|
·
|
on
an actual basis;
|
|
·
|
on
an adjusted basis to give effect to (i) the aggregate payment of
$7.1
million of dividends declared and paid in July 2007, (ii) the additional
drawdown of $18.8 million for the vessels, Majorca, Heinrich Oldendorff
and Ecola, (iii) the repayment of $18.8 million due to the sale of
vessels Mostoles and Lanikai which were delivered to their new
owners
during July and August 2007 and (iv) the loan installment payment
of $20.0
million paid in August 2007; and
|
|
·
|
on
a further adjusted basis giving effect to our issuance and sale
of up to
350,000 shares of common stock, which may be sold from time to
time prior
to December 31, 2007, at an assumed offering price of $75.37 per
share, the last reported closing price of our common stock on September
11, 2007, net of issuance costs of $ 0.66
million.
|
|
As
of June 30, 2007
|
||||||||||||
|
Actual
|
As
Adjusted (1)
|
As
Further Adjusted (2)
|
||||||||||
|
(in
thousands of U.S. dollars)
|
||||||||||||
|
Debt
|
||||||||||||
|
Current
portion of long-term debt
|
$ |
81,938
|
$ |
61,905
|
$ |
61,905
|
||||||
|
Total
long-term debt, net of current portion
|
730,507
|
730,507
|
730,507
|
|||||||||
|
Total debt
|
$ |
812,445
|
$ |
792,412
|
$ |
792,412
|
||||||
|
Shareholders’
equity
|
||||||||||||
|
Preferred
stock, $0.01 par value; 30,000,000 shares
|
||||||||||||
|
authorized,
none issued
|
-
|
-
|
-
|
|||||||||
|
Common
stock, $0.01 par value; 45,000,000 shares
authorized,
|
-
|
-
|
-
|
|||||||||
|
35,490,097
shares issued and outstanding at June 30, 2007
|
355
|
355
|
359
|
|||||||||
|
Additional
paid-in capital
|
327,446
|
327,446
|
353,162
|
|||||||||
|
Retained
earnings
|
285,533
|
278,435
|
278,435
|
|||||||||
|
Total
shareholders’ equity
|
613,334
|
606,236
|
631,956
|
|||||||||
|
Total
capitalization
|
$ |
1,425,779
|
$ |
1,398,648
|
$ |
1,424,368
|
||||||
|
(1)
|
There
have been no significant adjustments to our capitalization since
June 30,
2007, as so adjusted.
|
|
(2)
|
Assumes
a sale price of $75.37 per share, which was the last reported closing
price of our common stock on September 11,
2007.
|
|
(a)
|
increase
the amounts available under the existing credit facility by up to
$181
million and
|
|
(b)
|
include
a re-borrowing option for mandatory prepayment amounts of up to $
200
million.
|
|
Page
|
||
|
Unaudited
Condensed Consolidated Balance Sheets as of December 31, 2006 and
June 30,
2007
|
F-2
|
|
|
Unaudited
Condensed Consolidated Statements of Income for the six month periods
ended June 30, 2006 and 2007
|
F-3
|
|
|
Unaudited
Condensed Consolidated Statements of Stockholders’ Equity for the six
month periods ended June 30, 2006 and 2007
|
F-4
|
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows for the six month
periods
ended June 30, 2006 and 2007
|
F-5
|
|
|
Notes
to Unaudited Interim Condensed Consolidated Financial
Statements
|
F-6
|
|
|
DRYSHIPS
INC.
|
|||||
|
Unaudited
Condensed Consolidated Balance Sheets
|
|||||
|
December
31, 2006 and June 30, 2007
|
|||||
|
(Expressed
in thousands of U.S. Dollars – except for share and per share
data)
|
|||||
|
December
31, 2006
|
June
30, 2007
|
||||
|
ASSETS
|
|||||
|
CURRENT
ASSETS:
|
|||||
|
Cash
and cash equivalents
|
$
|
2,537
|
$
|
33,466
|
|
|
Restricted
cash (Note 8)
|
6,614
|
6,738
|
|||
|
Accounts
receivable trade
|
3,187
|
8,169
|
|||
|
Insurance
claims
|
671
|
6,237
|
|||
|
Due
from related parties (Note 2)
|
3,353
|
3,625
|
|||
|
Inventories
(Note 3)
|
2,571
|
2,754
|
|||
|
Prepayments
and advances
|
5,568
|
6,300
|
|||
|
Fair
value of above market acquired time charter (Note 6)
|
1,335
|
-
|
|||
| Financial instruments (Note 9) | 39 | - | |||
|
Total
current assets
|
25,875
|
67,289
|
|||
|
FIXED
ASSETS, NET:
|
|||||
|
Advances
for vessels under construction and acquisitions (Note 5)
|
27,380
|
22,847
|
|||
|
Vessels,
net (Note 4)
|
1,084,924
|
1,338,256
|
|||
|
Total
fixed assets, net
|
1,112,304
|
1,361,103
|
|||
|
OTHER
NON CURRENT ASSETS:
|
|||||
|
Deferred
charges, net (Note 7)
|
6,200
|
4,227
|
|||
|
Restricted
cash (Note 8)
|
20,000
|
20,000
|
|||
|
Financial
instruments (Note 9)
|
946
|
2,123
|
|||
|
Other
|
2,848
|
1,768
|
|||
|
Total
assets
|
$
|
1,168,173
|
$
|
1,456,510
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||
|
CURRENT
LIABILITIES:
|
|||||
|
Current
portion of long-term debt (Note 8)
|
$
|
71,412
|
$
|
81,118
|
|
|
Accounts
payable
|
11,423
|
8,409
|
|||
|
Due
to related parties (Note 2)
|
25,086
|
-
|
|||
|
Accrued
liabilities
|
6,326
|
10,501
|
|||
|
Deferred
revenue
|
12,270
|
11,521
|
|||
| Financial instruments (Note 9) | 2,625 | - | |||
|
Other
current liabilities
|
202
|
230
|
|||
|
Total
current liabilities
|
129,344
|
111,779
|
|||
|
NON
CURRENT LIABILITIES:
|
|||||
|
Fair
value of below market acquired time charter (Note 6)
|
-
|
3,454
|
|||
|
Long
term debt, net of current portion (Note 8)
|
587,330
|
727,534
|
|||
|
Other
|
607
|
409
|
|||
|
Total
non current liabilities
|
587,937
|
731,397
|
|||
|
COMMITMENTS
AND CONTIGENCIES
|
-
|
-
|
|||
|
STOCKHOLDERS’
EQUITY:
|
|||||
|
Preferred
stock, $ 0.01 par value; 30,000,000 shares authorized, none
issued.
