UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of September 2020
Commission File Number: 001-33869
(Translation of registrant’s name into English)
Star Bulk Carriers Corp.
c/o Star Bulk Management Inc.
40 Agiou Konstantinou Street,
15124 Maroussi,
Athens, Greece
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Attached as Exhibit 99.1 to this Form 6-K is a Management’s Discussion and Analysis of Financial Condition and Results of Operations and the unaudited interim condensed consolidated financial statements of the Company as of and for the six months ended June 30, 2019 and 2020.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Form 6-K, and the documents to which the Company refers in this Form 6-K, as well as information included in oral statements or other written statements made or to be made by the Company, contain “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act, with respect to our financial condition, results of operations and business and our expectations or beliefs concerning future events. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “projects,” “likely,” “would,” “could” and similar expressions or phrases may identify forward-looking statements.
All forward-looking statements involve risks and uncertainties. The occurrence of the events described, and the achievement of the expected results, depend on many events, some or all of which are not predictable or within our control. Actual results may differ materially from expected results.
In addition, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include:
• | general dry bulk shipping market conditions, including fluctuations in charterhire rates and vessel values; |
• | the strength of world economies; |
• | the stability of Europe and the Euro; |
• | fluctuations in interest rates and foreign exchange rates; |
• | changes in demand in the dry bulk shipping industry, including the market for our vessels; |
• | changes in our operating expenses, including bunker prices, dry docking and insurance costs; |
• | changes in governmental rules and regulations or actions taken by regulatory authorities; |
• | potential liability from pending or future litigation; |
• | general domestic and international political conditions; |
• | potential disruption of shipping routes due to accidents or political events; |
• | the availability of financing and refinancing; |
• | our ability to meet requirements for additional capital and financing to grow our business; |
• | the impact of our indebtedness and the restrictions in our debt agreements; |
• | vessel breakdowns and instances of off-hire; |
• | risks associated with vessel construction; |
• | potential exposure or loss from investment in derivative instruments; |
• | potential conflicts of interest involving our Chief Executive Officer, his family and other members of our senior management; |
• | our ability to complete acquisition transactions as and when planned; and |
• | the risk factors and other factors referred to in the Company’s reports filed with or furnished to the SEC. |
Consequently, all of the forward-looking statements we make in this document are qualified by the information contained or referred to herein, including, but not limited to, (i) the information contained under this heading and (ii) the information disclosed in the Company’s annual report on Form 20-F for the fiscal year ended 2019, filed with the SEC on March 27, 2020, as amended on April 2, 2020.
You should carefully consider the cautionary statements contained or referred to in this section in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. Except as required by law, the Company undertakes no obligation to update any of these forward-looking statements.
RISK FACTORS
Our significant business risks are described in Item 3.d. in our Annual Report on Form 20F, as filed with the SEC on March 27, 2020, as amended on April 2, 2020. You should be aware that these risk factors and other information may not describe every risk facing the Company. In addition to the risks disclosed in that filing, following are additional updates to our risk factor disclosures with respect to our business.
The Covid-19 pandemic has impacted the dry bulk shipping industry and could have a material adverse impact on our business and operations.
Since the beginning of the calendar year 2020, the outbreak of the Covid-19 pandemic has resulted in the implementation of numerous actions by governments and governmental agencies in an attempt to mitigate the spread of the virus, including travel bans, quarantines, and other emergency public health measures, and a number of countries implemented lockdown measures. Depending on the course of the Covid-19 pandemic, such measures could be newly imposed or reimposed in certain countries. These measures have resulted in a significant reduction in global economic activity and extreme volatility in the global financial markets. If the Covid-19 pandemic continues on a prolonged basis or becomes more severe, the adverse impact on the global economy and the rate environment for dry bulk and other cargo vessels may deteriorate further and our operations and cash flows may be negatively impacted. Relatively weak global economic conditions during periods of volatility have and may continue to have a number of adverse consequences for dry bulk and other shipping sectors, including, among other things:
• | low charter rates, particularly for vessels employed on short-term time charters or in the spot market; |
• | decreases in the market value of dry bulk vessels and limited second-hand market for the sale of vessels; |
• | limited financing for vessels; |
• | loan covenant defaults; and |
• | declaration of bankruptcy by certain vessel operators, vessel owners, shipyards and charterers. |
The Covid-19 pandemic and measures to contain its spread have negatively impacted regional and global economies and trade patterns in markets in which we operate, the way we operate our business, and the businesses of our charterers and suppliers. These negative impacts could continue or worsen, even after the pandemic itself diminishes or ends. Companies, including us, have also taken precautions, such as requiring employees to work remotely and imposing travel restrictions, while some other businesses have been required to close entirely.
Moreover, we face significant risks to our personnel and operations due to the Covid-19 pandemic. Our crews face risk of exposure to Covid-19 as a result of travel to ports in which cases of Covid-19 have been reported. Our shore-based personnel likewise face risk of such exposure, as we maintain offices in areas that have been impacted by the spread of Covid-19.
Measures against Covid-19 in a number of countries have restricted crew rotations on our vessels, which may continue or become more severe. As a result, in 2020, we have experienced and may continue to experience disruptions to our normal vessel operations caused by increased deviation time associated with positioning our vessels to countries in which we can undertake a crew rotation in compliance with such measures. Delays in crew rotations have led to issues with crew fatigue and may continue to do so, which may result in delays or other operational issues. We have had and expect to continue to have increased expenses due to incremental fuel consumption and days in which our vessels are unable to earn revenue in order to deviate to certain ports on which we would ordinarily not call during a typical voyage. We may also incur additional expenses associated with testing, personal protective equipment, quarantines, and travel expenses such as airfare costs in order to perform crew rotations in the current environment. In 2020, delays in crew rotations have also caused us to incur additional costs related to crew bonuses paid to retain the existing crew members on board and may continue to do so.
Finally, Covid-19 and measures against it have led to a highly difficult environment in which to dispose of vessels given difficulty to physically inspect vessels.
In addition, organizations across industries, including ours, are rightly focusing on their employees’ well-being, whilst making sure that their operations continue undisrupted and at the same time, adapting to the new ways of operating. As such employees are encouraged or even required to operate remotely which significantly increases the risk of cyber security attacks.
The continuation of the Covid-19 pandemic and one or more of the events described above could have a material adverse effect on our business, results of operations, cash flows and financial condition.
We rely on our information systems to conduct our business, and failure to protect these systems against security breaches could adversely affect our business and results of operations, including on our vessels. Additionally, if these systems fail or become unavailable for any significant period of time, our business could be harmed.
We rely on our computer systems and network infrastructure across our operations, including on our vessels. The safety and security of our vessels and efficient operation of our business, including processing, transmitting and storing electronic and financial information, are dependent on computer hardware and software systems, which are increasingly vulnerable to security breaches and other disruptions. Any significant interruption or failure of our information systems or any significant breach of security could adversely affect our business and results of operations.
Our vessels rely on information systems for a significant part of their operations, including navigation, provision of services, propulsion, machinery management, power control, communications and cargo management. We have in place safety and security measures on our vessels and onshore operations to secure our vessels against cyber-security attacks and any disruption to their information systems. However, these measures and technology may not adequately prevent security breaches despite our continuous efforts to upgrade and address the latest known threats. A disruption to the information system of any of our vessels could lead to, among other things, wrong routing, collision, grounding and propulsion failure.
Beyond our vessels, we rely on industry accepted security measures and technology to securely maintain confidential and proprietary information maintained on our information systems. However, these measures and technology may not adequately prevent security breaches. The technology and other controls and processes designed to secure our confidential and proprietary information, detect and remedy any unauthorized access to that information were designed to obtain reasonable, but not absolute, assurance that such information is secure and that any unauthorized access is identified and addressed appropriately. Such controls may in the future fail to prevent or detect, unauthorized access to our confidential and proprietary information. In addition, the foregoing events could result in violations of applicable privacy and other laws. If confidential information is inappropriately accessed and used by a third party or an employee for illegal purposes, we may be responsible to the affected individuals for any losses they may have incurred as a result of misappropriation. In such an instance, we may also be subject to regulatory action, investigation or liable to a governmental authority for fines or penalties associated with a lapse in the integrity and security of our information systems.
Our operations, including our vessels, and business administration could be targeted by individuals or groups seeking to sabotage or disrupt such systems and networks, or to steal data, and these systems may be damaged, shutdown or cease to function properly (whether by planned upgrades, force majeure, telecommunications failures, hardware or software break-ins or viruses, other cyber-security incidents or otherwise). For example, the information systems of our vessels may be subject to threats from hostile cyber or physical attacks, phishing attacks, human errors of omission or commission, structural failures of resources we control, including hardware and software, and accidents and other failures beyond our control. The threats to our information systems are constantly evolving, and have become increasingly complex and sophisticated. Furthermore, such threats change frequently and are often not recognized or detected until after they have been launched, and therefore, we may be unable to anticipate these threats and may not become aware in a timely manner of such a security breach, which could exacerbate any damage we experience.
We may be required to expend significant capital and other resources to protect against and remedy any potential or existing security breaches and their consequences. A cyber-attack could result in significant expenses to investigate and repair security breaches or system damages and could lead to litigation, fines, other remedial action, heightened regulatory scrutiny and diminished customer confidence. In addition, our remediation efforts may not be successful and we may not have adequate insurance to cover these losses.
The unavailability of the information systems or the failure of these systems to perform as anticipated for any reason could disrupt our business and could have a material adverse effect on our business, results of operations, cash flows and financial condition.
SIGNATURE
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.
Dated: September 30, 2020
COMPANY NAME | |||
By: | /s/ Simos Spyrou | ||
Name: | Simos Spyrou | ||
Title: | Co-Chief Financial Officer |
Exhibit Number |
Description | |
99.1 | Management’s Discussion and Analysis of Financial Condition and Results of Operations and our unaudited interim condensed consolidated financial statements of the Company as of and for the six months ended June 30, 2019 and 2020. |
Exhibit 99.1
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of operations of Star Bulk Carriers Corp. (“Star Bulk”) for the six-month periods ended June 30, 2019 and 2020. Unless otherwise specified herein, references to the “Company,” “we,” “us” or “our” shall include Star Bulk and its subsidiaries. You should read the following discussion and analysis together with the unaudited interim condensed consolidated financial statements and related notes included elsewhere herein. For additional information relating to our management’s discussion and analysis of financial conditions and results of operations, please see our Annual Report on Form 20-F for the year ended December 31, 2019, which was filed with the U.S. Securities and Exchange Commission (the “Commission”) on March 27, 2020, as amended on April 2, 2020 (the “2019 Annual Report”). Unless otherwise defined herein, capitalized words and expressions used herein shall have the same meanings ascribed to them in the 2019 Annual Report. This discussion includes forward-looking statements which, although based on assumptions that we consider reasonable, are subject to risks and uncertainties which could cause actual events or conditions to differ materially from those currently anticipated and expressed or implied by such forward-looking statements.
