FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of December 2006
Commission File Number 000-51141
DRYSHIPS INC.
80 Kifissias Avenue
Amaroussion 15125, 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 [X] 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): ___
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [_] No [X]
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-______________.
INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Attached hereto as Exhibit 1 is Management's Discussion and Analysis of
Financial Condition and Results of Operation and interim unaudited financial
statements and related information and data of DryShips Inc. (the "Company") as
of and for the period ended September 30, 2006.
This Report on Form 6-K is hereby incorporated by reference into the
Company's Registration Statement on Form F-3/A (Registration No. 333-133482)
filed on May 3, 2006.
EXHIBIT 1
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless otherwise specified herein, references to "DryShips" or the "Company" or
"we" shall include DryShips Inc. and its applicable subsidiaries. The following
management's discussion and analysis should be read in conjunction with our
unaudited interim consolidated financial statements and related notes included
herein. This discussion contains forward-looking statements that reflect our
current views with respect to future events and financial performance. Our
actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, such as those set
forth in the section entitled "Risk Factors" included in the Company's Annual
Report on Form 20-F/A filed with the Securities and Exchange Commission on May
1, 2006.
Results of Operations
For the nine months ended September 30, 2006 compared to nine months ended
September 30, 2005
Voyage Revenues increased slightly by $2 million, or 1.3%, to $169 million in
the nine months ended September 30, 2006, compared to $167 million for the nine
months ended September 30, 2005. The increase which is attributable to the
increase in the average number of vessels operated from 19.7 during the nine
months ended September 30, 2005 to 28.4 during the nine months ended September
30, 2006 and is offset by a substantial decrease in freight and hire rates over
this period.
Voyage Expenses increased by $3.8 million, or 39%, to $13.5 million in the nine
months ended September 30, 2006, compared to $9.7 million for the nine months
ended September 30, 2005. The increase is due to the number of vessels operated
from an average of 19.7 vessels for the nine months ended September 30, 2005 to
28.4 vessels for the nine months ended September 30, 2006.
Depreciation and Amortization increased by $15.3 million, or 53.9%, to $43.7
million for the nine months ended September 30, 2006, compared to $28.4 million
for nine months ended September 30, 2005. The increase is attributable to the
increase in the number of vessels operated from an average of 19.7 vessels for
the nine months ended September 30, 2005 to 28.4 vessels for the nine months
ended September 30, 2006.
Vessel Operating Expenses increased by $8.7 million, or 35%, to $33.5 million in
the nine months ended September 30, 2006 compared to $24.8 million in 2005. The
increase is attributable to the increase in the number of vessels operated from
an average of 19.7 vessels for the nine months ended September 30, 2005 to 28.4
vessels for the nine months ended September 30, 2006.
Management Fees increased by $1.1 million, or 30.6%, to $4.7 million in the nine
months ended September 30, 2006 compared to $3.6 million in the nine months
ended September 30, 2005. The increase is attributable to the increased number
of vessels under management in 2006 as a direct result of the increase in the
number of fleet calendar days from 5,379 in the nine months ended September 30,
2005 to 7,743 in the nine months ended September 30, 2006 due to the growth of
the fleet.
Interest and Finance Cost increased by $16.6 million, or 123%, to $30.1 million
for the nine months ended September 30, 2006 compared to $13.5 million for the
nine months ended September 30, 2005. The increase primarily resulted from the
increase in interest expenses due to the increased amount of average
indebtedness outstanding during the nine months ended September 30, 2006
compared to the nine months ended September 30, 2005.
Cash Flow
Net Cash Provided By Operating Activities
Net cash provided by operating activities decreased by $55.5 million, or 43%, to
$73.4 million for the nine months ended September 30, 2006 compared to $128.9
million for the nine months ended September 30, 2005. This decrease is primarily
due to the Forward Freight Agreements (FFA) losses incurred and to the decreased
time charter rates during the 2006 period.
Net Cash Used In Investing Activities
Net cash used in investing activities was $210.9 million for the nine months
ended September 30, 2006, representing the purchase price we paid for the
acquisition and delivery of six vessels and the advance paid for two additional
vessels expected to be delivered in the fourth quarter of 2006. Net cash used in
investing activities was $847.6 million for the nine months ended September 30,
2005, which represented the purchase price of twenty one vessels acquired and
delivered in the period.
Net Cash Provided By Financing Activities
Net cash provided by financing activities was $153.1 million for the nine months
ended September 30, 2006, consisting mainly of $664.3 million drawn under our
revolving credit facility for the acquisition of the vessels discussed above,
$546.9 million of payments of principal on our outstanding indebtedness during
the nine months ended September 30, 2006, $18.2 million of dividends paid during
the nine months ended September 30, 2006 and $56.5 million raised in connection
with the Company's offering and issuance of 4,650,000 shares under its shelf
registration statement.
Net cash provided by financing activities was $713.2 million for nine months
ended September 30, 2005, consisting of $557.6 million of indebtedness drawn for
the acquisition of the vessels acquired during the nine months ended September
30, 2005; $65.7 million of payments of principal on our outstanding indebtedness
during the nine months ended September 30, 2005; $24.0 million of cash dividends
paid to stockholders and $21.6 million of restricted cash that was made due to
the new indebtedness incurred.
Capitalization
On September 30, 2006, debt to total capitalization (debt, net of deferred
financing fees and stockholders' equity) was 61% and net debt (total debt less
cash and cash equivalents) to total capitalization was 57%.
As of September 30, 2006, the Company had a total liquidity of approximately $
47.1 million.
Recent Developments
Vessel Acquisitions/Disposals
The six new vessels delivered during the nine months ended September 30, 2006,
have been financed by cash, the existing term loan facility and a new secured
bridge loan. Following the delivery of the Company's seventh vessel and the sale
of two Panamaxes, the Company expects to combine these facilities into a single
increased term loan facility.
In November 2006, the Company concluded a memorandum of agreement for the
acquisition of the vessel Zella Oldendorff, for $39.7 million, delivery of which
is expected in the second quarter of 2007.
In September 2006, the Company concluded a memorandum of agreement for the
disposal of the vessel Panormos, to an unaffiliated third party for $35.0
million. The vessel is expected to be delivered to her new owners during the
fourth quarter of 2006 free of charter. A gain of approximately $15 million will
be realized and recognized in the financial statements at the date of delivery
of the vessel.
