issued 250
shares of its common stock, par value $.01 per share, to Eagle Ventures LLC. An
additional $21,384 was recorded as a subscription receivable. On June 14, 2005
the Company effected a 25,500 for 1 stock split in the form of a stock dividend.
As a result of the stock split, Eagle Ventures LLC received, in the form of a
stock dividend, 12,749,500 additional shares of the Company's common stock. All
share and per share data gives retroactive effect to the stock split. As of
March 31, 2005, Eagle Ventures LLC had made equity contributions to the Company
(as successor to Eagle Holdings LLC) of $40,822,278.
On June 23, 2005, the Company completed its initial public offering by
issuing and selling to the public 14,400,000 shares of common stock, par value
$0.01 per share, at a price to the public of $14.00 per share, raising gross
proceeds of $201,600,000 before deduction of underwriting discounts, commissions
and expenses of $15,070,710. The Company used $185,288,656 of the net proceeds
from the offering to repay $125,950,000 of the indebtedness under its existing
loan facility and $59,338,656 owed to Eagle Ventures under a promissory note,
including accrued interest.
The Company is the sole owner of all of the outstanding shares of the
Marshall Island incorporated wholly-owned subsidiaries listed below. The primary
activity of each of these subsidiaries is the ownership of a vessel.
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LLC
Company Agreement Date Owner of Vessel dwt. Built Vessel Acquired
- ------- -------------- --------------- ---- ----- ---------------
Cardinal Shipping LLC............ March 17, 2005 Cardinal 55,362 2004 April 18, 2005
Condor Shipping LLC.............. January 28, 2005 Condor 50,206 2001 April 29, 2005
Falcon Shipping LLC.............. January 28, 2005 Falcon 50,206 2001 April 21, 2005
Griffon Shipping LLC............. March 17, 2005 Griffon 46,635 1995 June 1, 2005
Harrier Shipping LLC............. January 28, 2005 Harrier 50,206 2001 April 19, 2005
Hawk Shipping LLC................ January 28, 2005 Hawk I 50,206 2001 April 26, 2005
Kite Shipping LLC................ February 24, 2005 Kite 47,195 1997 May 9, 2005
Osprey Shipping LLC.............. February 24, 2005 Osprey I 50,206 2002 To be acquired
Peregrine Shipping LLC........... March 17, 2005 Peregrine 50,913 2001 June 30, 2005
Shikra Shipping LLC.............. March 17, 2005 Shikra 41,096 1984 April 29, 2005
Sparrow Shipping LLC............. February 24, 2005 Sparrow 48,225 2000 July 19, 2005
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The operations of the vessels are managed by a wholly-owned subsidiary of
the Company, Eagle Shipping International (USA) LLC, a Marshall Islands limited
liability company.
The following table represents certain information about the Company's revenue
earning charters:
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Daily Time
Vessel Delivered to Charter Hire
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Charterer Time Charter Expiration (1) Rate
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Cardinal April 19, 2005 March 2007 to June 2007 $26,500
Condor April 30, 2005 November 2006 to March 2007 $24,000
Falcon April 22, 2005 February 2008 to June 2008 $20,950
Griffon June 3, 2005 February 2006 to April 2006 $28,000
Harrier April 21, 2005 March 2007 to June 2007 $23,750
Hawk I April 28, 2005 March 2007 to June 2007 $23,750
Kite May 10, 2005 March 2006 to May 2006 $25,000
Osprey I Expected August May 2008 to September 2008 $21,000
2005
Peregrine July 1, 2005 October 2006 to January 2007 $24,000
Shikra April 30, 2005 July 2006 to November 2006 $22,000
Sparrow July 20, 2005 November 2006 to Feb 2007 $22,500
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(1) The date range provided represents the earliest and latest date on which
the charterer may redeliver the vessel to the Company upon the termination
of the charter.
During the three-month period ended June 30, 2005, six charterers
individually accounted for more than 10% of the Company's time charter revenue
as follows:
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% of time charter
Charterer revenue
--------- -------
Charterer A............................... 27.9%
Charterer B............................... 16.5%
Charterer C............................... 12.9%
Charterer D............................... 12.6%
Charterer E............................... 12.2%
Charterer F............................... 11.2%
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The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States, and the rules and regulations of the SEC which apply to interim
financial statements. Accordingly, they do not include all of the information
and footnotes normally included in consolidated financial statements prepared in
conformity with accounting principles in the United States. They should be read
in conjunction with the consolidated financial statements and notes thereto
included in the Company's Registration Statement on Form S-1 (File No.
333-123817).
The accompanying unaudited condensed consolidated financial statements
include all adjustments (consisting of normal recurring adjustments) that
management considers necessary for a fair presentation of its consolidated
financial position and results of operations for the interim periods presented.
The Company commenced its vessel operations during the three-month period ended
June 30, 2005. The results of operations for the interim periods are not
necessarily indicative of the results that may be expected for the entire year.
Note 2. Significant Accounting Policies:
(a) Principles of Consolidation: The accompanying unaudited consolidated
financial statements have been prepared in accordance with U.S.
generally accepted accounting principles and include the accounts of
Eagle Bulk Shipping Inc. and its wholly-owned subsidiaries referred to
in Note 1. All significant intercompany balances and transactions were
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 follows the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income", which requires separate presentation
of certain transactions, which are recorded directly as components of
stockholders' equity. The Company records the fair value of interest
rate swaps as an asset or liability on the balance sheet. The
effective portion of the swap is recorded in accumulated other
comprehensive income (loss). Comprehensive Income (Loss) is composed
of net income (loss) and gains or losses relating to the adoption of
SFAS No. 133.
(d) Cash and Cash Equivalents: The Company considers highly liquid
investments such as time deposits and certificates of deposit with an
original maturity of three months or less to be cash equivalents.
Restricted Cash includes minimum cash deposits required to be
maintained with a bank for loan compliance purposes.
(e) Accounts Receivable: Accounts receivable includes receivables from
charterers for hire. At each balance sheet date, all potentially
uncollectible accounts are assessed for purposes of determining the
appropriate provision for doubtful accounts.
(f) Insurance Claims: Insurance claims are recorded on an accrual basis
and represent the claimable expenses, net of deductibles, incurred
through each balance sheet date, which are expected to be recovered
from insurance companies. Any remaining costs to complete the claims
are included in accrued liabilities.
(g) Vessels at Cost: Vessels are stated at cost which consists of the
contract price and any material expenses incurred upon acquisition for
initial repairs, major improvements and delivery expenses.
(h) Intangibles: Where the Company identifies any intangible assets or
liabilities associated with the acquisition of a vessel, the Company
records all identified tangible and intangible assets or liabilities
at fair value. Fair value is determined by reference to market data
and the amount of expected future cash flows. The Company values any
asset or liability arising from the market value of the time charters
assumed when a vessel is acquired. When the time charters assumed are
above market charter rates, the difference between the market charter
rate and assumed charter rate is recorded as Prepaid Charter Revenue.
When the time charters assumed are below market charter rates, the
difference between the market charter rate and assumed charter rate is
recorded as Deferred Revenue. Such assets and liabilities are
amortized to revenue over the remaining period of the time charters.
(i) Impairment of Long-Lived Assets: The Company uses SFAS No. 144
"Accounting for the Impairment or Disposal of Long-lived Assets,"
which addresses financial accounting and reporting for the impairment
or disposal of long-lived assets. The standard requires that,
long-lived assets and certain identifiable intangibles held and used
or disposed of by an entity be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable. When the estimate of undiscounted cash
flows, excluding interest charges, expected to be generated by the use
of the asset 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 as provided by
third parties or discounted cash flow analyses. In this respect,
management regularly reviews the carrying amount of the vessels in
connection with the estimated recoverable amount for each of the
Company's vessels.