|
-
|
-
|
|||
|
Common
stock, $0.01 par value; 75,000,000 shares authorized; 35,490,097
shares
issued and outstanding.
|
355
|
355
|
|||
|
Additional
paid-in capital
|
327,446
|
327,446
|
|||
|
Retained
earnings
|
123,091
|
285,533
|
|||
|
Total
stockholders’ equity
|
450,892
|
613,334
|
|||
|
Total
liabilities and stockholders’ equity
|
$
|
1,168,173
|
$
|
1,456,510
|
|
|
DRYSHIPS
INC.
|
||||||
|
Unaudited
Condensed Consolidated Statements of Income
|
||||||
|
For
the six month period ended June 30, 2006 and
2007
|
||||||
|
(Expressed
in thousands of U.S. Dollars – except for share and per share
data)
|
||||||
|
Six
Months Ended June
30,
|
||||||
|
2006
- as restated
(Note
10)
|
2007
|
|||||||
|
REVENUES:
|
||||||||
|
Voyage
revenues
|
$ |
109,356
|
199,171
|
|||||
|
EXPENSES:
|
||||||||
|
Loss
on forward freight agreements
|
12,863
|
-
|
||||||
|
Voyage
expenses
|
7,692
|
11,461
|
||||||
|
Voyage
expenses – related party (Note 2)
|
1,367
|
2,431
|
||||||
|
Gain on
sale of bunkers, net
|
(2,003 | ) | (1,635 | ) | ||||
|
Vessel
operating expenses
|
21,596
|
29,017
|
||||||
|
Depreciation
|
26,723
|
34,025
|
||||||
|
Amortization
of deferred drydocking costs
|
1,551
|
1,572
|
||||||
|
Gain
on sale of vessels
|
-
|
(84,283 | ) | |||||
|
Management
fees – related party (Note 2)
|
2,954
|
4,641
|
||||||
|
General
and administrative expenses
|
788
|
1,979
|
||||||
|
General
and administrative expenses – related party (Note 2)
|
1,216
|
1,916
|
||||||
|
Operating
income
|
34,609
|
198,047
|
||||||
|
OTHER
INCOME / (EXPENSES):
|
||||||||
|
Interest
and finance costs
|
(13,977 | ) | (23,886 | ) | ||||
|
Interest
and finance costs – related party (Note 2)
|
(192
|
) | (614 | ) | ||||
|
Interest
income
|
245
|
1,738
|
||||||
|
Other,
net
|
(3,379 | ) |
1,353
|
|||||
|
Total other income/ (expenses), net
|
(17,303 | ) | (21,409 | ) | ||||
|
Net
Income
|
$ |
17,306
|
176,638
|
|||||
|
Earnings
per common share, basic and diluted
|
$ |
0.57
|
4.98
|
|||||
|
Weighted
average number of common shares, basic and
diluted
|
30,381,294
|
35,490,097
|
||||||
|
DRYSHIPS
INC.
|
|||||||||||||
|
Unaudited
Condensed Consolidated Statements of Stockholders’
Equity
|
|||||||||||||
|
For
the six month period ended June 30, 2006 and 2007
|
|||||||||||||
|
(Expressed
in thousands of U.S. Dollars – except for share and per share
data)
|
|||||||||||||
|
Common
Stock
|
Additional
Paid-in
Capital
|
||||||||||||
|
Comprehensive
Income
|
#
of
Shares
|
Par
Value
|
Retained
|
||||||||||
|
Earnings
|
Total
|
||||||||||||
|
BALANCE,
December 31, 2005
|
30,350,000
|
$
|
304
|
$
|
264,600
|
$
|
91,597
|
$
|
356,501
|
||||
|
-
Net income
|
17,306
|
-
|
-
|
-
|
17,306
|
17,306
|
|||||||
|
-
Issuance of common stock
|
214,818
|
2
|
1,907
|
1,909
|
|||||||||
|
-
Dividends declared ($ 0.60 per share)
|
-
|
-
|
-
|
(18,237)
|
(18,237)
|
||||||||
|
-
Comprehensive income
|
$
|
17,306
|
|||||||||||
|
BALANCE,
June 30, 2006 - as restated (Note 10)
|
30,564,818
|
306
|
266,507
|
90,666
|
357,479
|
||||||||
|
BALANCE,
December 31, 2006
|
35,490,097
|
$
|
355
|
$
|
327,446
|
$
|
123,091
|
450,892
|
|||||
|
-
Net income
|
176,638
|
-
|
-
|
-
|
176,638
|
176,638
|
|||||||
|
-
Dividends declared ($ 0.40 per share)
|
-
|
-
|
-
|
(14,196)
|
(14,196)
|
||||||||
|
Comprehensive
income
|
$
|
176,638
|
|||||||||||
|
BALANCE,
June 30, 2007
|
35,490,097
|
355
|
327,446
|
285,533
|
613,334
|
||||||||
|
DRYSHIPS
INC.