In October 2006, the Company concluded a memorandum of agreement for the
disposal of the vessel Flecha, to an unaffiliated third party for $11.7 million.
The vessel will be delivered to her new owners during the fourth quarter of
2006. A gain of approximately $9 million will be realized on the sale of the
vessel and recognized upon delivery.
In November 2006, the Company concluded a memorandum of agreement for the
disposal of the vessel Shibumi, to an unaffiliated third party for $24.6
million. The vessel will be delivered to her new owners during the second
quarter of 2007. A gain of approximately $17.8 million will be realized on the
sale of the vessel and recognized upon delivery.
Repayment of Short-Term Credit Facility
In August 2006, the Company terminated and repaid in full $8.8 million of
principal and interest under a short-term credit facility provided by an
affiliate, in connection with the purchase of the MV Maganari.
Issuance of Shares
In October 2006, the Company terminated and repaid in full by means of issuance
of Dryships' common stock, $3.3 million of principal and interest under a
seller's credit agreement entered into with an affiliate in connection with the
acquisition of the MV Hille Oldendorff. The Company issued 254,512 shares in
relation with the repayment of the seller's credit.
In October 2006, the Company issued a total of 235,585 shares of common stock to
three major shareholders that requested to reinvest in Company common stock the
dividend payment in the aggregate amount of $3.1 million that such shareholders
were scheduled to receive for the third quarter of 2006.
As of November 30, 2006, the Company has a total of 35,490,097 shares of common
stock outstanding.
Appointment of New Chief Financial Officer
On October 6, 2006, the Chief Financial Officer (CFO), Mr. Christopher Thomas,
resigned. The Board of Directors appointed the Chief Executive Officer, Mr.
George Economou, to act as interim CFO. Mr Gregory Zikos was appointed as Chief
Financial Officer by the Board effective November 24, 2006.
Supplemental Loan Agreements
On November 30, 2006, the Company entered into two supplemental agreements to
the Company's $628.7 million term loan entered into on March 31, 2006,
increasing the aggregate amount of the loan by up to $82.3 million. Out of the
total loan, an amount of $70.7 million will be used to refinance the bridge loan
and to provide the Company with working capital and the remaining amount of
$11.6 million will be used to partially finance the acquisition cost of the
vessel Redondo, which the Company agreed to acquire in September 2006 for a
purchase price of approximately $40.75 million. On November 30, 2006, the amount
of $70.7 million was drawn down, while the remaining amount of $11.6 million
will be drawn down upon delivery of the vessel Redondo.
In addition, the amount of $18.9 million, which had been required to be repaid
following the sale of the vessel Panormos under the terms of the initial loan
agreement, was not repaid and was made available by the lenders to partially
finance the acquisition cost of the vessel Redondo.
DRYSHIPS INC.
INDEX TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Consolidated Balance Sheets as of December 31, 2005 and
September 30, 2006 (Unaudited)....................................... F-2
Consolidated Unaudited Statements of Income for the
nine-month periods ended September 30, 2005 and 2006................. F-3
Consolidated Unaudited Statements of Stockholders'
Equity for the nine-month periods ended September 30, 2005 and 2006... F-4
Consolidated Unaudited Statements of Cash Flows for
the nine-month periods ended September 30, 2005 and 2006............ F-5
Notes to Unaudited Interim Consolidated Financial Statements.............. F-6
DRYSHIPS INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2005 AND SEPTEMBER 30, 2006 (Unaudited)
(Expressed in thousands of U.S. Dollars - except for share and per share data)
December 31, 2005 September 30, 2006
-------------------- -------------------
(Note 1)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,184 $ 20,889
Restricted cash 3,040 6,205
Accounts receivable, trade 5,514 1,793
Due from related parties - 1,965
Insurance claims 107 233
Inventories 1,326 2,821
Prepayments and advances 3,336 5,295
Prepaid charter revenue - 2,872
Financial instruments 270 961
-------------- --------------
Total current assets 18,777 43,034
-------------- --------------
FIXED ASSETS, NET:
Advances for vessels acquisition - 6,975
Vessels, net 864,733 1,030,692
-------------- --------------
Total fixed assets, net 864,733 1,037,667
-------------- --------------
OTHER NON-CURRENT ASSETS:
Deferred charges, net 3,781 5,342
Restricted cash 21,011 20,000
Other 2,257 2,785
-------------- --------------
Total assets $ 910,559 $ 1,108,828
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt, net of deferred financing fees $ 107,738 $ 107,060
Sellers credit - 3,250
Financial instruments - 14,618
Accounts payable 8,479 8,884
Due to related parties 6,460 2,170
Dividends payable - 7,000
Accrued liabilities 6,529 7,081
Deferred revenue 6,309 13,500
Other current liabilities 230 201
-------------- --------------
Total current liabilities 135,745 163,764
-------------- --------------
LONG-TERM DEBT, net of current portion and net of deferred financing fees 417,615 535,884
-------------- --------------
OTHER NON-CURRENT LIABILITIES 698 607
-------------- --------------
COMMITMENTS AND CONTINGENCIES - -
-------------- --------------
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 30,000,000 shares authorized, none issued - -
Common stock, $0.01 par value; 45,000,000 and 75,000,000 shares authorized at
December 31, 2005 and September 30, 2006, respectively; 30,350,000 and 35,000,000
issued and outstanding at December 31, 2005 and September 30, 2006, respectively 304 350
Additional paid-in capital 264,600 321,044
Retained earnings 91,597 87,179
-------------- --------------
Total stockholders' equity 356,501 408,573
-------------- --------------
Total liabilities and stockholders' equity $ 910,559 $ 1,108,828
============== ==============
The accompanying notes are an integral part of these consolidated statements
DRYSHIPS INC.