(j) Vessel Depreciation: Depreciation is computed using the straight-line
method over the estimated useful life of the vessels, after
considering the estimated salvage 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 28 years from the date of initial delivery from the shipyard to the
original owner. Management estimates the scrap rate to be $150 per
lightweight ton. Secondhand vessels are depreciated from the date of
their acquisition through their remaining estimated useful life.
(k) 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 vessels' sale.
(l) Financing Costs: Fees incurred for obtaining new loans or refinancing
existing ones are deferred and amortized to interest expense over the
life of the related debt. Unamortized fees relating to loans repaid or
refinanced are expensed in the period the repayment or refinancing is
made.
(m) Accounting for Revenues and Expenses: Revenues are generated from
voyage and time charter agreements. Time charter revenues are
recognized on a straight-line basis over the term of the respective
time charter agreements as service is provided. Under a voyage charter
the revenues and associated voyage costs are recognized on a pro-rata
basis over the duration of the voyage. Probable losses on voyages are
provided for in full at the time such losses can be estimated. A
voyage is deemed to commence upon the completion of discharge of the
vessel's previous cargo and is deemed to end upon the completion of
discharge of the current cargo. Voyage expenses primarily include only
those specific costs which are borne by the Company in connection with
voyage charters which would otherwise have been borne by the charterer
under time charter agreements. These expenses principally consist of
fuel and port charges. Demurrage income represents payments by the
charterer to the vessel owner when loading or discharging time
exceeded the stipulated time in the voyage charter and is recognized
as incurred. Time charter hire and voyage charter revenue brokerage
Commissions are recorded in the same period as these revenues are
recognized. Vessel operating expenses are accounted for on the accrual
basis.
(n) Unearned Charter Hire Revenue: Unearned charter hire revenue
represents cash received from charterers prior to the time such
amounts are earned. These amounts are recognized as revenue as
services are provided in future periods.
(o) Repairs and Maintenance: All repair and maintenance expenses are
expensed as incurred.
(p) Protection and Indemnity Insurance: The Vessel's Protection and
Indemnity Insurance is subject to additional premiums referred to as
"back calls" or "supplemental calls" which are accounted for on an
accrual basis.
(q) Derivatives: SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" as amended establishes accounting and reporting
standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured
at its fair value, with changes in the derivatives' fair value
recognized currently in earnings unless specific hedge accounting
criteria are met.
(r) Earnings Per Share: Earnings/(loss) per share is computed by dividing
the net income/(loss) by the weighted average number of common shares
outstanding during the period.
(s) Segment Reporting: The Company reports financial information and
evaluates its operations 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 and thus the Company has
determined that it operates under one reportable segment. 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.
(t) Interest Rate Risk Management: The Company is exposed to the impact of
interest rate changes. The Company's objective is to manage the impact
of interest rate changes on earnings and cash flows of its borrowings.
The Company may use interest rate swaps to manage net exposure to
interest rate changes related to its borrowings.
(u) Federal Income Taxes: The Company is a Marshall Islands Corporation.
Pursuant to various tax treaties and the current United States
Internal Revenue Code, the Company does not believe its operations
prospectively will be subject to federal income taxes in the United
States of America.
(v) Comprehensive Income: Comprehensive (loss) for the period from January
26, 2005 (inception) to June 30, 2005 and for the three months ended
June 30, 2005 was $12,369,154 and $11,562,941 respectively.
Note 3. Recent Accounting Pronouncements:
On December 16, 2004, Statement of Financial Accounting Standards No. 123
(revised 2004) (SFAS No. 123(R)), "Share-Based Payment," was issued. SFAS No.
123(R) is a revision of SFAS No. 123 and supersedes APB No. 25. The approach in
SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However,
SFAS No. 123(R) requires all share-based payments to employees, including grants
of employee stock options, to be recognized in the income statement based on
their fair values. Pro forma disclosure, required under SFAS No. 123, is no
longer an alternative. The Company adopted SFAS No.123(R) at inception.
Note 4. Advances for Vessel Acquisitions
The Company through its subsidiaries entered into contracts to purchase 11
Handymax dry bulk vessels from three unaffiliated owners with an aggregate
contracted price of $365,181,000. As of June 30, 2005, the Company has taken
delivery of 9 vessels. The Company has made deposits in the amount of
$7,018,100, representing 10% of the purchase price for the remaining two
vessels. At June 30, 2005, the unpaid balance of the purchase price for the two
remaining vessels was $63,162,900.
As of June 30, 2005, the Company has recorded $640,000 in advances for
vessel improvements.
Note 5. Vessels
As of June 30, 2005, the Company has acquired nine vessels at a total cost
of $294,583,793. These costs consists of aggregate purchase contract price of
$295,000,000, $158,793 in additional costs relating to the acquisition of the
vessels, and $575,000 in prepaid charter revenue adjustments relating to the
assumption of time charters associated with certain of the acquired vessels. Net
of Accumulated Depreciation of $2,020,572, Vessels at Cost at June 30, 2005,
amounted to $292,563,221.
Note 6. Accrued Liabilities
Accrued liabilities consists of:
June 30, March 31,
2005 2005
-------- --------
Interest and Other Financing Costs ......... $430,984 $ --
Vessel Operating Expenses .................. 121,854 --
General and Administrative Expenses ........ 113,921 651,453
-------- --------
Balance, June 30, 2005 ..................... $666,759 $651,453
======== ========
Note 7. Long-Term Debt
The Company's subsidiaries had entered into a term loan facility with an
aggregate principal balance of $185,950,000. Concurrent with its initial public
offering, the Company used part of the proceeds from the initial public offering
to repay $125,950,000 of the principal balance under the term loan facility.
Subsequent to the Company's initial public offering, the Company borrowed
$28,500,000 to fund the balance of the purchase price for its tenth vessel, the
M/V Peregrine.
As of June 30, 2005, the Company's debt consisted of $88,500,000 in term
loans. The Company's vessels are pledged as collateral under the term loan
agreements.
From the facility's inception through June 30, 2005, interest rates ranged
from 4.10% to 4.30%, including a margin of 0.95% over the London Interbank
Offered Rate ("LIBOR"). The weighted average effective interest rate was 4.15%.
Interest Expense consists of :
June 30, 2005
-------------
Loan Interest ....................................... $1,353,306
Commitment Fees ..................................... 141,355
Eagle Ventures Note Interest ........................ 608,222
Amortization of Deferred Financing Costs ............ 1,130,713
----------
Total Interest Expense .............................. $3,233,596
==========
In July 2005, the Company entered into a $330 million revolving credit
facility. The facility was used to refinance the existing term loan and will be
used to fund vessel acquisitions and for working capital requirements.
The new credit facility has a facility limit of $330 million and a term of
ten years. The Company will be permitted to borrow up to $150 million to (i)
refinance up to $88.5 million of the indebtedness that was incurred under the
existing credit facility to pay the balance of the purchase price for the nine
vessels that the Company had already acquired and (ii) pay up to the entire
balance of the purchase price of the two remaining vessels that it expects to
acquire between July and August 2005. The Company will be permitted to borrow up
to $180 million, which amount includes amounts borrowed for working capital
purposes as described below, in connection with future acquisitions of dry bulk
carriers between 25,000 dwt and 85,000 dwt that are not older than 10 years. The
Company will also be permitted to borrow up to $10 million at any one time for
working capital purposes during an initial period of 18 months from the first
draw down date, after which time the Company's ability to borrow amounts for
working capital purposes will be subject to review and reapproval on an annual
basis.