Overview
We are a global shipping company providing worldwide seaborne transportation solutions in the dry bulk sector. Our vessels transport major bulks, which include iron ore, coal and grain, and minor bulks which include bauxite, fertilizers and steel products. We were incorporated in the Marshall Islands on December 13, 2006 and on December 3, 2007, we commenced operations when we took delivery of our first vessel. We maintain offices in Athens, Oslo, New York, Limassol and Singapore. Our common shares trade on the Nasdaq Global Select Market under the symbol “SBLK.” Following, and in connection with, the Songa Vessel Purchase Transaction, as defined in the 2019 Annual Report, our common shares also traded on the Oslo Stock Exchange (“OSE”) (secondary listing) under the same ticker. On June 4, 2020 the OSE granted our request for delisting our common shares from the OSE. Our common shares were delisted from the OSE on August 3, 2020.
Our Fleet
As of September 29, 2020, our owned fleet consisted of 116 operating vessels with an aggregate carrying capacity of approximately 12.9 million dwt, consisting of Newcastlemax, Capesize, Post Panamax, Kamsarmax, Panamax, Ultramax and Supramax vessels. We believe our Company is the largest US listed dry bulk operator in terms of number vessels and deadweight tonnage.
The following tables present summary information relating to our fleet as of September 29, 2020:
Existing On the Water Fleet
Vessel Name | Vessel Type | Capacity (dwt.) | Year Built |
Date Delivered to Star Bulk | ||
1 | Goliath (1) | Newcastlemax | 209,537 | 2015 | July-15 | |
2 | Gargantua (1) | Newcastlemax | 209,529 | 2015 | April-15 | |
3 | Star Poseidon | Newcastlemax | 209,475 | 2016 | February-16 | |
4 | Maharaj (1) | Newcastlemax | 209,472 | 2015 | July-15 | |
5 | Star Leo | Newcastlemax | 207,939 | 2018 | May-19 | |
6 | Star Laetitia | Newcastlemax | 207,896 | 2017 | August-18 | |
7 | Star Ariadne | Newcastlemax | 207,812 | 2017 | March-17 | |
8 | Star Virgo | Newcastlemax | 207,810 | 2017 | March-17 | |
9 | Star Libra (1) | Newcastlemax | 207,765 | 2016 | June-16 |
10 | Star Sienna | Newcastlemax | 207,721 | 2017 | August-18 | |
11 | Star Marisa | Newcastlemax | 207,709 | 2016 | March-16 | |
12 | Star Karlie | Newcastlemax | 207,566 | 2016 | August-18 | |
13 | Star Eleni | Newcastlemax | 207,555 | 2018 | January-18 | |
14 | Star Magnanimus | Newcastlemax | 207,490 | 2018 | March-18 | |
15 | Debbie H | Newcastlemax | 206,861 | 2019 | May-19 | |
16 | Star Ayesha | Newcastlemax | 206,852 | 2019 | July-19 | |
17 | Katie K | Newcastlemax | 206,839 | 2019 | April-19 | |
18 | Leviathan | Capesize | 182,511 | 2014 | September-14 | |
19 | Peloreus | Capesize | 182,496 | 2014 | July-14 | |
20 | Star Claudine | Capesize | 181,258 | 2011 | July-18 | |
21 | Star Ophelia | Capesize | 180,716 | 2010 | July-18 | |
22 | Star Martha | Capesize | 180,274 | 2010 | October-14 | |
23 | Star Pauline | Capesize | 180,233 | 2008 | December-14 | |
24 | Pantagruel | Capesize | 180,181 | 2004 | July-14 | |
25 | Star Borealis | Capesize | 179,678 | 2011 | September-11 | |
26 | Star Polaris | Capesize | 179,546 | 2011 | November-11 | |
27 | Star Lyra | Capesize | 179,147 | 2009 | July-18 | |
28 | Star Janni | Capesize | 178,978 | 2010 | January-19 | |
29 | Star Marianne | Capesize | 178,906 | 2010 | January-19 | |
30 | Star Angie | Capesize | 177,931 | 2007 | October-14 | |
31 | Big Fish | Capesize | 177,662 | 2004 | July-14 | |
32 | Kymopolia | Capesize | 176,990 | 2006 | July-14 | |
33 | Star Triumph | Capesize | 176,343 | 2004 | December-17 | |
34 | Star Scarlett | Capesize | 175,800 | 2014 | August-18 | |
35 | Star Audrey | Capesize | 175,125 | 2011 | August-18 | |
36 | Big Bang | Capesize | 174,109 | 2007 | July-14 | |
37 | Star Paola | Mini-Capesize | 115,259 | 2011 | August-18 | |
38 | Star Eva | Mini-Capesize | 106,659 | 2012 | August-18 | |
39 | Amami | Post Panamax | 98,681 | 2011 | July-14 | |
40 | Madredeus | Post Panamax | 98,681 | 2011 | July-14 | |
41 | Star Sirius (1) | Post Panamax | 98,681 | 2011 | March-14 | |
42 | Star Vega (1) | Post Panamax | 98,681 | 2011 | February-14 | |
43 | Star Aphrodite | Post Panamax | 92,006 | 2011 | August-18 | |
44 | Star Piera | Post Panamax | 91,952 | 2010 | August-18 | |
45 | Star Despoina | Post Panamax | 91,945 | 2010 | August-18 | |
46 | Star Electra | Kamsarmax | 83,494 | 2011 | July-18 | |
47 | Star Angelina | Kamsarmax | 82,981 | 2006 | December-14 | |
48 | Star Gwyneth | Kamsarmax | 82,790 | 2006 | December-14 | |
49 | Star Kamila | Kamsarmax | 82,769 | 2005 | September-14 | |
50 | Star Luna | Kamsarmax | 82,687 | 2008 | July-18 | |
51 | Star Bianca | Kamsarmax | 82,672 | 2008 | July-18 | |
52 | Pendulum | Kamsarmax | 82,619 | 2006 | July-14 | |
53 | Star Maria | Kamsarmax | 82,598 | 2007 | November-14 | |
54 | Star Markella | Kamsarmax | 82,594 | 2007 | September-14 | |
55 | Star Danai | Kamsarmax | 82,574 | 2006 | October-14 | |
56 | Star Jeannette | Kamsarmax | 82,567 | 2014 | August-18 | |
57 | Star Georgia | Kamsarmax | 82,298 | 2006 | October-14 | |
58 | Star Sophia | Kamsarmax | 82,269 | 2007 | October-14 | |
59 | Star Mariella | Kamsarmax | 82,266 | 2006 | September-14 |
60 | Star Moira | Kamsarmax | 82,257 | 2006 | November-14 | |
61 | Star Nina | Kamsarmax | 82,224 | 2006 | January-15 | |
62 | Star Renee | Kamsarmax | 82,221 | 2006 | December-14 | |
63 | Star Nasia | Kamsarmax | 82,220 | 2006 | August-14 | |
64 | Star Laura | Kamsarmax | 82,209 | 2006 | December-14 | |
65 | Star Jennifer | Kamsarmax | 82,209 | 2006 | April-15 | |
66 | Star Mona | Kamsarmax | 82,188 | 2012 | July-18 | |
67 | Star Helena | Kamsarmax | 82,187 | 2006 | December-14 | |
68 | Star Astrid | Kamsarmax | 82,158 | 2012 | July-18 | |
69 | Star Alessia | Kamsarmax | 81,944 | 2017 | August-18 | |
70 | Star Calypso | Kamsarmax | 81,918 | 2014 | July-18 | |
71 | Star Charis | Kamsarmax | 81,711 | 2013 | March-17 | |
72 | Star Suzanna | Kamsarmax | 81,711 | 2013 | May-17 | |
73 | Mercurial Virgo | Kamsarmax | 81,545 | 2013 | July-14 | |
74 | Stardust | Kamsarmax | 81,502 | 2011 | July-18 | |
75 | Star Sky | Kamsarmax | 81,466 | 2010 | July-19 | |
76 | Star Lydia | Kamsarmax | 81,187 | 2013 | August-18 | |
77 | Star Nicole | Kamsarmax | 81,120 | 2013 | August-18 | |
78 | Star Virginia | Kamsarmax | 81,061 | 2015 | August-18 | |
79 | Star Genesis | Kamsarmax | 80,705 | 2010 | July-19 | |
80 | Star Flame | Kamsarmax | 80,448 | 2011 | July-19 | |
81 | Star Iris | Panamax | 76,466 | 2004 | September-14 | |
82 | Star Emily | Panamax | 76,417 | 2004 | September-14 | |
83 | Idee Fixe (1) | Ultramax | 63,458 | 2015 | March-15 | |
84 | Roberta (1) | Ultramax | 63,426 | 2015 | March-15 | |
85 | Laura (1) | Ultramax | 63,399 | 2015 | April-15 | |
86 | Kaley (1) | Ultramax | 63,283 | 2015 | June-15 | |
87 | Kennadi (1) | Ultramax | 63,262 | 2016 | January-16 | |
88 | Mackenzie (1) | Ultramax | 63,226 | 2016 | March-16 | |
89 | Star Apus (1) | Ultramax | 63,123 | 2014 | July-19 | |
90 | Star Wave (1) | Ultramax | 61,491 | 2017 | July-18 | |
91 | Star Challenger (1) | Ultramax | 61,462 | 2012 | December-13 | |
92 | Star Fighter (1) | Ultramax | 61,455 | 2013 | December-13 | |
93 | Star Lutas | Ultramax | 61,347 | 2016 | January-16 | |
94 | Honey Badger (1) | Ultramax | 61,320 | 2015 | February-15 | |
95 | Wolverine (1) | Ultramax | 61,292 | 2015 | February-15 | |
96 | Star Antares (1) | Ultramax | 61,258 | 2015 | October-15 | |
97 | Star Monica | Ultramax | 60,935 | 2015 | August-18 | |
98 | Star Acquarius | Ultramax | 60,916 | 2015 | July-15 | |
99 | Star Pisces (1) | Ultramax | 60,916 | 2015 | August-15 | |
100 | Star Glory | Supramax | 58,680 | 2012 | July-18 | |
101 | Star Pyxis (1) | Supramax | 56,615 | 2013 | August-19 | |
103 | Star Hydrus (1) | Supramax | 56,604 | 2013 | August-19 | |
105 | Diva | Supramax | 56,582 | 2011 | July-17 | |
102 | Star Cleo (1) | Supramax | 56,582 | 2013 | July-19 | |
104 | Star Centaurus (1) | Supramax | 56,559 | 2012 | September-19 | |
109 | Star Hercules (1) | Supramax | 56,545 | 2012 | July-19 | |
111 | Star Pegasus (1) | Supramax | 56,540 | 2013 | July-19 | |
107 | Star Cepheus (1) | Supramax | 56,539 | 2012 | July-19 |
108 | Star Columba (1) | Supramax | 56,530 | 2012 | July-19 | |
110 | Star Dorado (1) | Supramax | 56,507 | 2013 | July-19 | |
106 | Star Aquila (1) | Supramax | 56,506 | 2012 | July-19 | |
112 | Star Bright | Supramax | 55,783 | 2010 | October-18 | |
113 | Strange Attractor | Supramax | 55,742 | 2006 | July-14 | |
114 | Star Omicron | Supramax | 53,489 | 2005 | April-08 | |
115 | Star Zeta | Supramax | 52,994 | 2003 | January-08 | |
116 | Star Theta | Supramax | 52,425 | 2003 | December-07 | |
Total dwt: | 12,859,300 |
(1) |
Subject to a bareboat lease which meets the criteria of a financing transaction. See Note 6 and 15 to our consolidated financial statements included elsewhere herein.