CONSOLIDATED UNAUDITED STATEMENTS OF INCOME FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 2005 AND 2006 (Expressed in thousands of U.S. Dollars - except for
share and per share data)
Nine Months Ended
September 30,
2005 2006
--------------- ------------------
REVENUES:
Voyage revenues $ 167,232 $ 169,324
EXPENSES:
Loss on Forward Freight Agreements - 22,473
Voyage expenses 7,438 11,415
Voyage expenses - related party 2,286 2,117
Bunkers (3,036) (2,689)
Vessel operating expenses 24,774 33,490
Depreciation 27,024 41,278
Amortization of deferred drydocking costs 1,378 2,471
Management fees - related party 3,552 4,666
General and administrative expenses 708 1,406
General and administrative expenses - related party 2,211 2,408
------------- --------------
Operating income 100,897 50,289
------------- --------------
OTHER INCOME / (EXPENSES):
Interest and finance costs (13,516) (30,063)
Interest income 650 384
Other, net 20 209
------------- --------------
Total other income / (expenses), net (12,846) (29,470)
------------- --------------
Net Income $ 88,051 $ 20,819
============= ==============
Net income per common share, basic and diluted $ 3.09 $ 0.66
============= ==============
Weighted average number of common shares, basic and diluted 28,488,095 31,343,241
============= ==============
The accompanying notes are an integral part of these consolidated statements
DRYSHIPS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 2005 AND 2006 (Expressed in thousands of U.S. Dollars - except for
share and per share data)
Retained
Common Stock Additional Earnings / Total
Comprehensive # of Par Paid-in (Accumulated Stockholders'
Income Shares Value Capital Deficit) Equity
------ ------ ----- ------- -------- ------
BALANCE, December 31, 2004 15,400,000 $ 154 $ 13,465 $ (7,280) $ 6,339
- Net income 88,051 - - - 88,051 88,051
- Issuance of common stock 14,950,000 150 251,135 - 251,285
- Dividends paid ($ 0.40 per share) - - - (12,140) (12,140)
----------
- Comprehensive income $ 88,051
==========
------------ -------- ---------- ----------- ----------
BALANCE, September 30, 2005 (Unaudited) 30,350,000 $ 304 $ 264,600 $ 68,631 $ 333,535
============ ======== ========== =========== ==========
BALANCE, December 31, 2005 30,350,000 $ 304 $ 264,600 $ 91,597 $ 356,501
- Net income 20,819 - - - 20,819 20,819
- Issuance of common stock 4,650,000 46 56,444 - 56,490
- Dividends declared or paid
($ 0.80 per share) - - - (25,237) (25,237)
----------
- Comprehensive income $ 20,819
==========
------------ -------- ---------- ----------- ----------
BALANCE, September 30, 2006 (Unaudited) 35,000,000 $ 350 $ 321,044 $ 87,179 $ 408,573
============ ======== ========== =========== ==========
The accompanying notes are an integral part of these consolidated statements.
DRYSHIPS INC.
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2005 AND 2006
(Expressed in thousands of U.S. Dollars)
Nine Months Ended
September 30,
2005 2006
----------- -----------
Cash Flows from Operating Activities:
Net income $ 88,051 $ 20,819
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 27,024 41,278
Amortization of deferred drydocking costs 1,378 2,471
Amortization and write-off of deferred financing costs 491 3,290
Amortization of fair value of time charter (4,646) 1,598
Change in fair value of derivatives 252 13,927
Recognition and amortization of free lubricants benefit 761 (120)
Changes in operating assets and liabilities:
Accounts receivable trade (2,812) 3,721
Insurance claims (86) (126)
Due from related parties 4,000 (1,965)
Inventories (904) (1,495)
Prepayments and advances (4,395) (1,959)
Accounts payable 5,627 405
Due to related parties 6,817 (4,290)
Accrued liabilities 8,514 552
Deferred revenue 1,524 (632)
Payments for drydocking (2,714) (4,032)
----------- -----------
Net Cash provided by Operating Activities 128,882 73,442
----------- -----------
Cash Flows from Investing Activities:
Advances for vessels' acquisitions (6,975)
Additions to vessel cost (847,552) (203,884)
----------- -----------
Net Cash used in Investing Activities (847,552) (210,859)
----------- -----------
Cash Flows from Financing Activities:
Increase in restricted cash (21,640) (2,154)
Advances to Baumarine Pool (1,027) (528)
Sellers credit - 3,250
Proceeds from long-term debt 577,585 664,281
Proceeds from short-term credit facility - 8,837
Payments of long-term debt (65,735) (546,925)
Payment of short-term credit facility - (8,837)
Proceeds from issuance of shares, net of related issuance costs 251,285 56,490
Dividends paid (24,063) (18,237)
Payment of financing costs (3,251) (3,055)
----------- -----------
Net Cash provided by Financing Activities 713,154 153,122
----------- -----------
Net increase (decrease) in cash and cash equivalents (5,516) 15,705
Cash and cash equivalents at beginning of period 8,371 5,184
----------- -----------
Cash and cash equivalents at end of period $ 2,855 $ 20,889
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest payments $ 11,173 $ 25,761
=========== ===========
Non-cash financing activities:
Liabilities assumed in connection with joint and several
borrowings with related parties $ 68,109 $ -
=========== ===========
The accompanying notes are an integral part of these consolidated statements
DRYSHIPS INC.
Notes to Unaudited Interim Consolidated Financial Statements
September 30, 2006
(Expressed in thousands of United States Dollars - except for share and per
share data, unless otherwise stated)
1. Basis of Presentation and General Information:
The accompanying consolidated financial statements include the accounts of
Dryships Inc. ("Dryships") and its wholly-owned subsidiaries (collectively,
the "Company"). Dryships was formed on September 9, 2004, under the laws of
the Republic of the Marshall Islands. On October 18, 2004, all of the
outstanding shares of the vessel owning companies listed under 1 through 6
in the table below (collectively, the "Contributed Companies"), were
contributed to the Company through Entrepreneurial Spirit Foundation (the
"Foundation"), a family foundation of Vaduz, Liechtenstein. The Company's
Chief Executive Officer, Mr. George Economou and members of his immediate
family (the "Family") control and are beneficiaries of the Foundation. The
transaction described above constituted a reorganization of companies under
common control, and has been accounted for in a manner similar to a pooling
of interests and the Contributed Companies are presented at historical cost
as control of the Contributed Companies before and after the reorganization
was with the Family. In February 2005 the Company completed its initial
public offering in the United States under the United States Securities Act
of 1933, as amended, the net proceeds of which amounted to $251,285. On
February 14, 2006, the Foundation transferred its shares of Dryships to its
wholly-owned subsidiary, Elios Investments Inc., a corporation organized
under the laws of the Republic of the Marshall Islands.
The accompanying consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles for interim
financial information. Accordingly, they do not include all the information
and notes required by U.S. generally accepted accounting principles for
complete financial statements. These consolidated financial statements have
been prepared on the same basis as the annual financial statements and, in
the opinion of management, reflect all adjustments, which include only
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 nine-month period
ended September 30, 2006 are not necessarily indicative of the results that
might be expected for the fiscal year ending December 31, 2006.
