During the
year ended December 31, 2011, we recorded early redelivery income, relating to
the early termination of period time charters of our vessels, of $0.2 million
compared to $0.1 million early redelivery income during the year ended December
31, 2010.
Year ended December
31, 2010 compared to year ended December 31, 2009
During the
year ended December 31, 2010, we had an average of 14.6 drybulk vessels in our
fleet. During the year ended December 31, 2009, we had an average of 13.2
drybulk vessels in our fleet.
During the
year ended December 31, 2010, we acquired the vessels
Kanaris
, a Capesize class
vessel,
Panayiota K
, a Post-Panamax class vessel, and
Venus Heritage
, a Post-Panamax class
vessel and sold
Old Efrossini
, a
Panamax class vessel.
During the
year ended December 31, 2009, we acquired the vessels
Martine
, a Post-Panamax
class vessel, and
Andreas K
, a
Post-Panamax class vessel.
Revenues
Revenues
decreased by 5.2%, or $8.7 million, to $159.7 million during the year ended
December 31, 2010 from $168.4 million during the year ended December 31, 2009,
as result of the net effect of the following factors: (i) a decrease in the TCE
rate for 2010 by 13.7% to $29,534, compared to $34,208 for 2009 due to the
decrease in prevailing charter rates at which a number of our vessels were
chartered and (ii) an increase in operating days for the year ended December
31, 2010 by 10.3% to 5,269 days, compared to 4,778 days for the year ended
December 31, 2009 due to deliveries of the vessels
Kanaris
in March 2010,
Panayiota
K
in April 2010 and
Venus
Heritage
in December 2010 and the sale of
Old Efrossini
in January 2010.
Commissions
Commissions to
unaffiliated ship brokers, other brokers associated with our charterers and our
charterers during the year ended December 31, 2010 amounted to $2.7 million, a
decrease of $1.1 million, or 28.9%, compared to $3.8 million during the year
ended December 31, 2009, primarily due to the decrease in our revenues and to
lower average contracted commissions, which were reduced to 1.68% from 2.25%
for the years ended December 31, 2010 and 2009, respectively.
Vessel operating expenses
Vessel
operating expenses increased by 17.9% to $23.1 million during the year ended
December 31, 2010 from $19.6 million during the year ended December 31, 2009.
This increase of $3.5 million reflects mainly: (i) the cost for repairs,
maintenance and drydocking of $1.8 million, compared to $1.0 million, including
three drydockings completed during 2010, of our
vessels Marina, Pedhoulas
Trader
and
Pedhoulas Merchant
, compared
to two drydockings completed during 2009, of our vessels
Stalo
, and
Maritsa
, (ii) crewing cost of $11.4 million, compared to
$10.1 million primarily attributable to increased salaries paid to our crews
and increased number of ownership days from 4,817 in 2009 to 5,326 in 2010,
(iii) cost for lubricants of $2.8 million, compared to $2.5 million mainly due
to increased number of operating days from 4,778 in 2009 to 5,269 in 2010 and
increased lubricants prices and (iv) cost for spares, stores and provisions of
$3.9 million, compared to $2.8 million due to increased use of spares for
repairs, including one additional dry-docking and one additional vessel
delivery, increased prices for stores and provisions and increased number of ownership
days during the year ended December 31, 2010 and December 31, 2009,
respectively.
Consequently,
daily operating expenses, which represent the operating expenses per vessel per
ownership day, increased by 6.6% to $4,342 during the year ended December 31,
2010 from $4,075 during the year ended December 31, 2009, as a result of the
increase of vessel operating expenses by 17.9% partially offset by the 10.6%
increase of ownership days, as described above.
Depreciation
45
Depreciation
expense increased by 41.7% to $19.7 million during the year ended December 31,
2010, compared to $13.9 million during the year ended December 31, 2009, due to
the increase in the average number of vessels from 13.2 during the year ended
December 31, 2009 to 14.6 during the year ended December 31, 2010.
General and administrative expenses
General and
administrative expenses remained stable at $7.0 million for the years ended
December 31, 2010, and December 31, 2009.
Interest expense
Interest
expense decreased by 37.9% to $6.4 million during the year ended December 31,
2010 from $10.3 million during the year ended December 31, 2009. The $3.9
million decrease in interest expense was mainly attributable to the decrease
in the weighted average interest rate of our outstanding indebtedness to
1.39% p.a. for the year ended December 31, 2010 from 2.14% p.a. for the
year ended December 31, 2009 due to lower prevailing LIBOR rates. The total
loans outstanding as of December 31, 2010 amounted to $494.74 million compared
to $471.2 million as of December 31, 2009.
Loss on derivatives
Loss on
derivatives increased by $3.8 million to $8.2 million during the year ended
December 31, 2010 from $4.4 million during the year ended December 31, 2009.
The increase of $3.8 million reflects: (i) an increase in losses of $4.5
million from interest rate derivatives as a result of the realized loss and the
mark-to-market valuation of interest rate swap transactions to $8.0 million for
the year ended December 31, 2010 compared to $3.5 million for the year ended
December 31, 2009, and (ii) a decrease in losses of $0.7 million from foreign
exchange derivatives, as a result of the decrease in the nominal value of the
foreign exchange derivatives and movements of the rates of the currencies in
which the derivatives contracts were denominated, to $0.2 million for the year
ended December 31, 2010, compared to $0.9 million for the year ended December
31, 2009.
As of December
31, 2010, the aggregate notional amount of interest rate swap transactions
outstanding was $638.0 million, compared to $452.5 million at December 31,
2009. The aggregate notional amount of interest rate swap transactions
outstanding at December 31, 2010 is higher than the aggregate loans outstanding
at December 31, 2010, of $494.7 million, as during the year ended December 31,
2010, we entered into four interest rate swap transactions relating to four
outstanding loans, whereby the new interest rate swap transactions will become
effective upon the expiration of the existing interest rate swap transactions
relating to such loans. These swaps economically hedged the interest rate
exposure of 98% of the Companys aggregate loans outstanding as of December 31,
2010. The mark-to-market valuation of these interest rate swap transactions at
the end of each period is affected by the prevailing comparable interest rates
at that time.
Foreign currency gain/(loss)
Foreign
currency gain was $0.3 million during the year ended December 31, 2010,
compared to gain of $0.8 million during the year ended December 31, 2009.
Foreign currency exchange gains resulted primarily from currency translation
or currency conversion of loans denominated in foreign currencies. Following
conversions during 2008 and the first quarter of 2009, none of our loans were
denominated in foreign currency as of December 31, 2010.
Early redelivery income, net
During the
year ended December 31, 2010, we recorded early redelivery income, relating to
the early termination of period time charters of our vessels, of $0.1 million
compared to $75.0 million early redelivery income during the year ended
December 31, 2009. Early redelivery income during the year ended December 31,
2010 is analyzed as follows: (i)
Maria
was redelivered on August 24, 2010 instead of November 30, 2010, for which we
paid compensation of $0.2 million, net of commissions, (ii)
Katerina
was agreed to be redelivered on
January 15, 2011 instead of September 15, 2011, for which we recognized a cost
of $1.5 million, consisting of cash compensation paid to charterer on April 7,
2010, net of commissions, (iii)
Pedhoulas
Merchant
was redelivered on April 13, 2010
46
instead of
November 5, 2010, for which we recognized income of $3.6 million, consisting of
cash compensation paid by the relevant charterer on May 6, 2010 of $4.8
million, net of commissions, less $1.2 million representing the accrued revenue
from the terminated period time charter contract, (iv)
Pedhoulas Leader
was redelivered on
November 12, 2010 instead of September 30, 2011, for which we recognized a cost
of $1.8 million, consisting all of cash compensation paid to the relevant
charterer on May 6, 2010, net of commissions. Early redelivery income during
the year ended December 31, 2009 is analyzed as follows: (i)
Maritsa
was redelivered on January 1, 2009
instead of January 13, 2009, for which we received compensation of $0.6
million, net of commissions, (ii)
Old
Efrossini
was redelivered on
March 15, 2009 instead of January 8, 2011, for which we recognized income of
$29.1 million consisting of cash compensation received of $25.5 million, net of
commissions, and $3.6 million representing the unearned revenue from the
terminated period time charter contract, (iii)
Katerina
was redelivered on June 26, 2009 instead of November 26, 2010, for which we
recognized income of $22.3 million consisting of cash compensation paid by the
relevant charterer on July 1, 2009 of $21.5 million, net of commissions, and
$0.9 million representing the unearned revenue from the terminated period time
charter contract, (iv)
Maria
was
redelivered on June 28, 2009 instead of January 2, 2011, for which we
recognized income of $20.0 million consisting of cash compensation paid by the
relevant charterer on July 1, 2009 of $15.5 million, net of commissions, and
$4.5 million representing the unearned revenue from the terminated period time
charter contract, (v)
Pedhoulas Leader
was redelivered on July 19, 2009 instead of November 22, 2009, for which we
received cash compensation of $2.7 million, net of commissions and (vi)
Stalo
was redelivered on July 20, 2009
instead of July 29, 2009, for which we received cash compensation of $0.2
million, net of commissions.
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B.
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Liquidity and Capital Resources
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As of December
31, 2011, we had $33.5 million in cash and restricted cash, of which $28.1
million consisted of cash and cash equivalents, and $5.4 million was long-term
restricted cash. In addition, as of December 31, 2011, we had $50.0 million in
a long-term floating rate note investment (for more information, please see
Note 8 to our financial statements included at the end of this annual report).
Against this investment we may borrow, under certain conditions, up to $40.0
million in cash.
As of December
31, 2011, we had aggregate debt outstanding of $484.3 million, of which $18.5
million was payable within the next 12 months. As of December 31, 2011, we had
aggregate additional borrowing capacity of $178.9 million, consisting of $135.2
million available in undrawn or committed loan facilities and $43.7 million
available under existing revolving credit facilities. The undrawn loan
facilities consist of $24.0 million under a new credit facility for
Panayiota K
signed in 2010, $52.8 million
under a new credit facility for
Pelopidas
signed in 2011 and $38.4 million under a new credit facility for
Venus Horizon
signed in 2011. In addition,
in 2011 we accepted a commitment letter for a new credit facility for
Hull No
. 616 scheduled to be delivered in
2012, in the amount of $20 million, the documentation for which was concluded
in February 2012. In February 2012, we accepted an offer letter from a bank for
a new revolving credit facility of up to $18 million which will be utilized to
finance the acquisition of one of the remaining newbuild vessels (see Note 23
to our financial statements included at the end of this annual report).
Our primary
liquidity needs are to fund capital expenditures in relation to newbuild
contracts, financing expenses, debt repayment, vessel operating expenses,
general and administrative expenses and dividend payments to our stockholders.
We anticipate that our primary sources of funds will be the existing cash and
cash equivalents as of December 31, 2011 of $28.1 million, borrowings of $40
million against our long term floating rate note investment, additional undrawn
or committed borrowing capacity of $178.9 million, cash from operations and
possibly, additional indebtedness to be raised against seven unencumbered
newbuild vessels upon their delivery and equity financing.
Our
commitments for newbuilds of $259.7 million as of December 31, 2011 consisted
of $150.9 million, payable in 2012, $38.2 million, payable in 2013 and $70.6
million, payable in 2014. These commitments represent the remaining installment
payments for the delivery of ten newbuild vessels, six of which are scheduled
to be delivered in 2012, one in 2013 and three in 2014.
We currently
estimate that the contracted cash flow from operations, existing cash and cash
equivalents, additional borrowing against our floating rate note investment,
existing undrawn loan and revolving credit facilities and commitments and
additional indebtedness secured by seven newbuild vessels which are currently
unencumbered, will
47
be sufficient
to fund the operations of our fleet, including our working capital requirements,
and the capital expenditure requirements through the end of 2012. However,
during 2012 or 2013, we may seek additional indebtedness to partially fund our
capital expenditure requirements in order to maintain a strong cash position.
We may incur additional indebtedness secured by our other seven newbuild vessels
upon their delivery which are currently unencumbered. To the extent that market
conditions deteriorate, charterers may default or seek to renegotiate charter
contracts, and vessel valuations may decrease, resulting in a breach of our
debt covenants. In such case our contracted revenues may decrease and we
may be required to make additional prepayments under existing loan facilities,
resulting in additional financing needs. If we acquire additional vessels, our
capital expenditure requirements will increase and we will need to rely on
existing cash and time deposits, operating cash surplus and existing undrawn
loan commitments. If we are unable to obtain additional indebtedness, or to
find alternative financing, we will not be capable of funding our commitments
for capital expenditures relating to our contracted newbuilds. A failure to
fulfill our commitment would generally result in a forfeiture of the advance
we paid to the shipyard with respect to the contracted newbuild. In addition,
we may also be liable for other damages for breach of contract. Examples
of such liabilities could include payments to the shipyard for the difference
between the forfeited advance and the amount that remains to be paid by us
if the shipyard cannot locate a third-party buyer that is willing to pay
an amount equal to the difference or compensatory payments by us to charter
parties with whom we have entered into charters with respect to the contracted
newbuilds. Such events could adversely impact the dividends we intend to
pay, and could have a material adverse effect on our business, financial
condition and results of operation.
We have paid
dividends to our stockholders each quarter since our initial public offering in
June 2008, including an aggregate amount of $41.8 million over four consecutive
quarterly dividends, each in the amount of $0.15 per share, payable during
2011. We also declared a dividend of $0.15 per share, payable on February 29,
2012, to our shareholders of record on February 24, 2012. Our future liquidity
needs will impact our dividend policy. We currently intend to use a portion of
our free cash to pay dividends to our stockholders. The declaration and payment
of dividends, if any, will always be subject to the discretion of our board of
directors. The timing and amount of any dividends declared will depend on,
among other things: (i) our earnings, financial condition and cash requirements
and available sources of liquidity, (ii) decisions in relation to our growth
strategies, (iii) provisions of Marshall Islands and Liberian law governing the
payment of dividends, (iv) restrictive covenants in our existing and future
debt instruments and (v) global financial conditions. Dividends might not be
paid in the future.
Cash Flows
Cash and cash
equivalents decreased to $28.1 million as of December 31, 2011, compared to
$65.3 million as of December 31, 2010. We consider highly liquid investments
such as time deposits and certificates of deposit with an original maturity of
three months or less to be cash equivalents. Cash and cash equivalents are
primarily held in U.S. dollars.
Net Cash Provided by Operating Activities
Net cash
provided by operating activities amounted to $107.2 million in 2011, consisting
of net income after non-cash items of $114.4 million plus an increase in
working capital of $7.2 million. Net cash provided by operating activities
amounted to $118.1 million in 2010, consisting of net income after non-cash
items of $109.6 million plus a decrease in working capital of $8.5 million. Net
cash provided by operating activities amounted to $211.3 million in 2009,
consisting of net income after non-cash items of $195.1 million plus a decrease
in working capital of $16.2 million.
Net Cash Used in Investing Activities
Net cash flows
used in investing activities were $125.9 million for the year ended December
31, 2011 compared to net cash flows used in investing activities of $131.7
million for the year ended December 31, 2010. The decrease in cash flows used
in investing activities of $5.8 million from 2010 is mainly attributable to the
net effect of the following factors: (i) a decrease in our net bank time
deposits by $35.0 million during the year ended December 31, 2011, compared to
a decrease of $22.8 million during the same period in 2010 and (ii) a decrease
of $31.5 million in payments for vessel acquisitions and advances for vessels
under construction during the year ended December 31, 2011 due to our
acquisition of two new vessels,
Venus
History
in September, and
Pelopidas
in November, while during the year ended December 31, 2010, we acquired three
new vessels,
Kanaris
in March,
Panayiota K
in April
48
and
Venus Heritage
in December, 2010 and (iii)
proceeds from sale of vessels, amounting to $32.2 million in 2010 due to the
sale of the
Old Efrossini
; no
vessels were sold in 2011.
Net cash flows
used in investing activities were $131.7 million for the year ended December
31, 2010 compared to net cash flows used in investing activities of $191.9
million for the year ended December 31, 2009. The decrease in cash flows used
in investing activities of $60.2 million from 2010 is mainly attributable from
the following factors: (i) investment in a 5 year floating rate note of $50
million in 2009, compared to no new long term investments in 2010, (ii) a
decrease in our net bank time deposits by $22.8 million during the year ended
December 31, 2010, compared to an increase of $36.6 million during the same
period in 2009 and (iii) proceeds of $32.2 million during the year ended
December 31, 2010 from the sale of
Old
Efrossini
on January 7, 2010, compared to no sales of assets during
the year ended December 31, 2009 and (iv) a partial offset caused by an
increase of $60.9 million to $192.4 million from $131.5 million in vessel
acquisitions and advances for vessels payments during the year ended December
31, 2010 due to our acquisition of three new vessels,
Kanaris
in March,
Panayiota K
in April and
Venus Heritage
in December, while during
the year ended December 31, 2009, we acquired two new vessels,
Martine
in February and
Andreas K
in September.
Net Cash (Used in)/Provided by Financing
Activities
Net cash flows
used in financing activities were $18.5 million for the year ended December 31,
2011, compared to net cash flows provided by financing activities of $60.1
million for the year ended December 31, 2010. This increase of $78.6 million
compared to 2010 is largely attributable to a decrease of $35.4 million in
proceeds from the issuance of common stock, an increase in long-term debt principal
payments of $43.5 million, an increase in long-term debt proceeds of $9.5
million an increase in payments of deferred financing costs of $5.4 million and
an increase in dividends paid of $4 million.
Net cash flows
provided by financing activities were $60.1 million for the year ended December
31, 2010, compared to net cash flows used in financing activities of $28.7
million for the year ended December 31, 2009. This increase of $88.8 million,
compared to 2010 is largely attributable to an increase of $75.0 million in
proceeds from the issuance of common stock, an increase in long-term debt
principal payments of $13.0 million, an increase in long-term debt proceeds of
$32.5 million and an increase in dividends paid of $5.1 million.
Credit Facilities
We operate in
a capital intensive industry which requires significant amounts of investment,
and we fund a portion of this investment through long-term bank debt. Our
subsidiaries have generally entered into individual credit facilities in order
to finance the acquisition of the vessels owned by these subsidiaries and for
general corporate purposes. The durations until maturity of our 16 credit
facilities outstanding on December 31, 2011, ranged from four to 12 years, and
they are generally repaid by semiannual principal installments and a balloon
payment for 13 out of 15 of them, due on maturity except for the Maxdeka and
Shikoku loan facilities, which are repayable in semi-annual installments. We
generally pay interest on these facilities which bear interest at LIBOR plus a
margin, except for the Maxdeka and Shikoku loan facilities, under which a
portion of the principal amounts bear interest at the Commercial Interest
Reference Rate published by the Organization for Economic Co-operation and
Development (OECD) applicable on the date of signing of the relevant loan
agreements. The obligations under our credit facilities are secured by, among
other types of security, first priority mortgages over the vessels owned by the
respective borrower subsidiaries, first priority assignments of all insurances
and earnings of the mortgaged vessels and guarantees by Safe Bulkers, Inc.
During 2011,
we drew down loans totaling $84.0 million and we repaid $94.5 million of our
indebtedness. As of December 31, 2011, we had 16 outstanding credit facilities
with a combined outstanding balance of $484.3 million. These debt facilities
have maturity dates between 2015 and 2023. For a description of our debt
facilities as of December 31, 2011, please see Note 7 to our financial statements
included at the end of this annual report. During 2012, we plan to repay
approximately $18.5 million of our long-term debt outstanding as of December
31, 2011. During 2011, we entered into a new credit facility in the amount of
$52.8 million for
Pelopidas
and
we entered into a new credit facility in the amount of $38.4 million for
Venus Horizon
. Additionally, during 2011,
we accepted a commitment letter from a bank for a credit facility for up to
$20.0 million, which will be used for the financing of the acquisition of
Hull No. 616
, the documentation for which
was concluded in February 2012. This credit facility
49
will be made
available after delivery from the shipyard of
Hull
No
.
616
. Additionally, during February 2012, we accepted a commitment
letter from a bank for a credit facility for up to $18.0 million, which will
be used for the financing of the acquisition of
Hull
No
.
631
. For more
information regarding these credit facilities, please refer to Notes 10(b) and
23(b) of the financial statements included at the end of this annual report.