Liquidity and Capital Resources
Our principal sources of funds have been cash from operations, equity provided by our shareholders through equity offerings, additional debt under secured credit facilities, debt securities or bareboat lease financings and proceeds from vessel sales. Our principal uses of funds have been capital expenditures to acquire our vessels and grow our fleet, maintain the quality of our vessels and comply with international shipping standards, environmental laws and regulations, fund working capital requirements, make principal and interest payments on outstanding indebtedness and make dividend payments when approved by the Board of Directors.
Our short-term liquidity requirements include paying operating costs, funding working capital requirements and the short-term equity portion of the cost of vessel acquisitions and vessel upgrades, interest and principal payments on outstanding indebtedness and maintaining cash reserves to strengthen our position against adverse fluctuations in operating cash flows. Our primary source of short-term liquidity is cash generated from operating activities, available cash balances and portions from debt and equity financings.
Our medium- and long-term liquidity requirements are funding the equity portion of newbuilding vessel installments and second hand vessel acquisitions, funding required payments under our vessel financing and other financing agreements and paying cash dividends when declared. Sources of funding for our medium and long-term liquidity requirements include cash flows from operations, new debt, or bareboat lease financings, equity issuances and vessel sales.
As of June 30, 2020, the Company has negative working capital of $101.0 million. As further discussed in Note 15 to our unaudited interim condensed consolidated financial statements, subsequent to June 30, 2020, we completed a number of refinancing transactions which as of the date of this report increased our cash balance by $113.5 million. In addition we continue to generate positive cash flows from operating activities.
As of June 30, 2020, we had $1,561.4 million of outstanding indebtedness under our outstanding credit facilities and debt securities, including our finance lease obligations and the 2022 Senior Notes, net of unamortized debt issuance costs, of which $220.1 million is scheduled to be repaid in the next twelve months. As of June 30, 2020, our cash balance was $107.6 million, including $7.5 million of legally restricted cash, due to cash collateral requirements contained in our loan agreements, and $22.6 million cash held as collateral for our open positions on freight derivatives and bunker swaps. As of December 31, 2019, our cash balance was $126.3 million, including $8.0 million of legally restricted cash, due to cash collateral requirements contained in our loan agreements, and $0.4 million cash held as collateral for our open positions on freight derivatives and bunker swaps. For further information relating to our loan agreements, 2022 Senior Notes, finance lease obligations and our commitments, please see Notes 7, 9 and 21 to our audited consolidated financial statements for the year ended December 31, 2019, included in our 2019 Annual Report, and Notes 6, 8 and 15 to our unaudited interim condensed consolidated financial statements for the six-month period ended June 30, 2020, included elsewhere herein.
Our debt agreements contain financial covenants and undertakings requiring us (or the borrowing entity) to maintain various ratios, a summary of these terms included in Note 9 of the Company’s consolidated financial statements for the year ended December 31, 2019, included in the 2019 Annual Report.
We may fund possible growth through our cash balances, operating cash flows, additional long-term borrowing, finance leases and the issuance of new equity. Our practice has been to acquire dry bulk vessels using a combination of funds from operations and bank debt and lease financing secured by mortgages on our dry bulk vessels, to the extent applicable. In the event that we determine to finance a portion of the purchase price for new vessel acquisitions with debt, and if conditions in dry bulk market deteriorate, we may not be able to obtain new borrowings on favorable terms or at all. Furthermore, our stock price and the stock prices of shipping companies in general have been volatile, and if adverse market conditions prevail, we may not be able to raise additional equity financing. Our business is capital intensive, and our future success will depend on our ability to maintain a high-quality fleet through the acquisition of newer dry bulk vessels and the selective sale of older dry bulk vessels. Such transactions will be principally subject to management’s expectation of future market conditions as well as our ability to acquire dry bulk vessels on favorable terms.
On March 11, 2020, the World Health Organization declared the 2019 Novel Coronavirus (the “Covid-19”) outbreak a pandemic. In response to the outbreak, many countries, ports and organizations, including those where we conduct a large part of our operations, have implemented measures to combat the outbreak, such as quarantines and travel restrictions. Such measures have and will likely continue to cause severe trade disruptions. The extent to which the Covid-19 pandemic will impact our results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the virus and the actions to contain or treat its impact, among others. Accordingly, an estimate of the impact cannot be made at this time.
Other Recent Developments
Please refer to Note 15 to our unaudited interim condensed consolidated financial statements, included elsewhere herein, for developments that took place after June 30, 2020.
Operating Results
Factors Affecting Our Results of Operations
We deploy our vessels on a mix of short to medium time charters or voyage charters, contracts of affreighment or in dry bulk carrier pools, according to our assessment of market conditions. We adjust the mix of these charters to take advantage of the relatively stable cash flow and high utilization of our fleet associated with medium to long-term time charters, or to profit from attractive spot charter rates during periods of strong charter market conditions, or to maintain employment flexibility that the spot market offers during periods of weak charter market conditions. The following table reflects certain operating data of our fleet, including our ownership days and TCE rates, which we believe are important measures for analyzing trends in our results of operations, for the periods indicated:
Six-month period ended June 30, | ||||||||
(TCE rates expressed in U.S. Dollars) | 2019 | 2020 | ||||||
Average number of vessels (1) | 107.2 | 116.0 | ||||||
Number of vessels (2) | 108 | 116 | ||||||
Average age of operational fleet (in years) (3) | 8.1 | 8.7 | ||||||
Ownership days (4) | 19,412 | 21,112 | ||||||
Available days (5) | 17,987 | 19,426 | ||||||
Charter-in days (6) | 3,208 | 726 | ||||||
Time Charter Equivalent Rate (TCE rate) (7) | $ | 10,880 | $ | 10,128 |
(1) |
Average number of vessels is the number of vessels that constituted our owned fleet for the relevant period, as measured by the sum of the number of days each operating vessel was a part of our owned fleet during the period divided by the number of calendar days in that period.
(2) |
As of the last day of the periods reported.
(3) |
Average age of our operational fleet is calculated as of the end of each period.
(4) |
Ownership days are the total calendar days each vessel in the fleet was owned by us for the relevant period, including vessels subject to bareboat leases which meet the criteria of a financing transaction.
(5) |
Available days for the fleet are the Ownership days after subtracting off-hire days for major repairs, dry docking or special or intermediate surveys and scrubber installation.
(6) |
Charter-in days are the total days that we charter-in vessels not owned by us.
(7) |
Represents the weighted average daily TCE rates of our operating fleet (including owned fleet and fleet under charter-in arrangements). TCE rate is a measure of the average daily net revenue performance of our vessels. Our method of calculating TCE rate is determined by dividing (a) TCE Revenues which consists of: voyage revenues (net of voyage expenses, charter-in hire expense, amortization of fair value of above/below market acquired time charter agreements and provision for onerous contracts, if any, as well as adjusted for the impact of realized gain/(loss) on forward freight agreements (“FFAs”) and bunker swaps) by (b) Available days for the relevant time period. Available days do not include the Charter-in days as per the relevant definitions provided above. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by the charterer under a time charter contract, as well as commissions. In the calculation of TCE Revenues, we also include the realized gain/(loss) on FFAs and bunker swaps as we believe that this method better reflects the chartering result of our fleet and is more comparable to the method used by our peers. TCE Revenues and TCE rate, which are non-GAAP measures, provide additional meaningful information in conjunction with voyage revenues, the most directly comparable GAAP measure, because they assist Company’s management in making decisions regarding the deployment and use of its vessels and because the Company believes that they provide useful information to investors regarding the Company's financial performance. TCE rate is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company's performance despite changes in the mix of charter types (i.e., voyage charters, time charters, bareboat charters and pool arrangements) under which its vessels may be employed between the periods. Our method of computing TCE Revenues and TCE rate may not necessarily be comparable to those of other companies due to differences in methods of calculation.
The following table reflects the calculation of our TCE rates as discussed in footnote (7) above. The table presents reconciliation of TCE Revenues to voyage revenues as reflected in the unaudited interim condensed consolidated statement of operations.
Six-month period ended June 30, | ||||||||
(In thousands of U.S. Dollars, except for TCE rates expressed in U.S. Dollars) | 2019 | 2020 | ||||||
Voyage revenues | $ | 324,282 | $ | 306,996 | ||||
Less: | ||||||||
Voyage expenses | (91,329 | ) | (115,072 | ) | ||||
Charter-in hire expenses | (44,442 | ) | (14,053 | ) | ||||
Realized gain/(loss) on FFAs/bunker swaps | 8,370 | 19,592 | ||||||
Amortization of fair value of below/above market acquired time charter agreements | (1,186 | ) | (718 | ) | ||||
Time charter equivalent revenues | 195,695 | 196,745 | ||||||
Available days | 17,987 | 19,426 | ||||||
Daily time charter equivalent rate (“TCE”) | $ | 10,880 | $ | 10,128 |
Voyage Revenues
Voyage revenues are driven primarily by the number of vessels in our operating fleet, the duration of our charters, the number of charter-in days, the amount of daily charter hire or freight rates that our vessels earn under time and voyage charters, respectively, which, in turn, are affected by a number of factors, including our decisions relating to vessel acquisitions and disposals, the number of vessels chartered-in, the amount of time that we spend positioning our vessels, the amount of time that our vessels spend in dry dock undergoing repairs, maintenance and upgrade work, the age, condition and specifications of our vessels, levels of supply and demand in the seaborne transportation market.