|
||||||
|
Unaudited
Condensed Consolidated Statements of Cash Flows
|
||||||
|
For
the six month period ended June 30, 2006 and 2007
|
||||||
|
(Expressed
in thousands of U.S. Dollars)
|
||||||
|
Six
Months Ended June
30,
|
||||||||
| Cash Flows from Operating Activities: |
2006
|
2007
|
||||||
| Net income | $ |
17,306
|
$
|
176,638
|
||||
| Adjustments to reconcile net income to | ||||||||
| Net cash provided by operating activities: | ||||||||
|
Depreciation
|
26,723
|
34,025
|
||||||
|
Amortization of
deferred drydocking costs
|
1,551
|
1,572
|
||||||
|
Payments for dry docking
|
(3,364 | ) | (950 | ) | ||||
|
Amortization
of financing costs
|
3,243
|
1,414
|
||||||
|
Amortization
of fair value of acquired time charter
|
(290 | ) | (2,655 | ) | ||||
|
Loss
on forward freight agreements
|
12,863
|
-
|
||||||
|
Gain
on sale of vessels
|
-
|
(84,283 | ) | |||||
|
Change
in fair value of derivatives
|
(3,122 | ) | (3,763 | ) | ||||
|
Recognition
and amortization of free lubricants benefit
|
83
|
(170 | ) | |||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Accounts
receivable trade
|
2,040
|
(3,902 | ) | |||||
|
Insurance
claims
|
107
|
(5,566 | ) | |||||
|
Due
from related parties
|
(13,460 | ) | (272 | ) | ||||
|
Inventories
|
(1,490 | ) | (183 | ) | ||||
|
Prepayments
and advances
|
(1,847 | ) | (732 | ) | ||||
|
Accounts
payable
|
(426 | ) | (3,014 | ) | ||||
|
Due
to related parties
|
-
|
(86 | ) | |||||
|
Accrued
liabilities
|
5,990
|
4,175
|
||||||
|
Other
current liabilities
|
3
|
28
|
||||||
|
Deferred
revenue
|
103 |
4,804
|
||||||
|
Net
Cash provided by Operating Activities
|
46,013
|
117,080
|
||||||
|
Cash
Flows from Investing Activities:
|
||||||||
|
Advances
for vessels’ acquisitions
|
-
|
(5,466 | ) | |||||
|
Additions
to vessels cost
|
(76,220 | ) | (441,975 | ) | ||||
|
Proceeds
from vessels’ sale
|
-
|
252,114
|
||||||
| Sellers credit | 3,250 | - | ||||||
|
Net
Cash used in Investing Activities
|
(72,970 | ) | (195,575 | ) | ||||
|
Cash
Flows from Financing Activities:
|
||||||||
|
Advances from
Baumarine Pool
|
315
|
-
|
||||||
|
Proceeds
from long-term debt
|
579,793
|
300,860
|
||||||
|
Proceeds
from short-term credit facility
|
8,837
|
43,400
|
||||||
|
Principal
payments of long-term debt
|
(528,324 | ) | (150,000 | ) | ||||
|
Payment
of short term credit facility
|
-
|
(68,400 | ) | |||||
|
Change
in restricted cash
|
(9,209 | ) |
(124
|
) | ||||
|
Issuance
of common stock
|
1,909
|
-
|
||||||
|
Cash
dividends
|
(12,144 | ) | (14,196 | ) | ||||
|
Payment
of financing costs
|
(2,741 | ) | (2,364 | ) | ||||
|
Net
Cash provided by Financing Activities
|
38,436
|
109,176
|
||||||
|
Net
increase in cash and cash equivalents
|
11,479
|
30,929
|
||||||
|
Cash
and cash equivalents at beginning of period
|
5,184
|
2,537
|
||||||
|
Cash
and cash equivalents at end of period
|
$ |
16,663
|
33,466
|
|||||
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
||||||||
|
Cash
paid during the period for:
|
||||||||
|
Interest
|
$ |
10,300
|
23,534
|
|||||
|
1.
|
Basis
of Presentation and General Information
|
|
The
accompanying unaudited condensed 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 the Company to its
wholly-owned subsidiary, Elios Investments Inc. (“Elios”), a corporation
organized under the laws of the Republic of the Marshall
Islands.
|
|
|
The
accompanying unaudited condensed consolidated financial statements
have
been prepared in accordance with accounting principles generally
accepted
in the United States of America (“U.S. GAAP”) for interim financial
information. Accordingly, they do not include all the information
and
notes required by U.S. GAAP for complete annual financial statements.
These statements and the accompanying notes should be read in conjunction
with our Annual Report on Form 20-F for the year ended December 31,
2006. These unaudited condensed 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 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, 2007 are not necessarily indicative
of the
results that might be expected for the fiscal year ending
December 31, 2007.
|
|
|
The
balance sheet as of December 31, 2006 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. GAAP
for
complete annual financial statements.
|
|
|
Certain
amounts in the 2006 consolidated financial statements have been
reclassified to conform to the current period’s unaudited interim
condensed consolidated financial statements. The reclassifications
had no
impact on the results of operations of the Company.
|
|
|
The
Company’s wholly-owned subsidiaries as of June 30, 2007 are listed
below:
|
|
1.
|
Basis
of Presentation and General
Information-(continued):
|
|
Ship-owning
Company
|
Country
of
Incorporation
|
Vessel
|
|||
|
1.
|
Hydrogen
Shipping Company Limited (“Hydrogen”)
|
Malta
|
Mostoles
(Note 4)
|
||
|
2.
|
Oxygen
Shipping Company Limited (“Oxygen”)
|
Malta
|
Shibumi
(sold – April 2007)
|
||
|
3.
|
Annapolis
Shipping Company Limited (“Annapolis”)
|
Malta
|
Lacerta
|
||
|
4.
|
Helium
Shipping Company Limited (“Helium”)
|
Malta
|
Striggla
(sold – January 2007)
|
||
|
5.
|
Blueberry
Shipping Company Limited (“ Blueberry “)
|
Malta
|
Panormos
(sold – January 2007)
|
||
|
6.
|
Silicon
Shipping Company Limited (“Silicon”)
|
Malta
|
Flecha
(sold – December 2006)
|
||
|
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
(sold – June 2007)
|
||
|
17.
|
Iguana
Shipping Company Limited (“Iguana”)
|
Malta
|
Iguana
|
||
|
18.
|
Borsari
Shipping Company Limited (“Borsari”)
|
Malta
|
Catalina
|
||
|
19.
|
Onil
Shipping Company Limited (“Onil”)
|
Malta
|
Padre
|
||
|
20.
|
Zatac
Shipping Company Limited (“Zatac”)
|
Malta
|
Waikiki
|
||
|
21.
|
Fabiana
Navigation Company Limited (“Fabiana”)
|
Malta
|
Alameda
|
||
|
22.
|
Fago
Shipping Company Limited (“Fago”)
|
Malta
|
Lanikai
(Note 4)
|
||
|
23.
|
Felicia
Navigation Company Limited (“Felicia”)
|
Malta
|
Solana
|
||
|
24.
|
Karmen
Shipping Company Limited (“Karmen”)
|
Malta
|
Sonoma
|
||
|
25.
|
Thelma
Shipping Company Limited (“Thelma”)
|
Malta
|
Manasota
|
||
|
26.
|
Celine
Shipping Company Limited (“Celine”)
|
Malta
|
Medocino
|
||
|
27.
|
Seaventure
Shipping Limited (“Seaventure”)
|
Marshall
Islands
|
Hille
Oldendorff (sold June 2007)
|
||
|
28.
|
Tempo
Marine Company Limited (“Tempo”)
|
Marshall
Islands
|
Maganari
|
||
|
29.