Covenants under Credit Facilities
The credit
facilities impose operating and financial restrictions on us. These
restrictions in our existing credit facilities generally limit our
subsidiaries ability to, among other things, and subject to exceptions set
forth in such credit facilities:
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pay
dividends if an event of default has occurred and is continuing or would
occur as a result of the payment of such dividends;
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enter into
certain long-term charters;
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incur
additional indebtedness, including through the issuance of guarantees;
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change the
flag, class or management of the vessel mortgaged under such facility or
terminate or materially amend the management agreement relating to such
vessel;
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create liens
on their assets;
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make loans;
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make
investments;
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make capital
expenditures;
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undergo a
change in ownership or control or permit a change in ownership and control of
our Manager;
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sell the
vessel mortgaged under such facility; and
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permit our
chief executive officer to change.
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Our existing
credit facilities also require certain of our subsidiaries to maintain
financial ratios and satisfy financial covenants. Depending on the credit
facility, certain of our subsidiaries are subject to financial ratios and
covenants requiring that these subsidiaries:
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ensure that
the market value of the vessel mortgaged under the applicable credit
facility, determined in accordance with the terms of that facility, does not
fall below 110% to 120%, as applicable, of the outstanding amount of the loan
(the Minimum Value Covenant);
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ensure that
outstanding amounts in currencies other than the U.S. dollar do not exceed
100% or 110%, as applicable, of the U.S. dollar equivalent amount specified
in the relevant credit agreement for the applicable period by, if necessary,
providing cash collateral security in an amount necessary for the outstanding
amounts to meet this threshold; and
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ensure that
we comply with certain financial covenants under the guarantees described
below.
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In addition,
under guarantees we have entered into with respect to certain of our
subsidiaries existing credit facilities, we are subject to financial covenants.
Depending on the guarantee, these financial covenants include the following:
50
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our total
consolidated liabilities with the relevant bank divided by our total
consolidated assets must not exceed 70% or 80% as the case may be
(Consolidated Leverage Covenant). The total consolidated assets are based
on the market value of our vessels and the book values of all other assets,
on an adjusted basis as set out in the relevant guarantee;
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the ratio of
our aggregate debt to EBITDA must not at any time exceed 5.5:1 on a trailing
12 months basis (EBITDA Covenant);
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our net
consolidated worth (total consolidated assets less total consolidated
liabilities) (Consolidated Net Worth Covenant) must not at any time be less
than $150.0 million, $175.0 million or $200.0 million, as the case may be,
with the relevant bank;
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payment of
dividends is subject to no event of default having occurred;
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maintenance
of minimum free liquidity of $500,000 is required on deposit on a per vessel
basis for five vessels; and
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a minimum of
51% of the Companys shares shall remain directly or indirectly beneficially
owned by the Hajioannou family for the duration of the relevant credit
facilities.
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As of December
31, 2011, the Company was in compliance with all debt covenants with respect to
its credit facilities.
Interest Rate Swaps
We have
entered into interest rate swap agreements converting floating interest rate
exposure into fixed interest rates in order to economically hedge our exposure
to fluctuations in prevailing market interest rates. For more information on
our interest rate swap agreements, refer to Note 13 to our financial statements
included at the end of this annual report.
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C.
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Research and Development, Patents and Licenses
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We incur from
time to time expenditures relating to inspections for acquiring new vessels
that meet our standards. Such expenditures are insignificant and they are
expensed as they are incurred.
Our results of
operations depend primarily on the charter hire rates that we are able to
realize, and the demand for drybulk vessel services. After reaching historical
highs in mid-2008, charter hire rates for Panamax and Capesize drybulk vessels
reached near historically low levels. For example, the Baltic Drybulk Index, or
BDI, declined from
a high of 11,793 in May 2008 to a low of 663 in December 2008, which represents
a decline of 94% within a single calendar year. During 2011, the BDI remained
volatile, reaching a low of 1,043 on February 4, 2011 and a high of 2,173 on
October 14, 2011. On February 3, 2012, the BDI reached a 26 year low of 647,
due to a combination of weak demand and further growth in vessel supply. As of
February 24, 2012, the BDI was 718.
The decline and volatility in charter rates
in the drybulk market reflects in part the fact that the supply of drybulk
vessels in the market has been increasing, and the number of newbuild drybulk
vessels on order is near historic highs. Demand for drybulk vessel services is
influenced by global financial conditions. The recovery in China and India
positively influenced the charter rates; however, global financial conditions
remain volatile and demand for drybulk services may decrease in the future. The
combination of increasing drybulk capacity (both current and expected) and
decreasing demand or demand which is not offset by the increase in drybulk
capacity is likely to result in reductions in charter hire rates and, as a
consequence, adversely affect our operating results.
51
In response to
the volatile market conditions, we seek to strengthen our charter coverage.
Currently, 15 of our 20 vessels are employed or scheduled to be employed in
period time charters of more than three months. Additionally, we believe we
have structured our capital expenditure requirements, debt commitments and
liquidity resources is a way that will provide us with financial flexibility
(see Item 5. Operating and Financial Review and Prospects B. Liquidity and
Capital Resources for more information).
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E.
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Off-Balance Sheet Arrangements
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As of December
31, 2011, we did not have any off-balance sheet arrangements.
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F.
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Contractual Obligations
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Our
contractual obligations as of December 31, 2011 were:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Less than 1
year (2012)
|
|
1-3 years
(2013-2014)
|
|
3-5 years
(2015-2016)
|
|
More than
5 years
(After
January 1,
2017)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt obligations
|
|
$
|
484,291
|
|
$
|
18,486
|
|
$
|
55,321
|
|
$
|
101,032
|
|
$
|
309,452
|
|
Interest payments (1)
|
|
$
|
69,962
|
|
$
|
16,834
|
|
$
|
23,877
|
|
$
|
15,328
|
|
$
|
13,923
|
|
Payments to our Manager (2)
|
|
$
|
16,794
|
|
$
|
10,661
|
|
$
|
6,133
|
|
|
|
|
|
|
|
Newbuild contracts
|
|
$
|
251,837
|
|
$
|
146,515
|
|
$
|
37,026
|
|
$
|
68,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
822,884
|
|
$
|
192,496
|
|
$
|
122,357
|
|
$
|
184,656
|
|
$
|
323,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts
shown reflect estimated interest payments we expect to make with respect to
our long-term debt obligations and interest rate swaps. The interest payments
reflect an assumed LIBOR-based applicable interest rate of 0.8080% (the
six-month LIBOR rate as of December 31, 2011), plus the relevant margin of
the applicable credit facility and the estimated net settlement of our
interest rate swaps. See B. Liquidity and Capital ResourcesInterest Rate
Swaps.
|
(2)
|
Represents a
fee of $700 per vessel per day and 1.25% of estimated charter hire based on
charter agreements in place as of December 31, 2011, based on the management
fees effective as of May 29, 2011. In addition, it includes amounts payable
to our Manager in respect of the commission of 1.0% of the contract price of
our newbuilds and $550,000 per newbuild for the on-premises supervision of
newbuilds, of which 50% is payable upon the signing of the relevant
supervision agreement, and 50% upon successful completion of the sea trials
of each newbuild, we have agreed to acquire pursuant to shipbuilding
contracts, memoranda of agreement or otherwise. The levels of the above
mentioned fees are subject to adjustment every year and will be agreed upon
between us and our Manager. The fees shown in the table above do not take
into account any potential future changes to the fees.
|
|
|
I
TEM 6.
|
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|
|
|
A.
|
Directors and Senior Management
|
The following
table sets forth, as of February 25, 2012, information regarding our directors
and executive officers.
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
|
|
|
|
|
Polys Hajioannou
|
|
45
|
|
Chief Executive Officer,
Chairman of the Board and Class I Director
|
Dr. Loukas Barmparis
|
|
49
|
|
President, Secretary and
Class II Director
|
Konstantinos Adamopoulos
|
|
49
|
|
Chief Financial Officer
and Class III Director
|
Ioannis Foteinos
|
|
53
|
|
Chief Operating Officer
and Class I Director
|
John Gaffney
|
|
51
|
|
Class II Director
|
Frank Sica
|
|
61
|
|
Class III Director
|
Ole Wikborg
|
|
56
|
|
Class I Director
|
52
Certain
biographical information about each of these individuals is set forth below.
The term of our Class I directors expires in 2012, the term of our Class II
directors expires in 2013 and the term of our Class III directors expires in
2014.
Polys Hajioannou
is
our Chief Executive Officer and has been Chairman of our board of directors
since 2008. Mr. Hajioannou also serves with our Manager and prior to its
inception, our Managers predecessor Alassia Steamship Co., Ltd., which he
joined in 1987. Mr. Hajioannou was elected as a member of the board of
directors of the Union of Greek Shipowners in 2006 and served on the board
until February 2009. Mr. Hajioannou is also a founding member of the Union of
Cyprus Shipowners. Mr. Hajioannou is a member of the Lloyd’s Register Hellenic
Advisory Committee. In 2011, Mr. Hajioannou was appointed to the board of directors of the Hellenic Mutual War Risks Association
(Bermuda) Limited. Mr. Hajioannou holds a Bachelor of Science degree in
nautical studies from Sunderland University.
Dr. Loukas Barmparis
is our President and Secretary and has been a member of our board of directors
since 2008. Dr. Barmparis also serves as the technical manager of our Manager,
which he joined in February 2006. Until 2009 he was the project development
manager of the affiliated Alasia Development S.A., responsible for renewable
energy projects. Prior to joining our Manager and Alasia Development S.A., from
1999 to 2005 and from 1993 to 1995, Dr. Barmparis was employed at N.
Daskalantonakis Group, Grecotel, one of the largest hotel chains in Greece, as
technical manager and project development general manager. During the interim
period between 1995 and 1999, Dr. Barmparis was employed at Exergia S.A. as an
energy consultant. Dr. Barmparis holds a master of business administration
(MBA) from the Athens Laboratory of Business Administration, a doctorate from
the Imperial College of Science Technology and Medicine, a master of applied
science from the University of Toronto and a diploma in mechanical engineering
from the Aristotle University of Thessaloniki.
Konstantinos Adamopoulos
is our Chief Financial Officer and has been a member of our board of directors
since 2008. Prior to joining us, Mr. Adamopoulos was employed at Calyon, a
financial institution, as a senior relationship manager in shipping finance for
14 years. Prior to this, from 1990 to 1993, Mr. Adamopoulos was employed by the
National Bank of Greece in London as an account officer for shipping finance
and in Athens as deputy head of the export finance department. Prior to this,
from 1987 to 1989, Mr. Adamopoulos served as a finance officer in the Greek Air
Force. Mr. Adamopoulos holds an MBA in finance from the City University
Business School and a Bachelor of Science degree in business administration
from the Athens School of Economics and Business Science.
Ioannis Foteinos
is
our Chief Operating Officer and has been a member of our board of directors
since February 2009. Mr. Foteinos has 25 years of experience in the shipping
industry. After obtaining a bachelors degree in nautical studies from
Sunderland University, he joined the predecessor of our Manager, Safety
Management Overseas, in 1984, where he presently serves and will continue to
serve as Chartering Manager.
Frank Sica
has been
a member of our board of directors and of our corporate governance, nominating
and compensation committee, and a member and chairman of our audit committee, since
2008. Mr. Sica has served as a Managing Partner at Tailwind Capital, a private
equity firm since 2006. From 2004 to 2005, Mr. Sica was a Senior Advisor to
Soros Private Funds Management. From 1998 to 2003, Mr. Sica worked at Soros
Fund Management where he oversaw the direct real estate and private equity
investment activities of Soros. From 1988 to 1998, Mr. Sica was a Managing
Director at Morgan Stanley. Mr. Sica is a graduate of Wesleyan University,
where he received a B.A. degree, and of the Amos Tuck School of Business at
Dartmouth College, where he received his M.B.A. Mr. Sica is also director of
CSG Systems International, an account management and billing software company
for communication industries, JetBlue Airways Corporation, a commercial airline,
and Kohls Corporation, an owner and operator of department stores.
Ole Wikborg
has been
a member of our board of directors and of our audit committee and corporate
governance, nominating and compensation committee since 2008. Mr. Wikborg has
been involved in the marine and shipping industry in various capacities for
over 30 years. Since 2002, Mr. Wikborg has served as a director, senior
underwriter and member of the management team of the Norwegian Hull Club, based
in Oslo, Norway. From 2002 to 2006, Mr. Wikborg also served as a member and
chairman of the Ocean Hull Committee of the International
53
Union of
Marine Insurance (IUMI). Since 2006, he has served as Vice President and a
member of the Executive Board of the IUMI and in 2010, he was elected as
President of IUMI. Since 1997, Mr. Wikborg has served as a board member of the
Central Union of Marine Insurers, based in Oslo, and is presently that
organizations Chairman. From 1997 until 2002, Mr. Wikborg served as the senior
vice president and manager of the marine and energy division of the Zurich
Protector Insurance Company ASA, based in Oslo and Zurich, and from 1993 until
1997, he served as a senior underwriter for the marine division of Protector
Insurance Company ASA, based in Oslo. Priorf to his career in the field of
marine insurance, Mr. Wikborg served in the Royal Norwegian Navy, attaining the
rank of Lieutenant Commander.
John Gaffney
has been a member of our board of directors and of our audit
committee, and a member and chairman of our corporate governance, nominating
and compensation committee, since October 2011. Mr. Gaffney joined the law firm
of Gibson, Dunn & Crutcher LLP as a partner in November 2011. From January
2010 through September 2011, Mr. Gaffney was a Senior Vice President, Corporate
Affairs and General Counsel of Solyndra, Inc., where he led Solyndras
corporate affairs and legal activities. From January 2008 through December
2009, Mr. Gaffney was an Executive Vice President at First Solar, where he led
First Solars corporate development, legal, sustainable development and
environmental affairs activities. Prior to joining First Solar, Mr. Gaffney
practiced law at the firm of Cravath, Swaine & Moore LLP, where he was a
partner from 1993 to 2008. During his time at Cravath, Mr. Gaffney advised
numerous corporate and financial institution clients on merger, acquisition and
capital markets transactions. Mr. Gaffney holds a B.A. from George Washington
University and a J.D. and an MBA from New York University.
|
|
B.
|
Compensation of Directors and Senior Management
|
Non-executive
independent directors of the Company are paid an annual fee in the amount of
$40,000 plus reimbursement for their out-of-pocket expenses.
In addition,
the chairman of the audit committee, Frank Sica, receives the annual equivalent
of $60,000 in the form of shares of our common stock. John Gaffney and Ole
Wikborg receive the annual equivalent of $30,000 in the form of shares of our
common stock. The members of our senior management are provided and compensated
by our Manager and have not received and will not receive any compensation from
us. We do not have any employment contracts with any of our executive officers
whose services are provided to us by our Manager. For a discussion of the fees
payable to our Manager, refer to Item 7. Major Shareholders and Related Party
TransactionsB. Related Party TransactionsManagement Agreement. Also, we do
not have any service contracts with any of our non-executive directors that
provide for benefits upon termination of their services.
No amounts are
set aside or accrued by us to provide pension, retirement or similar benefits.
As of December
31, 2011, we had seven members on our board of directors. The board of
directors may change the number of directors to not less than three, nor more
than 15, by a vote of a majority of the entire board. Each director shall be
elected to serve until the third succeeding annual meeting of stockholders and
until his or her successor shall have been duly elected and qualified, except
in the event of death, resignation or removal. A vacancy on the board created
by death, resignation, removal (which may only be for cause), or failure of the
stockholders to elect the entire class of directors to be elected at any election
of directors or for any other reason, may be filled only by an affirmative vote
of a majority of the remaining directors then in office, even if less than a
quorum, at any special meeting called for that purpose or at any regular
meeting of the board of directors. None of our directors is a party to service
contracts with us providing for benefits upon termination of employment.
During the
fiscal year ended December 31, 2011, the full board of directors held four
meetings. Each director attended all of the meetings of committees of which the
director was a member. Our board of directors has determined that each of Mr.
Sica, Gaffney and Wikborg are independent within the current meanings of
independence employed by the corporate governance rules of the New York Stock
Exchange and the SEC.
54
Stockholders
who wish to send communications on any topic to the board of directors or to
the independent directors as a group, or to the chairman of the audit
committee, Mr. Frank Sica, or to the chairman of the corporate governance,
nominating and compensation committee, Mr. John Gaffney, may do so by writing
to our Secretary, Dr. Loukas Barmparis, Safe Bulkers, Inc., 30-32 Avenue
Karamanli, 16605, Voula, Athens, Greece.
Corporate Governance
The board of
directors and our Companys management have engaged in an ongoing review of our
corporate governance practices in order to oversee our compliance with the
applicable corporate governance rules of the New York Stock Exchange and the
SEC.
We have
adopted a number of key documents that are the foundation of the Companys
corporate governance, including:
|
|
|
|
|
a Code of
Business Conduct and Ethics for all officers and employees, which
incorporates a Code of Ethics for directors and a Code of Conduct for corporate officers;
|
|
|
|
|
|
a Corporate
Governance, Nominating and Compensation Committee Charter; and
|
|
|
|
|
|
an Audit
Committee Charter.
|
These
documents and other important information on our governance are posted on our
website and may be viewed at
http://www.safebulkers.com
.
We will also provide a paper copy of any of these documents upon the written
request of a stockholder. Stockholders may direct their requests to the
attention of our Secretary, Dr. Loukas Barmparis, Safe Bulkers, Inc., 30-32
Avenue Karamanli, 16605, Voula, Athens, Greece.
Committees of the
Board of Directors
Audit committee
Our audit
committee consists of Ole Wikborg, John Gaffney and Frank Sica, as chairman.
Our board of directors has determined that Frank Sica qualifies as an audit
committee financial expert, as such term is defined in Regulation S-K
promulgated by the SEC. The audit committee is responsible for:
|
|
|
|
|
the
appointment, compensation, retention and oversight of independent auditors
and approving any non-audit services performed by such auditor;
|
|
|
|
|
|
assisting
the board in monitoring the integrity of our financial statements, the
independent auditors qualifications and independence, the performance of the
independent accountants and our internal audit function and our compliance
with legal and regulatory requirements;
|
|
|
|
|
|
annually
reviewing an independent auditors report describing the auditing firms
internal quality-control procedures, and any material issues raised by the
most recent internal quality control review, or peer review, of the auditing
firm;
|
|
|
|
|
|
discussing
the annual audited financial and quarterly statements with management and the
independent auditors;
|
|
|
|
|
|
discussing
earnings press releases, as well as financial information and earnings
guidance provided to analysts and rating agencies;
|
|
|
|
|
|
discussing
policies with respect to risk assessment and risk management;
|
55
|
|
|
|
|
meeting
separately, and periodically, with management, internal auditors and the
independent auditor;
|
|
|
|
|
|
reviewing with
the independent auditor any audit problems or difficulties and managements
responses;
|
|
|
|
|
|
setting
clear hiring policies for employees or former employees of the independent
auditors;
|
|
|
|
|
|
annually
reviewing the adequacy of the audit committees written charter, the internal
audit charter, the scope of the annual internal audit plan and the results of
internal audits;
|
|
|
|
|
|
reporting
regularly to the full board of directors; and
|
|
|
|
|
|
handling
such other matters that are specifically delegated to the audit committee by
the board of directors from time to time.
|
Corporate governance, nominating and
compensation committee
Our corporate
governance, nominating and compensation committee consists of Ole Wikborg,
Frank Sica and John Gaffney, as chairman. The corporate governance, nominating
and compensation committee is responsible for:
|
|
|
|
|
nominating
candidates, consistent with criteria approved by the full board of directors,
for the approval of the full board of directors to fill board vacancies as
and when they arise, as well as putting in place plans for succession, in
particular, of the chairman of the board of directors and executive officers;
|
|
|
|
|
|
selecting,
or recommending that the full board of directors select, the director
nominees for the next annual meeting of shareholders;
|
|
|
|
|
|
developing
and recommending to the full board of directors corporate governance
guidelines applicable to us and keeping such guidelines under review;
|
|
|
|
|
|
overseeing
the evaluation of the board and management; and
|
|
|
|
|
|
handling
such other matters that are specifically delegated to the corporate
governance, nominating and compensation committee by the board of directors
from time to time.
|
Other than an
employee who serves as our legal representative in Greece, we have no salaried
employees and have not entered into any employment agreements. Our Manager
employs, and provides us with, all four of our executive officers, including
our chief executive officer, Polys Hajioannou, our president, Dr. Loukas
Barmparis, our chief financial officer, Konstantinos Adamopoulos, and our chief
operating officer, Ioannis Foteinos. Our Manager is responsible for paying any
salaries payable to our executive officers. As of December 31, 2011, approximately
387 people served on board the vessels in our fleet, and our Manager employed
approximately 47 people on shore.