Vessels operating on time charters for a certain period of time provide more predictable cash flows over that period of time, but can yield lower profit margins than vessels operating in the spot charter market during periods characterized by favorable market conditions. Vessels operating in the spot charter market generate revenues that are less predictable, but may enable us to capture increased profit margins during periods of improvements in charter rates, although we would be exposed to the risk of declining vessel rates, which may have a materially adverse impact on our financial performance. If we employ vessels on period time charters, future spot market rates may be higher or lower than the rates at which we have employed our vessels on period time charters.
Voyage Expenses
Voyage expenses may include port and canal charges, agency fees, fuel (bunker) expenses and brokerage commissions payable to related and third parties. Voyage expenses are incurred for our owned and chartered-in vessels during voyage charters, ballast voyages or when the vessel is unemployed. Bunker expenses, port and canal charges primarily increase in periods during which vessels are employed on voyage charters because these expenses are paid by the owners. Our voyage expenses primarily consist of bunkers cost, port expenses and commissions paid in connection with the chartering of our vessels.
Charter-in hire expenses
Charter-in hire expenses represent hire expenses for chartering-in third and related party vessels, either under time charters or voyage charters.
Vessel Operating Expenses
Vessel operating expenses include crew wages and related costs, the cost of insurance and vessel registry, expenses relating to repairs and maintenance, the cost of spares and consumable stores, tonnage taxes, regulatory fees, technical management fees, lubricants and other miscellaneous expenses. Other factors beyond our control, some of which may affect the shipping industry in general, including for instance, developments relating to market prices for crew wages, lubricants and insurance, may also cause these expenses to increase.
Dry Docking Expenses
Dry docking expenses relate to regularly scheduled intermediate survey or special survey dry docking necessary to preserve the quality of our vessels as well as to comply with international shipping standards and environmental laws and regulations. Dry docking expenses can vary according to the age of the vessel and its condition, the location where the dry docking takes place, shipyard availability and the number of days the vessel is under dry-dock. We utilize the direct expense method, under which we expense all dry docking costs as incurred.
Depreciation
We depreciate our vessels on a straight-line basis over their estimated useful lives, which is determined to be 25 years from the date of their initial delivery from the shipyard. Depreciation is calculated based on a vessel’s cost less the estimated residual value.
General and Administrative Expenses
We incur general and administrative expenses, including our onshore personnel related expenses, directors and executives’ compensation, share based compensation, legal, consulting, audit and accounting expenses.
Management Fees
Management fees include fees paid to third and related parties providing mainly certain procurement services to our fleet.
(Gain) / Loss on Forward Freight Agreements and Bunker Swaps
From time to time, we may take positions in freight derivatives, including freight forward agreements (the “FFAs”) and freight options with an objective to utilize those instruments as economic hedges that are highly effective in reducing the risk on specific vessels trading in the spot market and to take advantage of short term fluctuations in the market prices. Upon the settlement, if the contracted charter rate is less than the average of the rates, as reported by an identified index, for the specified route and time period, the seller of the FFA is required to pay the buyer the settlement sum, being an amount equal to the difference between the contracted rate and the settlement rate, multiplied by the number of days in the specified period covered by the FFA. Conversely, if the contracted rate is greater than the settlement rate, the buyer is required to pay the seller the settlement sum. Our FFAs are settled on a daily basis through reputable exchanges such as London Clearing House (LCH) or Singapore Exchange (SGX). Customary requirements for trading in FFAs include the maintenance of initial and variation margins based on expected volatility, open position and mark to market of the contracts. Freight options are treated as assets or liabilities until they are settled. Any such settlements by us or settlements to us under FFAs or freight options are recorded under (Gain)/Loss on forward freight agreements and bunker swaps.
Also, from time to time, we may enter into bunker swap contracts to manage our exposure to fluctuations of bunker prices associated with the consumption of bunkers by our vessels. Bunker swaps are agreements between two parties to exchange cash flows at a fixed price on bunkers, where volume, time period and price are agreed in advance. Our bunker swaps are settled through reputable clearing houses.
The fair value of freight derivatives and bunker swaps are determined through Level 1 inputs of the fair value hierarchy (quoted prices from the applicable exchanges such as the London Clearing House (LCH) or the Singapore Exchange (SGX)). Our FFAs and bunker swaps do not qualify for hedge accounting and therefore unrealized gains or losses are recognized under (Gain)/Loss on forward freight agreements and bunker swaps.
Interest and Finance Costs
We incur interest expense and financing costs in connection with our outstanding indebtedness under our existing loan facilities (including finance leases) and the 2022 Notes. We also incurred financing costs in connection with establishing those facilities, which are presented as a direct deduction from the carrying amount of that debt liability and amortize them to interest and financing costs over the term of the underlying obligation using the effective interest method.
Interest Income
We earn interest income on our cash deposits with our lenders and other financial institutions.
Gain / (Loss) on Derivative Financial Instruments
We may enter into interest rate swap transactions to manage interest costs and risk associated with changing interest rates with respect to our variable interest loans and credit facilities. Interest rate swaps are recorded in the balance sheet as either assets or liabilities, measured at their fair value (Level 2), with changes in such fair value recognized in earnings under (gain)/loss on derivative financial instruments, unless specific hedge accounting criteria are met. When interest rate swaps are designated and qualify as cash flow hedges, the effective portion of the unrealized gains/losses from those swaps is recorded in Other Comprehensive Income / (Loss) while any ineffective portion is recorded as Gain/ (Loss) on derivative financial instruments.
Inflation
Inflation does not have a material effect on our expenses given current economic conditions. In the event that significant global inflationary pressures appear, these pressures would increase our operating, voyage, administrative and financing costs.
Results of Operations
The six-month period ended June 30, 2020 compared to the six-month period ended June 30, 2019
Voyage revenues net of Voyage expenses: Voyage revenues for the six months ended June 30, 2020 decreased to $307.0 million from $324.3 million in the corresponding period in 2019. Time charter equivalent revenues (“TCE Revenues”) (as defined above) were $196.7 million compared to $195.7 million for the corresponding period in 2019. TCE Revenues were positively impacted by an increase in realized gain on FFAs and bunker swaps of $19.6 million in the first six month period of 2020 compared to a realized gain of $8.4 million in the corresponding period in 2019, partially counterbalancing the negative impact of COVID-19 in the dry bulk market. As a result, the TCE rate for the first six month period of 2020 was $10,128 compared to $10,880 for the corresponding period in 2019.
Charter-in hire expenses: Charter-in hire expenses for the six months ended June 30, 2020 and 2019 were $14.1 million and $44.4 million, respectively. This decrease is attributable to the significant decrease in charter-in days from 3,208 in the first six month period of 2019 to 726 in the corresponding period in 2020.
Vessel operating expenses: For the six months ended June 30, 2020 and 2019, vessel operating expenses were $85.2 million and $78.1 million, respectively. This increase was primarily due to the increase in the average number of vessels to 116.0 from 107.2.
Dry docking expenses: During the first six months of 2020, we incurred $20.9 million dry docking expenses mainly attributable to 25 of our vessels that completed their periodic dry docking surveys within such period. During the first six month period of 2019, 12 of our vessels completed their periodic dry docking surveys expenses and we incurred $12.3 million dry docking expenses in connection therewith. Additionally, we incurred $16.4 million dry docking expenses in the same period of 2019 in connection with in-progress and upcoming dry dockings.
Depreciation: Depreciation expense increased to $70.0 million for the six-month period ended June 30, 2020, compared to $59.8 million for the six-month period ended June 30, 2019. The increase was mainly driven by the higher average number of vessels in 2020 compared to 2019 as well as due to the increase in the cost basis of our vessels due to the recent installation of scrubber equipment on 114 vessels.
Management fees: Management fees for the six month period ended June 30, 2020 and 2019 were $9.2 million and $8.2 million, respectively. The increase is attributable to the management agreements entered into in connection with the fleet we acquired during the third quarter of 2019.
General and administrative expenses: General and administrative expenses for the six month period ended June 30, 2020 were $15.0 million compared to $17.1 million in the corresponding period in 2019. The decrease is primarily attributable to the decrease in stock-based compensation expense to $1.2 million in the first six months of 2020 from $2.9 million in the first six months of 2019 affected also by the reversal of previously recognized cost of $1.2 million following the reassessment of the probability of achieving the performance conditions for some of our outstanding awards.
Impairment loss: For the six months ended June 30, 2019, impairment loss of $3.4 million was recognized in anticipation of the sale of the Star Anna and Star Gamma and their deliveries to their new owners in September 2019.
(Gain)/Loss on forward freight agreements and bunker swaps: For the six month period ended June 30, 2020, we incurred a gain on FFAs and bunker swaps of $19.5 million, consisting of a realized gain of $19.6 million and an unrealized loss of $0.1 million. For the six-month period ended June 30, 2019, (Gain)/Loss on FFAs and bunker swaps amounted to a $7.4 million gain, consisting of realized gain of $8.4 million and unrealized loss of $1.0 million.
Interest and finance costs net of interest and other income/(loss): Interest and finance costs net of interest and other income/ (loss) for the six months ended June 30, 2020 and 2019 were $37.9 million and $42.7 million, respectively. Despite the increase in the weighted average balance of our outstanding indebtedness to $1,597.3 million during the first six months of 2020 from $1,468.4 million during the first six months of 2019, the interest and finance costs net of interest and other income/ (loss) decreased due to the decrease in the average interest rate on our outstanding indebtedness, mainly driven by the refinancing of certain of our debt agreements, the swap agreements that we entered during the second quarter of 2020 and the lower LIBOR rates during the first six months of 2020.
Loss on debt extinguishment: During the six months ended June 30, 2020 and 2019, we recorded a $0.6 million and $1.6 million, respectively, loss on debt extinguishment representing expenses and the non-cash write-off of unamortized deferred finance charges in connection with the refinancing of certain lease and loan agreements.