The balance sheet as of December 31, 2005 has been derived from the audited
consolidated financial statements at that date, but does not include all of
the information and footnotes required by U.S. generally accepted
accounting principles for complete financial statements.
The Company is engaged in the ocean transportation services of dry bulk
cargoes worldwide through the ownership and operation of bulk carrier
vessels. Since the consummation of its initial public offering and through
December 31, 2005, the Company took delivery of twenty-one dry bulk carrier
vessels, through newly established wholly owned subsidiaries. All
twenty-one vessels were delivered to the Company during the first nine
months of 2005, while there were six vessels acquisitions during the first
nine months of 2006.
Country of
Ship-owing Company Incorporation Vessel
------------------- ------------- ------
1. Helium Shipping Company Limited ("Helium") Malta Striggla
2. Hydrogen Shipping Company Limited ("Hydrogen") Malta Mostoles
3. Silicon Shipping Company Limited ("Silicon") Malta Flecha (Note 11)
4. Oxygen Shipping Company Limited ("Oxygen") Malta Shibumi (Note 11)
5. Annapolis Shipping Company Limited ("Annapolis") Malta Lacerta
6. Blueberry Shipping Company Limited ("Blueberry") Malta Panormos (Note 5)
7. Lancat Shipping Company Limited ("Lancat") Malta Matira
8. Tolan Shipping Company Limited ("Tolan") Malta Tonga
9. Malvina Shipping Company Limited ("Malvina") Malta Coronado
10. Arleta Navigation Company Limited ("Arleta") Malta Xanadu
11. Selma Shipping Company Limited ("Selma") Malta La Jolla
12. Royerton Shipping Company Limited ("Royerton") Malta Netadola
13. Samsara Shipping Company Limited ("Samsara") Malta Ocean Crystal
14. Lansat Shipping Company Limited ("Lansat") Malta Paragon
15. Farat Shipping Company Limited ("Farat") Malta Toro
16. Madras Shipping Company Limited ("Madras") Malta Alona
17. Iguana Shipping Company Limited ("Iguana") Malta Iguana
18. Borsari Shipping Company Limited ("Borsari") Malta Catalina
19. Onil Shipping Company Limited ("Onil") Malta Padre (exBelmonte)
20. Zatac Shipping Company Limited ("Zatac") Malta Waikiki
21. Fabiana Navigation Company Limited ("Fabiana") Malta Alameda
22. Fago Shipping Company Limited ("Fago") Malta Lanikai
23. Felicia Navigation Company Limited ("Felicia") Malta Solana
24. Platan Shipping Company Limited ("Platan") Malta Daytona
25. Karmen Shipping Company Limited ("Karmen") Malta Sonoma
26. Thelma Shipping Company Limited ("Thelma") Malta Manasota
27. Celine Shipping Company Limited ("Celine") Malta Conrand Oldendorff
28. Seaventure Shipping Limited ("Seaventure") Marshall Islands Hille Oldendorff
29. Tempo Marine Company Limited ("Tempo") Marshall Islands Maganari
30. Star Record Owning Company Limited (`Star") Marshall Islands Ligari
31. Human Owning Company Limited ("Human") Marshall Islands Estepona
32. Classical Owning Company Limited ("Classical") Marshall Islands Delray
33. Maternal Owning Company Limited ("Maternal") Marshall Islands Lanzarote
34. Paternal Owning Company Limited ("Paternal") Marshall Islands Formentera (Note 4)
35. Argo Owning Company Limited ("Argo") Marshall Islands Redondo (Note 4)
36. Roscoe Marine Ltd. Marshall Islands Hull 1518A (Note 5)
37. Monteagle Shipping S.A Marshall Islands Hull 1519A (Note 5)
Other company Activity
------------- --------
38. Wealth Management Inc. ("Wealth") Marshall Islands Cash Manager
The operations of the Company's vessels are managed by Cardiff Marine Inc.
(the "Manager"), a related party entity incorporated in Liberia.
Furthermore, Drybulk S.A., a related party Liberian corporation acts as the
charter and sales and purchase broker for the Company (Note 2). The
majority shareholding (70%) of the Manager and Drybulk S.A., is owned by
Entrepreneurial Spirit Foundation, a family foundation of Vaduz,
Liechtenstein, of which the Company's Chief Executive Officer, Mr. George
Economou and members of his family are beneficiaries.
The 30% shareholding of the Manager and Drybulk S.A. is held by Prestige
Finance S.A., a Liberian corporation which is wholly owned by the sister of
the Company's Chief Executive Officer.
During the nine-month periods ended September 30, 2005 and 2006, two and
one charterers, respectively, individually accounted for 10% or more of the
Company's voyage revenues as follows:
Charterer 2005 2006
----------------------------------- ------------ -----------
Oldendorff Carriers Gmbh 10% 16%
North China Shipping Ltd. 11% -
In addition, of the Company's voyage revenues during the nine-month periods
ended September 30, 2005 and 2006, 26% and 25%, respectively, were derived
from the participation of certain Company's vessels in a drybulk pool.
2. Transactions with Related Parties:
(a) Cardiff Marine Inc. and Drybulk S.A.: The operations of the Company's
vessels are managed by Cardiff Marine Inc. (Note 1). The Manager has
an office in Greece located at 80, Kifissias Avenue 151 25 Athens
Greece. The Manager provides the Company a wide range of shipping
services such as technical support and maintenance, insurance
consulting, chartering, financial and accounting services, in exchange
for a daily fixed fee of U.S. dollars 650 per vessel, on the basis of
a parity of Euro/U.S. $1.30. Such fee, at the beginning of each
calendar quarter date, is adjusted upwards or downwards according to
the U.S.$/Euro exchange rate as quoted by EFG Eurobank Ergasias S.A.
two business days before the end of each calendar quarter.
Additionally, the Manager charges U.S. Dollars 550 for superintendents
visits on board vessels in excess of five days per annum, per vessel,
for each additional day, per superintendent. In addition, under the
management agreement with Cardiff Marine Inc., Drybulk S.A. (Note 1)
acts as the charter and sales and purchase broker for the Company in
exchange for a commission of 1.25% on all freight, hire, demurrage
revenues and a commission of 1.00% on all gross sale proceeds or
purchase price paid of vessels. The management agreements were renewed
on October 18, 2004, with an initial term of five years and will
automatically be extended to successive five-year terms. Notice to
terminate shall not be effective until 30 days following its having
been delivered, unless otherwise mutually agreed in writing. Effective
January 1, 2007 the fee charged will increase by U.S Dollars $100 per
vessel.