The common
stock beneficially owned by our directors and executive officers and/or
companies affiliated with these individuals is disclosed in Item 7. Major
Shareholders and Related Party TransactionsA. Major Shareholders below.
56
Equity Compensation
Plans
We have agreed
to provide the chairman of the audit committee, Mr. Frank Sica, as part of his
remuneration, the annual equivalent of $60,000 in the form of shares of our
common stock, and our non-executive independent directors, Mr. John Gaffney and
Mr. Ole Wikborg, as part of their remuneration, the annual equivalent of
$30,000 each, in the form of shares of our common stock.
|
|
I
TEM 7.
|
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|
The following
table sets forth certain information regarding the beneficial ownership of our
outstanding common stock as of February 25, 2012 held by:
|
|
|
|
|
each person
or entity that we know beneficially owns 5% or more of our common stock;
|
|
|
|
|
|
each of our
officers and directors; and
|
|
|
|
|
|
all our
directors and officers as a group.
|
Beneficial
ownership is determined in accordance with the rules of the SEC. In general, a
person who has voting power or investment power with respect to securities is
treated as a beneficial owner of those securities.
Beneficial
ownership does not necessarily imply that the named person has the economic or
other benefits of ownership. For purposes of this table, shares subject to
options, warrants or rights or shares exercisable within 60 days of February
25, 2012 are considered as beneficially owned by the person holding those
options, warrants or rights. Each stockholder is entitled to one vote for each
share held. The applicable percentage of ownership for each stockholder is
based on 70,896,924 shares of common stock outstanding as of February 25, 2012.
Information for certain holders is based on their latest filings with the SEC
or information delivered to us. Except as noted below, the address of all
stockholders, officers and directors identified in the table and the
accompanying footnotes below is in care of our principal executive offices.
|
|
|
|
|
|
|
|
Identity of Person or Group
|
|
Number of
Shares
of Common
Stock Owned
|
|
Percentage
of
Common
Stock
|
|
|
|
|
|
|
|
5%
Beneficial Owners:
|
|
|
|
|
|
|
|
Vorini Holdings Inc.
(1)
|
|
|
45,826,015
|
|
|
64.64
|
%
|
Officers
and Directors:
|
|
|
|
|
|
|
|
Polys Hajioannou
(2)
|
|
|
45,826,015
|
|
|
64.64
|
%
|
Dr. Loukas Barmparis
|
|
|
|
|
|
|
|
Konstantinos Adamopoulos
|
|
|
|
|
|
|
|
Ioannis Foteinos
|
|
|
|
|
|
|
|
Frank Sica
|
|
|
46,877
|
|
|
*
|
|
Ole Wikborg
|
|
|
8,070
|
|
|
*
|
|
John Gaffney
|
|
|
8,070
|
|
|
*
|
|
All
executive officers and directors as a group (7 persons)
|
|
|
45,889,032
|
|
|
64.73
|
%
|
|
|
|
|
|
*
|
Less than 1%
|
(1)
|
Vorini
Holdings Inc. is controlled by Polys Hajioannou and his family.
|
(2)
|
By virtue of
shares owned indirectly through Vorini Holdings Inc., which is our principal
stockholder.
|
In June 2008,
we completed a registered public offering of our shares of common stock in
which the selling stockholder was Vorini Holdings Inc., and our common stock
began trading on the New York Stock Exchange. Our major stockholders have the
same voting rights as our other stockholders. As of February 25, 2012, we had
five
57
stockholders
of record, three of these stockholders of record were located in the United
States and held an aggregate 25,388,854 shares of common stock, representing
approximately 35.8% of our outstanding shares of common stock. However, one of
the United States stockholders of record is Cede & Co., a nominee of The
Depository Trust Company, which holds 25,372,059 shares of our common stock.
Accordingly, we believe that the shares held by Cede & Co. include shares
of common stock beneficially owned by both holders in the United States and
non-United States beneficial owners. We are not aware of any arrangements the
operation of which may at a subsequent date result in our change of control. We
are not aware of any significant changes in the percentage ownership held by
any major stockholders since our initial public offering.
Vorini
Holdings Inc. owns approximately 64.64% of our outstanding common stock. This
stockholder is able to control the outcome of matters on which our stockholders
are entitled to vote, including the election of our entire board of directors
and other significant corporate actions. Shares of our common stock held by
Vorini Holdings Inc. do not have different or unique voting rights.
|
|
B.
|
Related Party Transactions
|
Management
Affiliations
Our Manager,
Safety Management Overseas S.A., is controlled by Polys Hajioannou, our chief
executive officer, through another entity, Machairiotissa Holdings, Inc. Our
Manager, along with its predecessor, has provided services to our vessels since
1965 and continues to provide technical, administrative and certain commercial
services which support our business, as well as comprehensive ship management
services such as technical supervision and commercial management, including chartering
our vessels, pursuant to our Management Agreement described below.
Management Agreement
Under our
Management Agreement, our Manager is responsible for providing us with
technical, administrative and certain commercial services, which include the
following:
Technical Services
These services
include managing day-to-day vessel operations, performing general vessel
maintenance, ensuring regulatory compliance and compliance with the law of the
flag state of each vessel and of the places where the vessel operates, ensuring
classification society compliance, supervising the maintenance and general
efficiency of vessels, arranging the hire of qualified officers and crew,
training, transportation and lodging, insurance (including handling and
processing all claims) of, and appropriate investigation of any charterer
concerns with respect to, the crew, conducting union negotiations concerning
the crew, performing normally scheduled drydocking and general and routine
repairs, arranging insurance for vessels (including marine hull and machinery,
protection and indemnity and risks insurance), purchasing stores, supplies,
spares, lubricating oil and maintenance capital expenditures for vessels,
appointing supervisors and technical consultants, providing technical support,
shoreside support and shipyard supervision, and attending to all other
technical matters necessary to run our business.
Commercial Services
These services
include chartering the vessels which we own, assisting in our chartering,
locating, purchasing, financing and negotiating the purchase and sale of our
vessels, supervising the design and construction of newbuilds, and such other
commercial services as we may reasonably request from time to time.
Administrative Services
These services
include administering payroll services, assistance with the preparation of our
tax returns and financial statements, assistance with corporate and regulatory
compliance matters not related to our vessels, procuring legal and accounting
services, assistance in complying with U.S. and other relevant securities laws,
human resources (including provision of our executive officers and directors of
our subsidiaries), cash management and bookkeeping
58
services,
development and monitoring of internal audit controls, disclosure controls and
information technology, assistance with all regulatory and reporting functions
and obligations, furnishing any reports or financial information that might be
requested by us and other non-vessel related administrative services,
assistance with office space, providing legal and financial compliance
services, overseeing banking services (including the opening, closing,
operation and management of all of our accounts, including making deposits and
withdrawals reasonably necessary for the management of our business and
day-to-day operations), arranging general insurance and director and officer
liability insurance (at our expense), providing all administrative services
required for any subsequent debt and equity financings and attending to all other
administrative matters necessary to ensure the professional management of our
business.
Reporting Structure
Our Manager
reports to us and to our board of directors through our executive officers.
Compensation of Our Manager
Under our
Management Agreement, in return for providing technical, commercial and
administrative services, our Manager receives a flat daily fee of $700 per
vessel for vessels in our fleet, prorated for the number of calendar days that
we own or charter-in each vessel and $250 per vessel per day, for bareboat
charters. Our Manager also receives a fee of 1.25% on all gross freight,
charter hire, ballast bonus and demurrage with respect to each vessel in our
fleet. Further, our Manager receives a commission of 1.0% based on the contract
price of any vessel bought or sold by it on our behalf, including each of our
contracted newbuilds. We also pay our Manager a flat supervision fee of
$550,000 per newbuild, of which 50% is payable upon the signing of the relevant
supervision agreement, and 50% upon successful completion of the sea trials of
each newbuild, for the on-premises supervision of all newbuilds we have agreed
to acquire pursuant to shipbuilding contracts, memoranda of agreement, or
otherwise. The management fees were constant for the 2 year initial period of
the Management Agreement, which ended on May 29, 2010. On May 29, 2010,
pursuant to an agreement between us and our Manager, the fee on gross freight,
charter hire, ballast bonus and demurrage was readjusted to 1.25% from 1.0%. On
May 29, 2011, the flat daily fee per vessel was readjusted to $700 from $575,
and the flat supervision fee per newbuild was readjusted to $550,000 from
$375,000, while all other management fees remained constant.
The management fees do not
cover capital expenditure, financial costs and operating expenses for our
vessels and our general and administrative expenses such as directors, and
officers liability insurance, legal and accounting fees and other similar
third party expenses. More specifically, we reimburse expenses of the Manager
or its personnel directly related to the operation and management of our
vessels, such as:
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interest,
principal and other financial costs,
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voyage
expenses
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vessel
operating expenses including crewing costs, surveyors attendance fees,
bunkers, lubricant oils, spares, survey fees, classification society fees,
maintenance and repair costs and vetting expenses,
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commissions,
remuneration or disbursements due to lawyers, brokers, agents, surveyors, consultants,
financial advisors, investment bankers, insurance advisors,
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deductibles,
insurance premiums and/or P&I calls,
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postage,
communication, traveling, victualling and other out of pocket expenses.
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Each year, our
Manager prepares and submits to us a detailed draft budget for the next
calendar year, which includes a statement of estimated revenue, estimated
general and administrative expenses and a proposed budget for capital
expenditures, repairs or alterations. Once approved by us, this draft budget
becomes the approved budget.
59
Term and Termination Rights
Subject to the termination rights described
below, the initial term of our Management Agreement expired on May 28, 2010.
Since then our Management Agreement has been automatically renewed for two
one-year periods, expiring May 28, 2012. Upon expiration of the renewal term,
our Management Agreement automatically renews for one-year periods until May
28, 2018, at which point the agreement will expire. In addition to the
termination provisions outlined below, we are able to terminate our Management
Agreement at any point after the initial term upon 12 months notice to our
Manager. Such notice of termination has not been provided to our Manager by us.
Our Managers Termination Rights
Our Manager
may terminate our Management Agreement prior to the end of its term if:
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any money
payable by us is not paid when due or if due on demand, within ten business
days following demand by our Manager;
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we default
in the performance of any other material obligation under the Management
Agreement and the matter is unresolved within 20 business days after we
receive written notice of such default from our Manager;
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the
management fee determined by arbitration in respect of any annual period
following the initial term is unsatisfactory to our Manager, in which case
the Manager may terminate upon 12 months written notice to us;
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any
acquisition of our shares or a merger, consolidation or similar transaction
results in any person or group acquiring 40% or more of the total voting
power of our or the resulting entitys outstanding voting securities, and
such percentage represents a higher percentage of such voting power than that
held directly or indirectly by Polys Hajioannou and Nicolaos Hadjioannou,
collectively; or
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there is a
change in directors after which a majority of the members of our board of
directors are not continuing directors.
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Continuing
directors means, as of any date of determination, any member of our board of
directors who was:
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a member of
our board of directors on June 4, 2008; or
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nominated
for election or elected to our board of directors with the approval of a
majority of the directors then in office who were either directors on June 4,
2008 or whose nomination or election was previously so approved.
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Our Termination Rights
In addition to
certain standard termination rights, we may terminate our Management Agreement
prior to the end of its term if:
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our Manager
defaults in the performance of any material obligation under our Management
Agreement and the matter is not resolved within 20 business days after our
Manager receives from us written notice of such default; or
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any money
payable by our Manager to us or third parties under our Management Agreement
is not paid or accounted for within ten business days following written
notice by us.
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Non-Competition
60
Our Manager
has agreed that, during the term of our Management Agreement and for one year
after its termination, our Manager will not provide any management services to,
or with respect to, any drybulk vessels, other than in the following
circumstances:
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(a)
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pursuant to
its involvement with us; or
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(b)
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with respect
to drybulk vessels that are owned or operated by companies affiliated with
our chief executive officer or Nicolaos Hadjioannou, subject in each case to
compliance with, or waivers of, the restrictive covenant agreements entered
into between us and companies affiliated with our chief executive officer or
Nicolaos Hadjioannou.
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Our Manager
has also agreed that if one of our drybulk vessels and a drybulk vessel owned
or operated by a company affiliated with our chief executive officer or
Nicolaos Hadjioannou are both available and meet the criteria for a charter
being fixed by our Manager, our drybulk vessel will receive such charter.
Currently our Manager does not provide management services to any third party.
Sale of Our Manager
Our Manager
has agreed that, during the term of the Management Agreement and for one year
after its termination, our Manager will not transfer, assign, sell or dispose
of all or substantially all of its business that is necessary for the
performance of its services under the Management Agreement without the prior
written consent of our board of directors. Furthermore, during such period, in
the event of any proposed change in control of our Manager, we have a 30-day
right of first offer to purchase our Manager. In December 2011, the Management
Agreement was amended to define a proposed change in control of our Manager
to mean (a) the approval by the board of directors of the Manager or the
shareholders of the Manager of a proposed sale of all or substantially all of
the assets or property of the Manager necessary for the performance of its
services under the Management Agreement; or (b) the approval of any transaction
that would result in: (i) Polys Hajioannou or Vorini Holdings Inc., or any
entity controlled by, or under common control with, any of the above,
beneficially owning, directly or indirectly, less than 60% of the outstanding
voting securities or voting power of the Manager or Machairiotissa Holdings
Inc., respectively, or (ii) Polys Hajioannou or Vorini Holdings Inc., or any
entity controlled by, or under common control with, any of the above, together
with all directors, officers and employees of the Manager beneficially owning,
directly or indirectly, less than 80% of the outstanding voting securities or
voting power of the Manager or Machairiotissa Holdings Inc., respectively. The
Management Agreement was also amended to provide us the right to obtain certain
information about the ownership of the Manager.
Restrictive Covenant
Agreements
Under the
restrictive covenant agreements entered into with us, Polys Hajioannou, Vorini
Holdings Inc., Machairiotissa Holdings Inc., or any entity controlled by, or
under common control with, any of the above (together, the Hajioannou
Entities), have agreed to restrictions on their ownership or operation of any
drybulk vessels or the acquisition, investment in or control of any business
involved in the ownership or operation of drybulk vessels, subject to the
exceptions described below.
In the case of
Polys Hajioannou, the restricted period continues until the later of (a) one
year following the termination of the Management Agreement and (b) one year
following the termination of his services and employment with us. In the case
of the Hajioannou Entities, the restricted period continues until one year
following the termination of the Management Agreement. Notwithstanding these
restrictions, Polys Hajioannou and the Hajioannou Entities are permitted to
engage in the restricted activities during the restricted periods in the
following circumstances:
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(a)
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pursuant to
their involvement with us;
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(b)
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pursuant to
their involvement with our Manager, subject to compliance with, or waivers
of, the Management Agreement;
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61
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(c)
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with respect
to certain permitted acquisitions (as defined below), provided that (i) any
commercial management of drybulk vessels controlled by the restricted
individuals and entities in connection with such permitted acquisition is
performed by our Manager and (ii) the restricted individuals and entities
comply with the requirements for permitted acquisitions described below; and
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(d)
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pursuant to
their passive ownership of up to 9.99% of the outstanding voting securities
of any publicly traded company that is engaged in the drybulk vessel
business.
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As noted
above, Polys Hajioannou and the Hajioannou Entities are permitted to engage in
restricted activities with respect to two types of permitted acquisitions. One
such permitted acquisition is an acquisition of a drybulk vessel or an
acquisition or investment in a drybulk vessel business on terms and conditions
as to price that are not more favorable, and on such other terms and conditions
that are not materially more favorable, than those first offered to us and
refused by a majority of our independent directors. The second type of
permitted acquisition is an acquisition of a group of vessels or a business
that includes non-drybulk vessels and non-drybulk vessel businesses, provided
that less than 50% of the fair market value of the acquisition is attributable
to drybulk vessels or drybulk vessel businesses. Under this second type of
permitted acquisition, we must be promptly given the opportunity to buy the
drybulk vessels or drybulk vessel businesses included in the acquisition for
their fair market value plus certain break-up costs.
Polys
Hajioannou and the Hajioannou Entities have also agreed that if one of our
drybulk vessels and a drybulk vessel owned or operated by any of the Hajioannou
Entities are both available and meet the criteria for a charter being fixed by
our Manager, our drybulk vessels will receive such charter.
Registration Rights
Agreement
In connection
with the closing of our initial public offering, we entered into a registration
rights agreement with Vorini Holdings Inc., our largest stockholder, pursuant
to which we have granted it and certain of its transferees the right, under
certain circumstances and subject to certain restrictions, to require us to
register under the Securities Act shares of our common stock held by those
persons. Under the registration rights agreement, Vorini Holdings Inc. and
certain of its transferees have the right to request us to register the sale of
shares held by them on their behalf and may require us to make available shelf
registration statements permitting sales of shares into the market from time to
time over an extended period. In addition, those persons have the ability to
exercise certain piggyback registration rights in connection with registered
offerings initiated by us. Vorini Holdings Inc. currently owns 44,500,000
shares entitled to these registration rights.
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C.
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Interests of Experts and Counsel
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Not
applicable.
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I
TEM 8.
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FINANCIAL INFORMATION
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A.
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Consolidated Statements and Other Financial Information
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See Item 18.
Financial Statements below.
Legal Proceedings
We have not
been involved in any legal proceedings which may have, or have had, a
significant effect on our business, financial position, results of operations
or liquidity, nor are we aware of any proceedings that are pending or
threatened which may have a significant effect on our business, financial
position, results of operations or liquidity.
The nature of
our business exposes us to the risk of lawsuits for damages or penalties
relating to, among other things, personal injury, property casualty and
environmental contamination. From time to time, we may be subject to legal
proceedings and claims in the ordinary course of business, principally personal
injury and property casualty
62
claims. We
expect that these claims would be covered by insurance, subject to customary
deductibles. However, such claims, even if lacking merit, could result in the
expenditure of significant financial and managerial resources.
Dividend Policy
We paid our
first quarterly dividend as a public company of $0.1461 per share in August
2008 and subsequent dividends of $0.475 per share in November 2008 and $0.15
per share in February 2009, May 2009, August 2009, November 2009, February
2010, May 2010, August 2010, November 2010, February 2011, May 2011, August
2011 and November 2011. We also declared a dividend of $0.15 per share on
February 14, 2012, for the shareholders of record on February 24, 2012, payable
on February 29, 2012.
We currently
intend to use a portion of our free cash to pay dividends to our shareholders.
The declaration and payment of dividends, if any, will always be subject to the
discretion of our board of directors. The timing and amount of any dividends
declared will depend on, among other things: (a) our earnings, financial
condition and cash requirements and available sources of liquidity, (b)
decisions in relation to our growth strategies, (c) provisions of Marshall
Islands and Liberian law governing the payment of dividends, (d) restrictive
covenants in our existing and future debt instruments and (e) global financial
conditions. Dividends might not be paid by us. Our ability to pay dividends may
be limited by the amount of cash we can generate from operations following the
payment of fees and expenses and the establishment of any reserves, as well as
additional factors unrelated to our profitability. We are a holding company,
and we depend on the ability of our subsidiaries to distribute funds to us in
order to satisfy our financial obligations and to make dividend payments. See
Item 3. Key InformationD. Risk FactorsRisks Inherent in Our Industry and Our
Business for a discussion of the risks related to our ability to pay
dividends.
No significant
change has occurred since the date of the annual financial statements included
in this annual report on Form 20-F.
63
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I
TEM 9.
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THE OFFER AND LISTING
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Trading on the New York Stock Exchange
Since our
initial public offering in the United States on May 29, 2008, our common stock
has been listed on the New York Stock
Exchange under
the symbol SB. The following table shows the high and low closing sales
prices for our common stock during the indicated periods.
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Price
Range
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High
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Low
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2008
(1)
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$
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19.05
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$
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3.27
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2009
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9.40
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2.81
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2010
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9.11
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6.66
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2011
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9.53
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5.61
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First Quarter 2010
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9.11
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6.97
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Second Quarter 2010
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8.26
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6.66
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Third Quarter 2010
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7.93
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6.79
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Fourth Quarter 2010
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8.86
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7.79
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First Quarter 2011
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9.53
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8.30
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Second Quarter 2011
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9.52
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7.03
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Third Quarter 2011
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7.92
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6.19
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Fourth Quarter 2011
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7.01
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5.61
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August 2011
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7.56
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6.26
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September 2011
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6.97
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6.19
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October 2011
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7.01
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5.61
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November 2011
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6.87
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5.97
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December 2011
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6.32
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5.94
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January 2012
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7.28
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6.22
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February 2012
(2)
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7.65
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6.75
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(1)
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For the
period from May 29, 2008, the date on which our common stock began trading on
the New York Stock Exchange, until the end of the period.