Cash Flows
Net cash provided by operating activities
Net cash provided by operating activities for the six months ended June 30, 2020 and 2019 was $55.5 million and $7.6 million, respectively.
Despite the decrease in our operating income (excluding non-cash items) to $67.7 million during the six month period ended June 30, 2020 from $77.2 million during the corresponding period in 2019, our cash provided by operating activities increased in 2020 compared to 2019 due to (i) a net working capital inflow of $22.1 million compared to a net working capital outflow of $19.1 million during the first six months of 2019 and (ii) lower net interest expense for the first six months of 2020 compared to the corresponding period in 2019.
Net cash used in investing activities
Net cash used in investing activities for the six months ended June 30, 2020 and 2019 was $48.2 million and $132.1 million, respectively.
For the six months ended June 30, 2020, net cash used in investing activities consisted of $51.3 million paid in connection with the acquisition and installation of scrubber equipment and ballast water management systems for certain of our vessels, offset partially by insurance proceeds of $3.1 million.
For the six months ended June 30, 2019, net cash used in investing activities mainly consisted of (a) $93.2 million paid in connection with our newbuilding and newly acquired vessels and other capitalized expenses and (b) $64.6 million paid for the acquisition and installation of scrubber equipment and ballast water management systems for certain of our vessels, offset partially by proceeds from the sale of three vessels concluded during the period of $20.0 million and insurance proceeds of $5.7 million.
Net cash provided by financing activities
During the six months ended June 30, 2020, net cash used in financing activities was $25.9 million while during the six months ended June 30, 2019 net cash provided by financing activities was $7.0 million.
For the six months ended June 30, 2020, net cash used in financing activities mainly consisted of:
a) |
$149.1 million of proceeds from loan and lease financings including $53.8 million drawn under the HSBC Working Capital Facility;
offset by:
b) |
$93.4 million lease and debt repayments in connection with the regular amortization of outstanding vessel financings, $24.2 million repayment under the HSBC Working Capital Facility and $51.6 million early repayment due to the refinancing of certain of our finance agreements;
c) |
$0.9 million of financing fees paid in connection with the new financing agreements; and
d) |
$4.8 million of dividends paid in March 2020 for the fourth quarter of 2019.
For the six months ended June 30, 2019, net cash provided by financing activities consisted of:
a) |
$392.4 million of proceeds from financing, including financing from leases which were used to refinance certain lease and debt agreements and partly finance the delivery installments of our newbuildings and the cost of the newly acquired vessels; offset partially by:
b) |
$366.1 million lease and debt obligations paid in aggregate in connection with: (i) the regular amortization of outstanding vessel financings and finance lease installments, and (ii) early repayment due to the refinancing of certain of our finance agreements and the sale of three of our vessels;
c) |
$11.6 million used mainly to repurchase our common shares in open market transactions;
d) |
$6.2 million of financing fees paid in connection with new financing agreements; and
e) |
$1.5 million of prepayment fees paid in connection with early repaid debt.
Significant Accounting Policies and Critical Accounting Policies
For a description of our critical accounting policies and all of our significant accounting policies, see Note 2 to our audited financial statements and “Item 5 - Operating and Financial Review and Prospects,” included in our 2019 Annual Report. There have been no material changes from the “Critical Accounting Policies” previously disclosed in our 2019 Annual Report.
STAR BULK CARRIERS CORP.
INDEX TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 2019 and June 30, 2020 (unaudited) | F-2 |
Unaudited Interim Condensed Consolidated Statements of Operations for the six-month periods ended June 30, 2019 and 2020 | F-3 |
Unaudited Interim Condensed Consolidated Statements of Comprehensive Income/(Loss) for the six-month periods ended June 30, 2019 and 2020 | F-4 |
Unaudited Interim Condensed Consolidated Statements of Stockholders’ Equity for the six-month periods ended June 30, 2019 and 2020 | F-5 |
Unaudited Interim Condensed Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2019 and 2020 | F-6 |
Notes to Unaudited Interim Condensed Consolidated Financial Statements | F-7 |
F-1 |
STAR BULK CARRIERS CORP.
Consolidated Balance Sheets
As of December 31, 2019 and June 30, 2020 (unaudited)
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise
stated)
December 31, 2019 | June 30, 2020 | ||||||
ASSETS | |||||||
CURRENT ASSETS | |||||||
Cash and cash equivalents | $ | $ | |
||||
Restricted cash, current (Note 8) | |
||||||
Trade accounts receivable, net | |
||||||
Inventories (Note 4) | |
||||||
Due from managers | |
|
|||||
Due from related parties (Note 3) | |
||||||
Prepaid expenses and other receivables | |
||||||
Derivatives, current asset portion (Note 13) | |
||||||
Other current assets (Notes 14) | |
||||||
Total Current Assets | |||||||
FIXED ASSETS | |||||||
Vessels and other fixed assets, net (Note 5) | |
||||||
Total Fixed Assets | |
||||||
OTHER NON-CURRENT ASSETS | |||||||
Long term investment (Note 3) | |
||||||
Restricted cash, non-current (Note 8) | |
||||||
Leased buildings, right-of-use assets | |
|
|||||
Other non-current assets | |
|
|||||
TOTAL ASSETS | $ | $ | |
||||
LIABILITIES & SHAREHOLDERS' EQUITY | |||||||
CURRENT LIABILITIES | |||||||
Current portion of long term debt (Note 8) | $ | |
$ | |
|||
Lease financing short term (Note 6) | |
||||||
Accounts payable | |
||||||
Due to managers | |
|
|||||
Due to related parties (Note 3) | |
||||||
Accrued liabilities | |
||||||
Derivatives, current liability portion (Note 13) | |
||||||
Deferred revenue | |
||||||
Total Current Liabilities | |
||||||
NON-CURRENT LIABILITIES | |||||||
8.30% 2022 Notes, net of unamortized debt issuance costs of $ |
|
||||||
Long term debt, net of current portion and unamortized debt issuance costs of $ |
|
||||||
Lease financing long term, net of unamortized debt issuance costs of $ |
|
||||||
Derivatives, non-current liability portion (Note 13) | |
|
|||||
Fair value of below market time charters acquired (Note 7) | |
|
|||||
Leased buildings, operating lease liabilities | |
|
|||||
Other non-current liabilities | |
||||||
TOTAL LIABILITIES | |
||||||
COMMITMENTS & CONTINGENCIES | |||||||
SHAREHOLDERS' EQUITY | |||||||
Preferred Shares; $ | par value, authorized shares; issued or outstanding at December 31, 2019 and June 30, 2020, respectively (Note 9) |
|
|||||
Common Shares, $ | par value, shares authorized; shares issued and shares (net of treasury shares) outstanding as of December 31, 2019; shares issued and shares (net of treasury shares) outstanding as of June 30, 2020 (Note 9) |
||||||
Additional paid in capital | |
||||||
Treasury shares ( | and shares at December 31, 2019 and June 30, 2020, respectively) ( |
( |
|||||
Accumulated other comprehensive income/(loss) | |
( |
|||||
Accumulated deficit | ( |
( |
|||||
Total Shareholders' Equity | |
||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | $ | |
||||
The accompanying notes are integral part of these unaudited interim consolidated financial statements. |
F-2
STAR BULK CARRIERS CORP.
Unaudited Interim Condensed Consolidated Statements of Operations
For the six-month periods ended June 30, 2019 and 2020
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise
stated)
Six months ended June 30, 2019 | Six months ended June 30, 2020 | |||||
Revenues: | ||||||
Voyage revenues (Note 14) | $ | $ | ||||
Expenses | ||||||
Voyage expenses (Note 3) | ||||||
Charter-in hire expenses (Note 3) | |
| ||||
Vessel operating expenses | ||||||
Dry docking expenses | |
| ||||
Depreciation | ||||||
Management fees (Note 3) | |
| ||||
General and administrative expenses (Note 3) | ||||||
Impairment loss | |
| ||||
Other operational loss | |
| ||||
Other operational gain | ( |
( | ||||
Provision for doubtful debts | |
| ||||
(Gain)/Loss on forward freight agreements and bunker swaps (Note 13) | ( |
( | ||||
(Gain)/Loss on sale of vessels ( Note 5) | |
| ||||
Total Operating Expenses | ||||||
Operating income / (loss) | ( |
( | ||||
Other Income/ (Expenses): | ||||||
Interest and finance costs (Note 8) | ( |
( | ||||
Interest and other income/(loss) | ||||||
Loss on debt extinguishment (Note 6 and 8) | ( |
( | ||||
Total other expenses, net | ( |
( | ||||
Income / (loss) before taxes and equity in income of investee | $ | ( |
$ | ( | ||
Income taxes | ( |
( | ||||
Income/(Loss) before equity in income of investee | ( |
( | ||||
Equity in income of investee | ||||||
Net income/(loss) | ( |
( | ||||
Earnings / (Loss) per share, basic | $ | ( |
$ | ( | ||
Earnings / (Loss) per share, diluted | ( |
( | ||||
Weighted average number of shares outstanding, basic (Note 10) | ||||||
Weighted average number of shares outstanding, diluted (Note 10) | ||||||
The accompanying notes are integral part of these unaudited interim condensed consolidated financial statements. |
F-3
STAR BULK CARRIERS CORP.
Unaudited Interim Condensed Consolidated Statements of Comprehensive Income / (Loss)
For the six-month periods ended June 30, 2019 and 2020
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise
stated)
Six months ended June 30, 2019 | Six months ended June 30, 2020 | |||||
Net income / (loss) | $ | ( |
$ | ( | ||
Other comprehensive income / (loss): | ||||||
Unrealized gains / losses from cash flow hedges: | ||||||
Unrealized gain / (loss) from hedging interest rate swaps recognized in Other comprehensive income/(loss) before reclassifications (Note 13) | |
( | ||||
Less: | ||||||
Reclassification adjustments of interest rate swap (gain)/loss (Note 13) | |
( | ||||
Other comprehensive income / (loss) | |
( | ||||
Total comprehensive income / (loss) | $ | ( |
$ | ( | ||
The accompanying notes are integral part of these unaudited interim condensed consolidated financial statements. |
F-4 |
STAR BULK CARRIERS CORP.