The fees charged by the Manager for the nine-month periods ended
September 30, 2005 and 2006, totaled $3,552 and $4,666 respectively
and are separately reflected in the accompanying consolidated
unaudited statements of income. Chartering commissions charged by
Drybulk S.A. for the nine-month periods ended September 30, 2005 and
2006, totaled $2,286 and $2,117, respectively, and are separately
reflected as voyage expenses - related party in the accompanying
consolidated unaudited statements of income.
In addition, $8,400 and $2,011 during the year ended December 31, 2005
and during the nine-month period ended September 30, 2006,
respectively, relate to the acquisition of vessels and were charged by
Drybulk S.A. These amounts are capitalized as a vessel acquisition
cost and included in Vessels, net in the accompanying consolidated
balance sheets.
During the nine-month period ended September 30, 2005 the Company also
paid an amount of $600 to the Manager as remuneration for additional
services not contemplated by the management agreement and carried out
during the pre-delivery period of the newly acquired vessels which is
included in General and administrative expenses - related party in the
accompanying 2005 consolidated unaudited statement of income.
In addition on November 8, 2005 and effective January 1, 2005 the
Company concluded a contract for ongoing services with the Manager,
under which the Company pays a quarterly fee of $250 beginning January
1, 2005 for services rendered by the Manager commencing in the second
quarter of 2005 in relation to the financial reporting requirements of
the Company under the rules of the Securities and Exchange Commission
and the establishment and monitoring of internal controls over
financial reporting. The above fees totaled $666 and $750 for the
nine-month periods ended September 30, 2005 and 2006, respectively and
are included in General and administrative expenses - related party in
the accompanying consolidated unaudited statements of income.
During the nine-month period ended September 30, 2006 the Company also
incurred costs of $562 related to remuneration to the Manager for
additional services not contemplated by the contract for ongoing
services discussed above with respect to the Manager's compliance with
the Sarbanes Oxley Act of 2004 Section 404 requirements which is
included in General and administrative expenses - related party in the
accompanying 2006 consolidated unaudited statement of income. The
amount of $562 is included in accrued liabilities in the accompanying
consolidated 2006 balance sheet. At December 31, 2005 and September
30, 2006, the amounts due to/(from) Cardiff were $1,434 and ($1,965),
respectively, while the amounts due to Drybulk S.A were $5,026 and
$2,170, respectively.
(b) Lease Agreement: On October 1, 2005 and effective as of the same date,
the Company entered into a rental agreement with its Chief Executive
Officer to lease office space in Athens, Greece. The agreement is for
duration of 5 years beginning October 1, 2005 and expires on September
30, 2010. The annual rental for the first two years is Euro 9,000
(approximately $11,000) and thereafter it will be adjusted annually
for inflation increases. Prior to entering the above agreement both
parties agreed to cancel without penalties a previously existing
rental agreement for leased office space. That agreement had been
effective for a five year period beginning January 1, 2005 at an
annual rental of Euro 14,000 (approximately $17,000) before any annual
inflation increases. The related rent expense for the nine-month
period ended September 30, 2005 and 2006 totalled $13 and $8,
respectively, and is included in General and administrative expenses -
related party in the accompanying consolidated unaudited statements of
income.
(c) Consultancy Agreements: On February 3, 2005, the Company concluded two
agreements with Fabiana Services S.A. ("Fabiana") a related party
entity incorporated in the Republic of the Marshall Islands. Fabiana
is beneficially owned by the Company's Chief Executive Officer and
Chief Financial Officer. Under the agreements, Fabiana provides the
services of the individuals who serve in the positions of Chief
Executive and Chief Financial Officers of the Company. The duration of
the agreements is for three years beginning February 3, 2005 and
ending (unless terminated earlier on the basis of any other provisions
as may be defined in the agreement) on the day before the third
anniversary of such date. The Company pays Euro 979,000 (approximately
$1,175) and Euro 147,000 (approximately $176) per annum payable
monthly on the last working day of every month in twelve installments
for the services of the Chief Executive and Chief Financial Officers
respectively. The related expense for the nine-month periods ended
September 30, 2005 and 2006 totaled $932 and $1,088, respectively, and
is included in General and administrative expenses - related party in
the accompanying consolidated unaudited statements of income. No
amounts were payable to or receivable from Fabiana at December 31,
2005. At September 30, 2006 an amount of $317 was due to Fabiana and
is included in accrued liabilities in the accompanying consolidated
2006 balance sheet.
(d) Acquisition of vessels: On March 24, 2006, the Company concluded a
Memorandum of Agreement with a company controlled by the Company's
Chief Executive Officer for the acquisition of Hille Oldendorff for
$40,760 which was delivered on April 19, 2006. The purchase price
consists of the price paid by the vessel's previous owners to acquire
the vessel in October 2005 and certain pre-trading expenses also
incurred by the previous owners. Upon her acquisition, the vessel was
under an existing bareboat charter contract at the rate of $600 net of
commission per month until March 31, 2007 with a two-month extention
in charterer's option. The purchase price was partly financed
($26,696) by the proceeds of the loan discussed in Note 8 below and by
an unsecured sellers' credit of $3,250 as provided by the Memorandum
of Agreement dated March 24, 2006. The sellers' credit bears interest
at LIBOR plus a margin of 1.5% and was initially repayable in one
installment not earlier than December 2006 but not later than March
2007. In October 2006, the credit was fully settled with common stock.
(Note 11)
3. Inventories:
The amounts shown in the accompanying consolidated balance sheets are
analyzed as follows:
December 31, September 30,
2005 2006
-------------- ----------------
Bunkers....................... - 465
Lubricants ................... 1,148 2,106
Victualling stores............ 178 250
-------------- ----------------
Total.................... 1,326 2,821
============== ================
4. Advances for vessels acquisitions:
The amount in the accompanying 2006 balance sheet represents the advance
payment (10% of the purchase price) made for the acquisition of the
following drybulk carrier vessels.
(a) Vessel Formentera, a second-hand, 1996 built Panamax, was acquired by
Paternal Owning Company Limited for $29.0 million based on a
memorandum of agreement concluded in August 2006. The vessel was
delivered to the Company on October 16, 2006 (Note 11). The purchase
price of the vessel will be partially financed ($21,750) by the loan
discussed in Note 8 below.