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(2)
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For the
period through February 28, 2012.
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I
TEM 10.
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ADDITIONAL INFORMATION
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Under our
articles of incorporation, our authorized capital stock consists of 200,000,000
shares of common stock, par value $0.001 per share, of which, as of December
31, 2011 and February 25, 2012, 70,891,916 and 70,896,924 shares were issued
and outstanding, respectively, and 20,000,000 shares of blank check preferred
stock, par value $0.01 per share, of which, as of December 31, 2011 and
February 25, 2012, no shares were issued and outstanding. Of this blank check
preferred stock, 1,000,000 shares have been designated Series A Participating
Preferred Stock in connection with our adoption of a stockholder rights plan as
described below under Stockholder Rights Plan. All of our shares of stock
are in registered form.
Please see
Note 9 to our financial statements included at the end of this annual report
for a discussion of the history of our share capital.
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B.
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Memorandum and Articles of Association
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64
Our purpose,
as stated in our articles of incorporation, is to engage in any lawful act or
activity for which corporations may now or hereafter be organized under the
BCA. Our articles of incorporation and bylaws do not impose any limitations on
the ownership rights of our stockholders.
The rights of
our stockholders are set forth in our articles of incorporation and bylaws.
Amendments to our articles of incorporation require the affirmative vote of the
holders of a majority of all outstanding shares entitled to vote, except that
amendments to certain provisions of our articles of incorporation dealing with
the rights of stockholders, the board of directors, our bylaws and amendments
to the articles of incorporation require the affirmative vote of at least 75%
of all outstanding shares entitled to vote. Amendments to our bylaws require the
affirmative vote of at least 75% of all outstanding shares entitled to vote.
Under our
bylaws, annual stockholder meetings will be held at a time and place selected
by our board of directors. The meetings may be held inside or outside of the
Republic of The Marshall Islands. Special meetings may be called by the
chairman of the board of directors, the chief executive officer or a majority
of the board of directors. Our board of directors may set a record date between
15 and 60 days before the date of any meeting to determine the stockholders
that will be eligible to receive notice and vote at the meeting. Our bylaws
permit stockholder action by unanimous written consent.
We are
registered at The Trust Company of The Marshall Islands, Inc. under registration
number 27394.
Directors
Under our
bylaws, our directors are elected by a plurality of the votes cast at each
annual meeting of the stockholders by the holders of shares entitled to vote in
the election. There is no provision for cumulative voting.
Pursuant to
the provisions of our bylaws, the board of directors may change the number of
directors to not less than three, nor more than 15, by a vote of a majority of
the entire board. Each director shall be elected to serve until the third
succeeding annual meeting of stockholders and until his or her successor shall
have been duly elected and qualified, except in the event of death, resignation
or removal. A vacancy on the board created by death, resignation, removal
(which may only be for cause), or failure of the stockholders to elect the
entire class of directors to be elected at any election of directors or for any
other reason may be filled only by an affirmative vote of a majority of the
remaining directors then in office, even if less than a quorum, at any special
meeting called for that purpose or at any regular meeting of the board of
directors. The board of directors has the authority to fix the amounts which
shall be payable to the non-employee members of our board of directors for
attendance at any meeting or for services rendered to us.
Common Stock
Each
outstanding share of common stock entitles the holder to one vote on all
matters submitted to a vote of stockholders. Subject to preferences that may be
applicable to any outstanding shares of preferred stock, holders of shares of
common stock are entitled to receive ratably all dividends, if any, declared by
our board of directors out of funds legally available for dividends. Upon our
dissolution or liquidation or the sale of all or substantially all of our
assets, after payment in full of all amounts required to be paid to creditors
and to the holders of preferred stock having liquidation preferences, if any,
the holders of our common stock will be entitled to receive pro rata our
remaining assets available for distribution. Holders of common stock do not
have conversion, redemption or preemptive rights to subscribe to any of our
securities. All outstanding shares of common stock are fully paid and
nonassessable. The rights, preferences and privileges of holders of common
stock are subject to the rights of the holders of any shares of preferred stock
which we may issue in the future. Our common stock is not subject to any
sinking fund provisions and no holder of any shares will be required to make
additional contributions of capital with respect to our shares in the future.
There are no provisions in our articles of incorporation or bylaws
discriminating against a shareholder because of his or her ownership of a
particular number of shares.
We are not aware of any
limitations on the rights to own our common stock, including rights of
non-resident or foreign stockholders to hold or exercise voting rights on our
common stock, imposed by foreign law or by our articles of incorporation or
bylaws.
65
Preferred Stock
Our articles
of incorporation authorize our board of directors, without any further vote or
action by our stockholders, to issue up to 20,000,000 shares of blank check
preferred stock, of which 1,000,000 shares have been designated Series A
Participating Preferred Stock, in connection with our adoption of a stockholder
rights plan as described below under Stockholder Rights Plan, and to
determine, with respect to any series of preferred stock established by our
board of directors, the terms and rights of that series, including:
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the
designation of the series;
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the number
of shares of the series;
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the
preferences and relative, participating, option or other special rights, if
any, and any qualifications, limitations or restrictions of such series; and
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the voting
rights, if any, of the holders of the series.
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Stockholder Rights
Plan
Each share of
our common stock includes a right that entitles the holder to purchase from us
a unit consisting of one-thousandth of a share of our Series A participating
preferred stock at a purchase price of $25.00 per unit, subject to specified
adjustments. The rights are issued pursuant to a stockholder rights agreement
between us and American Stock Transfer & Trust Company, as rights agent.
Until a right is exercised, the holder of a right will have no rights to vote
or receive dividends or any other stockholder rights.
The rights may
have anti-takeover effects. The rights will cause substantial dilution to any
person or group that attempts to acquire us without the approval of our board
of directors. As a result, the overall effect of the rights may be to render
more difficult or discourage any attempt to acquire us. Because our board of
directors can approve a redemption of the rights or a permitted offer, the
rights should not interfere with a merger or other business combination
approved by our board of directors. The adoption of the rights agreement was
approved by our existing stockholder prior to our initial public offering in
May 2008.
We have
summarized the material terms and conditions of the rights agreement and the
rights below. For a complete description of the rights, we encourage you to
read the stockholder rights agreement, which we have filed as an exhibit to this
annual report.
Detachment of rights
The rights are
attached to all certificates representing our outstanding common stock and will
attach to all common stock certificates we issue prior to the rights
distribution date that we describe below. The rights are not exercisable until
after the rights distribution date and will expire at the close of business on
the tenth anniversary date of the adoption of the rights plan, unless we redeem
or exchange them earlier as described below. The rights will separate from the
common stock and a rights distribution date will occur, subject to specified
exceptions, on the earlier of the following two dates:
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ten days
following the first public announcement that a person or group of affiliated
or associated persons or an acquiring person has acquired or obtained the
right to acquire beneficial ownership of 15% or more of our outstanding
common stock; or
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ten business
days following the start of a tender or exchange offer that would result, if
closed, in a person becoming an acquiring person.
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Our
controlling stockholder, Vorini Holdings Inc., and its affiliates are excluded
from the definition of acquiring person for purposes of the rights, and
therefore their ownership or future share acquisitions cannot trigger the
rights. Specified inadvertent owners that would otherwise become an acquiring
person, including those who
66
would have this
designation as a result of repurchases of common stock by us, will not become
acquiring persons as a result of those transactions.
Our board of
directors may defer the rights distribution date in some circumstances, and
some inadvertent acquisitions will not result in a person becoming an acquiring
person if the person promptly divests itself of a sufficient number of shares
of common stock.
Until the
rights distribution date:
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our common
stock certificates will evidence the rights, and the rights will be
transferable only with those certificates; and
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any new
shares of common stock will be issued with rights, and new certificates will
contain a notation incorporating the rights agreement by reference.
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As soon as
practicable after the rights distribution date, the rights agent will mail
certificates representing the rights to holders of record of common stock at
the close of business on that date. As of the rights distribution date, only
separate rights certificates will represent the rights.
We will not
issue rights with any shares of common stock we issue after the rights
distribution date, except as our board of directors may otherwise determine.
Flip-in event
A flip-in
event will occur under the rights agreement when a person becomes an acquiring
person. If a flip-in event occurs and we do not redeem the rights as described
under the heading Redemption of rights below, each right, other than any
right that has become void, as described below, will become exercisable at the
time it is no longer redeemable for the number of shares of common stock, or,
in some cases, cash, property or other of our securities, having a current
market price equal to two times the exercise price of such right.
If a flip-in
event occurs, all rights that then are, or in some circumstances that were,
beneficially owned by or transferred to an acquiring person or specified
related parties will become void in the circumstances which the rights
agreement specifies.
Flip-over event
A flip-over
event will occur under the rights agreement when, at any time after a person
has become an acquiring person:
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we are
acquired in a merger or other business combination transaction; or
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50% or more
of our assets, cash flows or earning power is sold or transferred.
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If a flip-over
event occurs, each holder of a right, other than any right that has become void
as we describe under the heading Flip-in event above, will have the right to
receive the number of shares of common stock of the acquiring company having a
current market price equal to two times the exercise price of such right.
Antidilution
The number of
outstanding rights associated with our common stock is subject to adjustment
for any stock split, stock dividend or subdivision, combination or
reclassification of our common stock occurring prior to the rights distribution
date. With some exceptions, the rights agreement does not require us to adjust
the exercise price of the rights until cumulative adjustments amount to at
least 1% of the exercise price. It also does not require us to issue fractional
shares of our preferred stock that are not integral multiples of one
one-hundredth of a share, and, instead, we may make a cash adjustment based on
the market price of the common stock on the last trading date prior to the
67
date of
exercise. The rights agreement reserves us the right to require, prior to the
occurrence of any flip-in event or flip-over event, that, on any exercise of
rights, a number of rights must be exercised so that we will issue only whole
shares of stock.
Redemption of rights
At any time
until ten days after the date on which the occurrence of a flip-in event is
first publicly announced, we may redeem the rights in whole, but not in part,
at a redemption price of $0.01 per right. The redemption price is subject to
adjustment for any stock split, stock dividend or similar transaction occurring
before the date of redemption. At our option, we may pay that redemption price
in cash, shares of common stock or any other consideration our board of
directors may select. The rights are not exercisable after a flip-in event
until they are no longer redeemable. If our board of directors timely orders
the redemption of the rights, the rights will terminate on the effectiveness of
that action.
Exchange of rights
We may, at our
option, exchange the rights (other than rights owned by an acquiring person or
an affiliate or an associate of an acquiring person, which have become void),
in whole or in part. The exchange must be at an exchange ratio of one share of
common stock per right, subject to specified adjustments at any time after the
occurrence of a flip-in event and prior to
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any person
other than our existing stockholder becoming the beneficial owner of common
stock with voting power equal to 50% or more of the total voting power of all
shares of common stock entitled to vote in the election of directors; or
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the
occurrence of a flip-over event.
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Amendment of terms of rights
While the
rights are outstanding, we may amend the provisions of the rights agreement
only as follows:
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to cure any
ambiguity, omission, defect or inconsistency;
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to make
changes that do not adversely affect the interests of holders of rights,
excluding the interests of any acquiring person; or
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to shorten
or lengthen any time period under the rights agreement, except that we cannot
change the time period when rights may be redeemed or lengthen any time
period, unless such lengthening protects, enhances or clarifies the benefits
of holders of rights other than an acquiring person.
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At any time
when no rights are outstanding, we may amend any of the provisions of the
rights agreement, other than decreasing the redemption price.
Dissenters Rights of Appraisal and Payment
Under the BCA,
our stockholders have the right to dissent from various corporate actions,
including any merger or sale of all, or substantially all, of our assets not
made in the usual course of our business, and receive payment of the fair value
of their shares. In the event of any amendment of our articles of
incorporation, a stockholder also has the right to dissent and receive payment
for his or her shares if the amendment alters certain rights in respect of
those shares. The dissenting stockholder must follow the procedures set forth
in the BCA to receive payment. In the event that we and any dissenting
stockholder fail to agree on a price for the shares, the BCA procedures
involve, among other things, the institution of proceedings in the high court
of the Republic of The Marshall Islands or in any appropriate court in any
jurisdiction in which our shares are primarily traded on a local or national
securities
68
exchange. The
value of the shares of the dissenting stockholder is fixed by the court after
reference, if the court so elects, to the recommendations of a court-appointed
appraiser.
Stockholders Derivative Actions
Under the BCA,
any of our stockholders may bring an action in our name to procure a judgment
in our favor, also known as a derivative action, provided that the stockholder
bringing the action is a holder of common stock both at the time the derivative
action is commenced and at the time of the transaction to which the action
relates.
Limitations on Liability and Indemnification
of Officers and Directors
The BCA
authorizes corporations to limit or eliminate the personal liability of
directors and officers to corporations and their stockholders for monetary
damages for breaches of directors fiduciary duties. Our articles of
incorporation include a provision that eliminates the personal liability of
directors for monetary damages for actions taken as a director to the fullest
extent permitted by law.
Our bylaws
provide that we must indemnify our directors and officers to the fullest extent
authorized by law. We are also expressly authorized to advance certain expenses
(including attorneys fees and disbursements and court costs) to our directors
and officers and carry directors and officers insurance providing
indemnification for our directors, officers and certain employees for some
liabilities. We believe that these indemnification provisions and insurance are
useful to attract and retain qualified directors and executive officers.
The limitation
of liability and indemnification provisions in our articles of incorporation
and bylaws may discourage stockholders from bringing a lawsuit against
directors for breach of their fiduciary duty. These provisions may also have
the effect of reducing the likelihood of derivative litigation against directors
and officers, even though such an action, if successful, might otherwise
benefit us and our stockholders. In addition, stockholders investments may be
adversely affected to the extent we pay the costs of settlement and damage
awards against directors and officers pursuant to these indemnification
provisions.
There is
currently no pending material litigation or proceeding involving any of our
directors, officers or employees for which indemnification is sought.
Anti-Takeover Effect of Certain Provisions of
our Articles of Incorporation and Bylaws
Several
provisions of our articles of incorporation and bylaws, which are summarized in
the following paragraphs, may have anti-takeover effects. These provisions are
intended to avoid costly takeover battles, lessen our vulnerability to a
hostile change of control and enhance the ability of our board of directors to
maximize stockholder value in connection with any unsolicited offer to acquire
us. However, these anti-takeover provisions could also delay, defer or prevent
(a) the merger or acquisition of our company by means of a tender offer, a
proxy contest or otherwise that a stockholder might consider in its best
interest, including attempts that may result in a premium over the market price
for the shares held by the stockholders, and (b) the removal of incumbent
officers and directors.
Blank check preferred stock
Under the
terms of our articles of incorporation, our board of directors has authority,
without any further vote or action by our stockholders, to issue up to
20,000,000 shares of blank check preferred stock, of which 1,000,000 shares
have been designated Series A Participating Preferred Stock, in connection with
our adoption of a stockholder rights plan as described above under Stockholder
Rights Plan. Our board of directors may issue shares of preferred stock on
terms calculated to discourage, delay or prevent a change of control of our
company or the removal of our management.
Classified board of directors
Our articles
of incorporation provide for a board of directors serving staggered, three-year
terms. Approximately one-third of our board of directors will be elected each
year. This classified board provision could discourage a third
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party from
making a tender offer for our shares or attempting to obtain control of our
company. It could also delay stockholders who do not agree with the policies of
the board of directors from removing a majority of the board of directors for
two years.
Election and removal of directors
Our articles
of incorporation prohibit cumulative voting in the election of directors. Our
bylaws require parties other than the board of directors to give advance
written notice of nominations for the election of directors. Our articles of
incorporation and bylaws also provide that our directors may be removed only
for cause. These provisions may discourage, delay or prevent the removal of
incumbent officers and directors.
Calling of special meeting of stockholders
Our articles
of incorporation and bylaws provide that special meetings of our stockholders
may only be called by our Chairman of the board of directors, chief executive
officer or by either, at the request of a majority of our board of directors.
Advance notice requirements for stockholder
proposals and director nominations
Our bylaws
provide that stockholders seeking to nominate candidates for election as
directors or to bring business before an annual meeting of stockholders must
provide timely notice of their proposal in writing to the corporate secretary.
Generally, to
be timely, a stockholders notice must be received at our offices not less than
90 days nor more than 120 days prior to the first anniversary date of the
previous years annual meeting. Our bylaws also specify requirements as to the
form and content of a stockholders notice. These provisions may impede
stockholders ability to bring matters before an annual meeting of stockholders
or to make nominations for directors at an annual meeting of stockholders.
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C.
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Material Contracts
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Not
applicable.
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D.
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Exchange Controls and Other Limitations Affecting Security Holders
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Under
Marshall Islands law, there are currently no restrictions on the export or
import of capital, including foreign exchange controls or restrictions that affect
the remittance of dividends, interest or other payments to non-resident
holders of our common stock.
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E.
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Tax Considerations
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Marshall Islands Tax
Considerations
We are a
non-resident domestic Marshall Islands corporation. Because we do not, and we
do not expect that we will, conduct business or operations in the Republic of
The Marshall Islands, under current Marshall Islands law we are not subject to
tax on income or capital gains and our stockholders (so long as they are not
citizens or residents of the Republic of The Marshall Islands) will not be
subject to Marshall Islands taxation or withholding on dividends and other
distributions (including upon a return of capital) we make to our stockholders.
In addition, so long as our stockholders are not citizens or residents of the
Republic of The Marshall Islands, our stockholders will not be subject to
Marshall Islands stamp, capital gains or other taxes on the purchase, holding
or disposition of our common stock, and our stockholders will not be required
by the Republic of The Marshall Islands to file a tax return relating to our
common stock.
Each
stockholder is urged to consult their tax counselor or other advisor with
regard to the legal and tax consequences, under the laws of pertinent jurisdictions,
including the Republic of The Marshall Islands, of their
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investment in
us. Further, it is the responsibility of each stockholder to file all state,
local and non-U.S., as well as U.S. federal tax returns that may be required of
them.
Liberian Tax
Considerations
Some of our
vessel-owning subsidiaries are incorporated under the laws of the Republic of
Liberia. The Republic of Liberia enacted a new income tax act effective as of
January 1, 2001 (the New Act) which did not distinguish between the taxation
of non-resident Liberian corporations, such as our subsidiaries, which
conduct no business in Liberia and were wholly exempt from taxation under the
income tax law previously in effect since 1977, and resident Liberian
corporations which conduct business in Liberia and are, and were under the
prior law, subject to taxation. The New Act was amended by the Consolidated Tax
Amendments Act of 2011 which was published and became effective on November 1,
2011 (the Amended Act). The Amended Act specifically exempts from taxation
non-resident Liberian corporations such as our Liberian subsidiaries that
engage in international shipping (and not exclusively in Liberia) and that do
not engage in other business or activities in Liberia other than specifically
enumerated in the Amended Act. In addition, the Amended Act made such exemption
from taxation retroactive to the effective date of the New Act.
United States
Federal Income Tax Considerations
The following
discussion of United States federal income tax matters is based on the Code,
judicial decisions, administrative pronouncements, and existing and proposed
regulations issued by the United States Department of the Treasury, all of
which are subject to change, possibly with retroactive effect. This discussion
does not address any United States state or local taxes.
Taxation of Our
Shipping Income
For purposes
of the following discussion shipping income means income that is derived by a
non- United States corporation from:
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(a)
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the use of vessels;
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(b)
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the hiring
or leasing of vessels for use on a time, operating or bareboat charter basis;
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(c)
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the
participation in a pool, partnership, strategic alliance, joint operating
agreement or other joint venture it directly or indirectly owns or
participates in that generates such income; or
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(d)
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the
performance of services directly related to those uses.