Under the terms of the revolving credit agreement, the facility will be
available in full for five years and there are no principal repayment
obligations for the first five years. Over the remaining period of five years,
the amount available under the facility will reduce in semi-annual amounts of
$20.5 million with a final reduction of $125 million occurring simultaneously
with the last semi-annual reduction. The credit facility bears interest at LIBOR
plus a margin of 0.95%. The Company must pay a fee of 0.4% per annum on the
unused portion of the revolving loan on a quarterly basis. The Company was also
required to pay an arrangement fee of $1,200,000, of which $150,000 has been
paid upon the Company's acceptance of the commitment letter which is recorded
under Deferred Financing Costs as of June 30, 2005. The balance of the
arrangement fee was paid upon the closing of the facility subsequent to June 30,
2005.
The Company's ability to borrow amounts under the new credit facility is
subject to satisfaction of certain customary conditions precedent and compliance
with terms and conditions included in the loan documents. In connection with
vessel acquisitions, amounts borrowed may not exceed 60% of the value of the
vessels securing the Company's obligations under the credit facility. The
Company's ability to borrow such amounts, in each case, is subject to its
lender's approval of the vessel acquisition. The lender's approval will be based
on the lender's satisfaction of the Company's ability to raise additional
capital through equity issuances in amounts acceptable to the lender and the
proposed employment of the vessel to be acquired.
The Company's obligations under the credit facility is secured by a first
priority mortgage on each of the vessels in its fleet and such other vessels
that it may from time to time include with the approval of the lender, a first
assignment of all freights, earnings, insurances and requisition compensation.
The Company's new credit facility will also limit its ability to create liens on
its assets in favor of other parties. The Company may grant additional security
from time to time in the future.
The new credit facility contains financial covenants requiring the Company,
among other things, to ensure that: (1) the aggregate market value of the
vessels in the Company's fleet that secure its obligations under the new credit
facility, as determined by an independent shipbroker on a charter-free basis, at
all times exceeds 130% of the aggregate principal amount of debt outstanding
under the new credit facility and the notional or actual cost of terminating any
related hedging arrangements; (2) the Company's total assets minus debt will not
be less than $150 million; (3) the Company's EBITDA, as defined in the credit
agreement, will at all times be not less than 2x the aggregate amount of
interest incurred and net amounts payable under interest rate hedging
arrangements during the relevant period; and (4) the Company maintains with the
lender $500,000 per vessel in addition to an amount adequate to meet anticipated
capital expenditures for the vessel over a 12 month period. Such cash deposits
are recorded in Restricted Cash.
For the purposes of the new credit facility, the Company's "total assets"
will be defined to include its tangible fixed assets and its current assets, as
set forth in the consolidated financial statements, except that the value of any
vessels in its fleet that secure its obligations under the new credit facility
will be measured by their fair market value rather than their carrying value on
its consolidated balance sheet.
The Company's new credit facility permits it to pay dividends in amounts up
to its earnings before extraordinary or exceptional items, interest, taxes,
depreciation and amortization (EBITDA), less the aggregate amount of interest
incurred and net amounts payable under interest rate hedging agreements during
the relevant period and an agreed upon reserve for dry-docking, provided that
there is not a default or breach of loan covenant under the credit facility and
the payment of the dividends would not result in a default or breach of a loan
covenant.
Interest-Rate Swaps
The Company entered into interest rate swaps to effectively convert a
portion of its debt from a floating to a fixed-rate basis. The swaps are
designated and qualify as cash flow hedges. As of June 30, 2005 the Company has
entered into an interest rate swap contract for a notional amount of
$100,000,000. This contract commences in September 2005 and matures in September
2010. Exclusive of a margin of 0.95%, the Company will pay 4.22% fixed-rate
interest and receive floating-rate interest amounts based on three month LIBOR
settings (for a term equal to the swaps' reset periods). The Company records the
fair value of the interest rate swap as an asset or liability on the balance
sheet. The effective portion of the swap is recorded in accumulated other
comprehensive income (loss). At June 30, 2005, the Company recorded an asset of
$525,603 which is included in Other Assets in the accompanying balance sheet.
In July 2005, the Company entered into an interest rate swap agreement with
a notional amount of $30,000,000 which commences in September 2005 and matures
in September 2010. Exclusive of a margin of 0.95%, the Company will pay 4.54%
fixed-rate interest and receive floating-rate interest amounts based on three
month LIBOR settings.
Note 8. Related Party Transactions
The Company borrowed $58,730,434 from Eagle Ventures LLC. This borrowing
bore interest at 7%. Such amount was repaid along with interest amounting to
$608,222 upon the closing of the Company's initial public offering.
The Company had a financial advisory agreement dated February 1, 2005 with
Kelso. Under the terms of the agreement the Company was to pay Kelso annual fees
of up to $500,000. The Company terminated certain of its obligations under this
agreement, including its obligation to pay the annual fees of $500,000, for a
one-time payment of $1,000,000. The agreement also provides for Kelso to be paid
certain fees in connection with other services.
In the period ended June 30, 2005, the Company paid $5,175,046 in fees to
Kelso and certain non-management affiliates of Eagle Ventures LLC for investment
banking services pursuant to the financial advisory agreement. This fee was
payable in connection with Kelso assisting the Company in its formation,
strategic planning, obtaining debt and equity financing and acquiring vessels.
Note 9. Commitments and Contingencies
Vessel Technical Management Contract
The Company entered into technical management agreements for each of its
vessels with V. Ships Management Ltd., an independent technical manager. In
conjunction with the Company's management, V. Ships has established an operating
expense budget for each vessel. All deviations from the budgeted amounts are for
the Company's account. V. Ships is paid a technical management fee of $8,333 per
vessel per month.
Vessel Acquisitions
As of June 30, 2005, the Company had commitments to acquire two vessels
under vessel purchase agreements. The total purchase price for these two vessels
is $70,181,000. The Company has funded deposits in the amount of $7,018,100,
representing 10% of the purchase price, for the remaining two vessels. The
Company will use its bank financing and operating cash to fund the remaining
balance of the purchase price (an amount equal to $63,162,900) to be paid for
these two vessels.
On July 19, 2005 the Company took delivery of its tenth vessel, the M/V
Sparrow, which immediately began service under its contracted time charter. The
acquisition was funded in part with borrowings of $30,600,000 under the
Company's new credit facility. The M/V Osprey I, is expected to be delivered in
August 2005.
Note 10. Earnings Per Common Share
The computation of earnings per share is based on the weighted average
number of common shares outstanding during the period. The Company does not have
any potentially dilutive securities outstanding. Accordingly, basic and diluted
loss per share are the same for each period presented.
Note 11. Non-cash Compensation
Members of the Company's management have been awarded profits interests
(and in the future others having senior management and/or strategic
planning-type responsibilities may be awarded similar profits interests) in
Eagle Ventures LLC that may entitle such persons to an economic interest of up
to 16.7% on a fully diluted basis (assuming all profits interests were vested)
in any appreciation in the value of the assets of Eagle Ventures LLC (including
shares of the Company's common stock owned by Eagle Ventures LLC when sold). In
all, one-fourth of the profits interests are service-related and vest in equal
three-month installments over four years (the vesting of such service-related
profits interests is subject to continued employment with Eagle Ventures LLC or
its affiliates at the end of each such three-month period), and the remaining
profits interests are performance-related. Pursuant to an amendment to the Eagle
Ventures LLC limited liability company agreement, 44% of the performance-related
profits interests became fully vested upon the consummation of the Company's
initial public offering (or an economic interest in approximately 6.2% of the
appreciation of the assets of Eagle Ventures LLC on a fully diluted basis taking
into account the vesting of only such profits interests), and the remaining
portion of the performance-related profits interests will vest based on
affiliates of Kelso achieving certain multiples on their original indirect
investment in the Company, subject to an internal rate of return minimum.