Unaudited Interim Condensed Consolidated Statements of Stockholders’ Equity
For the six-month periods ended June 30, 2019 and 2020
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise
stated)
Common Stock | ||||||||||||||||||||
# of Shares | Par Value | Additional Paid-in Capital | Accumulated Other Comprehensive income/(loss) | Accumulated deficit |
Treasury stock | Total Shareholders' Equity | ||||||||||||||
Balance January 1, 2019 | $ | $ | $ | |
$ | ( |
$ | ( |
$ | |||||||||||
Net income / (loss) | — | |
|
|
( |
|
( | |||||||||||||
Amortization of share-based compensation (Note 11) |
— | |
|
|
|
|
||||||||||||||
Acquisition of Songa Vessels | — | — | — | — | — | ( |
( | |||||||||||||
Acquisition of ER vessels | |
|
— | — | — | | ||||||||||||||
Purchase and cancellation of treasury stock | ( |
( |
( |
|
|
( | ||||||||||||||
BALANCE, June 30, 2019 | $ | $ | $ | |
$ | ( |
$ | ( |
$ | |||||||||||
Balance January 1, 2020 | $ | $ | $ | |
$ | ( |
$ | ( |
$ | |||||||||||
Net income / (loss) | — | |
( |
|
( | |||||||||||||||
Other comprehensive income / (loss) | — | |
( |
|
( | |||||||||||||||
Issuance of vested and non-vested shares and amortization of share-based compensation (Notes 9 and 11) | |
— | — | — | — | |||||||||||||||
Dividend declared and paid ($ per share) (Note 9) | — | |
|
|
( |
|
( | |||||||||||||
BALANCE, June 30, 2020 | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | |||||||||||
The accompanying notes are integral part of these unaudited interim condensed consolidated financial statements. |
F-5
STAR BULK CARRIERS CORP.
Unaudited Interim Condensed Consolidated Statements of Cash Flows
For the six-month periods ended June 30, 2019 and 2020
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise
stated)
Six months ended June 30, 2019 | Six months ended June 30, 2020 | ||||||
Cash Flows from Operating Activities: | |||||||
Net income / (loss) | $ | ( |
$ | ( | |||
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities: | |||||||
Depreciation | |||||||
Amortisation of fair value of above market time charters (Note 7) | |
| |||||
Amortisation of fair value of below market time charters (Note 7) | ( |
( | |||||
Amortization of debt issuance costs (Note 8) | |||||||
Loss on debt extinguishment (Note 6 and 8) | |
| |||||
Impairment loss | |
| |||||
Loss / (gain) on sale of vessels | |
| |||||
Provision for doubtful debts | |
| |||||
Share-based compensation (Note 11) | |||||||
Non-cash effects of derivative financial instruments | |
||||||
Other non-cash charges | |
||||||
Gain on hull and machinery claims | ( |
( | |||||
Equity in income of investee | ( |
( | |||||
Changes in operating assets and liabilities: | |||||||
(Increase)/Decrease in: | |||||||
Trade accounts receivable | ( |
||||||
Inventories | ( |
||||||
Prepaid expenses and other receivables | ( |
||||||
Derivatives | |
( | |||||
Due from related parties | |||||||
Due from managers | |||||||
Increase/(Decrease) in: | |||||||
Accounts payable | |||||||
Due to related parties | ( |
( | |||||
Accrued liabilities | ( | ||||||
Due to managers | |
||||||
Deferred revenue | |||||||
Net cash provided by / (used in) Operating Activities | |||||||
Cash Flows from Investing Activities: | |||||||
Advances for vessels under construction and acquisition of vessels and other fixed assets | ( |
( | |||||
Cash proceeds from vessel sales | |
| |||||
Hull and machinery insurance proceeds | |||||||
Net cash provided by / (used in) Investing Activities | ( |
( | |||||
Cash Flows from Financing Activities: | |||||||
Proceeds from bank loans, leases and notes | |||||||
Loan and lease prepayments and repayments | ( |
( | |||||
Financing and debt extinguishment fees paid | ( |
( | |||||
Dividends paid | |
( | |||||
Repurchase of common shares | ( |
| |||||
Net cash provided by / (used in) Financing Activities | ( | ||||||
Net increase/(decrease) in cash and cash equivalents and restricted cash | ( |
( | |||||
Cash and cash equivalents and restricted cash at beginning of period | |||||||
Cash and cash equivalents and restricted cash at end of period | $ | $ | |||||
SUPPLEMENTAL CASH FLOW INFORMATION: | |||||||
Cash paid during the period for: | |||||||
Interest | $ | $ | |||||
Non-cash investing and financing activities: | |||||||
Shares issued in connection with vessel acquisitions | |
| |||||
Vessel upgrades | |
| |||||
Reconciliation of (a) cash and cash equivalents, and restricted cash reported within the consolidated balance sheets to (b) the total amount of such items reported in the statements of cash flows: | |||||||
Cash and cash equivalents | $ | $ | |||||
Restricted cash, current (Note 8) | |||||||
Restricted cash, non-current (Note 8) | |||||||
Cash and cash equivalents and restricted cash at end of period shown in the statement of cash flows | $ | $ | |||||
The accompanying notes are integral part of these unaudited interim condensed consolidated financial statements. |
F-6
1. Basis of Presentation and General Information:
Star Bulk Carriers Corp.
(“Star Bulk”) is a global shipping company providing worldwide seaborne transportation solutions in the dry bulk
sector. Star Bulk was incorporated in the Marshall Islands on
The unaudited interim condensed consolidated financial statements include the accounts of Star Bulk and its wholly owned subsidiaries (collectively, the “Company”) and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all the information and notes required by U.S. GAAP for annual financial statements.
These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements for the year ended December 31, 2019 and, in the opinion of management, reflect all normal recurring adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. Operating results for the six-month period ended June 30, 2020 are not necessarily indicative of the results that might be expected for the fiscal year ending December 31, 2020.
The unaudited interim condensed consolidated financial statements presented in this report should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2019 included in the 2019 Annual Report. The balance sheet as of December 31, 2019 has been derived from the audited consolidated financial statements as of that date, but, pursuant to the requirements for interim financial information, does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
Unless otherwise defined herein, capitalized words and expressions used herein shall have the same meanings ascribed to them in the 2019 Annual Report.
On March 11, 2020, the World Health Organization declared the 2019 Novel Coronavirus (the “Covid-19”) outbreak a pandemic. In response to the outbreak, many countries, ports and organizations, including those where the Company conducts a large part of its operations, have implemented measures to combat the outbreak, such as quarantines and travel restrictions. Such measures have and will likely continue to cause severe trade disruptions. The extent to which the Covid-19 pandemic will impact the Company’s future results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the virus and the actions to contain or treat its impact, among others. Accordingly, an estimate of the impact cannot be made at this time.
As of June 30, 2020, the Company
owned a modern fleet of
2. Significant accounting policies and recent accounting pronouncements:
A summary of the Company’s significant accounting policies and recent accounting pronouncements is included in Note 2 to the Company’s consolidated financial statements included in the 2019 Annual Report. Other than the recent accounting pronouncements adopted in the first six month period of 2020 and described below there have been no changes to the Company’s significant accounting policies and recent accounting pronouncements in the six-month period ended June 30, 2020.
Financial Instruments - Credit Losses (Topic 326):
In June 2016, the FASB issued ASU 2016-13- “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This standard, including the codification improvements issued in November 2018, requires entities to measure all expected credit losses of financial assets held at a reporting date based on historical experience, current conditions, and reasonable and supportable forecasts in order to record credit losses in a more timely manner. ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. Several Codification Improvements have been issued since June 2016 with respect to this topic. For public entities, the amendments of this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application is permitted. On January 1, 2020, the Company adopted ASC 2016-13, "Financial Instruments - Credit Losses" (“ASC 326”). The accounting standard amended the current financial instrument impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables but excluding those arising from operating leases. Under the new guidance, an entity recognizes as an allowance its estimate of lifetime expected credit losses which result in more timely recognition of such losses. The Company adopted the accounting standard using the prospective transition approach as of January 1, 2020. The adoption of the accounting standard did not have any material impact on the Company’s condensed consolidated financial statements.
Fair Value Measurement (Topic 820):
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the disclosure requirements for fair value measurement.” The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including the consideration of costs and benefits. The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this update. The Company has evaluated the impact of the adoption of this ASU and has determined that there is no effect on its condensed consolidated financial statements and accompanying notes.
Reference Rate Reform (Topic 848):
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”).” ASU 2020-04 provides temporary optional expedients and exceptions to the guidance in U.S. GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This ASU is effective for adoption at any time between March 12, 2020 and December 31, 2022. The date of adoption of this optional guidance and the effect on its consolidated financial statements and accompanying notes is currently under evaluation by the Company.
3. Transactions with Related Parties:
Except for what is described below, details of the Company’s transactions with related parties did not change in the six-month period ended June 30, 2020 and are discussed in Note 3 of the Company’s consolidated financial statements for the year ended December 31, 2019, included in the 2019 Annual Report.
During the second
quarter of 2020, the Company together with Golden Ocean Group, Bocimar International NV and Oceanbulk Maritime S.A (collectively
the “Short Pool Members”) have agreed to enter into Contracts of Affreightment (“COAs”) with major miners
and commodity traders to transport dry bulk commodities at fixed freight rates (the “Short Pool”). The Short Pool
Members may use own vessels or charter-in from the market to perform the COAs. During the second quarter of 2020 the Company earned
$
In May 2020, the Company received credit
committee approval from Piraeus Bank for a loan of up to $
Transactions and balances with related parties are analyzed as follows:
Balance Sheets
December 31, 2019 | June 30, 2020 | |||||
Due from related parties | ||||||
Oceanbulk Maritime and its affiliates | $ | $ | ||||
Interchart | ||||||
AOM | ||||||
Starocean | ||||||
Product Shipping & Trading S.A. | ||||||
Due from related parties | $ | $ | ||||
Due to related parties | ||||||
Management and Directors Fees | $ | $ | ||||
Sydelle | ||||||
Augustea Technoservices Ltd. | ||||||
Coromel Maritime Limited | ||||||
Due to related parties | $ | $ |
Statements of Operations
Six months ended June 30, | ||||||
2019 | 2020 | |||||
Voyage expenses: |
||||||
Voyage expenses-Interchart | $ | ( |
( | |||
General and administrative expenses: |
||||||
Consultancy fees | ( |
( | ||||
Directors compensation | ( |
( | ||||
Office rent - Combine Marine Ltd. & Alma Properties | ( |
( | ||||
General and administrative expenses - Oceanbulk Maritime and its affiliates | ( |
( | ||||
Management fees: |
||||||
Management fees- Augustea Technoservices Ltd. |
( |
( | ||||
Management fees- Songa Shipmanagement Ltd. |
( |
|||||
Charter-in hire expenses: |
||||||
Charter - in hire expenses - AOM | ( | |||||
Charter - in hire expenses - Sydelle | ( | |||||
Charter - in hire expenses - Coromel | ( |
4. Inventories:
The amounts shown in the consolidated balance sheets are analyzed as follows:
December 31, 2019 | June 30, 2020 | |||||
Lubricants | $ | $ | ||||
Bunkers | ||||||
Total | $ | $ |
5. Vessels and other fixed assets, net:
The amounts in the consolidated balance sheets are analyzed as follows:
Cost | Accumulated depreciation | Net Book Value | ||||
Balance, December 31, 2019 | $ | $ | ( |
$ | ||
- Acquisitions, improvements and other vessel costs | |
— | ||||
- Depreciation for the period | — | ( |
( | |||
Balance, June 30, 2020 | $ | $ | ( |
$ |
As of June 30, 2020,
Vessels acquired / delivered / disposed of during the six-month period ended June 30, 2020
No vessel acquisitions or disposals took place during the six-month period ended June 30, 2020. The amounts reported under “Acquisitions, improvements, and other vessel costs” in the table above which incurred during the six months ended June 30, 2020 were made mainly in connection with the acquisition and installations of scrubber equipment and ballast water management systems on certain of the Company’s vessels.