|
Star
Record Owning Company Limited (‘Star”)
|
Marshall
Islands
|
Ligari
|
||
|
30.
|
Human
Owning Company Limited (“Human”)
|
Marshall
Islands
|
Estepona
(sold – April 2007)
|
||
|
31.
|
Classical
Owning Company Limited (“Classical”)
|
Marshall
Islands
|
Delray
(sold – May 2007)
|
||
|
32.
|
Maternal
Owning Company Limited (“Maternal”)
|
Marshall
Islands
|
Lanzarote
|
||
|
33.
|
Paternal
Owning Company Limited (“Paternal”)
|
Marshall
Islands
|
Formentera
|
||
|
34.
|
Argo
Owning Company Limited (“Argo”)
|
Marshall
Islands
|
Redondo
|
||
|
35.
|
Rea
Owning Company Limited (“Rea”)
|
Marshall
Islands
|
Ecola
(ex Zella Oldendorff)
|
||
|
36.
|
Gaia
Owning Company Limited (“Gaia”)
|
Marshall
Islands
|
Samsara
(ex Cape Venture)
|
||
|
37.
|
Kronos
Owning Company Limited (“Kronos”)
|
Marshall
Islands
|
Primera
(ex Sea Epoch)
|
||
|
38.
|
Trojan
Maritime Co. (“Trojan”)
|
Marshall
Islands
|
Brisbane
(ex Spring Brave)
|
||
|
39.
|
Atlas
Owning Company Limited (“Atlas”)
|
Marshall
Islands
|
Menorca
(ex Oinoussian Legend)
|
||
|
40.
|
Dione
Owning Company Limited (“Dione”)
|
Marshall
Islands
|
Marbella
(ex Restless)
|
||
|
41.
|
Phoebe
Owning Company Limited (“Phoebe”)
|
Marshall
Islands
|
Majorca
(ex Maria G.O.)
|
||
|
42.
|
Uranus Owning
Company Limited (“Uranus”)
|
Marshall
Islands
|
Heinrich
Oldendorff
|
||
|
43.
|
Roscoe
Marine Ltd. (“Roscoe”)
|
Marshall
Islands
|
Hull
1518A
|
||
|
44.
|
Monteagle
Shipping S.A. (“Monteagle”)
|
Marshall
Islands
|
Hull
1519A
|
||
|
45.
|
Platan
Shipping Company Limited (“Platan”)
|
Malta
|
Daytona
(sold – January 2007)
|
||
|
46.
|
Selene
Owning Company Limited (“Selene”)
|
Marshall
Islands
|
Bargara
(ex Songa Hua)
|
||
|
47.
|
Tethys
Owning Company Limited (“Tethys”)
|
Marshall
Islands
|
Capitola
(ex Songa Hui)
|
||
|
48.
|
Ioli
Owning Company Limited (“Ioli”)
|
Marshall
Islands
|
Clipper
Gemini
|
||
|
Other
company
|
Activity
|
||||
|
49.
|
Wealth
Management Inc. (“Wealth”)
|
Marshall
Islands
|
Cash
Manager
|
|
1.
|
Basis
of Presentation and General
Information-(continued):
|
|
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 acted as the charter and sales and purchase broker for
the
Company until September 30, 2006. Effective October 1, 2006 the Manager
acts as the Company’s charter and sales and purchase
broker. The majority shareholding (70%) of the Manager and
Drybulk S.A. is owned by the Foundation. 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 six-month period ended June 30, 2006, one charterer (Oldendorff
Carriers Gmbh), accounted for 20% of the Company’s voyage
revenues. No charterer accounted for 10% or more of
the Company’s voyage revenues for the six-month period ended
June 30, 2007.
|
|
|
In
addition, of the Company’s voyage revenues during the six-month periods
ended June 30, 2006 and 2007, 24% and 17%, respectively, were derived
from
the participation of certain Company’s vessels in a drybulk
pool.
|
|
|
In
September 2006, the FASB issued Staff Position (FSP) AUG AIR−1,
“Accounting for Planned Major Maintenance Activities.” FSP AUG AIR−1
addresses the accounting for planned major maintenance activities.
Specifically, the FSP prohibits the practice of the accrue−in−advance
method of accounting for planned major maintenance activities, but
continues to permit the application of the other three alternative
methods
of accounting for planned major activities: direct expense, built−in
overhaul, and deferral. FSP AUG AIR−1 is effective for fiscal years
beginning after December 15, 2006. The Company continued
applying deferral accounting method for dry−docking costs. As such,
FSPAUG AIR−1 did not have significant impact on our financial
position, results of operations or cash flows.
|
|
|
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”), which permits
entities to choose to measure many financial instruments and certain
other
items at fair value. SFAS 159 is effective as of the beginning of
an
entity’s first fiscal year that begins after November 15, 2007. Earlier
adoption is permitted as of the beginning of a fiscal year that begins
on
or before November 15, 2007, provided the entity also elects to apply
the
provisions of FASB Statement No. 157, “Fair Value
Measurements.” The Company is currently evaluating the impact
of SFAS 159, but does not expect the adoption of SFAS 159 to have
an
effect on its consolidated financial position, results of operations
or
cash flows.
|
|
2.
|
Transactions
with Related Parties:
|
|
(a)
|
Cardiff
Marine Inc.: 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 management fee of Euro 530 per day, per
vessel. In addition the Manager charges the Company with:
(i) a fee of U.S. Dollars one hundred per day per vessel for
compliance with section 404 of Sarbanes-Oxley Act of 2002; (ii) U.S.