Retention of the non-accelerated performance-related profits interests is
subject to continued employment with Eagle Ventures LLC or its affiliates.
The vesting of profits interests may be further accelerated in the future
by the compensation committee of Eagle Ventures LLC. These profits interests
will dilute only the interests of owners of Eagle Ventures LLC, and will not
dilute direct holders of the Company's common stock. However, the Company's
income statement reflects non-cash charges for compensation related to the
profits interests.
For the quarter ended June 30, 2005, the Company recorded a non-cash
compensation charge of $7.6 million. Of that charge, approximately $7.2 million
relates to the portion of the performance-related profits interests that vested
upon consummation of the Company's initial public offering. The remaining $0.4
million non-cash compensation charge was taken as a result of the
service-related and non-accelerated performance-related profits interests. The
Company is recording compensation charges relating to the service-related
profits interests over four years. The non-accelerated performance related
profits interests vest based on affiliates of Kelso achieving certain multiples
on their original investment in the assets of Eagle Ventures LLC through the
receipt of distributions from Eagle Ventures LLC. The vesting occurs ratably
upon achieving a return on investment ranging from two times to four times the
original investment. To calculate the non-cash compensation charge that is
reflected in the Company's income statement for the non-accelerated
performance-related profits interests, the Company has assumed that these
profits interests will vest four years after their issuance. The Company is
therefore recording compensation charges relating to such profits interests over
four years.
If the September 30, 2005 stock price is $13.50 per share (the stock price
at June 30, 2005), the total non-cash compensation charge for the third quarter
of 2005 for the service-related profits interests and performance-related
profits interest would be approximately $0.8 million.
The non-cash compensation charge will be recorded as an expense over the
estimated service period in accordance with SFAS No. 123(R). The non-cash
compensation charges will be based on the fair value of the profits interests
which will be "marked to market" at the end of each reporting period. The impact
of any changes in the estimated fair value of the profits interests will be
recorded as a change in estimate cumulative to the date of change. The impact on
the amortization of the compensation charge of any changes to the estimated
vesting periods for the performance-related profits interests will be adjusted
prospectively as a change in estimate.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion of the Company's financial condition and
results of operations for the period ended June 30, 2005. This section should be
read in conjunction with the consolidated financial statements including the
notes to those financial statements for the periods mentioned above.
This discussion contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended and the Private Securities
Litigation Reform Act of 1995 and are intended to be covered by the safe harbor
provided for under these sections. These statements may include words such as
"believe," "estimate," "project," "intend," "expect," "plan," "anticipate," and
similar expressions in connection with any discussion of the timing or nature of
future operating or financial performance or other events. Forward looking
statements reflect management's current expectations and observations with
respect to future events and financial performance. Where we express an
expectation or belief as to future events or results, such expectation or belief
is expressed in good faith and believed to have a reasonable basis. However, our
forward-looking statements are subject to risks, uncertainties, and other
factors, which could cause actual results to differ materially from future
results expressed, projected, or implied by those forward-looking statements.
The principal factors that affect our financial position, results of operations
and cash flows include, charter market rates, which have recently increased to
historic highs, and periods of charter hire, vessel operating expenses and
voyage costs, which are incurred primarily in U.S. dollars, depreciation
expenses, which are a function of the cost of our vessels, significant vessel
improvement costs and our vessels' estimated useful lives, and financing costs
related to our indebtedness. Our actual results may differ materially from those
anticipated in these forward looking statements as a result of certain factors
which could include the following: (i) changes in demand in the dry bulk market,
including, without limitation, changes in production of, or demand for,
commodities and bulk cargoes, generally or in particular regions; (ii) greater
than anticipated levels of dry bulk vessel new building orders or lower than
anticipated rates of dry bulk vessel scrapping; (iii) changes in rules and
regulations applicable to the dry bulk industry, including, without limitation,
legislation adopted by international bodies or organizations such as the
International Maritime Organization and the European Union or by individual
countries; (iv) actions taken by regulatory authorities; (v) changes in trading
patterns significantly impacting overall dry bulk tonnage requirements; (vi)
changes in the typical seasonal variations in dry bulk charter rates; (vii)
changes in the cost of other modes of bulk commodity transportation; (viii)
changes in general domestic and international political conditions; (ix) changes
in the condition of the Company's vessels or applicable maintenance or
regulatory standards (which may affect, among other things, our anticipated dry
docking costs); (x) and other factors listed from time to time in our filings
with the Securities and Exchange Commission, including, without limitation, our
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission. We disclaim any intent or obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise, except as may be required under applicable securities laws.
GENERAL
We are Eagle Bulk Shipping Inc., a newly formed Marshall Islands
corporation headquartered in New York City. We are the largest U.S. based owner
of Handymax dry bulk vessels. Handymax dry bulk vessels range in size from
35,000 to 60,000 dwt and transport a broad range of major and minor bulk
cargoes, including iron ore, coal, grain, cement and fertilizer, along worldwide
shipping routes. We own a modern fleet of Handymax dry bulk vessels that we have
purchased or agreed to purchase from unrelated third parties. As of June 30,
2005, we had taken delivery of nine vessels and in July 2005 we took delivery of
our tenth vessel. We expect to take delivery of the remaining eleventh vessel in
August 2005. Our 11 vessel fleet has a combined carrying capacity of 540,816 dwt
and an average age of six years as of June 2005, as compared to an average age
for the world Handymax dry bulk fleet of over 15 years.
We are focused on maintaining a high quality fleet that is concentrated
primarily in one vessel type - Handymax dry bulk carriers. Our strategy is to
charter our vessels primarily pursuant to one to three year time charters to
allow us to take advantage of the stable cash flow and high utilization rates
that are associated with medium to long-term time charters.
Results of Operations
We commenced vessel operations during the three months ended June 30, 2005.
Accordingly, no comparisons can be made with previous periods.
Factors Affecting Our Results of Operations
We believe that the important measures for analyzing future trends in our
results of operations consist of the following:
Three Months ended June
-----------------------
30, 2005
--------
Ownership Days....................... 490
Available Days....................... 479
Operating Days....................... 477
Fleet Utilization.................... 99.6%
o 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.
o 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 vessel familiarization upon acquisition, scheduled
repairs or repairs under guarantee, vessel upgrades or special surveys
and the aggregate amount of time that we spend positioning our
vessels. The shipping industry uses available days to measure the
number of days in a period during which vessels should be capable of
generating revenues.
o 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.
o 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.
o TCE rates. We define TCE rates as our voyage and 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 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.
Voyage and Time Charter Revenue
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 the daily
charter hire rates that our vessels earn under charters, which, in turn, are
affected by a number of factors, including:
o the duration of our charters;
o our decisions relating to vessel acquisitions and disposals;
o the amount of time that we spend positioning our vessels;
o the amount of time that our vessels spend in dry-dock undergoing
repairs;
o maintenance and upgrade work;
o the age, condition and specifications of our vessels;
o levels of supply and demand in the dry bulk shipping industry; and
o other factors affecting spot market charter rates for dry bulk
carriers.
As is common in the shipping industry, we pay commissions ranging from
1.25% to 6.25% 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.
Net revenues for the three month period ended June 30, 2005 of $10,615,879
included brokerage commissions of $665,532 and $205,000 in amortization of
prepaid charter revenue. For the period ended June 30, 2005, 100% of our
revenues were earned from time charters.