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Shipping
income attributable to transportation exclusively between non-United States
ports is generally not subject to United States income tax. However, unless
exempt from United States income tax under the rules contained in Section 883
of the Code, a non-United States corporation is, under the rules of Section 887
of the Code, subject to a 4% United States income tax in respect of its United
States source gross transportation income (without the allowance for
deductions). United States source gross transportation income includes 50% of
shipping income that is attributable to transportation that begins or ends (but
that does not both begin and end) in the United States. Under Section 883 of
the Code, a non-United States corporation will be exempt from United States
income tax on its United States source gross transportation income if:
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(a)
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it is
organized in a foreign country (or its country of organization) that grants
an equivalent exemption to United States corporations; and
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(b)
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either
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(i)
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more than
50% of the value of its stock is owned, directly or indirectly, by
individuals who are residents of its country of organization or of
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another
foreign country that grants an equivalent exemption to United States
corporations; or
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(ii)
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its stock is
primarily and regularly traded on an established securities market in its
country of organization, in another country that grants an equivalent
exemption to United States corporations, or in the United States.
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We believe
that we will not satisfy the requirements of Section 883 of the Code. As a
result, we will be subject to the 4% United States income tax on United States
source gross transportation income. Since 50% of our gross shipping income for
transportation that begins or ends in the United States would be treated as
United States source gross transportation income, we expect that the effective
rate of United States income tax on our gross shipping income for such
transportation would equal 2%. Many of our charters contain a provision that
obligates the charterer to reimburse us for the 4% United States income tax
that we are required to pay in respect of the vessel subject to the relevant
charter.
In lieu of the
foregoing rules, since the exemption of Section 883 of the Code will not apply
to us, our United States source gross transportation income that is considered
to be effectively connected with the conduct of a United States trade or
business would be subject to the United States corporate income tax currently
imposed at rates of up to 35% (net of applicable deductions). In addition, we
may be subject to the 30% United States branch profits taxes on earnings
effectively connected with the conduct of such trade or business, as determined
after allowance for certain adjustments, and on certain interest paid or deemed
paid attributable to the conduct of our United States trade or business.
We expect that
none of our United States source gross transportation income will be
effectively connected with the conduct of a United States trade or business.
Such income would be considered effectively connected only if:
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(a)
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we had, or were
considered to have, a fixed place of business in the United States involved
in the earning of our United States source gross transportation income; and
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(b)
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substantially
all of our United States source gross
transportation income was attributable to regularly scheduled transportation,
such as the operation of a vessel that followed a published schedule with
repeated sailings at regular intervals between the same points for voyages
that begin or end in the United States.
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We believe
that we will not meet these conditions because we will not have, or permit
circumstances that would result in our having, any vessel sailing to or from
the United States on a regularly scheduled basis. In addition, income
attributable to transportation that both begins and ends in the United States
is not subject to the tax rules described above. Such income is subject to
either a 30% gross-basis tax or to United States corporate income tax on net
income at rates of up to 35% (and the branch profits tax discussed above). Although
there can be no assurance, we do not expect to engage in transportation that
produces shipping income of this type.
Taxation of Gain on Sale of Assets
Regardless of
whether we qualify for the exemption under Section 883 of the Code, we will not
be subject to United States income taxation with respect to gain realized on a
sale of a vessel, provided the sale is considered to occur outside of the
United States (as determined under United States tax principles). In general, a
sale of a vessel will be considered to occur outside of the United States for
this purpose if title to the vessel (and risk of loss with respect to the
vessel) passes to the buyer outside of the United States. We expect that any
sale of a vessel will be so structured that it will be considered to occur
outside of the United States.
United States
Federal Income Taxation of United States Holders
You are a
United States holder if you are a beneficial owner of our common stock and
you are a United States citizen or resident, a United States corporation (or
other United States entity taxable as a corporation), an estate the
72
income of
which is subject to United States federal income taxation regardless of its
source, or a trust if a court within the United States is able to exercise
primary jurisdiction over the administration of the trust and one or more
United States persons have the authority to control all substantial decisions
of that trust.
If a partnership holds our
common stock, the tax treatment of a partner will generally depend upon the
status of the partner and upon the activities of the partnership. Partners in a
partnership holding our common stock are encouraged to consult their tax
advisors.
Distributions on Our Common Stock
Subject to the discussion of
PFICs below, any distributions with respect to our common stock that you
receive from us will generally constitute dividends, which may be taxable as
ordinary income or qualified dividend income as described below, to the
extent of our current or accumulated earnings and profits (as determined under
United States tax principles). Distributions in excess of our earnings and
profits will be treated first as a nontaxable return of capital to the extent
of your tax basis in our common stock (on a dollar-for-dollar basis) and
thereafter as capital gain. Because we do not intend to determine our earnings
and profits on the basis of United States federal income tax principles, any
distribution paid will generally be treated as a dividend for United States
federal income tax purposes.
Because we are not a United
States corporation, if you are a United States corporation (or a United States
entity taxable as a corporation), you will not be entitled to claim a
dividends-received deduction with respect to any distributions you receive from
us.
Dividends paid with respect
to our common stock will generally be treated as passive category income for
purposes of computing allowable foreign tax credits for United States foreign
tax credit purposes.
If you are an individual,
trust or estate, dividends you receive from us should be treated as qualified
dividend income taxed at a preferential rate of 15% (through 2012), provided
that:
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(a)
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the common stock is
readily tradable on an established securities market in the United States
(such as the New York Stock Exchange);
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(b)
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We are not a PFIC for the
taxable year during which the dividend is paid or the immediately preceding
taxable year (see the discussion below under PFIC Status);
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(c)
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You own our common stock
for more than 60 days in the 121-day period beginning 60 days before the date
on which the common stock becomes ex-dividend;
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(d)
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You are not under an
obligation to make related payments with respect to positions in
substantially similar or related property; and
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(e)
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Certain other conditions
are met.
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Special rules may apply to
any extraordinary dividend. Generally, an extraordinary dividend is a
dividend in an amount that is equal to (or in excess of) 10% of your adjusted
tax basis (or fair market value in certain circumstances) in a share of our
common stock. If we pay an extraordinary dividend on our common stock that is
treated as qualified dividend income and if you are an individual, estate or
trust, then any loss you derive from a subsequent sale or exchange of such
common stock will be treated as long-term capital loss to the extent of such
dividend.
There is no assurance that
dividends you receive from us will be eligible for the preferential 15% rate.
Dividends you receive from us that are not eligible for the preferential rate
of 15% will be taxed at the ordinary income rates.
Sale, Exchange or other Disposition of Common Stock
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Provided that we are not a
PFIC for any taxable year, you generally will recognize taxable gain or loss
upon a sale, exchange or other disposition of our common stock in an amount
equal to the difference between the amount realized by you from such sale,
exchange or other disposition and your tax basis in such stock. Such gain or
loss will be treated as long-term capital gain or loss if your holding period
is greater than one year at the time of the sale, exchange or other
disposition. Such capital gain or loss will generally be treated as United
States source income or loss, as applicable, for United States foreign tax
credit purposes. Your ability to deduct capital losses against ordinary income
is subject to limitations.
PFIC Status
Special United States income
tax rules apply to you if you hold stock in a non-United States corporation
that is classified as a passive foreign investment company (or PFIC) for
United States income tax purposes. In general, we will be treated as a PFIC in
any taxable year in which, after applying certain look-through rules, either:
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(a)
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at least 75% of our gross
income for such taxable year consists of passive income (e.g., dividends,
interest, capital gains and rents derived other than in the active conduct of
a rental business); or
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(b)
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at least 50% of the
average value of our assets during such taxable year consists of passive
assets (
i.e.
, assets that
produce, or are held for the production of, passive income).
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For purposes of determining
whether we are a PFIC, we will be treated as earning and owning our
proportionate share of the income and assets, respectively, of any of our
subsidiary corporations in which we own at least 25% of the value of the
subsidiarys stock. Income we earned, or are deemed to earn, in connection with
the performance of services will not constitute passive income. By contrast,
rental income will generally constitute passive income (unless we are treated
under certain special rules as deriving our rental income in the active conduct
of a trade or business).
Because we have chartered
all our vessels to unrelated charterers on the basis of period time and spot
charter contracts (and not on the basis of bareboat charters) and because we
expect to continue to do so, we believe that currently we should not be treated
as being and should not become a PFIC. We believe it is more likely than not
that our gross income derived from our time charter activities constitutes active
service income (as opposed to passive rental income) and, as a result, our
vessels constitute active assets (as opposed to passive assets) for purposes of
determining whether we are a PFIC. We believe there is legal authority
supporting this position, consisting of case law and IRS pronouncements
concerning the characterization of income derived from time charters as service
income for other tax purposes. However, there is no legal authority
specifically relating to the statutory provisions governing PFICs or relating
to circumstances substantially similar to ours. Moreover, a recent case by the
United States Court of Appeals for the Fifth Circuit held that, contrary to the
position of the IRS in that case, and for purposes of a different set of rules
under the Code, income received under a time charter of vessels should be
treated as rental income rather than services income. If the reasoning of the
Fifth Circuit case were extended to the PFIC context, the gross income we
derive or are deemed to derive from our time chartering activities would be
treated as rental income, and we would probably be a PFIC.
We have not sought, and we
do not expect to seek, an IRS ruling on this matter. As a result, the IRS or a
court could disagree with our position that we are not currently a PFIC. No
assurance can be given that this result will not occur. In addition, although
we intend to conduct our affairs in a manner to avoid, to the extent possible,
being classified as a PFIC with respect to any taxable year, we cannot assure
you that the nature of our operations will not change in the future, or that we
can avoid PFIC status in the future.
As discussed below, if we
were to be treated as a PFIC for any taxable year, you generally would be
subject to one of three different United States income tax regimes, depending
on whether or not you make certain elections.
Taxation of United States Holders That Make a Timely QEF
Election
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If we were treated as a
PFIC, and if you make a timely election to treat us as a Qualifying Electing
Fund for United States tax purposes (a QEF Election), you would be required
to report each year your pro rata share of our ordinary earnings and our net
capital gain for our taxable year that ends with or within your taxable year,
regardless of whether we make any distributions to you. Such income inclusions
would not be eligible for the preferential tax rates applicable to qualified
dividend income. Your adjusted tax basis in our common stock would be
increased to reflect such taxed but undistributed earnings and profits.
Distributions of earnings and profits that had previously been taxed would
result in a corresponding reduction in your adjusted tax basis in our common
stock and would not be taxed again once distributed. You would generally
recognize capital gain or loss on the sale, exchange or other disposition of
our common stock. Even if you make a QEF Election for one of our taxable years,
if we were a PFIC for a prior taxable year during which you held our common
stock and for which you did not make a timely QEF Election, you would also be
subject to the more adverse rules described below under Taxation of United
States Holders That Make No Election.
You would make a QEF
Election with respect to any year that our company is treated as a PFIC by
completing and filing IRS Form 8621 with your United States income tax return
in accordance with the relevant instructions. If we were to become aware that
we were to be treated as a PFIC for any taxable year, we would notify all
United States holders of such treatment and would provide all necessary
information to any United States holder who requests such information in order
to make the QEF election described above.
Taxation of United States Holders That Make a Timely
Mark-to-Market Election
Alternatively, if we were to
be treated as a PFIC for any taxable year and, as we believe, our common stock
is treated as marketable stock, you would be allowed to make a
mark-to-market election with respect to our common stock, provided that you
complete and file IRS Form 8621 in accordance with the relevant instructions.
If that election is made, you generally would include as ordinary income in
each taxable year the excess, if any, of the fair market value of our common
stock at the end of the taxable year over your adjusted tax basis in our common
stock. You also would be permitted an ordinary loss in respect of the excess,
if any, of your adjusted tax basis in our common stock over its fair market
value at the end of the taxable year (but only to the extent of the net amount
previously included in income as a result of the mark-to-market election). Your
tax basis in our common stock would be adjusted to reflect any such income or
loss amount. Gain realized on the sale, exchange or other disposition of our
common stock would be treated as ordinary income, and any loss realized on the
sale, exchange or other disposition of the common stock would be treated as
ordinary loss to the extent that such loss does not exceed the net
mark-to-market gains previously included by you.
Taxation of United States Holders That Make No Election
Finally, if we were treated
as a PFIC for any taxable year and if you did not make either a QEF Election or
a mark-to-market election for that year, you would be subject to special
rules with respect to (a) any excess distribution (that is, the portion of any
distributions received by you on our common stock in a taxable year in excess
of 125% of the average annual distributions received by you in the three
preceding taxable years, or, if shorter, your holding period for our common
stock) and (b) any gain realized on the sale, exchange or other disposition of
our common stock. Under these special rules:
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(i)
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the excess distribution or
gain would be allocated ratably over your aggregate holding period for our
common stock;
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(ii)
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the amount allocated to
the current taxable year would be taxed as ordinary income; and
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(iii)
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the amount allocated to
each of the other taxable years would be subject to tax at the highest rate
of tax in effect for the applicable class of taxpayer for that year, and an
interest charge for the deemed deferral benefit would be imposed with respect
to the resulting tax attributable to each such other taxable year.
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If an individual dies while
owning our common stock, the individuals successor generally would not receive
a step-up in tax basis with respect to such stock for United States tax
purposes.
United States Federal Income Taxation of
Non-United States Holders
You are a non-United States
holder if you are a beneficial owner of our common stock (other than a
partnership for United States tax purposes) and you are not a United States
holder.
Distributions on Our Common Stock
You generally will not be
subject to United States income or withholding taxes on dividends you receive
from us with respect to our common stock, unless that income is effectively
connected with your conduct of a trade or business in the United States. If you
are entitled to the benefits of an applicable income tax treaty with respect to
those dividends, that income generally is taxable in the United States only if
it is attributable to a permanent establishment maintained by you in the United
States.
Sale, Exchange or Other Disposition of Our Common Stock
You generally will not be
subject to United States income tax or withholding tax on any gain realized
upon the sale, exchange or other disposition of our common stock, unless:
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(a)
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the gain is effectively
connected with your conduct of a trade or business in the United States. If
you are entitled to the benefits of an applicable income tax treaty with
respect to that gain, that gain generally is taxable in the United States
only if it is attributable to a permanent establishment maintained by you in
the United States; or
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(b)
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you are an individual who
is present in the United States for 183 days or more during the taxable year
of disposition and certain other conditions are met.
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If you are engaged in a
United States trade or business for United States tax purposes, you will be
subject to United States tax with respect to your income from our common stock
(including dividends and the gain from the sale, exchange or other disposition
of the stock that is effectively connected with the conduct of that trade or
business) in the same manner as if you were a United States holder. In
addition, if you are a corporate non-United States holder, your earnings and
profits that are attributable to the effectively connected income (subject to
certain adjustments) may be subject to an additional United States branch
profits tax at a rate of 30%, or at a lower rate as may be specified by an
applicable income tax treaty.
United States Backup Withholding and
Information Reporting
In general, if you are a non-corporate
United States holder, dividend payments (or other taxable distributions) made
within the United States will be subject to information reporting requirements
and backup withholding tax if you:
|
|
|
|
(1)
|
fail to provide us with an
accurate taxpayer identification number;
|
|
|
|
|
(2)
|
are notified by the IRS
that you have failed to report all interest or dividends required to be shown
on your federal income tax returns; or
|
|
|
|
|
(3)
|
in certain circumstances,
fail to comply with applicable certification requirements.
|
Under legislation enacted in
2010, United States holders who are individuals generally will be required to
report our name, address and such information relating to an interest in our
common stock as is necessary to identify the class or issue of which your
common shares are a part. These
requirements are subject to exceptions, including an exception for shares held
in accounts maintained by certain financial institutions and an exception
applicable if the aggregate value of all specified foreign financial assets
(as defined in the Code) does not exceed $50,000.
76
If you are a non-United
States holder, you may be required to establish your exemption from information
reporting and backup withholding by certifying your status on IRS Form W-8BEN,
W-8ECI or W-8IMY, as applicable. If you sell our common stock to or through a
United States office or broker, the payment of the sales proceeds is subject to
both United States backup withholding and information reporting unless you
certify that you are a non-United States person, under penalties of perjury, or
you otherwise establish an exemption. If you sell our common stock through a
non-United States office of a non-United States broker and the sales proceeds
are paid to you outside the United States, then information reporting and
backup withholding generally will not apply to that payment. However, United
States information reporting requirements (but not backup withholding) will
apply to a payment of sales proceeds, even if that payment is made outside the
United States, if you sell our common stock through a non-United States office
of a broker that is a United States person or has certain other connections
with the United States.
Backup withholding tax is
not an additional tax. Rather, you generally may obtain a refund of any amounts
withheld under backup withholding rules that exceed your income tax liability
by accurately completing and timely filing a refund claim with the IRS. You
should consult your own tax advisor regarding the application of the backup
withholding and information reporting rules.
|
|
F.
|
Dividends
and Paying Agents
|
|
|
Not applicable.
|
|
|
G.
|
Statement
by Experts
|
|
|
Not applicable.
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|
|
H.
|
Documents
on Display
|
We are subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the Exchange Act). In accordance with these requirements, we file reports
and other information as a foreign private issuer with the SEC. You may inspect
and copy our public filings without charge at the public reference facilities
maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information about the public
reference room. You may obtain copies of all or any part of such materials from
the SEC upon payment of prescribed fees. You may also inspect reports and other
information regarding registrants, such as us, that file electronically with
the SEC without charge at a web site maintained by the SEC at
http://www.sec.gov
.
|
|
I.
|
Subsidiary
Information
|
|
|
Not applicable.
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|
I
TEM 11.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
|
A.
|
Quantitative
Information About Market Risk
|
|
|
Interest Rate Risk
|
We are subject to market
risks relating to changes in interest rates because we have floating rate debt
outstanding, which is based on U.S. dollar LIBOR plus, in the case of each
credit facility, a specified margin. Our objective is to manage the impact of
interest rate changes on our earnings and cash flow in relation to our
borrowings and to this effect, when we deem appropriate, we use derivative
financial instruments. We had entered into 17 interest rate swap agreements as
of December 31, 2011, compared to 18 interest rate swap agreements as of
December 31, 2010, in order to manage future interest costs and the risk
associated with changing interest rates.
The total notional principal
amount of these swaps as of December 31, 2011 was $547.1 million of which
$459.8 million was effective as of December 31, 2011 and $87.3 million becomes
effective during 2012 and 2013. The swaps have specified rates and durations.
Refer to the table in Note 13 of our financial statements included at the
77
end of this annual report
which summarizes the interest rate swaps in place as of December 31, 2011 and
December 31, 2010.
Under our interest rate swap
transactions, the bank effects quarterly or semiannual floating-rate payments
to us for the relevant amount based either on the three- or six-month U.S.
dollar LIBOR and we make quarterly or semiannual payments to the bank on the
relevant amount at the respective fixed rates.
We entered into these
interest rate swap agreements to mitigate our exposure to interest rate
fluctuations and at a time when we believed long-term interest rates were
reasonably low. None of our interest rate swap meets hedge accounting criteria
under accounting guidance relating to
Fair
Value Measurement
. Although we are exposed to credit-related losses
in the event of non-performance in connection with such swap agreements,
because the counterparties are major financial institutions, we consider the
risk of loss due to their nonperformance to be minimal.
Through these swap
transactions, we effectively hedged the interest rate exposure of 95.0% of our
loans outstanding as of December 31, 2011.
The following table sets
forth the sensitivity of our existing loans as of December 31, 2011 as to a 100
basis point increase in LIBOR taking into account our interest rate swap
agreements that are currently in place, during the next five years, and
reflects the additional interest expense.
|
|
|
Year
|
|
Amount
|
|
|
|
2012
|
|
$0.4
million
|
2013
|
|
$1.0
million
|
2014
|
|
$1.6
million
|
2015
|
|
$2.4
million
|
2016
|
|
$2.6
million
|
Foreign Currency Exchange Risk
We generate all of our
revenues in U.S. dollars, but for the year ended December 31, 2011 we incurred
approximately 22.88% of our vessel operating expenses in currencies other than
the U.S. dollar. As of December 31, 2011, approximately 20.51% of our
outstanding accounts payable were denominated in currencies other than the U.S.
dollar and were subject to exchange rate risk, as their value fluctuates with
changes in exchange rates.
A hypothetical 10% immediate
and uniform adverse move in all currency exchange rates from the rates in
effect as of December 31, 2011, would have increased our vessel operating
expenses by approximately $596,271 and the fair value of our outstanding
accounts payable by approximately $23,462.