(b) Vessel Redondo, a second-hand, 2000 built Panamax, was acquired by
Argo Owning Company Limited for $40.75 million based on a memorandum
of agreement concluded in September 2006. The vessel is expected to be
delivered to the Company during the fourth quarter of 2006. The
purchase price of the vessel will be partially financed by the
supplemental loan agreements discussed in Note 11.
5. Vessels, net:
The amounts in the accompanying consolidated balance sheets are analyzed as
follows:
Vessel Accumulated Net Book
Cost Depreciation Value
---------- ---------- ----------
Balance, December 31, 2005...... 923,890 (59,157) 864,733
- Additions 207,237 - 207,237
- Depreciation.................. - (41,278) (41,278)
---------- ---------- ----------
Balance, September 30, 2006..... 1,131,127 (100,435) 1,030,692
========== ========== ==========
During the nine month period ended September 30, 2006, the Company took
delivery of six vessels thereby bringing the fleet of the Company to thirty
three vessels.
As previously discussed in Note 2 (d), on April 19, 2006, the Company took
delivery of the vessel Hille Oldendorff.
In addition, on May 11, 2006, the Company acquired from an unrelated party,
the vessel Maganari, a second-hand Panamax drybulk carrier, for $32,350.
The purchase price of the vessel was partially financed ($26,513) by the
loan discussed in Note 8 below and a short term credit facility of $8,837
provided by Elios Investments Inc. (Note 1) bearing interest of $100 per
month and repayable within six months from drawdown. The short term credit
facility was fully settled in August 2006.
Furthermore, on August 3, 2006, the Company concluded three Memoranda of
agreement for the acquisition of the following drybulk carrier vessels from
unrelated parties:
(a) Vessel Lanzarote a second-hand, 1996 built Panamax, which was acquired
by Maternal Owning Company Limited for $29.0 million. The vessel was
delivered to the Company on September 6, 2006. The purchase price of
the vessel was partially financed ($21,750) by the loan discussed in
Note 8 below.
(b) Vessel Delray a second-hand, 1994 built Panamax, which was acquired by
Classical Owning Company Limited for $26.5 million. The vessel was
delivered to the Company on September 12, 2006. The purchase price of
the vessel was partially financed ($19,875) by the loan discussed in
Note 8 below.
(c) Vessel Estepona a second-hand, 1994 built Panamax, which was acquired
by Human Owning Company Limited for $26.5 million. The vessel was
delivered to the Company on September 26, 2006. The purchase price of
the vessel was partially financed ($19,875) by the loan discussed in
Note 8 below.
In addition, on August 22, 2006, vessel Ligari a second-hand, 2004 built
Panamax drybulk carrier was acquired by Star Record Owning Company Limited
for $43.0 million. The vessel was delivered to the Company on September 8,
2006. The purchase price of the vessel was partially financed ($22,790) by
the loan discussed in Note 8 below.
In September 2006, the Company concluded a memorandum of agreement for the
disposal of the vessel Panormos, to an unaffiliated third party for $35.0
million. The vessel is expected to be delivered to her new owners during
the fourth quarter of 2006 free of charter. A gain of approximately $15
million will be realized and recognized in the financial statements at the
date of delivery of the vessel.
In September 2006, the Company entered into two shipbuilding contracts for
the construction of two Panamax drybulk carriers for approximately $33.25
million each. The vessels are expected to be delivered from the shipyard in
the last quarter of 2009 and the first quarter of 2010.
All Company's vessels, for a total carrying value of $1,030,692 as of
September 30, 2006, have been provided as collateral to secure the loans
discussed in Note 8 below. As at September 30, 2006, ten vessels were
operating under the drybulk pool discussed in Note 1 above, one vessel was
awaiting orders for her next voyage and the remaining twenty-two vessels
were operating under time charters, the last of which expires in February
2008.
6. Prepaid Charter Revenue/Deferred revenue:
During the nine-month period ended September 30, 2005, eight vessels out of
the twenty-one acquired were under existing time charter contracts which
the Company agreed to assume through arrangements with the respective
charterers. The Company upon delivery of each of the above vessels
evaluated the charter contracts assumed and recognized a liability,
classified as deferred revenue, of $6,435 with a corresponding increase in
the vessels' purchase price.
During the nine-month period ended September 30, 2006, the Company acquired
six dry bulk carrier vessels which were all under existing time charter
contracts which the Company agreed to assume through arrangements with the
respective charterers. The Company upon delivery of each of the above
vessels evaluated the charter contracts assumed and recognized (a) an asset
of $5,469, for two of the vessels, with a corresponding decrease in the
vessels' purchase price and (b) a liability of $8,822, for the other four
vessels, with a corresponding increase in the vessels' purchase price.
As at December 31, 2005 and September 30, 2006, the unamortized balance of
the liability amounted to $1,211 and $7,948, respectively and is included
in deferred revenue in the accompanying consolidated balance sheets, while
the unamortized balance of the asset at September 30, 2006 amounted to
$2,872 and is separately reflected in the accompanying 2006 consolidated
balance sheet.
7. Deferred Charges, net:
The unamortized amounts in the accompanying consolidated balance sheet
represent drydocking costs and are analyzed as follows:
Balance, December 31, 2005................................. 3,781
- Additions .............................................. 4,032
- Amortization............................................ (2,471)
-------------
Balance, September 30, 2006................................ 5,342
=============
Additions to deferred dry-dock cost represent expenditures incurred for the
dry-docking of the vessels Mostoles, Striggla, Iguana, Netadola and Sonoma
during the nine month period ended September 30, 2006. The amortization of
drydock costs is separately reflected in the accompanying consolidated
unaudited statements of income.