Voyage Expenses
When we employ our vessels on voyage charters, we will incur expenses that
include port and canal charges, bunker (fuel oil) expenses and commissions. Port
and canal charges and bunker expenses primarily increase in periods during which
vessels are employed on voyage charters because these expenses are for the
account of the vessels. We expect that port and canal charges and bunker
expenses will represent a relatively small portion of our vessels' overall
expenses because all our vessels are currently employed under time charters that
require the charterer to bear all of those expenses.
Vessel Expenses
For the three month period ended June 30, 2005, total vessel expenses
incurred amounted to $3,066,188. These costs include $1,513,339 in vessel
operating costs, $1,187,551 in delivery and pre-operating costs associated with
the take-over of the acquired vessels including providing the newly acquired
vessels with initial provisions and stores, and $365,298 in costs associated
with vessel onboard inventory stocks.
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, other miscellaneous expenses, and technical
management fees. With regard to vessel operating expenses, we have entered into
management agreements for each of our vessels with V. Ships Management Ltd, our
independent technical manager. In conjunction with our management, V. Ships has
established an operating expense budget for each vessel and performs the
technical management of our vessels. All deviations from the budgeted amounts
are for our account.
We pay our technical manager, V. Ships, a fixed management fee of $8,333
per month for each vessel in our operating fleet in respect of which it provides
technical management services. These fees are included in Vessel Operating
Expenses. Technical management services include 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 dry-docking and repairs, purchasing stores, supplies, spare parts and
new equipment, appointing supervisors and technical consultants and providing
technical support.
Our vessel operating expenses, which generally represent costs under the
vessel operating budgets, cost of insurance and vessel registry and other
regulatory fees, will increase with the enlargement of our fleet. Other factors
beyond our control, some of which may affect the shipping industry in general,
may also cause these expenses to increase, including, for instance, developments
relating to market prices for insurance and lubricants.
Depreciation and Amortization
The cost of our vessels is depreciated on a straight-line basis over the
expected useful life of each vessel. Depreciation is based on the cost of the
vessel less its estimated residual value. We estimate the useful life of our
vessels to be 28 years from the date of initial delivery from the shipyard to
the original owner. Furthermore, we estimate the residual values of our vessels
to be $150 per lightweight ton, which we believe is common in the dry bulk
shipping industry. Our depreciation charges will increase as our fleet is
enlarged which will also lead to an increase of ownership days. For the three
month period ended June 30, 2005, total depreciation charges recorded amounted
to $2,020,572.
Amortization expense for the quarter ended June 30, 2005 amounted to
$1,130,713 which relates to financing costs associated with the existing term
loan.
General and Administrative Expenses
General and Administrative Expenses for the three-months ended June 30,
2005 amounted to $663,034. We incur general and administrative expenses, which
include recurring costs relating to our onshore vessel related expenses such as
legal and professional expenses and administrative and other expenses. These
recurring administrative costs which amounted to $363,327 in the three months
ended June 30, 2005 include payroll and expenses relating to our executive
officers, office rent and expenses and directors and officers insurance. We
expect general and administrative expenses to increase as our fleet is enlarged.
General and Administrative expenses also include non-recurring costs relating to
the formation of the our company and related advisory costs, and these costs
amounted to $299,707 for the quarter ended June 30, 2005.
Financial Advisory Fees
We have recorded an expense of $5,175,046 in the second quarter of 2005 in
connection with an investment banking and financial advisory fee paid to Kelso &
Company, L.P. ("Kelso") and certain non-management affiliates of Eagle Ventures
LLC pursuant to the financial advisory agreement that we entered into with Kelso
& Company, L.P. This fee was payable in connection with Kelso assisting us in
our formation, strategic planning, obtaining debt and equity financing and
acquiring vessels. In addition, we have recorded an expense of $1,000,000 in
connection with a payment made to Kelso in order to terminate certain of our
obligations under the financial advisory agreement including our obligation to
pay an annual $500,000 fee thereunder.
Non-Cash Compensation Expense
Members of the Company's management have been awarded profits interests
(and in the future others having senior management and/or strategic
planning-type responsibilities may be awarded similar profits interests) in
Eagle Ventures LLC that may entitle such persons to an economic interest of up
to 16.7% on a fully diluted basis (assuming all profits interests were vested)
in any appreciation in the value of the assets of Eagle Ventures LLC (including
shares of the Company's common stock owned by Eagle Ventures LLC when sold). In
all, one-fourth of the profits interests are service-related and vest in equal
three-month installments over four years (the vesting of such service-related
profits interests is subject to continued employment with Eagle Ventures LLC or
its affiliates at the end of each such three-month period), and the remaining
profits interests are performance-related. Pursuant to an amendment to the Eagle
Ventures LLC limited liability company agreement, 44% of the performance-related
profits interests became fully vested upon the consummation of the Company's
initial public offering (or an economic interest in approximately 6.2% of the
appreciation of the assets of Eagle Ventures LLC on a fully diluted basis taking
into account the vesting of only such profits interests), and the remaining
portion of the performance-related profits interests will vest based on
affiliates of Kelso achieving certain multiples on their original indirect
investment in the Company, subject to an internal rate of return minimum.
Retention of the non-accelerated performance-related profits interests is
subject to continued employment with Eagle Ventures LLC or its affiliates.
The vesting of profits interests may be further accelerated in the future
by the compensation committee of Eagle Ventures LLC. These profits interests
will dilute only the interests of owners of Eagle Ventures LLC, and will not
dilute direct holders of the Company's common stock. However, the Company's
income statement reflects non-cash charges for compensation related to the
profits interests.
For the quarter ended June 30, 2005, the Company recorded a non-cash
compensation charge of $7.6 million. Of that charge, approximately $7.2 million
relates to the portion of the performance-related profits interests that vested
upon consummation of the Company's initial public offering. The remaining $0.4
million non-cash compensation charge was taken as a result of the
service-related and non-accelerated performance-related profits interests. The
Company is recording compensation charges relating to the service-related
profits interests over four years. The non-accelerated performance related
profits interests vest based on affiliates of Kelso achieving certain multiples
on their original investment in the assets of Eagle Ventures LLC through the
receipt of distributions from Eagle Ventures LLC. The vesting occurs ratably
upon achieving a return on investment ranging from two times to four times the
original investment. To calculate the non-cash compensation charge that is
reflected in the Company's income statement for the non-accelerated
performance-related profits interests, the Company has assumed that these
profits interests will vest four years after their issuance. The Company is
therefore recording compensation charges relating to such profits interests over
four years.
If the September 30, 2005 stock price is $13.50 per share (the stock price
at June 30, 2005), the total non-cash compensation charge for the third quarter
of 2005 for the service-related profits interests and performance-related
profits interest would be approximately $0.8 million.
The non-cash compensation charge will be recorded as an expense over the
estimated service period in accordance with SFAS No. 123(R). The non-cash
compensation charges will be based on the fair value of the profits interests
which will be "marked to market" at the end of each reporting period. The impact
of any changes in the estimated fair value of the profits interests will be
recorded as a change in estimate cumulative to the date of change. The impact on
the amortization of the compensation charge of any changes to the estimated
vesting periods for the performance-related profits interests will be adjusted
prospectively as a change in estimate.