As of December 31, 2011 a
portion of our remaining capital expenditures related to the agreements for the
purchase of newbuilds was denominated in Japanese yen, equivalent to $3
million. A hypothetical 10% immediate adverse move in the Japanese yen exchange
rate from the rate in effect as of December 31, 2011, would have increased our
remaining capital expenditures by approximately $335,759. While, from time to
time, we have in the past used financial derivatives in the form of foreign
exchange forward agreements to mitigate the risk associated with exchange rate
fluctuations, currently, no such instruments are in place, although we may
enter into foreign exchange forward agreements in the future in relation to the
remaining payments denominated in Japanese Yen for the newbuild vessels we have
contracted to purchase.
There have been no material
quantitative changes in market risk exposures between 2011 and 2010.
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|
I
TEM 12.
|
DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES
|
Not applicable.
78
PART II
|
|
ITEM 13.
|
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|
|
|
None.
|
|
|
|
ITEM 14.
|
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
AND USE OF PROCEEDS
|
|
|
A.
|
Material
Modifications to the Rights of Security Holders
|
We adopted a stockholder
rights plan on May 13, 2008 that authorizes the issuance to our existing
stockholders of preferred share rights and additional shares of common stock if
any third party seeks to acquire control of a substantial block of our common
stock. See Item 10. Additional Information B. Memorandum and Articles of
AssociationStockholder Rights Plan included in this annual report for a
description of the stockholder rights plan.
|
|
A.
|
Disclosure
Controls and Procedures
|
Our management, with the
participation of our chief executive officer and chief financial officer, has
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act as of December 31, 2011. Disclosure controls and procedures are
defined under SEC rules as controls and other procedures that are designed to
ensure that information required to be disclosed by a company in the reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within required time periods. Disclosure controls and
procedures include controls and procedures designed to ensure that information
required to be disclosed by an issuer in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the issuers
management, including its principal executive and principal financial officers,
or persons performing similar functions, as appropriate, to allow timely decisions
regarding required disclosure. There are inherent limitations to the
effectiveness of any system of disclosure controls and procedures, including
the possibility of human error and the circumvention or overriding of the
controls and procedures. Accordingly, even effective disclosure controls and
procedures can only provide reasonable assurance of achieving their control
objectives.
Based on our evaluation, the
chief executive officer and the chief financial officer have concluded that our
disclosure controls and procedures were effective as of December 31, 2011.
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|
B.
|
Managements
Annual Report on Internal Control Over Financial Reporting
|
Our management is
responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act and for the assessment of the effectiveness of internal control
over financial reporting. Our internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles in the
United States (U.S. GAAP).
A companys internal control
over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit the preparation of financial statements in accordance with
U.S. GAAP, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the companys
assets that could have a material effect on the financial statements.
79
Because of its inherent
limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In making its assessment of
our internal control over financial reporting as of December 31, 2011,
management, including the chief executive officer and chief financial officer,
used the criteria set forth in Internal ControlIntegrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Management concluded that,
as of December 31, 2011, our internal control over financial reporting was
effective. Deloitte Hadjipavlou, Sofianos & Cambanis S.A. (Deloitte), our
independent registered public accounting firm, has audited the financial
statements included herein and our internal control over financial reporting and
has issued an attestation report on the effectiveness of our internal control
over financial reporting as of December 31, 2011 which is reproduced in its
entirety in Item 15(c) below.
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|
C.
|
Attestation
Report of the Registered Public Accounting Firm
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
and Stockholders of Safe Bulkers, Inc.,
Majuro, Republic of The Marshall Islands,
We have audited the internal
control over financial reporting of Safe Bulkers, Inc., and its subsidiaries
(the Company) as of December 31, 2011, based on criteria established in
Internal Control Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway Commission. The
Companys management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying
Managements Annual Report on Internal Control Over Financial Reporting. Our responsibility
is to express an opinion on the Companys internal control over financial
reporting based on our audit.
We conducted our audit in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on the assessed
risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.
A companys internal control
over financial reporting is a process designed by, or under the supervision of,
the companys principal executive and principal financial officers, or persons
performing similar functions, and effected by the companys board of directors,
management, and other personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the companys assets that could have a material effect
on the financial statements.
Because of the inherent
limitations of internal control over financial reporting, including the
possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the effectiveness of the
internal control over
80
financial reporting to
future periods are subject to the risk that the controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, the Company
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2011, based on the criteria established in
Internal Control Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements as of and for the year
ended December 31, 2011 of the Company and our report dated February 29,
2012 expressed an unqualified opinion on those financial statements.
/s/ Deloitte Hadjipavlou,
Sofianos & Cambanis S.A.
Athens, Greece
February 29, 2012
|
|
D.
|
Changes
in Internal Control over Financial Reporting
|
During the period covered by
this annual report, we have made no changes to our internal control over
financial reporting that have materially affected or are reasonably likely to
materially affect our internal control over financial reporting.
Our Audit Committee consists
of three independent directors, John Gaffney, Ole Wikborg and Frank Sica, who
is the chairman of the committee. Our board of directors has determined that
Frank Sica, whose biographical details are included in Item 6. Directors,
Senior Management and EmployeesA. Directors and Senior Management, qualifies
as an audit committee financial expert as defined under current SEC
regulations.
We have adopted a Code of
Business Conduct and Ethics for all officers and employees of our company,
which incorporates a Code of Ethics for directors and a Code of Conduct for
corporate officers, a copy of which is posted on our website, and may be viewed
at
http://www.safebulkers.com/corp_ethics.htm.
We will also provide a paper copy of this document free of charge upon written
request by our stockholders. Stockholders may direct their requests to the
attention of Dr. Loukas Barmparis, Secretary, Safe Bulkers, Inc., 32 Avenue
Karamanli, 16605, Voula, Athens, Greece. No waivers of the Code of Business
Conduct and Ethics have been granted to any person during the fiscal year ended
December 31, 2011.
|
|
ITEM 16C.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
Aggregate fees billed to the
Company for the fiscal years ended December 31, 2010 and 2011 by the Companys
principal accounting firm, Deloitte, Hadjipavlou, Sofianos & Cambanis S.A,
an independent registered public accounting firm and member of Deloitte Touche
Tohmatsu, Limited, by the category of service, were as follows:
|
|
|
|
|
|
|
|
|
|
2010
|
|
2011
|
|
|
|
|
|
|
|
|
|
(In Thousands)
|
|
Audit fees
|
|
$
|
496
|
|
$
|
509
|
|
All other fees
|
|
|
|
|
|
|
|
Total
fees
|
|
$
|
496
|
|
$
|
509
|
|
81
Audit fees represent
compensation for professional services rendered for the integrated audit of the
consolidated financial statements of the Company and for the review of the
quarterly financial information as well as in connection with the review of
registration statements and related consents and comfort letters and any other
audit services required for SEC or other regulatory filings.
Pre-approval Policies and Procedures
The audit committee charter
sets forth our policy regarding retention of the independent auditors, giving
the audit committee responsibility for the appointment, compensation, retention
and oversight of the work of the independent auditors. The audit committee
charter provides that the committee is responsible for reviewing and approving
in advance the retention of the independent auditors for the performance of all
audit and lawfully permitted non-audit services. The chairman of the audit
committee or in the absence of the chairman, any member of the audit committee
designated by the chairman, has authority to approve in advance any lawfully
permitted non-audit services and fees. The audit committee is authorized to
establish other policies and procedures for the pre-approval of such services
and fees. Where non-audit services and fees are approved under delegated
authority, the action must be reported to the full audit committee at its next
regularly scheduled meeting.
|
|
ITEM 16D.
|
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|
Not Applicable.
|
|
ITEM 16E.
|
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
|
On June 10, 2009, the Company
announced that Vorini Holdings Inc. authorized a program under which it may
from time to time purchase shares of the Companys common stock on the open
market. The maximum number of shares of common stock that can be purchased
annually under the program and any private placement is approximately 2% of the
Companys shares outstanding. The program is still in effect and details on the
shares purchased in 2011 pursuant to the program or through private placements
are set forth in the table below. As of February 25, 2012, the Company had
70,896,924 shares of common stock outstanding. Approximately 45,889,032 of
those shares, or 64.73% of common stock outstanding, were held by the Companys
affiliates, according to information provided to the Company by such affiliates.
The remaining 25,007,892 shares, or 35.27% of common stock outstanding,
represented the public float.
|
|
|
|
|
|
|
|
|
|
|
Period
2011
|
|
Total Number of Shares
(or Units) Purchased
|
|
Average Price Paid per
Share (or Units)
|
|
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
|
|
|
|
|
|
|
|
|
|
|
January
|
|
|
|
|
|
|
|
|
|
|
February
|
|
|
|
|
|
|
|
|
|
|
March
|
|
|
|
|
|
|
|
|
|
|
April
|
|
|
|
|
|
|
|
|
|
|
May
|
|
|
|
|
|
|
|
|
|
|
June
|
|
|
|
|
|
|
|
|
|
|
July
|
|
|
|
|
|
|
|
|
|
|
August
|
|
|
|
|
|
|
|
|
|
|
September
|
|
|
|
|
|
|
|
|
|
|
October
|
|
|
11,200
|
|
$
|
5.47
|
|
|
11,200
|
|
November
|
|
|
|
|
|
|
|
|
|
|
December
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
January
|
|
|
|
|
|
|
|
|
|
|
February
|
|
|
|
|
|
|
|
|
|
|
82
|
|
|
|
|
(a)
|
All purchases have been
made on the open market within the safe harbor provisions of Regulation
10b-18 under the Exchange Act.
|
|
|
ITEM 16F.
|
CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
|
Not Applicable.
Statement of Significant Differences Between our Corporate
Governance Practices and the New York Stock Exchange Corporate Governance
Standards for U.S. Non-Controlled Issuers
Overview
Pursuant to certain
exceptions for foreign private issuers and controlled companies, we are not
required to comply with certain of the corporate governance practices followed
by U.S. and non-controlled companies under the New York Stock Exchange listing
standards. However, pursuant to Section 303.A.11 of the New York Stock Exchange
Listed Company Manual and the requirements of Form 20-F, we are required to
state any significant differences between our corporate governance practices
and the practices required by the New York Stock Exchange. We believe that our
established practices in the area of corporate governance are in line with the
spirit of the New York Stock Exchange standards and provide adequate protection
to our shareholders. For example, our audit committee consists solely of
independent directors. The significant differences between our corporate
governance practices and the New York Stock Exchange standards applicable to
listed U.S. companies are set forth below.
Independent Directors
The New York Stock Exchange
requires that listed companies have a majority of independent directors. As
permitted under Marshall Islands law and our bylaws, our board of directors consists
of a majority of non-independent directors.
Executive Sessions
The New York Stock Exchange
requires that non-management directors meet regularly in executive sessions
without management. The New York Stock Exchange also requires that all independent
directors meet in an executive session at least once a year. As permitted under
Marshall Islands law and our bylaws, our non-management directors do not
regularly hold executive sessions without management and we do not expect them
to do so.
Corporate Governance, Nominating and
Compensation Committee
The New York Stock Exchange
requires that a listed U.S. company have a nominating/corporate governance
committee and a compensation committee, each composed of independent directors.
As permitted under Marshall Islands law and our bylaws, we have a combined
corporate governance, nominating and compensation committee, which at present
is composed wholly of independent directors.
83
PART III
Not Applicable.
Reference is made to pages
F-1 through F-26 included herein by reference.
|
|
|
Exhibit
Numbe
r
|
|
Description
|
|
|
|
1.1
|
|
Amended and Restated
Articles of Incorporation*
|
|
|
|
1.2
|
|
Articles of Amendment to
Amended and Restated Articles of Incorporation**
|
|
|
|
1.3
|
|
Amended and Restated
Bylaws*
|
|
|
|
2.1
|
|
Form of Registration
Rights Agreement between Safe Bulkers, Inc. and Vorini Holdings Inc.*
|
|
|
|
2.2
|
|
Stockholder Rights
Agreement*
|
|
|
|
2.3
|
|
Specimen Share Certificate*
|
|
|
|
4.1
|
|
Form of Management
Agreement between Safety Management Overseas S.A. and Safe Bulkers, Inc.*
|
|
|
|
4.2
|
|
Amendment No. 1 to
Management Agreement between Safety Management Overseas S.A. and Safe Bulkers, Inc.
|
|
|
|
4.3
|
|
Form of Restrictive Covenant
Agreement among Safe Bulkers, Inc., Polys Hajioannou, Vorini Holdings Inc., SafeFixing
Corp and Machairiotissa Holdings Inc.*
|
|
|
|
4.4
|
|
Form of Restrictive
Covenant Agreement between Safe Bulkers, Inc. and Polys Hajioannou*
|
|
|
|
4.5
|
|
Amendment No. 1 to
Restrictive Covenant Agreement between Safe Bulkers, Inc. and Polys Hajioannou
|
|
|
|
8.1
|
|
List of Subsidiaries
|
|
|
|
12.1
|
|
Certification of principal
executive officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as
amended
|
|
|
|
12.2
|
|
Certification of principal
financial officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as
amended
|
|
|
|
13.1
|
|
Certification of principal
executive officer pursuant to 18 U.S.C. Section 1350 as added by Section 906 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
13.2
|
|
Certification of principal
financial officer pursuant to 18 U.S.C. Section 1350 as added by Section 906 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
99.1
|
|
Consent of Independent
Registered Public Accounting Firm
|
|
|
|
|
|
*
|
Previously filed as an
exhibit to the Companys Registration Statement on Form F-1 (Reg. No. 333-150995) filed with the SEC
and hereby incorporated by reference to such Registration Statement.
|
**
|
Previously filed as an
exhibit to the Companys Form 6-K filed with the SEC on October 8, 2009.
|
84
SIGNATURES
The registrant hereby
certifies that it meets all of the requirements for filing on Form 20-F and
that it has duly caused and authorized the undersigned to sign this annual
report on its behalf.
February 29, 2012
|
|
|
By
|
|
|
|
/s/ KONSTANTINOS
ADAMOPOULOS
|
|
|
|
Name: Konstantinos
Adamopoulos
|
|
Title: Chief
Financial Officer and Director
|
85
INDEX TO FINANCIAL STATEMENTS
F-1
R
EPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board
of Directors and Shareholders of
Safe Bulkers, Inc.
Majuro, Republic of The Marshall Islands
We have
audited the accompanying consolidated balance sheets of Safe Bulkers, Inc. and
subsidiaries (the Company) as of December 31, 2010 and 2011, and the related
consolidated statements of income, shareholders equity, and cash flows for
each of the three years in the period ended December 31, 2011. These financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted
our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of Safe Bulkers, Inc. and subsidiaries as of
December 31, 2010 and 2011, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2011, in
conformity with accounting principles generally accepted in the United States
of America.
We have also
audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Companys internal control over financial
reporting as of December 31, 2011, based on the criteria established in
Internal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated February 29, 2012 expressed an unqualified opinion
on the Companys internal control over financial reporting.
/s/ Deloitte
Hadjipavlou, Sofianos & Cambanis S.A.
Athens, Greece
February 29, 2012
F-2
|
SAFE BULKERS, INC.
|
C
ONSOLIDATED
BALANCE SHEETS
|
DECEMBER 31, 2010 AND 2011
|
(In thousands of U.S. Dollars, except for
share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
2010
|
|
2011
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
65,335
|
|
|
28,121
|
|
Time deposits Short-term
|
|
|
|
|
|
35,080
|
|
|
|
|
Accounts receivable trade
|
|
|
|
|
|
1,285
|
|
|
5,550
|
|
Due from Manager
|
|
|
|
|
|
|
|
|
24
|
|
Inventories
|
|
|
|
|
|
1,417
|
|
|
2,653
|
|
Prepaid expenses and other current assets
|
|
|
|
|
|
1,159
|
|
|
1,611
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
104,276
|
|
|
37,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIXED ASSETS:
|
|
|
|
|
|
|
|
|
|
|
Vessels, net
|
|
|
4
|
|
|
541,244
|
|
|
655,356
|
|
Advances for vessel acquisition and vessels
under construction
|
|
|
5
|
|
|
99,014
|
|
|
122,307
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed assets
|
|
|
|
|
|
640,258
|
|
|
777,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER NON CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
Deferred finance charges, net
|
|
|
6
|
|
|
930
|
|
|
6,226
|
|
Restricted cash
|
|
|
|
|
|
5,423
|
|
|
5,423
|
|
Derivative assets
|
|
|
13
|
|
|
4,485
|
|
|
|
|
Long-term investment
|
|
|
8
|
|
|
50,000
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
805,372
|
|
|
877,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
7
|
|
|
27,674
|
|
|
18,486
|
|
Unearned revenue
|
|
|
19
|
|
|
10,685
|
|
|
23,211
|
|
Trade accounts payable
|
|
|
|
|
|
1,470
|
|
|
1,183
|
|
Accrued liabilities
|
|
|
14
|
|
|
5,903
|
|
|
6,556
|
|
Derivative liability
|
|
|
13
|
|
|
6,802
|
|
|
2,237
|
|
Due to Manager
|
|
|
3
|
|
|
449
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
52,983
|
|
|
51,673
|
|
Derivative liabilities
|
|
|
13
|
|
|
9,787
|
|
|
10,130
|
|
Long-term debt, net of current portion
|
|
|
7
|
|
|
467,070
|
|
|
465,805
|
|
Unearned revenue Long-term
|
|
|
19
|
|
|
31,399
|
|
|
17,821
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
561,239
|
|
|
545,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
10
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 200,000,000
authorized, 65,876,507 and 70,891,916 issued and outstanding at December 31,
2010 and 2011, respectively
|
|
|
9
|
|
|
66
|
|
|
71
|
|
Preferred stock, $0.01 par value;
20,000,000 authorized, none issued or outstanding
|
|
|
|
|
|
|
|
|
|
|
Additional paid in capital
|
|
|
|
|
|
75,166
|
|
|
114,918
|
|
Retained earnings
|
|
|
|
|
|
168,901
|
|
|
216,853
|
|
Total shareholders equity
|
|
|
|
|
|
244,133
|
|
|
331,842
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
|
|
|
|
805,372
|
|
|
877,271
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part
of these consolidated statements.
F-3
SAFE BULKERS, INC.
C
ONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011
(In thousands of U.S. Dollars, except for share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
2009
|
|
2010
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
11
|
|
|
168,400
|
|
|
159,698
|
|
|
172,036
|
|
Commissions
|
|
|
|
|
|
(3,794
|
)
|
|
(2,678
|
)
|
|
(3,128
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
|
|
|
164,606
|
|
|
157,020
|
|
|
168,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voyage expenses
|
|
|
|
|
|
(577
|
)
|
|
(610
|
)
|
|
(1,987
|
)
|
Vessel operating expenses
|
|
|
12
|
|
|
(19,628
|
)
|
|
(23,128
|
)
|
|
(26,066
|
)
|
Depreciation
|
|
|
4
|
|
|
(13,893
|
)
|
|
(19,673
|
)
|
|
(23,637
|
)
|
General and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Management fee to related party
|
|
|
3,18
|
|
|
(4,436
|
)
|
|
(4,880
|
)
|
|
(6,026
|
)
|
- Third party expenses
|
|
|
18
|
|
|
(2,610
|
)
|
|
(2,138
|
)
|
|
(2,463
|
)
|
Early redelivery income, net
|
|
|
15
|
|
|
74,951
|
|
|
132
|
|
|
207
|
|
Loss on asset purchase cancellations
|
|
|
16
|
|
|
(20,699
|
)
|
|
|
|
|
|
|
Gain on sale of assets
|
|
|
20
|
|
|
|
|
|
15,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
|
|
177,714
|
|
|
121,922
|
|
|
108,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER (EXPENSE)/INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
7
|
|
|
(10,342
|
)
|
|
(6,423
|
)
|
|
(5,250
|
)
|
Other finance costs
|
|
|
|
|
|
(442
|
)
|
|
(330
|
)
|
|
(1,055
|
)
|
Interest income
|
|
|
|
|
|
2,164
|
|
|
2,627
|
|
|
1,046
|
|
Loss on derivatives
|
|
|
13
|
|
|
(4,416
|
)
|
|
(8,164
|
)
|
|
(12,491
|
)
|
Foreign currency gain/(loss)
|
|
|
|
|
|
838
|
|
|
281
|
|
|
(799
|
)
|
Amortization and write-off of deferred finance charges
|
|
|
6
|
|
|
(106
|
)
|
|
(266
|
)
|
|
(653
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
165,410
|
|
|
109,647
|
|
|
89,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share in U.S. Dollars, basic and
diluted
|
|
|
22
|
|
|
3.03
|
|
|
1.73
|
|
|
1.29
|
|
Weighted average number of shares, basic and diluted
|
|
|
|
|
|
54,510,587
|
|
|
63,300,466
|
|
|
69,463,093
|
|
The accompanying
notes are an integral part of these consolidated statements.