6. Lease financing:
Details of the Company’s
lease financings are discussed in Note 7 of the Company’s consolidated financial statements for the year ended December
31, 2019, included in the 2019 Annual Report and the only new activities during the six-month period ended June 30, 2020 are
(i) the repayment of the outstanding amounts under the lease agreements of Star Leo and Star Eleni with CMBL
using the amounts drawn under the DSF $55,000 Facility (Note 8) and (ii) the drawdown of $
The interest expense on the
financial liability related to the Company’s finance leases for the six-month periods ended June 30, 2019 and 2020 was
$
In connection with the refinancing
of certain lease agreements, the Company incurred expenses of $
The payments required to be made
after June 30, 2020, for the outstanding lease financing obligations recognized on the balance sheet (the variable portion of
which is based on the
Twelve month periods ending | Amount | ||
June 30, 2021 | $ | ||
June 30, 2022 | |||
June 30, 2023 | |||
June 30, 2024 | |||
June 30, 2025 | |||
June 30, 2026 and thereafter | |||
Total bareboat lease minimum payments | $ | ||
Unamortized debt issuance costs | ( | ||
Total bareboat lease minimum payments, net | $ | ||
Excluding bareboat lease interest | ( | ||
Lease financing – short term | |||
Lease financing – long term |
The payments required to be made for the twelve month period ended June 30, 2021 are adjusted pursuant to the new refinancing agreements described in Note 15.
7. Fair value of Above / Below Market Acquired Time Charters:
Details of the Company’s fair value of above/below market acquired time charters are discussed in Note 8 of the Company’s consolidated financial statements for the year ended December 31, 2019, included in the 2019 Annual Report and no change took place in the six month period ended June 30, 2020.
For the six-month period ended
June 30, 2019, the amortization of fair value of the below market acquired time charters was $
The unamortized balance of the intangible
liability as of June 30, 2020 of $
Twelve month periods ending | Amount | ||
June 30, 2021 | $ | ||
June 30, 2022 | |||
June 30, 2023 | |||
Total | $ |
8. Long-term Debt:
Details of the Company’s credit facilities and debt securities are discussed in Note 9 of the Company’s consolidated financial statements for the year ended December 31, 2019, included in the 2019 Annual Report and are supplemented by the below new activities.
New Financing Activities
(i) DSF $55,000 Facility:
On
(ii) HSBC Working Capital Facility:
During the six months ended June
30, 2020, the Company drew down an aggregate amount of $
Scrubber Financing:
During the six months ended June 30,
2020, the Company drew down an amount of (i) $
The Company’s credit facilities contain financial covenants and undertaking, a summary of these terms included in Note 9 of the Company’s consolidated financial statements for the year ended December 31, 2019, included in the 2019 Annual Report.
As of December 31, 2019 and June
30, 2020, the Company was required to maintain minimum liquidity, not legally restricted, of $
The principal payments required to be made after June 30, 2020 for all of the then-outstanding bank debt, are as follows:
Twelve month periods ending | Amount | ||
June 30, 2021 | $ | | |
June 30, 2022 | | ||
June 30, 2023 | | ||
June 30, 2024 | | ||
June 30, 2025 | | ||
June 30, 2026 and thereafter | | ||
Total Long term debt | $ | | |
Unamortized debt issuance costs | ( | ||
Total Long term debt, net | $ | | |
Current portion of long term debt | | ||
Long term debt, net | |
The current portion of long term debt as of June 30, 2020, includes the scheduled loan repayments for the twelve month period ended June 30, 2021 according to the outstanding loan agreements adjusted also in connection with the new refinancing agreements as described in Note 15.
The 2022 Notes mature in November 2022
and are presented in the consolidated balance sheets as of June 30, 2020 net of unamortized debt issuance costs of $
For the six-month periods ended June
30, 2019 and 2020, the Company’s existing financing agreements (including finance lease agreements) bore interest at a weighted-average
rate of approximately
All of the Company’s
financing agreements (including finance lease agreements) bear interest at
Six months ended June 30, | ||||||
2019 | 2020 | |||||
Interest on financing agreements | $ | $ | ||||
Less: Interest capitalized | ( |
|||||
Reclassification adjustments of interest rate swap loss/(gain) transferred to Interest and finance costs from Other Comprehensive Income (Note 13) | ( | |||||
Amortization of debt issuance costs | ||||||
Other bank and finance charges | ||||||
Interest and finance costs | $ | $ |
During the six-month period ended
June 30, 2019, the Company incurred expenses of $
9. Preferred and Common Shares and Additional Paid-in Capital:
Details of the Company’s Preferred and Common Shares are discussed in Note 10 of the Company’s consolidated financial statements for the year ended December 31, 2019, included in the 2019 Annual Report.
During the six months ended June 30, 2020, the Company issued
common shares pursuant to its 2019 Plan.During the six months ended June
30, 2020 the Company paid a cash dividend of $
The computation of basic earnings/(loss) per share is based on the weighted average number of common shares outstanding for the six-months ended June 30, 2019 and 2020. The calculation of basic earnings per share does not consider the non-vested shares as outstanding until the time-based vesting restriction has lapsed. Diluted earnings/(loss) per share gives effect to stock awards, stock options and restricted stock units using the treasury stock method, unless the impact is anti-dilutive. Diluted net loss per share for the six-months ended June 30, 2019 does not include the effect of the
non-vested shares and of the non-vested share options outstanding as of that date, as that effect was anti-dilutive. Diluted earnings per share for the six months ended June 30, 2020 does not include the effect of the non-vested shares outstanding as of that date, as their effect was anti-dilutive.The Company calculates basic and diluted earnings / (loss) per share as follows:
Six months ended June 30, | ||||||
2019 | 2020 | |||||
Income / (Loss) : | ||||||
Net income / (loss) | $ | ( |
$ | ( | ||
Basic earnings / (loss) per share: | ||||||
Weighted average common shares outstanding, basic | ||||||
Basic earnings / (loss) per share | $ | ( |
$ | ( | ||
Effect of dilutive securities: | ||||||
Dillutive effect of non vested shares | ||||||
Weighted average common shares outstanding, diluted | ||||||
Diluted earnings / (loss) per share | $ | ( |
$ | ( |
Details of the Company’s Equity Incentive Plans and share awards granted up to December 31, 2019 are discussed in Note 13 of the Company’s consolidated financial statements for the year ended December 31, 2019, included in the 2019 Annual Report.
On May 25, 2020, the Company’s Board of Directors adopted the 2020 Equity Incentive Plan (the “2020 Plan”) and reserved for issuance common shares thereunder. The terms and conditions of the 2020 Plan are substantially similar to the terms and conditions of the Company’s previous equity incentive plans. On the same date, all of the restricted common shares were granted to certain of the Company’s directors, officers and employees of which restricted common shares vest in August 2020, restricted common shares vest in May 2021 and the remaining restricted common shares vest in May 2023. The fair value of each share was $, based on the closing price of the Company’s common shares on the grant date.
For the six-month periods ended June 30, 2019 and 2020, the share-based compensation cost recognized was $, respectively. In addition, as of December 31, 2019, the Company had recognized compensation cost of $ for the RSUs, which at that time were considered probable to vest. As of June 30, 2020, the Company determined that the current likelihood of vesting for any of the RSUs does not meet a “more likely than not” threshold under US GAAP. As a result, the previously recognized expense of $ was reversed during the six month period ended June 30, 2020. These amounts are included under “General and administrative expenses” in the unaudited interim condensed consolidated statements of operations.
and $A summary of the status of the Company’s non-vested restricted shares as of June 30, 2020 and the movement during the six-month period ended June 30, 2020 is presented below.
Number of shares | Weighted Average Grant Date Fair Value | ||||
Unvested as at January 1, 2020 | $ |
| |||
Granted | |
||||
Unvested as at June 30, 2020 | $ |
As of June 30, 2020 the estimated compensation cost relating to non-vested restricted share awards not yet recognized is $
and is expected to be recognized over the weighted average period of years.
12. Commitments and Contingencies:
a) Commitments:
The following table sets forth inflows and outflows related to the Company’s charter party arrangements and other commitments, as at June 30, 2020.
Twelve month periods ending June 30, | |||||||||||||||||||||
+ inflows/ - outflows | Total | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 and thereafter | ||||||||||||||
Future, minimum, non-cancellable charter revenue (1) | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Future, minimum, charter-in hire payments (2) | ( |
( |
|||||||||||||||||||
Office rent |
( |
( |
( |
( |
( |
( |
|||||||||||||||
Total | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
$ |
(1) | The amounts represent the minimum contractual charter revenues to be generated from the existing, as of June 30, 2020, non-cancellable time charter agreements, until their expiration, net of address commission, assuming no off-hire days other than those related to scheduled interim and special surveys of the vessels. |
(2) | The amounts represent the Company’s commitments under the existing, as of June 30, 2020, time charter-in arrangements for vessels not owned by the Company. |
b) Legal proceedings
Various claims, suits, and complaints, including those involving government regulations and product liability, arise in the ordinary course of the shipping business. In addition, losses may arise from disputes with charterers, agents, insurance and other claims with suppliers relating to the operations of the Company’s vessels. The Company accrues for the cost of environmental liabilities when management becomes aware that a liability is probable and is able to reasonably estimate the probable exposure. Currently, management is not aware of, and has not accrued for, any such claims or contingent liabilities requiring disclosure in the unaudited interim condensed consolidated financial statements.