Interest and Finance Costs
Three Months
ended June 30,
2005
--------------
Loan Interest ..................................... $1,353,306
Commitment Fees ................................... 141,355
Eagle Ventures Note ............................... 608,222
Amortization of Arrangement Fees .................. 1,130,713
----------
Total Interest Expense ............................ $3,233,596
==========
At the time of our initial public offering, we had term loan facilities
with aggregate principal balances of $185,950,000. Concurrent with the initial
public offering, we repaid $125,950,000 of the principal balance with part of
the proceeds of the offering. Subsequent to the public offering, we borrowed
$28,500,000 to fund the balance of the purchase price of the M/V Peregrine. From
the facility's inception through June 30, 2005, interest rates ranged from 4.10%
to 4.30%, including margins of 0.95% over the LIBOR. The weighted average
effective interest rate was 4.15%.
During the three month period ended June 30, 2005, we incurred $608,222 in
interest costs associated with the promissory note in the amount of $58,730,434
issued in favor of Eagle Ventures LLC. Concurrent with the initial public
offering, this note along with related interest charges was paid in full.
Subsequent to June 30, 2005, the outstanding balance of $88,500,000 under
the term loan facility was refinanced with a new ten year $330,000,000 credit
facility. Upon receiving the commitment letter for the new credit facility we
have paid $150,000 towards facility arrangement fees which is recorded under
Deferred Financing Costs. Subsequent to June 30, 2005, we took delivery of our
tenth vessel, the M/V Sparrow. The acquisition was funded in part with
borrowings of $30,600,000 under the new credit facility. We expect to incur
interest expense and additional financing costs under our new credit facility in
connection with debt incurred to finance future vessel acquisitions.
We have entered into interest rate swaps to effectively convert a portion
of our debt from a floating to a fixed-rate basis. The swaps are designated and
qualify as cash flow hedges. As of June 30, 2005 we have entered into an
interest rate swap contract for a notional amount of $100,000,000. This contract
commences in September 2005 and matures in September 2010. Exclusive of a margin
of 0.95%, the Company will pay 4.22% fixed-rate interest and receive
floating-rate interest amounts based on three month LIBOR settings (for a term
equal to the swaps' reset periods). We record the fair value of the interest
rate swap as an asset or liability in our financial statements. The effective
portion of the swap is recorded in accumulated other comprehensive income
(loss). Accordingly, $525,603 has been recorded in Other Assets in our financial
statements as of June 30, 2005.
In July 2005, we entered into an interest rate swap agreement with a
notional amount of $30,000,000 which commences in September 2005 and matures in
September 2010. Exclusive of a margin of 0.95%, the Company will pay 4.54%
fixed-rate interest and receive floating-rate interest amounts based on three
month LIBOR settings.
EBITDA
EBITDA represents operating earnings before extraordinary items,
depreciation and amortization, interest expense, and income taxes, if any.
EBITDA is included because it is used by certain investors to measure a
company's financial performance. EBITDA is not an item recognized by GAAP and
should not be considered a substitute for net income, cash flow from operating
activities and other operations or cash flow statement data prepared in
accordance with accounting principles generally accepted in the United States or
as a measure of profitability or liquidity. EBITDA is presented to provide
additional information with respect to the Company's ability to satisfy its
obligations including debt service, capital expenditures, and working capital
requirements. While EBITDA is frequently used as a measure of operating results
and the ability to meet debt service requirements, the definition of EBITDA used
here may not be comparable to that used by other companies due to differences in
methods of calculation.
Our new credit facility permits us to pay dividends in amounts up to our
earnings before extraordinary or exceptional items, interest, taxes,
depreciation and amortization (Credit Agreement EBITDA), less the aggregate
amount of interest incurred and net amounts payable under interest rate hedging
agreements during the relevant period and an agreed upon reserve for
dry-docking. Therefore, we believe that this non-GAAP measure is important for
our investors as it reflects our ability to pay dividends. The following table
is a reconciliation of net income, as reflected in the condensed consolidated
statements of operations, to the Credit Agreement EBITDA:
Three Months ended
June 30, 2005
------------------
Net Loss ........................................... $(12,088,544)
Interest Expense ................................... 3,233,596
Depreciation ....................................... 2,020,572
------------
EBITDA ............................................. (6,834,376)
Adjustments for Exceptional Items:
Management and Other Fees to Affiliates (1) ........ 6,175,046
Non-cash Compensation Expense (2) .................. 7,640,847
------------
Credit Agreement EBITDA ............................ $6,981,517
============
(1) One time charge (see Note 8 of our consolidated financial statements)
(2) Management's participation in profits interests in Eagle Ventures LLC
(see Note 11 of our consolidated financial statements)
Effects of Inflation
The Company does not believe that inflation has had or is likely, in the
foreseeable future, to have a significant impact on vessel operating expenses,
dry-docking expenses and general and administrative expenses.
Liquidity and Capital Resources
Prior to our initial public offering, we funded our initial capital
requirements with equity contributions, borrowings from Eagle Ventures and
borrowings under our existing credit facility. As of June 30, 2005, Eagle
Ventures had provided us with $40,843,662 in equity contributions, $58,730,404
in debt financing in the form of a promissory note, and we borrowed a total of
$214,450,000 under our existing term loan facility in connection with vessel
acquisitions. Our initial public offering on June 23, 2005 raised a total of
$201,600,000, providing us with net proceeds of $186,529,290. We used the net
proceeds from that offering primarily to repay the Eagle Ventures' promissory
note in full along with accrued interest of $608,222, to repay $125,950,000 of
outstanding principal under the existing term loan facility and to pay a
$1,000,000 one time fee to Kelso to terminate certain of our obligations under a
financial advisory agreement with Kelso & Company, L.P. We paid Kelso a
$5,000,000 financial advisory fee and paid $175,046 to certain non-management
affiliates of Eagle Ventures LLC pursuant to our financial advisory agreement
with Kelso. In connection with our initial public offering, we entered into a
new credit facility with our lender to refinance the remaining portion of our
outstanding indebtedness under the term loan facility, fund vessel acquisitions
and provide funds for working capital purposes.
As of June 30, 2005, our cash balance was $10,970,963. In addition,
$4,000,000 in cash deposits are maintained with our lender for loan compliance
purposes and this amount is recorded in Restricted Cash in our financial
statements. We anticipate that internally generated cash flow and, if necessary,
borrowings under our new credit facility will be sufficient to fund the
operations of our fleet, including our working capital requirements, for at
least the next 12 months. We have the ability to borrow up to $10 million under
our new credit facility for working capital purposes.
It is our intention to fund our future acquisition related capital
requirements initially through borrowings under our new credit facility and to
repay all or a portion of such borrowings from time to time with the net
proceeds of equity issuances. We believe that funds will be available to support
our growth strategy, which involves the acquisition of additional vessels, and
will allow us to pay dividends to our stockholders as contemplated by our
dividend policy. Our policy is to declare quarterly dividends to stockholders in
February, April, July and October in amounts that are substantially equal to our
available cash from operations during the previous quarter less any cash
reserves for dry-docking and working capital. Depending on market conditions in
the dry bulk shipping industry and acquisition opportunities that may arise, we
may be required to obtain additional debt or equity financing which could affect
our dividend policy.
New Credit Facility
Subsequent to June 30, 2005, we entered into a new revolving credit
facility. We used the facility to refinance indebtedness outstanding under our
existing credit facility and fund vessel acquisitions and working capital
requirements.
The new credit facility has a facility limit of $330 million and a term of
ten years. We will be permitted to borrow up to $150 million (i) to refinance up
to $88.5 million of the indebtedness that we incurred under our existing credit
facility to pay the balance of the purchase for the nine vessels that we have
already acquired and (ii) to pay up to the entire balance of the purchase price
of the two remaining vessels that we expect to acquire between July and August
2005. We are permitted to borrow up to $180 million, which amount includes
amounts borrowed for working capital purposes as described below, in connection
with future acquisitions of dry bulk carriers between 25,000 dwt and 85,000 dwt
that are not older than 10 years. We will also be permitted to borrow up to $10
million at any one time for working capital purposes during an initial period of
18 months from the first draw down date, after which time our ability to borrow
amounts for working capital purposes will be subject to review and reapproval on
an annual basis.