F-4
SAFE BULKERS, INC.
CONSOLIDATED STATEMENTS
OF SH
AREHOLDERS EQUITY FOR THE YEARS
ENDED DECEMBER 31, 2009, 2010 AND 2011
(In thousands of U.S. Dollars, except for per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Additional
Paid in
Capital
|
|
Retained
Earnings
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2009
|
|
|
55
|
|
|
30
|
|
|
(35,630
|
)
|
|
(35,545
|
)
|
Net income
|
|
|
|
|
|
|
|
|
165,410
|
|
|
165,410
|
|
Share based compensation
|
|
|
|
|
|
60
|
|
|
|
|
|
60
|
|
Dividends ($0.60 per
share)
|
|
|
|
|
|
|
|
|
(32,706
|
)
|
|
(32,706
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2009
|
|
|
55
|
|
|
90
|
|
|
97,074
|
|
|
97,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
109,647
|
|
|
109,647
|
|
Issuance of common stock
|
|
|
11
|
|
|
74,956
|
|
|
|
|
|
74,967
|
|
Share based compensation
|
|
|
|
|
|
120
|
|
|
|
|
|
120
|
|
Dividends ($0.60 per
share)
|
|
|
|
|
|
|
|
|
(37,820
|
)
|
|
(37,820
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31,2010
|
|
|
66
|
|
|
75,166
|
|
|
168,901
|
|
|
244,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
89,734
|
|
|
89,734
|
|
Issuance of common stock
|
|
|
5
|
|
|
39,632
|
|
|
|
|
|
39,637
|
|
Share based compensation
|
|
|
|
|
|
120
|
|
|
|
|
|
120
|
|
Dividends ($0.60 per
share)
|
|
|
|
|
|
|
|
|
(41,782
|
)
|
|
(41,782
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31,2011
|
|
|
71
|
|
|
114,918
|
|
|
216,853
|
|
|
331,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part
of these consolidated statements.
F-5
SAFE BULKERS, INC.
C
ONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011
(In thousands of U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2009
|
|
2010
|
|
2011
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
165,410
|
|
|
109,647
|
|
|
89,734
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net
cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
13,893
|
|
|
19,673
|
|
|
23,637
|
|
Gain on sale of assets
|
|
|
|
|
|
(15,199
|
)
|
|
|
|
Loss on asset purchase cancellations
|
|
|
20,395
|
|
|
|
|
|
|
|
Amortization and write-off of deferred
finance charges
|
|
|
106
|
|
|
266
|
|
|
653
|
|
Unrealized foreign exchange (gain)
|
|
|
(1,028
|
)
|
|
(326
|
)
|
|
|
|
Unrealized (gain)/loss on derivatives
|
|
|
(3,729
|
)
|
|
(4,508
|
)
|
|
263
|
|
Share based compensation
|
|
|
60
|
|
|
120
|
|
|
120
|
|
Change in:
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable trade
|
|
|
(1,377
|
)
|
|
620
|
|
|
(4,265
|
)
|
Due from Manager
|
|
|
112
|
|
|
|
|
|
(24
|
)
|
Inventories
|
|
|
(56
|
)
|
|
(172
|
)
|
|
(1,236
|
)
|
Accrued revenue
|
|
|
2,245
|
|
|
1,693
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
(408
|
)
|
|
(37
|
)
|
|
(452
|
)
|
Due to Manager
|
|
|
19
|
|
|
430
|
|
|
(449
|
)
|
Trade accounts payable
|
|
|
1,093
|
|
|
(1,198
|
)
|
|
(287
|
)
|
Accrued liabilities
|
|
|
1,396
|
|
|
(1,523
|
)
|
|
547
|
|
Unearned revenue
|
|
|
13,207
|
|
|
8,661
|
|
|
(1,052
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities
|
|
|
211,338
|
|
|
118,147
|
|
|
107,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
Vessel acquisitions including advances for
vessels under construction
|
|
|
(131,474
|
)
|
|
(192,418
|
)
|
|
(160,969
|
)
|
Proceeds from sale of assets
|
|
|
|
|
|
32,168
|
|
|
|
|
Acquisition of long term investments
|
|
|
(50,000
|
)
|
|
|
|
|
|
|
Increase in restricted cash
|
|
|
(6,405
|
)
|
|
(650
|
)
|
|
|
|
Restricted cash released
|
|
|
32,629
|
|
|
6,382
|
|
|
|
|
Increase in bank time deposits
|
|
|
(78,147
|
)
|
|
(86,548
|
)
|
|
|
|
Maturity of bank time deposits
|
|
|
41,534
|
|
|
109,357
|
|
|
35,080
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activities
|
|
|
(191,863
|
)
|
|
(131,709
|
)
|
|
(125,889
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt
|
|
|
42,000
|
|
|
74,500
|
|
|
84,000
|
|
Principal payments of long-term debt
|
|
|
(38,026
|
)
|
|
(50,992
|
)
|
|
(94,453
|
)
|
Dividends paid
|
|
|
(32,706
|
)
|
|
(37,820
|
)
|
|
(41,782
|
)
|
Payment of deferred financing costs
|
|
|
(10
|
)
|
|
(519
|
)
|
|
(5,916
|
)
|
Proceeds on issuance of common stock (net)
|
|
|
|
|
|
74,967
|
|
|
39,637
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash (Used in)/Provided by Financing
Activities
|
|
|
(28,742
|
)
|
|
60,136
|
|
|
(18,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease)/ increase in cash and cash
equivalents
|
|
|
(9,267
|
)
|
|
46,574
|
|
|
(37,214
|
)
|
Effect of exchange rate changes on cash
|
|
|
|
|
|
326
|
|
|
|
|
Cash and cash equivalents at beginning of
year
|
|
|
27,702
|
|
|
18,435
|
|
|
65,335
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
|
18,435
|
|
|
65,335
|
|
|
28,121
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest (excluding
capitalized interest):
|
|
|
13,695
|
|
|
6,414
|
|
|
5,050
|
|
The accompanying
notes are an integral part of these consolidated statements.
F-6
SAFE BULKERS, INC.
N
OTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of United States Dollarsexcept for share and per share data,
unless otherwise stated)
|
|
1.
|
Basis of Presentation and General Information:
|
Safe Bulkers,
Inc. (Safe Bulkers) was formed on December 11, 2007, under the laws of the
Republic of The Marshall Islands for the purpose of acquiring an ownership
interest in 19 companies, each of which owned a newbuild drybulk vessel or was
scheduled to acquire a newbuild drybulk vessel, all of which were under the
common control of Polys Hajioannou and his family.
Safe Bulkers
successfully completed its initial public offering (the IPO) on June 3, 2008
and its common stock trades on the New York Stock Exchange (NYSE) under the
symbol SB. Immediately prior to the completion of the IPO, the shares of the
19 subsidiaries were contributed to Safe Bulkers by Vorini Holdings, Inc.
(Vorini Holdings), a Marshall Islands corporation controlled by Polys
Hajioannou and his family, in exchange for the issuance of 54,500,000 shares,
which represented 100% of the outstanding common stock of Safe Bulkers. This
transaction is referred to as the Reorganization. Vorini Holdings sold
10,000,000 shares of common stock of Safe Bulkers in the IPO. Following the
Reorganization and the IPO, Safe Bulkers became the owner of 100% of each of
the 19 subsidiaries, and Vorini Holdings became the controlling shareholder of
Safe Bulkers.
As of December
31, 2011, Safe Bulkers held 32 wholly-owned companies which are referred to
herein as Subsidiaries, and which together owned and operated a fleet of 18
drybulk vessels, and which together were scheduled to acquire an additional 10
newbuilds (the Newbuilds).
The
accompanying consolidated financial statements include the operations, assets
and liabilities of Safe Bulkers and its Subsidiaries, using the historical
carrying costs of the assets and the liabilities of the Subsidiaries listed
below.
|
|
|
|
|
|
|
Subsidiary
|
|
Vessel Name
|
|
Type
|
|
Built
|
|
|
|
|
|
|
|
Marindou
Shipping Corporation (Marindou)
(1)
|
|
Maria
|
|
Panamax
|
|
April 2003
|
Avstes Shipping
Corporation (Avstes)
(1)
|
|
Vassos
|
|
Panamax
|
|
February 2004
|
Kerasies
Shipping Corporation (Kerasies)
(1)
|
|
Katerina
|
|
Panamax
|
|
May 2004
|
Marathassa
Shipping Corporation (Marathassa)
(1)
|
|
Maritsa
|
|
Panamax
|
|
January 2005
|
Maxeikositessera
Shipping Corporation
(1)
|
|
Efrossini - (H 804)
|
|
Panamax
|
|
February 2012
|
(Maxeikositessera)
(1)
|
|
|
|
|
|
|
Pemer
Shipping Ltd. (Pemer)
(1)
|
|
Pedhoulas
|
|
Kamsarmax
|
|
March 2006
|
|
|
Merchant
|
|
|
|
|
Petra
Shipping Ltd. (Petra)
(1)
|
|
Pedhoulas
|
|
Kamsarmax
|
|
May 2006
|
|
|
Trader
|
|
|
|
|
Pelea Shipping
Ltd. (Pelea)
(1)
|
|
Pedhoulas
|
|
Kamsarmax
|
|
March 2007
|
|
|
Leader
|
|
|
|
|
Staloudi
Shipping Corporation (Staloudi)
(1)
|
|
Stalo
|
|
PostPanamax
|
|
January 2006
|
Marinouki
Shipping Corporation (Marinouki)
(1)
|
|
Marina
|
|
PostPanamax
|
|
January 2006
|
Soffive
Shipping Corporation (Soffive)
(1)
|
|
Sophia
|
|
PostPanamax
|
|
June 2007
|
Eniaprohi
Shipping Corporation (Eniaprohi)
(1)
|
|
Eleni
|
|
PostPanamax
|
|
November 2008
|
Eniadefhi
Shipping Corporation (Eniadefhi)
(1)
|
|
Martine
|
|
PostPanamax
|
|
February 2009
|
Maxdodeka
Shipping Corporation (Maxdodeka)
(1)
|
|
Andreas K
|
|
PostPanamax
|
|
September 2009
|
Maxdekatria
Shipping Corporation (Maxdekatria)
(1)
|
|
Panayiota K
|
|
PostPanamax
|
|
April 2010
|
F-7
|
|
|
|
|
|
|
Subsidiary
|
|
Vessel Name
|
|
Type
|
|
Built
|
|
|
|
|
|
|
|
Maxdeka
Shipping Corporation (Maxdeka)
(2)
|
|
Venus Heritage
|
|
PostPanamax
|
|
December 2010
|
Shikoku
Friendship Shipping Company (Shikoku)
(2)
|
|
Venus History
|
|
PostPanamax
|
|
September 2011
|
Maxenteka
Shipping Corporation (Maxenteka)
(2)
|
|
Venus Horizon - (H 1594)
|
|
PostPanamax
|
|
February 2012
|
Maxpente
Shipping Corporation (Maxpente)
(1)
|
|
Kanaris
|
|
Capesize
|
|
March 2010
|
Eptaprohi
Shipping Corporation (Eptaprohi)
(1)
|
|
Pelopidas
|
|
Capesize
|
|
November 2011
|
Maxeikosi
Shipping Corporation (Maxeikosi)
(1)
|
|
TBN - H 616
|
|
Kamsarmax
|
|
1H 2012
(3)
|
Maxeikositria
Shipping Corporation (Maxeikositria)
(1)
|
|
TBN - H 631
|
|
Kamsarmax
|
|
1H 2012
(3)
|
Maxeikosiena
Shipping Corporation (Maxeikosiena)
(1)
|
|
TBN - H 617
|
|
Kamsarmax
|
|
1H 2012
(3)
|
Maxeikosipente
Shipping Corporation (Maxeikosipente)
(1)
|
|
TBN - H 131
|
|
Capesize
|
|
2H 2012
(3)
|
Efragel
Shipping Corporation (Efragel)
(1)
|
|
TBN - H 1154
|
|
Panamax
|
|
2H 2014
(3)
|
-//-
|
|
Efrossini
|
|
Panamax
|
|
February 2003
(4)
|
|
|
(
hereinafter
|
|
|
|
|
|
|
called
Old
|
|
|
|
|
|
|
Efrossini)
|
|
|
|
|
Shikokutessera
Shipping Inc. (Shikokutessera)
(2)
|
|
TBN - H 1659
|
|
Panamax
|
|
2H 2013
(3)
|
Shikokupente
Shipping Inc. (Shikokupente)
(2)
|
|
TBN - H 1660
|
|
Panamax
|
|
1H 2014
(3)
|
Shikokuexi
Shipping Inc. (Shikokuexi)
(2)
|
|
TBN - H 2396
|
|
PostPanamax
|
|
2H 2014
(3)
|
Shikokuepta
Shipping Inc. (Shikokuepta)
(2),(5)
|
|
|
|
|
|
|
Maxtessera
Shipping Corporation (Maxtessera)
(2)
|
|
|
|
|
|
|
Maxeikosiexi
Shipping Corporation (Maxeikosiexi)
(1)
|
|
|
|
|
|
|
Maxeikosiepta
Shipping Corporation (Maxeikosiepta)
(1)
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Incorporated
under the laws of the Republic of Liberia
|
(2)
|
Incorporated
under the laws of the Republic of The Marshall Islands
|
(3)
|
Estimated
completion date for newbuild vessels
|
(4)
|
Vessel sold
in January 2010. Refer to Note 20.
|
(5)
|
See Note 23(c).
|
Safe Bulkers
and the Subsidiaries are collectively referred to in the notes to the
consolidated financial statements as the Company.
The Companys
principal business is the acquisition, ownership and operation of drybulk
vessels. The Companys vessels operate worldwide, carrying drybulk cargo for
the worlds largest consumers of marine drybulk transportation services. Safety
Management Overseas S.A., a company incorporated under the laws of the Republic
of Panama (Safety Management or the Manager), a related party controlled by
Polys Hajioannou, provides technical, commercial and administrative management
services to the Company.
For the years
ended December 31, 2009, 2010 and 2011, the following charterers individually
accounted for more than 10% of the Companys charter revenues as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2009
|
|
2010
|
|
2011
|
|
|
|
|
|
|
|
|
|
A
|
|
|
56.59
|
%
|
|
44.92
|
%
|
|
48.17
|
%
|
B
|
|
|
18.35
|
%
|
|
18.78
|
%
|
|
17.93
|
%
|
C
|
|
|
|
|
|
12.67
|
%
|
|
|
|
There are many
charterers that are active in the market where the Companys vessels are
offered for charter, and management has determined that the concentration of
its business with a limited number of customers does not pose a significant
risk.
F-8
|
|
2.
|
Significant Accounting Policies
:
|
Principles of Consolidation:
The accompanying consolidated financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (U.S. GAAP) and include
the accounts of Safe Bulkers and its subsidiaries. All intra-group and
intercompany balances and transactions have been eliminated upon consolidation.
Use of Estimates:
The preparation of the consolidated
financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Other Comprehensive Income / (Loss):
The Company follows the accounting guidance
relating to
Statement of Comprehensive
Income,
which requires separate presentation of certain transactions
that are recorded directly as components of shareholders equity. The Company
has no other comprehensive income/(loss) and accordingly comprehensive
income/(loss) equals net income for the periods presented.
Foreign Currency Translation:
The reporting and functional currency of the
Company is the United States (U.S.) dollar or (USD). Transactions incurred
in other currencies are translated into U.S. dollars using the exchange rates
in effect at the time of the transaction. At the balance sheet date, monetary
assets and liabilities that are denominated in other currencies are translated
to reflect the period end exchange rates. Resulting gains or losses from
foreign currency transactions are recorded within Foreign currency gain/(loss)
in the accompanying consolidated statements of income in the period in which
they arise.
Cash and Cash Equivalents:
Cash and cash equivalents consist of
current, call, time deposits and certificates of deposit with original
maturities of three months or less and which are not restricted for use or
withdrawal.
Time Deposits:
Time deposits are held with banks with
original maturities longer than three months. In the event original maturities
are shorter than twelve months, such deposits are classified as current assets;
if original maturities are longer than twelve months, such deposits are
classified as non-current assets.
Restricted Cash:
Restricted cash represents minimum cash
deposits or cash collateral deposits required to be maintained with certain
banks under the Companys borrowing arrangements or in relation to bank
guarantees issued on behalf of the Company. In the event that the obligation
relating to such deposits is expected to be terminated within the next twelve
months, these deposits are classified as current assets; otherwise they are
classified as non-current assets.
Accounts Receivable Trade:
Accounts receivable trade reflects the
receivables from time or voyage charters, net of an allowance for doubtful
accounts. At each balance sheet date, all potentially uncollectible accounts
are assessed individually for purposes of determining the appropriate provision
for doubtful accounts. No allowance for doubtful accounts was recorded for any
of the periods presented.
Inventories:
Inventories consist of bunkers and
lubricants owned by the Company remaining on board the vessels at the end of
each reporting period, which are stated at the lower of cost or market. Cost is
determined using the firstin, first-out method.
Vessels, Net:
Vessels are stated at their historical cost,
which consists of the contracted purchase price and any direct material
expenses incurred upon acquisition (including improvements, on-site supervision
expenses incurred during the construction period, commissions paid, delivery
expenses and other expenditures to prepare the vessel for her initial voyage),
less accumulated depreciation. Financing costs incurred during the construction
period of the vessels are also capitalized and included in the vessels cost.
Certain subsequent expenditures for conversions and major improvements are also
capitalized if it is determined that they appreciably extend the life, increase
the earning capacity or improve the efficiency or safety of the vessels.
F-9
Vessels Depreciation:
Depreciation is computed using the
straight-line method over the estimated useful life of the vessels, after
considering the estimated residual value. Management estimates the useful life
of the Companys vessels to be 25 years from the date of initial delivery from
the shipyard.
Accounting for Special Survey and
Drydocking Costs:
Special survey and drydocking costs are expensed in the period incurred and are
included in vessel operating expenses in the accompanying consolidated
statements of income.
Repairs and Maintenance:
All repair and maintenance expenses,
including major overhauling and underwater inspection expenses, are expensed
when incurred and are included in vessel operating expenses in the accompanying
consolidated statements of income.
Impairment of Long-lived Assets:
The Company follows the Accounting Standards
Codification (ASC) Subtopic 360-10, Property, Plant and Equipment (ASC
360-10), which requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
their carrying amounts. If indicators
of impairment are present, the Company performs an analysis of the anticipated
undiscounted future net cash flows of the related long-lived assets. If the carrying value of the related asset
exceeds the undiscounted cash flows, the carrying value is reduced to its fair
value and the difference is recorded as an impairment loss in the consolidated
statement of income. Various factors
including anticipated future charter rates, estimated scrap values, future
drydocking costs and estimated vessel operating costs are included in this
analysis. No impairment loss was recorded during the years ended December 31,
2009, 2010 and 2011.
Assets Held for Sale:
The Company may dispose of certain of its
vessels when suitable opportunities occur, including prior to the end of their
useful lives. The Company classifies assets as being held for sale when the
following criteria are met: (i) management is committed to sell the asset; (ii)
the asset is available for immediate sale in its present condition; (iii) an
active program to locate a buyer and other actions required to complete the
plan to sell the asset have been initiated; (iv) the sale of the asset is
probable, and transfer of the asset is expected to qualify for recognition as a
completed sale within one year; (v) the asset is being actively marketed for
sale at a price that is reasonable in relation to its current fair value; and
(vi) actions required to complete the plan indicate that it is unlikely that
significant changes to the plan will be made or that the plan will be
withdrawn.
Long-lived assets classified
as held for sale are measured at the lower of their carrying amount or fair
value less cost to sell. These assets are no longer depreciated once they meet
the criteria of being held for sale.
Deferred Financing Costs:
Financing fees incurred for obtaining new
loans and credit facilities are deferred and amortized over the term of the
respective loan or credit facility using the effective interest rate method.
Any unamortized balance of costs relating to loans repaid or refinanced is
expensed in the period in which the repayment or refinancing is made, subject
to the guidance regarding
Debt
Extinguishment
. Any unamortized balance of costs related to credit
facilities repaid is expensed in the period. Any unamortized balance of costs
relating to credit facilities refinanced is deferred and amortized over the
term of the respective credit facility in the period in which the refinancing
occurs, subject to the provisions of the accounting guidance relating to
Changes in Line-of-Credit or Revolving-Debt
Arrangements
.