8. Long term Debt, net of deferred financing fees:
The amount of long-term debt shown in the accompanying consolidated balance
sheets is analyzed as follows:
December 31, September 30,
2005 2006
------------ ------------
Balance under three loans................. 528,325 645,681
Less related deferred financing costs .... (2,972) (2,737)
------------ ------------
Total..................................... 525,353 642,944
Less: Current portion..................... (107,738) (107,060)
------------ -------------
Long-term portion......................... 417,615 535,884
============ =============
As of September 30, 2006, the Company had three loans outstanding which
were concluded in March and September 2006 as follows:
o On March 31, 2006, the Company signed two loan agreements for an
aggregate amount of up to $628,750 with a syndicate of institutional
Lenders as follows:
A term loan of up to $557,500, in order to refinance the then
outstanding balance of the Company's prior indebtedness ($528,325 as
at December 31, 2005), to provide the Company with working capital and
to finance the acquisition cost of the second-hand vessel Hille
Oldendorff and a short term credit facility of up to $71,250, in order
to partially finance the acquisition cost of additional vessels
acceptable to the lenders. The credit facility was available for 364
days after the signing of the agreement and each amount drawn down
would be included in the term loan. As of September 30, 2006 the
credit facility has been used to partially finance the acquisition
cost of the second-hand vessels Maganari, Ligari and Lanzarote and was
included in the term loan. The outstanding balance of $605,931 (gross
of unamortized deferred financing fees) at September 30, 2006 is
repayable in 39 variable consecutive quarterly installments commencing
on November 30, 2006 and through May 2016 plus a balloon payment of
$132,052 payable together with the last installment.
Under the loan agreements, the Company is required to pay quarterly in
arrears on the last day of each fiscal quarter a commitment fee in the
amount of 0.40% per annum of the unutilized portion of the term loan
and 0.25% of the unutilized portion of the credit facility, a
non-refundable arrangement fee of 0.40% and structuring fee of 0.025%
on the aggregate loan amount, payable 50% upon acceptance of the
lenders' offer letter and 50% on signing of the loan agreements, and a
non-refundable annual agency fee in the amount of $45 payable to the
agent for the first time on signing of the loan agreements and on
every anniversary thereafter. Furthermore, the Company is required to
pay a draw-down fee of 0.075% on each drawdown amount under the credit
facilities.
o On September 7, 2006, the Company signed a bridge loan agreement for
an aggregate amount of up to $61,500 with a bank in order to partly
finance the acquisition cost of vessels Delray, Estepona and
Formentera. As of September 30, 2006, an amount of $39,750 was drawn
down, while the remaining amount of $21,750 will be drawn down upon
the delivery of the vessel Formentera. The loan was fully repaid in
November 2006 (Note 11). Under this loan agreement, the Company was
required to pay a non-refundable arrangement fee of 0.425% on the
aggregate loan amount, and a non-refundable annual commitment fee of
0.40% on the undrawn portion of the loan paid at the end of each
interest period.
During the nine-month period ended September 30, 2006, an amount of $3,055
representing $2,718 of arrangement fee, $157 of structuring fee and $180 of
legal fees were incurred and included in deferred financing fees classified
as a contra to debt in the accompanying 2006 consolidated balance sheet. In
addition, an amount of $2,844 relating to the unamortized balance of
deferred financing fees associated with the loans extinguished as discussed
above which were classified as a contra to debt prior to debt
extinguishment, were written off through interest and finance costs in the
accompanying 2006 consolidated unaudited income statement.
The loans bear interest at LIBOR plus a spread and are secured by a first
priority mortgage over the vessels involved, a first assignment of all
freights, earnings, insurances and requisition compensation. The loans
contain covenants including restrictions as to changes in management and
ownership of the vessels, additional indebtedness and mortgaging of vessels
without the bank's prior consent as well as certain financial covenants
relating to the Company's financial position, operating performance and
liquidity. The Company will be permitted to pay dividends under the loans
so long as such amount of dividends does not exceed 50% of the Company's
net income as evidenced by its relevant annual audited financial
statements. However, for the fiscal year 2006, the amount of dividends the
Company may pay cannot exceed the amount of $18,000. For any dividends
declared or paid in excess of this amount in 2006, the Company obtained
related written consent from its lenders.
Total interest incurred on long-term debt for the nine-month periods ended
September 30, 2005 and 2006 amounted to $12,559 and $26,261 respectively,
and is included in interest and finance costs in the accompanying unaudited
consolidated statements of income.
9. Derivatives:
i. Interest rate cap and floor agreements: As of December 31, 2005 and
September 30, 2006 the Company had outstanding six interest rate cap
and floor agreements concluded in May 2005 in order to hedge its
exposure to interest rate fluctuations with respect to its borrowings.
Such agreements did not qualify for hedge accounting and therefore
changes in their fair value are reflected in earnings.
The fair value of these six interest rate cap and floor agreements
equates to the amount that would be received or paid by the Company if
the agreements were cancelled. Such fair value at December 31, 2005
and September 30, 2006 was an asset of $270 and $879, respectively and
is included in Financial instruments in the accompanying consolidated
balance sheets. A gain of $609 has been recorded in Interest and
finance costs in the accompanying consolidated unaudited statement of
income for the nine months ended September 30, 2006.
ii. Foreign exchange transactions: In January 2006, the Company engaged in
a total of 12 call options, maturing in monthly intervals from
February 2006 to January 2007, under two foreign exchange transactions
involving the US dollar against the Euro. As of September 2006, the
Company had open 4 call options, maturing in monthly intervals from
October 2006 to January 2007, under two foreign exchange transactions
involving the US dollar against the Euro. The strike rate under each
option is 1.21 U.S. dollars per Euro, for amounts of Euro 200,000 per
month, for each of the 4 months after the individual contract dates.
In January 2006, the Company engaged in a total of 12 Forward Foreign
Exchange Agreements, in monthly intervals from October 2006 to January
2007. As of September 30, 2006, the Company had open 4 Forward Foreign
Exchange Agreements in monthly intervals from October 2006 to January
2007.
The forward rate under each forward transaction ranges from 1.2267 to
1.2320 U.S. Dollars per Euro for amounts of Euro 200,000 per month for
the four months after the individual contracts dates. The Company
engaged in such agreements in order to hedge its exposure to
fluctuations between U.S. Dollar and Euro with respect to certain
expenses incurred in Euro. Such agreements did not qualify for hedge
accounting and therefore changes in their fair value are reflected in
earnings.
The fair market value of the foreign currency call options discussed
above at September 30, 2006 resulted in an asset of $82. A gain of $82
has been included in General and Administrative expenses in the
accompanying 2006 consolidated unaudited statement of income. In
addition, other expenses of $89, representing the premium paid by the
Company for the conclusion of the foreign currency call options
discussed above, has been included in General and administrative
expenses in the accompanying 2006 consolidated unaudited statement of
income.
iii. Forward freight agreements: During the nine-month period ended
September 30, 2006, the Company entered into fifteen forward freight
agreements ("FFAs") with the objective to utilize them as economic
hedging instruments in order to reduce its exposure to Panamax freight
market fluctuations with respect to its fleet. Such agreements did not
qualify for hedge accounting and therefore changes in their fair value
are reflected in earnings.