Under the terms of the revolving credit agreement, the facility will be
available in full for five years and there are no principal repayment
obligations for the first five years. Over the remaining period of five years,
the facility will reduce in semi-annual amounts of $20.5 million with a final
reduction of $125 million occurring simultaneously with the last semi-annual
reduction. The facility bears interest at LIBOR plus a margin of 0.95%. Our
Company incurs a fee of 0.4% per annum on the unused portion of the revolving
loan on a quarterly basis. Our Company also incurred an arrangement fee of
$1,200,000 of which $150,000 was paid upon our acceptance of the commitment
letter and recorded under Deferred Financing Costs in the financial statements
as of June 30, 2005. The balance of the arrangement fee was paid upon the
closing of the facility subsequent to the period ended June 30, 2005.
Our ability to borrow amounts under the new credit facility will be subject
to the satisfaction of certain customary conditions precedent and compliance
with terms and conditions included in the loan documents. In connection with
vessel acquisitions, amounts borrowed may not exceed 60% of the value of the
vessels securing our obligations under the credit facility. Our ability to
borrow such amounts, in each case, are subject to our lender's approval of the
vessel acquisition. Our lender's approval will be based on the lender's
satisfaction of our ability to raise additional capital through equity issuances
in amounts acceptable to our lender and the proposed employment of the vessel to
be acquired.
Our obligations under the credit facility are secured by a first priority
mortgage on each of the vessels in our fleet and such other vessels that we may
from time to time include with the approval of our lender, a first assignment of
all freights, earnings, insurances and requisition compensation. Our new credit
facility also limits our ability to create liens on our assets in favor of other
parties. We may grant additional security from time to time in the future.
The new credit facility will contain financial covenants requiring us,
among other things, to ensure that:
o the aggregate market value of the vessels in our fleet that secure our
obligations under the new credit facility, as determined by an
independent shipbroker on a charter free basis, at all times exceeds
130% of the aggregate principal amount of debt outstanding under the
new credit facility and the notional or actual cost of terminating any
related hedging arrangements;
o our total assets minus our debt will not be less than $150 million;
o our EBITDA, as defined in the credit agreement, will at all times be
not less than 2x the aggregate amount of interest incurred and net
amounts payable under interest rate hedging arrangements during the
relevant period; and
o we maintain with the lender $500,000 per vessel in addition to an
amount adequate to meet anticipated capital expenditures for the
vessel over a 12 month period.
For the purposes of the new credit facility, our "total assets" are defined
to include our tangible fixed assets and our current assets, as set forth in our
consolidated financial statements, except that the value of any vessels in our
fleet that secure our obligations under the new credit facility will be measured
by their fair market value rather than their carrying value on our consolidated
balance sheet.
Our new credit facility permits us to pay dividends in amounts up to our
earnings before extraordinary or exceptional items, interest, taxes,
depreciation and amortization (EBITDA), less the aggregate amount of interest
incurred and net amounts payable under interest rate hedging agreements during
the relevant period and an agreed upon reserve for dry-docking, provided that
there is not a default or breach of loan covenant under the credit facility and
the payment of the dividends would not result in a default or breach of a loan
covenant.
Contractual Obligations
Capital Expenditures
Our current commitments for capital expenditures for vessel acquisitions
relate to our two undelivered Handymax dry bulk vessels. We have paid deposits
of $7,018,100 towards the purchase price for the two vessels aggregating
$70,181,000. Bank financing and operating cash will provide the remaining
purchase price of $63,162,900 to be paid. One vessel, the M/V Sparrow, was
delivered in July 2005 and the acquisition was funded in part with borrowings of
$30,600,000 under the new credit facility. The other vessel, the M/V Osprey I,
is expected to be delivered in August 2005 and we intend to finance the balance
of the purchase price for that vessel with additional borrowings under our new
credit facility and cash on hand.
In addition to the vessel acquisitions, we have spent $640,000 on
improvements to some of our acquired vessels. These improvements are expected to
enhance the revenue earning capabilities of these vessels.
In addition to acquisitions that we may undertake in future periods, other
major capital expenditures include funding the Company's maintenance program of
regularly scheduled dry docking necessary to preserve the quality of our vessels
as well as to comply with international shipping standards and environmental
laws and regulations. Although the Company has some flexibility regarding the
timing of its dry docking, the costs are relatively predictable. Management
anticipates that vessels that are younger than 15 years are to be dry docked
every five years, while vessels 15 years or older are to be dry docked every 2.5
years. Over the next four quarters, we will incur additional capital
expenditures when four of our 11 vessels undergo special or intermediate
surveys. We believe that the estimated aggregate cost of these special survey
and dry-dockings will be approximately $0.9 million. Funding of these
requirements is anticipated to be met with cash from operations. We anticipate
that this process of recertification will require us to reposition these vessels
from a discharge port to shipyard facilities, which we believe will reduce our
available days and operating days during that period.
The following is a breakdown of the estimated dry-dock costs for the next
four quarters with the allocation of anticipated off-hire days:
-----------------------------------------------------------
Quarter Ending Off-hire Days Projected Costs
-------------- ------------- ---------------
September 30, 2005........ -- --
December 31, 2005......... -- --
March 31, 2006............ 30 $0.45 million
June 30, 2006............. 30 $0.45 million
-----------------------------------------------------------
Contracted Time Charter Revenue
We have time charter contracts currently for all 11 vessels. The contracted
time charter revenue schedule, as shown below, reduces future contracted revenue
for any estimated off-hire days relating to dry-docks.
The following table represents certain information about the Company's
revenue earning charters:
- --------------------------------------------------------------------------------
Time Charter Expiration (1) Daily Time
--------------------------- ----------
Vessel Delivered to Charter Hire
- ------ ------------ ------------
Charterer Rate
--------- ----
Cardinal April 19, 2005 March 2007 to June 2007 $26,500
Condor April 30, 2005 November 2006 to March 2007 $24,000
Falcon April 22, 2005 February 2008 to June 2008 $20,950
Griffon June 3, 2005 February 2006 to April 2006 $28,000
Harrier April 21, 2005 March 2007 to June 2007 $23,750
Hawk I April 28, 2005 March 2007 to June 2007 $23,750
Kite May 10, 2005 March 2006 to May 2006 $25,000
Osprey I Expected August May 2008 to September 2008 $21,000
2005
Peregrine July 1, 2005 October 2006 to January 2007 $24,000
Shikra April 30, 2005 July 2006 to November 2006 $22,000
Sparrow July 20, 2005 November 2006 to Feb 2007 $22,500
- ----------
(1) The date range provided represents the earliest and latest date on which
the charterer may redeliver the vessel to the Company upon the termination
of the charter.
Off-balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Interest Rate Risk
The Company is exposed to market risk from changes in interest rates, which
could impact its results of operations and financial condition. The Company's
objective is to manage the impact of interest rate changes on earnings and cash
flows of its borrowings. The Company expects to manage this exposure to market
risk through its regular operating and financing activities and, when deemed
appropriate, through the use of derivative financial instruments. The Company
expects to use interest rate swaps to manage net exposure to interest rate
changes related to its borrowings and to lower its overall borrowing costs.
As of June 30, 2005, the Company's debt consisted of $88,500,000 in term
loans under bank mortgage agreements at a margin plus variable rates above the
LIBOR. From the facility's inception through June 30, 2005, rates ranged from
4.10% to 4.30% (including margins). The weighted average effective interest
rates was 4.15%.