Dollars five hundred and fifty for superintendent visits on board
vessels
in excess of five days per annum, per vessel, for each additional
day, per
superintendent; (iii) chartering commission of 1.25% on all
freight, hire and demurrage revenues; (iv) a
commission of 1.00% on all gross sale proceeds or purchase price
paid of
vessels since October 1, 2006; and (v) a quarterly fee of $250 for
services in relation to the financial reporting requirements of the
Company under the Securities and Exchange Commission Rules and the
establishment and monitoring of internal controls over financial
reporting.
|
|
|
The
management agreements concluded between the Manager and the vessel-owning
companies have 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.
|
||
|
The
management fees charged by the Manager for the six-month periods
ended
June 30, 2006 and 2007, totaled $2,954 and $4,641 respectively and
are separately reflected in the accompanying consolidated statements
of
income. Chartering commissions charged by Drybulk S.A. for the six-month
period ended June 30, 2006 and by the Manager for the six-month period
ended June 30, 2007 totaled to $1,367 and $2,431, respectively, which
are
separately reflected as “Voyage expenses - related party” in the
accompanying consolidated statements of income. The fees charged
by the
Manager for the services discussed in (i) and (v) above for the
six month periods ended June 30, 2006 and 2007, totaled $500 and
$500,
respectively, and are included in “General and administrative expenses –
related party” in the accompanying consolidated statements of income. In
addition, during the six month period ended June 30, 2006 and 2007,
an
amount of $761 and $7,080 respectively, was charged
by Drybulk S.A. and the Manager respectively, for the
acquisition and sale of vessels. The amounts that relate to
vessels’ acquisitions are capitalized and are included in “Vessels, net”
in the accompanying consolidated balance sheets. The
amounts that relate to vessels’ sales are included in “Gain on
sale of vessels” in the accompanying consolidated statements of
income.
|
||
|
The
amounts due from the Manager as at December 31, 2006 and June 30,
2007
totaled to $3,353 and $3,625,
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 and thereafter it will be adjusted annually for inflation
increases. The related rent expense for the six month periods ended
June
30, 2006 and 2007 totaled $5.5 and $5.9, respectively, and is included
in
General and administrative expenses - related parties in the accompanying
consolidated statements of income.
|
|
2.
|
Transactions
with Related
Parties-(Continued):
|
|
(c)
|
Consultancy
Agreements: On February 3, 2005, the Company concluded two
agreements with Fabiana Services S.A. (“Fabiana”) a related party entity
incorporated in Marshall Islands. Fabiana is beneficially owned by
the
Company’s Chief Executive 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 1,066,600 (Euro 1,126,000 or until
November 21, 2006) 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. The related expense for the six month
periods ended June 30, 2006 and 2007 totaled $711 and $734, respectively,
and is included in General and administrative expenses - related
parties
in the accompanying consolidated statements of income. At December
31,
2006 and June 30, 2007 an amount of $86 and $0, respectively, was
payable
to Fabiana.
|
|
|
(d)
|
Acquisition
of vessel: In March 2006 the
Company concluded a Memorandum of Agreement with a company controlled
by
the Company’s Chief Executive Officer for the acquisition of the vessel
Hille Oldendorff for $40,760 which was delivered to the Company in
April
2006. The purchase price was partly financed by an unsecured sellers’
credit of $3,250 as provided by the Memorandum of Agreement. In October
2006, the sellers’ credit was fully settled with common
stock.
|
|
|
(e)
|
Short-term
credit facilities:
|
|
(i)
|
In
December 2006, the Company borrowed an amount of $25,000 from Elios
in
order to partially finance the acquisition cost of vessel Redondo.
The
facility was fully repaid in January 2007.
|
||
|
(ii)
|
On
April 5, 2007 the Company obtained a short term credit facility of
$33,000
from Elios to partially finance the acquisition cost of the vessel
Primera
(ex Sea Epoch) (Note 4). The loan was fully repaid on April 23,
2007.
|
|
2.
|
Transactions
with Related
Parties-(Continued):
|
|
(iii)
|
On
May 23, 2007 the Company obtained a short term credit facility of
$30,000
from Elios, in addition to the amendment of the loan facility discussed
in
Note 8(c) below, to partially finance the acquisition cost of the
vessels
Bargara (ex Songa Hua), Marbella (ex Restless), Primera (ex Sea Epoch),
Brisbane (ex Spring Brave), Menorca (ex Oinoussian Legend), Capitola
(ex
Songa Hui), Ecola (ex Zella Oldendorff) and Majorca (ex Maria G.O.).
The
facility was fully repaid on June 15, 2007. Interest and
finance costs paid by the Company for the above facility during the
six
month period ended June 30, 2007 totaled $614 and is separately
reflected as “Interest and finance costs – related party” in
the accompanying 2007 consolidated statement of income.
|
||
|
(f)
|
Purchase
of derivatives from related parties
|
|
|
In
order to maintain the minimum hedging ratio of the recent loan amendment
(Note 8c), on June 22, 2007 the Company acquired the following existing
interest rate derivatives which were valued on that date by the financial
institutions which were counterparties to these agreements at an
amount of
$1,290 (asset), from the following two related
companies:
|
||
|
(i)
Sea Glory Navigation Ltd. which originally entered into an interest
rate
cap and floor agreement on November 3, 2004 for a period of seven
years
through November 2011, for a notional amount of $60 million. Under
the cap leg of the agreement, the interest rate is 5.34% if three-month
USD LIBOR lies between 5.34% and 7%. If three-month USD LIBOR is
above 7%
the interest rate is three-month USD LIBOR. Under the floor leg of
the agreement, the interest rate is 2.75% if the three-month USD
LIBOR is
equal or less than 1.75%.
|
||
|
(ii)
River Camel Shipping Co which originally entered into an interest
rate cap
and floor agreement for a period of seven years through November
2011, for
a notional amount of $75 million. Under the cap leg of the agreement,
the
interest rate is 5.25% if three-month USD LIBOR is within the range
of
5.25% and 7%. If three-month USD LIBOR exceeds 7% then the interest
rate
is three-month USD LIBOR. Under the floor leg of the agreement, the
interest rate is 2.75% if the three-month USD LIBOR is equal or less
than
1.75%.
|
||
|
The
transaction was completed during the third quarter of 2007 (Note
11(b)).
|
|
3.
|
Inventories:
|
|
The
amounts shown in the accompanying consolidated balance sheets are
analyzed
as follows:
|
|
December
31, 2006
|
June
30, 2007
|
|||||||
|
Lubricants
|
2,328
|
2,504
|
||||||
|
Victualling
stores
|
243
|
250
|
||||||
|
Total
|
2,571
|
2,754
|
||||||
|
4.
|
Vessels,
net
|
|
The
amounts in the accompanying consolidated balance sheets are analyzed
as
follows:
|
|
Vessel
Cost
|
Accumulated
Depreciation
|
Net
Book Value
|
||||||||||
|
Balance,
December 31, 2006
|
1,197,053
|
(112,129 | ) |
1,084,924
|
||||||||
|
-Vessel
acquisitions
|
455,300
|
-
|
455,300
|
|||||||||
|
-Vessel
disposals
|
(193,989 | ) |
26,046
|
(167,943 | ) | |||||||
|
-
Depreciation
|
-
|
(34,025 | ) | (34,025 | ) | |||||||
|
Balance,
June 30, 2007
|
1,458,364
|
(120,108 | ) |
1,338,256
|
||||||||
|
As
at June 30, 2007 the Company owned thirty-five drybulk carriers having
total carrying value of $1,338,256.