13. Fair value measurements and Hedging:
Fair value measurements
The Company recognizes all derivative instruments as either assets or liabilities at fair value on its consolidated balance sheets in accordance with ASC Topic 815, “Derivatives and Hedging”.
Interest rate swaps
The Company from time to time enters into interest rate derivative contracts to manage interest costs and risks associated with changing interest rates with respect to certain of its credit facilities.
As of December 31, 2019 the Company had no interest rate swaps open positions.
During the six month period ended June 30, 2020, the Company entered into various interest rate swaps with ING Bank N.V (“ING”), DNB Bank ASA (“DNB”), Skandinaviska Enskilda Banken AB (“SEB”) and Citibank Europe PLC (“Citi”) to convert a portion of its debt from floating to fixed rate. The following table summarizes the interest rate swaps in place as of June 30, 2020.
Counterparty | Trading Date | Inception | Expiry | Fixed Rate | Amortizing Notional amount |
ING | 10 March 2020 | from $ | |||
DNB | 25 March 2020 | from $ | |||
SEB | 25 March 2020 | from $ | mil to $ mil|||
ING | 10 March 2020 | from $ | |||
ING | 10 March 2020 | from $ | |||
ING | 18 March 2020 | from $ | |||
SEB | 6 March 2020 | from $ | mil to $ mil|||
SEB | 6 March 2020 | from $ | mil to $ mil|||
Citi | 11 June 2020 | from $ | |||
Citi | 11 June 2020 | from $ | |||
Citi | 11 June 2020 | from $ | |||
Citi | 11 June 2020 | from $ | |||
Citi | 11 June 2020 | from $ | |||
Citi | 11 June 2020 | from $ | |||
Citi | 11 June 2020 | from $ |
The above interest rate swaps were designated and qualified as cash flow hedges. The effective portion of the unrealized gains/losses from those swaps is recorded in Other Comprehensive Income / (Loss). No portion of the cash flow hedges was ineffective during the six-month period ended June 30, 2020.
A loss of approximately $
Freight Derivatives and Bunker Swaps
During the year ended December 31, 2019 and the six-month period ended June 30, 2020, the Company entered into a certain number of freight derivatives, including freight forward agreements (“FFAs”), freight options and bunker swaps, the results of which for the six-month periods ended June 30, 2019 and 2020 and the valuation of their open positions as at December 31, 2019 and June 30, 2020 are presented in the tables below.
As of June 30, 2020,
the Company had outstanding hedging for (i) 71,000
metric tons of its estimated fuel consumption by selling the 2020 Singapore spread between Very Low Sulfur Fuel oil (VLSFO)
– High Sulfur Fuel Oil (HSFO) at an average price of $
The amounts of Gain / (Loss) on interest rate swaps, freight derivatives and bunker swaps recognized in the unaudited interim condensed consolidated statements of operations, are analyzed as follows:
Six months ended June 30, | |||||
2019 | 2020 | ||||
Consolidated Statement of Operations | |||||
Interest and finance costs | |||||
Reclassification adjustments of interest rate swap gain/(loss) transferred to Interest and finance costs from Other comprehensive income/(loss) (Note 8) |
| ||||
Total Gain/(loss) recognized | $ | |
$ | | |
Gain/(loss) on forward freight agreements and bunker swaps | |||||
Realized gain/(loss) on forward freight agreements and freight options | |||||
Realized gain/(loss) on bunker swaps | |||||
Unrealized gain/(loss) on forward freight agreements and freight options | ( |
( | |||
Unrealized gain/(loss) on bunker swaps | |||||
Total Gain/(loss) recognized | $ | $ |
The guidance for fair value measurements applies to all assets and liabilities that are being measured and reported on a fair value basis. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The statement requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs that are not corroborated by market data
The following table summarizes the valuation of the Company’s financial instruments as of December 31, 2019 and June 30, 2020. The fair value of freight derivatives and bunker swaps was determined through Level 1 inputs of the fair value hierarchy (quoted prices from the applicable exchanges such as London Clearing House (LCH) or Singapore Exchange (SGX)), while the fair value of the interest rate swaps was determined through Level 2 inputs of the fair value hierarchy (such as interest rate curves).
Quoted Prices in Active Markets for Identical Assets (Level 1) | |||||
December 31, 2019 | June 30, 2020 | ||||
Balance Sheet location |
(not designated as cash flow hedges) | (designated as cash flow hedges) | (not designated as cash flow hedges) | (designated as cash flow hedges) | |
ASSETS | |||||
Freight derivatives - current | Derivatives, current asset portion |
$
|
$ |
||
Bunker swaps - current | Derivatives, current asset portion |
|
|
$
|
|
Total | $
|
|
$
|
||
LIABILITIES | |||||
Freight derivatives - current |
Derivatives, current liability portion |
|
$
|
| |
Bunker swaps - current |
Derivatives, current liability portion |
$ |
|
| |
Total | $ |
|
$ |
|
Significant Other Observable Inputs (Level 2) | |||||
December 31, 2019 | June 30, 2020 | ||||
Balance Sheet location |
(not designated as cash flow hedges) | (designated as cash flow hedges) | (not designated as cash flow hedges) | (designated as cash flow hedges) | |
ASSETS | |||||
Interest rate swaps - current | Derivatives, current asset portion |
$ |
$ |
$
|
|
Total | $ |
|
$ |
||
LIABILITIES | |||||
Interest rate swaps - current | Derivatives, current liability portion |
$ |
$ |
||
Interest rate swaps - non-current | Derivatives, non-current liability portion |
$ |
|
$ |
|
Total | $ |
$ |
|
Certain of the Company’s
financial instruments discussed above require the Company to periodically post additional collateral depending on the level
of any open position under such financial instruments, which as of December 31, 2019 and June 30,
2020 amounted to $
The carrying values of temporary
cash investments, restricted cash, accounts receivable and accounts payable approximate their fair value due to the
short-term nature of these financial instruments. The fair value of long-term bank loans and financing under bareboat leases
(Level 2), bearing interest at variable interest rates, approximates their recorded values as of June 30, 2020, due to the
variable interest rate nature thereof. The fair value of the DSF $55,000 Facility, measured through level 2 inputs (such as
interest rate curves) is $
The 2022 Notes have a fixed rate,
and their estimated fair value, determined through Level 1 inputs of the fair value hierarchy (quoted price on NASDAQ under
the ticker symbol SBLKZ ), was $
14. Voyage revenues:
The following table shows the voyage revenues earned from time charters, voyage charters and pool agreements for the six month periods ended June 30, 2019 and 2020, as presented in the consolidated statement of operation:
Six months ended June 30, | ||||
2019 | 2020 | |||
Time charters | $ | $ | ||
Voyage charters | ||||
Pool revenues | |
( | ||
$ | |
$ | |
As of
June 30, 2020, trade accounts receivable, net decreased by $
Further,
as of June 30, 2020, deferred assets related to revenue contracts (included within “Other current assets”)
increased by $
Under
ASC 606, unearned voyage charter revenue represents the consideration received for undelivered performance obligations. The Company
recorded $
On January 1, 2020, the Company adopted ASC 2016-13, "Financial Instruments - Credit Losses" ("ASC 326"). The accounting standard amended the current financial instrument impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. Under the new guidance, an entity recognizes as an allowance its estimate of lifetime expected credit losses which result in more timely recognition of such losses. The Company adopted the accounting standard using the prospective transition approach as of January 1, 2020. There was no cumulative effect upon adoption to the Company’s condensed consolidated financial statements.
The adoption of ASC 326 primarily affects the way the Company’s trade receivables are recorded on the condensed consolidated balance sheet. The Company assesses the need for an allowance for credit losses for expected uncollectible accounts receivable. Such allowance is recorded as an offset to accounts receivable in the consolidated balance sheets and changes in such allowance are recorded as provision for doubtful debt in the unaudited interim condensed consolidated statements of operations. Upon adoption of ASC 326, the Company assessed collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when the Company identifies specific charterers with known disputes or collectability concerns. In determining the amount of the allowance for credit losses, the Company considered historical collectability based on past due status and made judgments about the creditworthiness of charterers based on ongoing credit evaluations. The Company also considered charterer-specific information, current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data. For the six months ended June 30, 2020, the Company’s assessment considered business and market disruptions caused by COVID-19 and estimates of expected emerging credit and collectability trends. The continued volatility in market conditions and evolving shifts in credit trends are difficult to predict causing variability and volatility that may have a material impact on the Company’s allowance for credit losses in future periods. No allowance for credit losses on accounts receivable was made as of June 30, 2020, as the resulting effect was insignificant.
15. Subsequent Events:
· | On
|
· | On |
· | On
|
· | On |
· | In July
2020, the Company signed a commitment letter with CMBL to sell and leaseback the vessels Laura, Idee Fixe, Roberta, Kaley, Diva, Star
Sirius and Star Vega. On August 28 and 31, 2020, the Company received $ |
· | In July 2020, the Company signed a
commitment letter with a Japanese financial institution to sell and leaseback the vessel Star Lutas. An amount of
$ |
· | In July 2020, the Company signed a
commitment letter with a Chinese financial institution to sell and leaseback three of its Newcastlemax vessels. An amount of
$ |
· | In July 2020, the Company signed a
commitment letter with SPDB Financial Leasing Co. Ltd to sell and leaseback the vessels Mackenzie, Kennadi, Honey
Badger, Wolverine and Star Antares. In September 2020, an amount of $ |
In connection with the above mentioned debt
refinancing transactions, the Company as of the date of these financial statements has received aggregate net proceeds of approximately
$
· | Subsequently to June 30, 2020 the Company entered into certain interest rate swaps with ING (“ING”), Piraeus Bank and Alpha Bank to convert a portion of its debt from floating to a fixed rate. The following table summarizes these interest rate swaps: |
Counterparty | Trading Date | Inception | Expiry | Fixed Rate | Amortizing Notional amount |
Piraeus Bank | 6 July 2020 | from $ | |||
ING | 8 July 2020 | from $ | |||
Alpha Bank | 3 August 2020 | from $ |