The Company entered into interest rate swaps to effectively convert a
portion of its debt from a floating to a fixed-rate basis. The swaps are
designated and qualify as cash flow hedges. As of June 30, 2005 the Company has
entered into an interest rate swap contract for a notional amount of
$100,000,000. This contract commences in September 2005 and matures in September
2010. Exclusive of a margin of 0.95%, the Company will pay 4.22% fixed-rate
interest and receive floating-rate interest amounts based on three month LIBOR
settings (for a term equal to the swaps' reset periods). The Company records the
fair value of the interest rate swap as an asset or liability on the balance
sheet. The effective portion of the swap is recorded in accumulated other
comprehensive income (loss). At June 30, 2005, the Company recorded an asset of
$525,603 which is included in Other Assets in the accompanying balance sheet.
In July 2005, the Company entered into an interest rate swap agreement with
a notional amount of $30,000,000 which commences in September 2005 and matures
in September 2010. Exclusive of a margin of 0.95%, the Company will pay 4.54%
fixed-rate interest and receive floating-rate interest amounts based on three
month LIBOR settings.
Currency and Exchange Rates
We generate all of our revenues in U.S. dollars. The majority of our
operating expenses and the entirety of our management expenses are in U.S.
dollars. We do not intend to use financial derivatives to mitigate the risk of
exchange rate fluctuations.
Item 4. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures designed to ensure that
information required to be disclosed in reports filed under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, summarized
and processed within time periods specified in the SEC's rules and forms. As of
the end of the period covered by this report (the "Evaluation Date"), we carried
out an evaluation, under the supervision and with the participation of our
management, including our chief executive officer and our chief financial
officer, of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).
Based upon this evaluation, our chief executive officer and our chief financial
officer concluded that, as of the Evaluation Date, our disclosure controls and
procedures were effective.
During the last fiscal quarter, there were no changes in our internal
control over financial reporting that have materially affected, or are
reasonable likely to materially affect, our internal controls over financial
reporting.
PART II: OTHER INFORMATION
Item 1 - Legal Proceedings
We are not aware of any legal proceedings or claims to which we or our
subsidiaries are party or of which our property is subject. From time to time in
the future, we may be subject to legal proceedings and claims in the ordinary
course of business, principally personal injury and property casualty claims.
Those claims, even if lacking merit, could result in the expenditure by us of
significant financial and managerial resources.
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
(a) UNREGISTERED SALES OF EQUITY SECURITIES.
The Company is a holding company incorporated on March 23, 2005, under the
laws of the Republic of the Marshall Islands. Following incorporation, the
Company merged with Eagle Holdings LLC, a Marshall Islands limited liability
company formed on January 26, 2005, and became a wholly owned subsidiary of
Eagle Ventures LLC, a Marshall Islands limited liability company. Eagle Ventures
LLC is owned by Kelso Investments Associates VII, L.P. and KEP VI, LLC, both
affiliates of Kelso & Company, L.P., members of management and outside
investors. The merger was accounted for as a reorganization of entities under
common control. Immediately following the completion of the Company's initial
public offering, Eagle Ventures LLC owned approximately 47% of the Company's
outstanding common stock. Eagle Ventures LLC is 92.6% owned by affiliates of
Kelso & Company, L.P.
On March 31, 2005, in connection with our formation, we sold 250 shares of
our common stock, par value $.01 per share, to Eagle Ventures LLC for an
aggregate purchase price of $250. On March 31, 2005, in connection with the
merger of Eagle Holdings LLC with and into our Company, all of the issued and
outstanding membership interests in Eagle Holdings LLC (which were held by Eagle
Ventures LLC) were converted into and exchanged for, and we issued 250 shares of
our common stock, par value $.01 per share, to Eagle Ventures LLC. An additional
$21,384 was recorded as a subscription receivable. On June 14, 2005 the Company
effected a 25,500 for 1 stock split in the form of a stock dividend. As a result
of the stock split, Eagle Ventures LLC received, in the form of a stock
dividend, 12,749,500 additional shares of our common stock. As of March 31,
2005, Eagle Ventures LLC had made equity contributions to the Company (as
successor to Eagle Holdings LLC) of $40,822,278.
The sales of the above securities were exempt from the registration
requirements of the Securities Act, in reliance on Section 4(2) of the
Securities Act, Regulation D or Rule 701 promulgated thereunder, as transactions
by an issuer not involving a public offering or transactions pursuant to
compensatory benefit plans and contracts relating to compensation as provided
under Rule 701. There were no underwriters involved in connection with the sale
of the above securities.
On June 23, 2005, the Company completed its initial public offering by
issuing and selling to the public 14,400,000 common shares, par value $0.01 per
share, at a price to the public of $14.00 per share, raising gross proceeds of
$201,600,000 before deduction of underwriting discounts, commissions and
expenses of $15,070,710. These shares were issued on the basis of the prospectus
to which the Company's Registration Statement on Form S-1 initially filed with
the Securities and Exchange Commission on April 5, 2005, as amended, relates and
the foregoing transactions are described in greater detail therein. The managing
underwriters of the Company's initial public offering were UBS Securities LLC,
Bear Sterns & Co. Inc., Citigroup Global Markets Inc. and Credit Suisse First
Boston LLC.
(b) USE OF PROCEEDS. The Company used $185,228,656 of the net proceeds from the
offering to repay $125,950,000 of the indebtedness under the existing loan
facility and $59,338,656 owed to Eagle Ventures under a promissory note,
including accrued interest.
Except as otherwise noted above in this Item 2, none of the payments made
with the proceeds from the Company's initial public offering were direct or
indirect payments to directors, officers, general partners of the issuer or
their associates, to persons owning 10 percent or more of any class of equity
securities of the issuer or to affiliates of the issuer.
(c) WORKING CAPITAL RESTRICTIONS. A description of working capital
restrictions and other limitations on payment of dividends are set forth in Item
2 of Part I of this Form 10-Q.
Item 3 - Defaults upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 5 - Other Information
None.
Item 6 - Exhibits
EXHIBIT INDEX
Exhibit
Number Description
------------------------------------------------------------------------
3.1 Amended and Restated Articles of Incorporation of the
Company*
3.2 Amended and Restated Bylaws of the Company*
10.1 Form of Registration Rights Agreement*
10.2 Form of Management Agreement*
10.3 Form of Current Credit Facility Agreement*
10.4 Eagle Bulk Shipping Inc. 2005 Stock Incentive Plan*
10.5 Employment Agreement for Mr. Sophocles N. Zoullas*
10.6 Form of Second Amended and Restated Limited Liability
Company Agreement of Eagle Ventures LLC*
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) and 15d-14(a) of the Securities Exchange Act of
1934, as amended.
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) and 15d-14(a) of the Securities Exchange Act of
1934, as amended.
32.1 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350.
32.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350.
- ----------
* Incorporated by reference to the Company's Registration Statement filed on
Form S-1 (File No. 333-123817) with the Securities and Exchange Commission
on June 22, 2005.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EAGLE BULK SHIPPING INC.
- --------------------------------------------------------------------------------
(REGISTRANT)
Date: August 15, 2005
By: /s/Sophocles N. Zoullas
- --------------------------------------------------------------------------------
Sophocles N. Zoullas
Chairman of the Board and
Chief Executive Officer
Date: August 15, 2005
By: /s/Alan S. Ginsberg
- --------------------------------------------------------------------------------
Alan S. Ginsberg
Chief Financial Officer
and Treasurer
25083.0001 #594140