|
|
During
the six month period ended June 30, 2007 the following vessels were
disposed:
|
|
Vessels
disposals
|
|||||
|
Vessel
|
M.O.A.
date
|
Delivery
date
|
M.O.A.
price
|
Gain
on sale
|
|
|
Panormos
|
September
8, 2006
|
January
8, 2007
|
35,000
|
15,256
|
|
|
Striggla
|
December
18, 2006
|
January
22, 2007
|
12,120
|
9,184
|
|
|
Daytona
|
December
15, 2006
|
January
23, 2007
|
25,300
|
6,058
|
|
|
Estepona
|
February
9, 2007
|
April
10, 2007
|
36,735
|
7,585
|
|
|
Shibumi
|
November
20, 2006
|
April
12, 2007
|
24,600
|
17,813
|
|
|
Delray
|
January
16, 2007
|
May
8, 2007
|
36,735
|
8,173
|
|
|
Hille
Oldendorff
|
March
26, 2007
|
June
8, 2007
|
50,500
|
12,879
|
|
|
Alona
|
March
2, 2007
|
June
12, 2007
|
39,500
|
7,335
|
|
|
Total:
|
260,490
|
84,283
|
|||
|
The
aggregate gain resulting from the sale of the above vessels is separately
reflected in the accompanying consolidated statement of income for
six-months period ended June 30,
2007.
|
|
4.
|
Vessels,
net-(continued):
|
|
During
the six month period ended June 30, 2007 the following vessels were
acquired:
|
|
Vessel
acquisitions
|
|||
|
Vessel
|
M.O.A.
date
|
Delivery
date
|
Acquisition
price
|
|
Samsara,
(ex Cape Venture)
|
December
14, 2006
|
February
14, 2007
|
62,620
|
|
Primera
(ex Sea Epoch)
|
December
15, 2006
|
April
11, 2007
|
38,380
|
|
Marbella
(ex Restless)
|
February
27, 2007
|
April
27, 2007
|
46,460
|
|
Bargara
(ex Songa Hua)
|
April
11, 2007
|
May
14, 2007
|
49,490
|
|
Brisbane
(ex Spring Brave)
|
January
10, 2007
|
May
23, 2007
|
60,600
|
|
Capitola
(ex Songa Hui)
|
April
11, 2007
|
June
1, 2007
|
49,490
|
|
Menorca
(ex Oinoussian Legend)
|
January
18, 2007
|
June
7, 2007
|
41,410
|
|
Majorca
(ex Maria G.O.)
|
March
26, 2007
|
June
11, 2007
|
54,035
|
|
Heinrich
Oldendorff
|
March
23, 2007
|
June
11, 2007
|
52,815
|
|
Total:
|
455,300
|
||
|
On
June 8, 2007 the Company concluded a Memorandum of Agreement with
an
unaffiliated third party for the acquisition of a second hand handymax
vessel Clipper Gemini for $50,162. The vessel is expected to be delivered
during the third quarter of 2007.
|
|
|
All
Company’s vessels, having total carrying value of $1,338,256 as of June
30, 2007, have been pledged as collateral to secure the bank loans
discussed in Note 8. As at June 30, 2007, three vessels were operating
under a drybulk pool (Note 1) while the remaining vessels were operating
under time charters, the last of which expires in December
2007.
|
|
|
When
the Company concludes a Memorandum of Agreement for the disposal
of a
vessel which has still to complete a time charter contract, it is
considered that the “held for sale” criteria discussed under SFAS 144
paragraph 30, is not met until the time charter contract has been
completed. As a result such vessels are not classified as held for
sale.
|
|
|
When
the Company concludes a Memorandum of Agreement for the disposal
of a
vessel which has no time charter contract to complete, it is considered
that the “held for sale” criteria discussed under SFAS 144 paragraph 30 is
met. As a result such vessels are classified as held for sale. No
assets met these criteria to be classified as held for sale as at
June 30,
2007.
|
|
5.
|
Advances
for vessels under construction and
acquisitions:
|
|
During
the year ended December 31, 2006 advances amounting to $27,380 were
made
for the vessels Ecola ($3,970), Primera ($3,800) and Samsara ($6,200)
and
for the Hulls 1518A and 1519A ($6,650), respectively and imputed
interest
($110). During the six months ended June 30, 2007 an advance was
made for
the Clipper Gemini ($5,016) while the vessels Samsara and Primera
were
delivered, and imputed interest for the six month period was calculated
($450).
|
|
|
6.
|
Fair
value of acquired time charter:
|
|
During
the six-month period ended June 30, 2006, the Company acquired two
dry
bulk carrier vessels for an aggregate consideration of $76,110,which
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 an asset of $5,517, representing the excess
of the
present value of the charters assumed over the then fair value of
such
charters at current market rates.
|
|
|
During
the six-month period ended June 30, 2007, the Company acquired one
dry
bulk carrier vessel for $49,000, which was under an
existing bareboat time charter contract which the Company agreed
to assume
through arrangements with the respective charterers. The Company
upon
delivery of the above vessel evaluated the charter contracts assumed
and
recognized a liability of $ 3,325, representing the excess of the
then
fair value of such charters at current market rates over the then
excess
of the present value of the charters assumed.
|
|
|
These
amounts are amortized on a straight-line basis to the end of the
charter
period. As of December 31, 2006 and June 30, 2007, the unamortized
balance of the fair value of below market acquired time charters
in the
accompanying consolidated balance sheets amounted to $5,553 and $3,454,
respectively. As of December 31, 2006 and June 30, 2007, the
unamortized balance of the fair value of above market acquired time
charters in the accompanying consolidated balance sheets amounted
to $
1,335 and $0, respectively.
|
|
7.
|
Deferred
Charges, net:
|
|
The
amounts in the accompanying consolidated balance sheet represent
drydocking costs and are analyzed as
follows:
|
|
June
30, 2006
|
June
30, 2007
|
|||||||
|
Balance,
begining of the period
|
3,781
|
6,200
|
||||||
|
-
Additions
|
3,364
|
950
|
||||||
|
-
Amortization
|
(1,551 | ) | (1,572 | ) | ||||
|
-
Write-off due to sale of vessels
|
-
|
(1,351 | ) | |||||
|
Balance,
end of period
|
5,594
|
4,227
|
||||||
|
During
first half of 2007, vessels Mendocino, Alona and Matira underwent
their
drydocking at a total cost of $950.