As of September 30, 2006, nine FFAs remained open. During the
nine-month period ended September 30, 2006, the change in fair market
value and the ultimate settlement, if applicable, of the FFA contracts
resulted in a realized loss of $7,758 and an unrealized loss of
$14,618.
10. Common Stock and Additional Paid-in Capital
On May 3, 2006, the Company filed its universal shelf registration
statement and related Prospectus for the issuance of 5,000,000 of common
shares. From May 2006 through August 2006, an amount of 4,650,000 shares of
common stock with par value $0.01 were issued. The net proceeds after
underwriting commissions of 2.5% and other issuance fees amounted to
$56,490.
Based on a resolution adopted at the General Shareholders meeting on July
11, 2006, the aggregate number of shares of common stock that the Company
is authorized to issue increased from 45,000,000 registered shares with par
value of $0.01 to 75,000,000 registered shares with the same par value.
11. Subsequent Events
(a) Appointment of Interim Chief Financial Officer: On October 6, 2006,
the Chief Financial Officer (CFO), Mr. Christopher Thomas, resigned.
The Board of Directors appointed the Chief Executive Officer, Mr.
George Economou, to act as interim CFO. Mr. Gregory Zikos was
appointed as Chief Financial Officer by the Board effective November
24, 2006.
(b) Vessel delivery: On October 16, 2006, vessel Formentera was delivered
to the Company. The acquisition cost of the vessel was partly financed
($21,750) by the loan discussed Note 8 above.
(c) Vessel acquisition: In November 2006, the Company concluded a
memorandum of Agreement for the acquisition of the vessel Zella
Oldendorff, for $39.7 million, delivery of which is expected in the
second quarter of 2007.
(d) Disposal of vessels:
i. In October 2006, the Company concluded a memorandum of agreement for
the disposal of the vessel Flecha, to an unaffiliated third party for
$11.7 million. The vessel will be delivered to her new owners during
the fourth quarter of 2006. A gain of approximately $9 million will be
realized on the sale of the vessel and recognized upon delivery.
ii. In November 2006, the Company concluded a memorandum of agreement for
the disposal of the vessel Shibumi, to an unaffiliated third party for
$24.6 million. The vessel will be delivered to her new owners during
the second quarter of 2007. A gain of approximately $17.8 million will
be realized on the sale of the vessel and recognized upon delivery.
(e) Payment for vessels under construction: In October 2006, an advance
payment of $6,650 was paid for the two Panamax vessels under
construction, representing the 10% payment on the contract price.
(f) Supplemental loan agreements: On November 30, 2006, the Company
entered into two supplemental agreements to the $628,750 term loan
entered into on March 31, 2006, increasing the aggregate amount of the
loan by up to $82,343. Out of the total loan, an amount of up to
$70,763 will be used to refinance the bridge loan discussed in Note 8
above and to provide the Company with working capital and the
remaining amount of $11,580 will be used to partially finance the
acquisition cost of the vessel Redondo (Note 4). On November 30, 2006,
the amount of $70,763 was drawn down, while the remaining amount of
$11,580 will be drawn down upon delivery of the vessel Redondo. The
supplemental amount will be repayable in 38 variable consecutive
quarterly installments commencing in February 2007 through May 2016
plus a balloon payment of $2,111.
In addition, the amount of $18,892, required to be repaid following
the sale of the vessel Panormos in accordance with the initial loan
agreement, was not repaid and was made available by the lenders to
partially finance the acquisition cost of the vessel Redondo (Note 4).
Under these supplemental agreements, the Company is required to pay a
non-refundable arrangement fee of 0.375% on aggregate of the
supplemental loan amounts.
(g) Issuance of shares: On October 24, 2006, the Company's Board of
Directors agreed to the request of the Company's major shareholders
(Elios Investments Inc., Advice Investments S.A. and Magic Management
Inc.) to receive their dividend payment, following the declaration of
U.S. Dollar 0.20 quarterly dividend per share in September 2006, in
Dryships'common shares. In addition, the Board of Directors also
agreed on that date to the request of a company related to the
Company's Chairman and Chief Executive Officer, George Economou, to
accept repayment of the outstanding balance of the seller's credit
discussed in Note 2(d) in Dryships' common shares.
As a result of the agreement, an aggregate of $3,080 in dividends and
the seller's credit together with interest amounting to $3,327 were
settled with 235,585 and 254,512 of Dryships'common shares,
respectively.
The price used as consideration for issuance of the Company's shares
was equal to the average closing price of Dryships common stock on the
Nasdaq Global Market over the 8 trading days ended October 24, 2006.
(h) Change in charter and sales and purchase broker: Effective October 1,
2006, Drybulk S.A., which acts as the charter and sales and purchase
broker for the Company (note 1) has been replaced by Cardiff Marine
Inc.
Forward-Looking Statements
Matters discussed in this report may constitute forward-looking statements.
Forward-looking statements reflect our current views with respect to future
events and financial performance and may include statements concerning plans,
objectives, goals, strategies, future events or performance, and underlying
assumptions and other statements, which are other than statements of historical
facts.
The forward-looking statements in this report are based upon various
assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, management's examination of historical operating
trends, data contained in our records and other data available from third
parties. Although DryShips Inc. believes that these assumptions were reasonable
when made, because these assumptions are inherently subject to significant
uncertainties and contingencies which are difficult or impossible to predict and
are beyond our control, DryShips Inc. cannot assure you that it will achieve or
accomplish these expectations, beliefs or projections.
Important factors that, in our view, could cause actual results to differ
materially from those discussed in the forward-looking statements include the
strength of world economies and currencies, general market conditions, including
changes in charterhire rates and vessel values, changes in demand that may
affect attitudes of time charterers to scheduled and unscheduled drydocking,
changes in DryShips Inc.'s operating expenses, including bunker prices,
dry-docking and insurance costs, or actions taken by regulatory authorities,
potential liability from pending or future litigation, domestic and
international political conditions, potential disruption of shipping routes due
to accidents and political events or acts by terrorists.
Risks and uncertainties are further described in reports filed by DryShips
Inc. with the US Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DryShips Inc.
---------------------------------
(Registrant)
Dated: December 8, 2006 By /s/ Gregory Zikos
------------------------
Gregory Zikos
Chief Financial Officer