|
|
8.
|
Long-term
Debt, net of deferred financing fees:
|
|
The
amount of long-term debt, obtained from HSH Nordbank, shown in the
accompanying consolidated balance sheets is analyzed as
follows:
|
|
December
31, 2006
|
June
30, 2007
|
|||||||
|
Term
loan
|
661,586
|
812,445
|
||||||
|
Less
related deferred financing costs
|
(2,844 | ) | (3,793 | ) | ||||
|
Total
|
658,742
|
808,652
|
||||||
|
Less:
Current portion
|
(71,412 | ) | (81,118 | ) | ||||
|
Long-term
portion
|
587,330
|
727,534
|
||||||
|
(a)
|
In
March 2006 the Company concluded an agreement to borrow an amount
of up to
$628,750 and in November 2006 entered into a supplemental agreement
to the
loan concluded in March 2006 to increase the line of credit to $711,093.
The purpose of the loans was to refinance prior indebtedness, to
partially
finance the acquisition cost of eight vessels acquired during the
year
ended December 31, 2006 and to provide the Company with working capital.
On May 23, 2007 the Company amended the loan to increase the amount
available under the loan by up to $ 181,000 and to include a re-borrowing
option for mandatory repayment due to sale of vessels of up to $200,000
in
order to partly finance the acquisition cost of the second hand vessels
Samsara (ex Cape Venture), Bargara (ex Songa Hua), Marbella (ex Restless),
Primera (ex Sea Epoch), Brisbane (ex Spring Brave), Menorca (ex Oinoussian
Legend), Capitola (ex Songa Hui) and Ecola (ex Zella Oldendorff),
Majorca
(ex Maria G.O.) Heinrich Oldendorff and any additional vessels. The
loan
bears interest at LIBOR plus a margin. The interest rate, including
the
margin, at December 31, 2006 was 6.35% for $550,154 and 7.78% for
$111,432
and at June 30, 2007 was 6.32% for $677,129 and 7.75% for $135,316.
The
outstanding balance of $812,445 (gross of unamortized deferred financing
fees of $3,793 at June 30, 2007) is repayable in thirty six variable
consecutive quarterly installments commencing in August, 2007 and
through
May 2016 plus a balloon payment of $156,868 payable together with
the last
installment.
|
|
|
(b)
|
On
February 13, 2007, the Company borrowed an amount of $43,400 in
order to
partly finance the acquisition cost of vessel Samsara (ex Cape
Venture)
(Note 5). The loan bears interest at LIBOR plus a margin and was
repaid in
one installment on May 29, 2007.
|
|
|
(c)
|
On
April 19, 2007 the Company concluded a bridge facility of up to
$ 181,000
in order to partly finance the acquisition cost of the second hand
vessels
Primera (ex Sea Epoch), Menorca (ex Oinoussian Legend), Marbella
(ex
Restless), Brisbane (ex Spring Brave), Capitola (ex Songa Hui)
and Bargara
(ex Songa Hua). The loan bears interest at LIBOR plus a margin
and was
repaid in one single installment on May 29,
2007.
|
|
8.
|
Long-term
Debt, net of deferred financing
fees-(Continued):
|
|
As
of June 30, 2007 the unutilized line of credit totaled $2,915 and
the
Company is required to pay quarterly commitment fee of 0.25% per
annum of
the unutilized portion of the term loan and 0.25% of the unutilized
portion of the reborrowing option. Furthermore, the Company is required
to
pay a draw-down fee of 0.075% on each drawdown amount under the
reborrowing option.
|
|
|
The
principal payments required to be made after June 30, 2007, for the
loans
discussed above are the follows:
|
|
Year
ending June 30,
|
||||
|
2008
|
$ |
81,938
|
||
|
2009
|
81,330
|
|||
|
2010
|
75,385
|
|||
|
2011
|
75,385
|
|||
|
2012
|
75,385
|
|||
|
2013
and there after
|
423,022
|
|||
|
812,445
|
||||
|
Less-Financing
fees
|
(3,793 | ) | ||
| $ |
808,652
|
|||
|
Total
interest incurred on long-term debt for the six month periods ended
June
30, 2006 and 2007 amounted to $16,360 and $22,929, respectively.
Of the
six month period ended June 30, 2007 amount, $450 was capitalized
as part
of the vessel cost for advances paid for vessels under construction.
Interest expense, net of interest capitalized, is included in interest
and
finance costs in the accompanying consolidated statements of
income.
|
|
|
In
terms of the loan agreement the Company is required to hold bank
deposits
which are used to fund the loan installments coming due. The funds
can
only be used for the purposes of loan repayments and are shown as
restricted cash. Restricted cash also includes additional minimum
cash
deposits required to be maintained with certain banks under the Company’s
borrowing arrangements. The Company is in compliance with all the
debt covenants.
|
|
9.
|
Derivatives:
|
|
(a)
|
Interest
rate cap and floor agreements: As of December 31,
2006 and June 30, 2007, the Company had outstanding six interest
rate cap
and floor agreements concluded in May 2005. 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, 2006 and June 30, 2007, was an asset of
$946
and $2,123, respectively, and is included in Financial Instruments
in the
accompanying consolidated balance sheets. For the six month period
ended
June 30, 2006 a loss of $3,380 and for the six month period ended
June 30,
2007 a gain of $1,177 is included in Other, net in the accompanying
consolidated statements of income.
|
|
|
(b)
|
Foreign
exchange transactions: In January 2006, the Company engaged
in a total of 12 foreign currency call options, maturing in monthly
intervals from February 2006 to January 2007, under one foreign exchange
transaction involving the US dollar against the Euro. As of December
31,
2006 the Company had one open foreign currency call option which
matured
in January 2007. The strike rate under this option is 1.21 U.S. dollars
per Euro, for an amount of Euro 200,000.
|
|
|
In
January 2006, the Company engaged in a total of 12 forward foreign
exchange contracts, maturing in monthly intervals from February 2006
to
January 2007. As of December 31, 2006 the Company had one open
forward foreign exchange contract which matured in January 2007.
The
forward rate was 1.2320 U.S. Dollars per Euro for an amount of Euro
200,000.
|
||
|
As
of December 31, 2006, the fair market values of the open foreign
currency
call option and open forward foreign exchange contract discussed
above
were $22 and $17, respectively. For the six month period ended June
30,
2006 and 2007 a gain of $51 and $31, respectively, has been included
in
General and administrative expenses in the accompanying statements
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 also included in General and administrative
expenses in the accompanying statement of income for the six month
period
ended June 30, 2006.
|
||
|
(c)
|
Forward
freight agreements: During the year ended
December 31, 2006, the Company entered into seventeen forward freight
agreements (“FFAs”) with the objective to utilize them as economic hedging
instruments in order to reduce its exposure to market price 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. During the six months period ended June 30, 2006, the
loss on FFAs amounted to $12,863. As of December 31, 2006 the
fair value of the FFAs resulted in a liability of $2,625. As of June
30,
2007, no FFAs remain open.
|
|
10.
|
Restatement
of Unaudited Interim Consolidated Financial Statements for the period
ended June 30, 2006:
|
|
Subsequent
to the issuance of the Unaudited Interim Consolidated Financial Statements
for the period ended June 30, 2006, the Company’s management determined
that these financial statements were misstated for the items listed
below. As a result the Interim Consolidated
Financial Statements for the period ended June 30, 2006 have been
restated
to correct these misstatements.
|
|
•
|
The
restatement to the Statement of Income for the period ended June
30, 2006,
relates to the inclusion of the loss on forward freight agreements
of
$12,863, which was previously shown directly in equity as it was
considered to meet the hedge accounting criteria according to Statement
of Financial Accounting Standards (“SFAS No. 133”), “Accounting for
Derivative Instruments and Hedging Activities”. This was
corrected in the Statement of Income for the nine month period ended
September 30, 2006.
|
|
|
•
|
A
vessel acquired in March 2006 was not correctly recorded at cost.
This was
corrected in the Statement of Stockholders’ equity for the nine month
period ended September 30, 2006.
|
|
The
effects of the forgoing matters on the Company’s Unaudited Interim
Consolidated Financial Statements for the period ended June 30, 2006
are
presented below:
|
|||
|
As previously reported
|
As
restated
|
|||||||
|
Statement
of Income
|
For
the Period Ended June 30, 2006
|
|||||||
|
Loss
on forward freight agreements
|
-
|
12,863
|
||||||
|
Operating
income
|
47,472
|
34,609
|
||||||
|
Net
income
|
30,169
|
17,306
|
||||||
|
Earnings
per common share
|
0.99
|
0.57
|
||||||
|
Statement
of stockholders’ equity
|
As
of June 30, 2006
|
|||||||
|
Net
unrealized loss on derivatives
|
12,863
|
-
|
||||||
|
Incorrect
recording of vessel cost
|
(3,831 | ) |
-
|
|||||
|
Additional
paid in capital
|
262,676
|
266,507
|
||||||
|
Total
stockholders’ equity as of June 30, 2006
|
353,648
|
357,479
|
||||||
|
11.
|
Subsequent
Events:
|
|
a)
|
Declaration
of dividends: On July 3, 2007, the Company
declared dividends amounting to $7,098 or $0.20 per share to the
stockholders of record as of July 16, 2007. The dividends were
paid on July 31, 2007.
|
||
|
b)
|
Interest
rate derivatives: On June 22, 2007, the Company
agreed that the two interest rate derivatives with counterparties,
Sea
Glory Navigation Ltd and River Camel Shipping Co. (both related parties),
be acquired by Dryships Inc at a valuation of $ 1.29 million. This
transaction was completed on August 6, 2007, (Note
2(f)).
|
||
|
c)
|
Vessel
deliveries: On July 3 and 27, 2007, under Memoranda of
Agreement concluded in March 2007, the vessels Mostoles and Lanikai
were
delivered to their new owners. The carrying value of the vessels
Mostoles
and Lanikai as at June 30, 2007, amounted to $2,084 and $15,589
respectively. The resulting gain from the sale of the above vessels
is $
19,643 and will be included in the Company’s consolidated statement of
income for the nine month period ending September 30,
2007.
|
||
| On August 29, 2007, under a Memorandum of Agreement concluded in March 2007, the Company took delivery of the vessel Ecola (ex Heinrich Oldendorff). | |||
|
d)
|
Vessel
disposals: On August 7, 2007 the Company concluded a
Memorandum of Agreement for the disposal of the vessel Formentera
to
unaffiliated third party for $63,000 with expected delivery date
in the
fourth quarter of 2007. The vessel aggregate carrying value at June
30,
2007, amounted to $31,111. The resulting gain from the sale of the
above
vessel will be approximately $31,000 and will be included in the
Company’s
consolidated statement of income for the year ending December 31,
2007.
|
||
|
e)
|
Vessel
acquisitions: On July 13, 26, August 6, 8 and 15,
2007 the Company concluded five Memoranda of Agreement for the
acquisition of the vessels Athina Zafirakis, Nord Mercury, Shinyo
Brilliance, VOC Galaxy and Trans Atlantic for a price
of $67,175, $69,500, $75,000, $55,500 and $71,000
respectively. The vessels are expected to be delivered during the
fourth
quarter of 2007 and first quarter of 2008.
|
||
|
f)
|
Hulls
acquisitions:
|
||
|
i) On
July 27, 2007 the Company concluded a Memorandum of Agreement for
the
acquisition of a 180,000 dwt Capesize drybulk carrier for a price
of
$114,000. The vessel is expected to be delivered during
2009.
|
|||
|
ii)
On July 30, 2007 the Company concluded two Memoranda of Agreement
for the
acquisition of two 180,000 dwt Capesize drybulk carriers for a price
of
$105,500 each. The vessels are expected to be delivered in the last
quarter of 2009 and the first quarter
of 2010.
|
|||
|
iii)
On July 31, 2007 the Company concluded two Memoranda of Agreement
for the
acquisition of two 82,000 dwt Kamsarmax drybulk carriers for a price
of
$54,250 each. The vessels are expected to be delivered during
2010.
|
|||
| The delivery of all the above vessels from the sellers to buyers (the Company) shall be "back to back" with the delivery of the vessels to the sellers by the builder. |
|
DryShips
Inc.
|
|
(Registrant)
|
|
Dated: September
12, 2007
|
By:
|
/s/George
Economou
|
|
George
Economou
|
||
|
Chief
Executive Officer and Interim
|
||
|
Chief
Financial Officer
|