Derivative Instruments:
The Company may enter into foreign exchange
forward contracts to create economic hedges for its exposure to currency
exchange risk on payments relating to the acquisition of vessels and on certain
loan obligations. The Company also enters into interest rate derivatives to
create economic hedges for its exposure to interest rate risk of its loan
obligations (see also Notes 7 and 13). When such derivatives do not qualify for
hedge accounting the Company records these financial instruments in the
consolidated balance sheet at their fair value as either a derivative asset or
a liability, and recognizes the fair value changes thereto in the consolidated
statements of income. When the derivatives do qualify for hedge accounting,
depending upon the nature of the hedge, changes in fair value of the
derivatives are either offset against the fair value of assets, liabilities or
firm commitments through income, or recognized in other comprehensive
income/(loss) (effective portion) until the hedged item is recognized in the
consolidated statements of income. For the years ended December 31, 2009, 2010
and 2011, no derivatives were accounted for as accounting hedges.
F-10
Financial Instruments:
Over-the-counter foreign exchange forward
contracts and interest rate derivatives are recorded at fair value. Other
financial instruments, including cash equivalents and debt are recorded at
amortized cost.
|
|
|
|
(a)
|
Interest rate risk
:
The Companys interest rates and long-term
loan repayment terms are described in Note 7.The Company manages its interest
rate risk by entering into interest rate derivative instruments which are
described in Note 13.
|
|
|
|
|
(b)
|
Concentration of credit risk:
Financial instruments, which potentially
subject the Company to significant concentrations of credit risk, consist
principally of trade accounts receivable, cash and cash equivalents, time
deposits and derivative instruments. The Company limits its credit risk with
accounts receivable by performing ongoing credit evaluations of its customers
financial condition and generally does not require collateral for its trade
accounts receivable. The Company places its cash and cash equivalents, time
deposits and other investments with high credit quality financial
institutions. The Company performs periodic evaluations of the relative
credit standing of those financial institutions. The Company is exposed to
credit risk in the event of non-performance by its counterparties to
derivative instruments; however, the Company limits its exposure by transacting
with counterparties with high credit ratings.
|
|
|
|
|
(c)
|
Fair value measurement
:
In accordance with the requirements of
accounting guidance relating to
Fair Value
Measurement,
the Company classifies and discloses assets and
liabilities carried at fair value in one of the following three categories:
|
|
|
|
|
Level 1:
|
Quoted market prices in
active markets for identical assets or liabilities.
|
|
|
|
|
Level 2:
|
Observable market-based
inputs or unobservable inputs that are corroborated by market data.
|
|
|
|
|
Level 3:
|
Unobservable inputs that
are not corroborated by market data.
|
Accounting for Revenues and Related
Expenses:
The
Company generates its revenues from charterers for the charter hire of its
vessels. Vessels are chartered under time charter, where a contract is entered
into for the use of a vessel for a specific voyage or a specific period of time
and at a specified daily charter rate. Time charter revenues are recognized as
earned on the straight-line basis over the term of the charter as service is
provided. Revenues from time charter may also include ballast bonus, which is
an amount paid by the charterer for repositioning the vessel at the charterers
disposal (delivery point), which is recognized as revenue over the term of the
charter, and other miscellaneous revenues from vessel operations. Expenses
relating to the Companys time charters are vessel operating expenses and
certain voyage expenses, which are paid by the Company and recognized as
incurred. Vessel operating expenses that are paid by the Company include costs
for crewing, insurance, lubricants, spare parts, provisions, stores, repairs,
maintenance, statutory and classification expense, drydocking, intermediate and
special surveys and other minor miscellaneous expenses. Voyage expenses which
are also recognized as incurred and paid by the Company include costs for draft
surveys, hold cleaning, postage, extra war risk insurance, bunkers during
ballast period and other minor miscellaneous expenses related to the voyage.
The charterer is responsible for paying the cost of bunkers and other voyage
expenses (e.g., port expenses, agents fees, canal dues, extra war risks
insurance and any other expenses related to the cargo).
Revenue is recognized when a
charter agreement exists, the vessel is made available to the charterer and
collection of the related revenue is reasonably assured. Unearned revenue
includes: (i) revenue received prior to the balance sheet date relating to
services to be rendered after the balance sheet date and (ii) deferred revenue
resulting from straight-line revenue recognition in respect of charter
agreements that provide for varying charter rates. Accrued revenue results from
straight-line revenue recognition in respect of charter agreements that provide
for varying charter rates. Commissions (address and brokerage), regardless of
charter type, are always paid by the Company, are deferred and amortized over
the related charter period and are presented as a separate line item in
revenues to arrive at net revenues in the accompanying consolidated statements
of income.
F-11
Pension and Retirement Benefit
ObligationsCrew:
The Subsidiaries included in the consolidated financial statements employ the
crew on board under short-term contracts (usually up to nine months) and
accordingly, they are not liable for any pension or post-retirement
benefits.
Taxes:
Entities within the group that are
incorporated under the laws of either the Republic of Liberia or the Republic
of The Marshall Islands are not subject to Liberian or Marshall Islands income
taxes. However, each vessel-owning Subsidiary is subject to registration and
tonnage taxes under the laws of the Republic of Cyprus or the Republic of The
Marshall Islands depending on where each Companys vessel is registered, which
is not an income tax. These registration and tonnage taxes are recorded within
Vessel Operating Expenses in the accompanying consolidated statements of
income.
Furthermore, the
Subsidiaries are subject to a 4% United States federal tax in respect of its
U.S. source shipping income (imposed on gross income without the allowance for
any deductions) as they do not meet the requirements for an exemption from such
tax provided by Section 883 of the U.S. Internal Revenue Code of 1986. As a
result, the Subsidiaries file U.S. federal tax returns and pay the relevant
U.S. federal tax on their U.S. source shipping income, which is not an income
tax. Such taxes have been recorded within Voyage expenses in the accompanying
consolidated statements of income. In many cases, these taxes are recovered
from the charterers; such amounts recovered are recorded within Revenues in the
accompanying consolidated statements of income.
Dividends:
Dividends are recorded in the period in
which they are approved by the Companys Board of Directors.
Segment Reporting:
The Company reports financial information
and evaluates its operations by total charter revenue and not by the type of
vessel or vessel employment for its customers. The Companys vessels have
similar operating and economic characteristics. As a result, management,
including the chief operating decision makers, reviews operating results solely
by revenue per day and operating results of the fleet, and thus the Company has
determined that it operates under one reportable segment. Furthermore, when the
Company charters a vessel to a charterer, the charterer is free to trade the
vessel worldwide and, as a result, the disclosure of geographic information is
impracticable.
Recent Accounting Pronouncements:
On May 12, 2011, the Financial Accounting
Standards Board issued Accounting
Standards Update 2011-04 Fair Value
Measurement and Disclosures to Fair Value Measurement 2011-04. This update expands
ASC 820s (Fair Value Measurement) existing disclosure requirements for fair
value measurements and makes other amendments which could change how the fair
value measurement guidance in ASC 820 is applied. This new guidance is
effective prospectively for interim and annual periods beginning after December
15, 2011. The adoption of this pronouncement is not expected to have a material
impact on the Companys consolidated financial position and results of
operations.
F-12
|
|
3.
|
Transactions
with Related Parties
|
Safety Management Overseas S.A., Panama
(the Manager):
On May 29, 2008, Safe Bulkers signed a management agreement (the Management
Agreement) with Safety Management, a related party that is controlled by Polys
Hajioannou. Under such Management Agreement, each vessel-owning Subsidiary has
entered into, or in the case of vessels not yet delivered, will enter into, a
management agreement with the Manager (the Shipmanagement Agreements). Under
these Shipmanagement Agreements, chartering, operations, technical and
accounting services are provided to the vessels by the Manager. In accordance
with the Management Agreement and the Shipmanagement Agreements, the Manager
receives a fixed fee of $0.575 per day plus, 1.25% on gross freight, charter
hire, ballast bonus and demurrage from each of the vessel-owning companies in
exchange for these management services. As of May 29, 2010, pursuant to an
agreement between us and our Manager, the fee on gross freight, charter hire,
ballast bonus and demurrage was readjusted to 1.25% from 1.0%. Effective from
May 29, 2011, the Company and the Manager agreed to set the fixed fee to $0.700
per day. Under the Management Agreement, each of the Subsidiaries that are
scheduled to own a newbuild has entered into or will enter into supervision
agreements with the Manager (the Supervision Agreements). Under the
Supervision Agreements, the Manager will provide on-site supervision services
with respect to all newbuilds, and will receive a fee of $375, of which 50% is
payable upon the signing of the relevant Supervision Agreement, and 50% upon successful
completion of the sea trials of each newbuild. Effective from May 29, 2011, the
Company and the Manager agreed to set the fee for the on-site supervision
services with respect to all newbuilds to $550 for any Supervision Agreements
signed after May 29, 2011. In addition, under the Management Agreement, an
amount equal to 1.0% of the contract price for the sale or acquisition
(constructed or purchased) of each vessel is payable to the Manager with the
exception of the acquisition of
Eleni
and
Martine
.
Management fees charged by
the Manager for the years ended December 31, 2009, 2010 and 2011 amounted to
$4,436, $4,880 and $6,026 respectively, and are recorded in the accompanying
consolidated statements of income within General and Administrative Expenses
(see Note 18). Commissions on the contract price of vessels sold, charged by
the Manager during the years ended December 31, 2009, 2010 and 2011, amounted
to $0, $330 and $0 respectively, and are recorded within Gain on sale of assets
in the consolidated statements of income (see Note 20). Commissions on the
contract price of vessels purchased, charged by the Manager during the years
ended December 31, 2009, 2010 and 2011, amounted to $710, $1,840 and $1,348,
respectively, and are included as part of the vessel cost. Supervision fees
charged by the Manager during the years ended December 31, 2009, 2010 and 2011
amounted to $750, $938 and $2,113, respectively, and are included as part of
the vessel cost.
F-13
|
|
4.
|
Vessels,
Net
|
|
|
Vessels, net, are
comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel Cost
|
|
Accumulated
Depreciation
|
|
Net Book Value
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2010
|
|
|
418,443
|
|
|
(44,519
|
)
|
|
373,924
|
|
Transfer from Advances for vessel acquisitions
|
|
|
186,924
|
|
|
|
|
|
186,924
|
|
Depreciation expense
|
|
|
|
|
|
(19,604
|
)
|
|
(19,604
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2010
|
|
$
|
605,367
|
|
$
|
(64,123
|
)
|
$
|
541,244
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer from Advances for vessel acquisitions
|
|
|
137,749
|
|
|
|
|
|
137,749
|
|
Depreciation expense
|
|
|
|
|
|
(23,637
|
)
|
|
(23,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2011
|
|
$
|
743,116
|
|
$
|
(87,760
|
)
|
$
|
655,356
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer from Advances for
vessel acquisitions represents advances paid in respect of the acquisition of
vessels, which were under construction and delivered to the Company. For the
periods presented, the Company accepted delivery of the following vessels:
|
|
|
|
|
During the year ended
December 31, 2010:
Kanaris
,
Panayiota K
and
Venus Heritage
.
|
|
|
|
|
|
During the year ended
December 31, 2011:
Venus History and
Pelopidas
.
|
Depreciation charges for the
year ended December 31, 2010 include an amount of $69, which relates to the
depreciation of minor movable equipment on board the vessels, which were
capitalized up to December 31, 2007, and which are depreciated on a
straight-line basis over five years. No depreciation charges for such equipment
were incurred during the year ended December 31, 2011. Acquisitions of minor
movable equipment on board the vessels subsequent to December 31, 2007 are
expensed in the year incurred, due to the immaterial amounts involved.
As of December 31, 2011, vessels with a carrying value of 575,167
have been provided as collateral to secure the Companys bank loans as discussed in Note 7 and Note 10.
F-14
|
|
5.
|
Advances for Vessel Acquisition and Vessels under Construction
|
Advances for vessel acquisition and vessels under construction are comprised of the following:
|
|
|
|
|
Balance, January 1, 2010
|
|
|
93,520
|
|
Advances paid, including capitalized expenses and interest
|
|
|
192,418
|
|
Transferred to vessel cost
|
|
|
(186,924
|
)
|
|
|
|
|
|
Balance, December 31, 2010
|
|
$
|
99,014
|
|
|
|
|
|
|
Advances paid, including capitalized expenses and interest
|
|
|
161,042
|
|
Transferred to vessel cost
|
|
|
(137,749
|
)
|
|
|
|
|
|
Balance, December 31, 2011
|
|
$
|
122,307
|
|
|
|
|
|
|
Advances Paid
for vessel acquisitions and vessels under construction relate to payments of
installments that were due to the respective shipyard or third-party sellers
and certain capitalized expenses. During 2010 and 2011 such payments were made
for the following vessels:
|
|
|
|
|
During the
year ended December 31, 2010:
Kanaris, Panayiota K
,
Venus
Heritage
,
Pelopidas, Venus History, Hull 616, Hull 617
and
Hull
631
; and
|
|
|
|
|
|
During the
year ended December 31, 2011:
Venus Histor
y
,
Pelopidas, Venus
Horizon (ex. Hull 1594), Efrossini (ex. Hull 804), Hull 131, Hull 1659, Hull
1660
and
Hull
2396
.
|
Transfers to
vessel cost relate to the delivery to the Company from the respective shipyard
or third-party seller of the following vessels:
|
|
|
|
|
During the
year ended December 31, 2010:
Kanaris,
Panayiota K
and
Venus Heritage
.
|
|
|
|
|
|
During the
year ended December 31, 2011:
Venus
History
and
Pelopidas
.
|
|
|
|
6.
|
Deferred Finance Charges, Net
|
Deferred finance charges are comprised of the following:
|
|
|
|
|
Balance, January 1, 2010
|
|
|
677
|
|
Additions
|
|
|
519
|
|
Write-off
|
|
|
(127
|
)
|
Amortization expense
|
|
|
(139
|
)
|
|
|
|
|
|
Balance, December 31, 2010
|
|
$
|
930
|
|
|
|
|
|
|
Additions
|
|
|
5,949
|
|
Write-off
|
|
|
(60
|
)
|
Amortization expense
|
|
|
(593
|
)
|
|
|
|
|
|
Balance, December 31, 2011
|
|
$
|
6,226
|
|
|
|
|
|
|
F-15
Bank debt is
comprised of the following secured borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
Borrower
|
|
|
Commencement
|
|
|
Maturity
|
|
2010
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marathassa
|
|
|
February
2005
|
|
|
February
2017
|
|
$
|
18,195
|
|
$
|
16,565
|
|
Marinouki
|
|
|
March 2006
|
|
|
March 2018
|
|
|
29,229
|
|
|
27,695
|
|
Petra
|
|
|
January 2007
|
|
|
January 2019
|
|
|
32,671
|
|
|
24,971
|
|
Pemer
|
|
|
March 2007
|
|
|
March 2019
|
|
|
32,667
|
|
|
24,968
|
|
Pelea
|
|
|
June 2007
|
|
|
June 2019
|
|
|
37,987
|
|
|
31,987
|
|
Soffive
|
|
|
November
2007
|
|
|
November
2019
|
|
|
39,600
|
|
|
35,400
|
|
Kerasies
|
|
|
December
2007
|
|
|
December
2019
|
|
|
35,200
|
|
|
33,065
|
|
Marindou
|
|
|
January 2008
|
|
|
January 2018
|
|
|
34,500
|
|
|
28,500
|
|
Avstes
|
|
|
April 2008
|
|
|
April 2018
|
|
|
30,000
|
|
|
28,284
|
|
Staloudi
|
|
|
July 2008
|
|
|
July 2023
|
|
|
49,320
|
|
|
43,860
|
|
Eniaprohi
|
|
|
November
2008
|
|
|
November
2018
|
|
|
40,000
|
|
|
34,000
|
|
Eniadefhi
|
|
|
February
2009
|
|
|
February
2019
|
|
|
41,625
|
|
|
34,500
|
|
Maxdodeka
|
|
|
February
2010
|
|
|
February
2016
|
|
|
33,750
|
|
|
|
|
Maxpente
|
|
|
July 2010
|
|
|
January 2015
|
|
|
40,000
|
|
|
38,200
|
|
Maxdeka
|
|
|
August 2011
|
|
|
December
2022
|
|
|
|
|
|
37,496
|
|
Shikoku
|
|
|
October 2011
|
|
|
August 2023
|
|
|
|
|
|
44,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
$
|
494,744
|
|
$
|
484,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion
|
|
|
|
|
|
|
|
$
|
27,674
|
|
$
|
18,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
|
|
|
|
|
|
$
|
467,070
|
|
$
|
465,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The above
loans and credit facilities generally bear interest at LIBOR plus a margin,
except for the Maxdeka and Shikoku loan facilities, under which a portion of
the principal amounts bear interest at the Commercial Interest Reference Rate
published by the Organization for Economic Co-operation and Development
applicable on the date of signing of the relevant loan agreements. The above
loans and credit facilities are generally repayable in semi-annual installments
and a balloon payment at maturity except for the Maxdeka and Shikoku loan
facilities, which are repayable in semi-annual installments. The fair value of
the long term debt outstanding on December 31, 2011 amounted to $487,187.
As of December
31, 2011, an aggregate amount of $43,731 was available for drawing under
certain of the above loans and reducing revolving credit facilities. The
estimated minimum annual principal payments required to be made after December
31, 2011, based on the bank loan and credit facility agreements as amended, are
as follows:
|
|
|
|
|
To December 31,
|
|
|
|
|
|
|
|
|
|
2012
|
|
$
|
18,486
|
|
2013
|
|
|
23,588
|
|
2014
|
|
|
31,733
|
|
2015
|
|
|
66,216
|
|
2016
|
|
|
34,816
|
|
2017 and thereafter
|
|
|
309,452
|
|
|
|
|
|
|
Total
|
|
$
|
484,291
|
|
|
|
|
|
|
Total interest
incurred on long-term debt for the years ended December 31, 2009, 2010 and 2011
amounted to $10,399, $6,738, and $6,722, respectively, which includes interest
capitalized of $58, $315 and $1,472 for the years ended December 31, 2009, 2010
and 2011, respectively. The average interest rate (including the margin) for
all bank loan and credit facilities during the years 2009, 2010 and 2011 was
2.137% p.a., 1.394% p.a., and 1.439% p.a., respectively.
F-16
Certain of the
above loans or credit facilities have a currency conversion option whereby the
borrower may elect to convert the outstanding loan amount or any part thereof
to certain currencies specified in each agreement, using the spot exchange rate
applicable on the date of conversion. Specified currencies include Japanese Yen
(JPY), Swiss Franc (CHF), Euro (EUR), Canadian dollar (CAD) or pound
sterling (GBP), depending on the relevant agreement. In all the above loans
or credit facilities with a currency conversion option, no consideration has
been or will be paid by any of the borrowers to the respective lenders in
connection with the conversion option since the parties did not ascribe value
to the conversion option as the conversion options are always based on the
market or spot rates at the time they are exercised. The exercise of the
conversion option in any of the above loans or credit facilities results in a
change in both the currency denomination of the loan and the basis of the
interest rate (that is, a USD-denominated loan bears interest based on USD
LIBOR and, upon conversion into a JPY-denominated loan, will bear interest
based on JPY LIBOR). All other terms of the loans or credit facilities,
including the margin (the interest rate spread over LIBOR) and the repayment
terms, will remain the same upon exercise of the currency conversion option.
The Company
considered the accounting guidance relating to
Accounting
for Derivative Instruments and Hedging Activities
, and concluded
that the conversion options are embedded derivatives that would require
bifurcation and separate accounting because of the following:
|
|
|
|
(i)
|
The economic
characteristics and risks of an instrument in which the underlying is both a
foreign currency and interest rate are not clearly and closely related to the
economic characteristics and risks of a debt host;
|
|
|
|
|
(ii)
|
The
borrowing arrangement that embodies both the conversion option and the debt
host is not remeasured at fair value under otherwise applicable generally
accepted accounting principles with changes in fair value reported in
earnings as they occur; and
|
|
|
|
|
(iii)
|
A separate
instrument with the same terms as the conversion option would be a derivative
instrument subject to the requirements of this accounting guidance.
|
However, the
Company believes that the conversion option under the borrowing arrangements
has no fair value due to the fact that the conversion into a different
currency, and, accordingly, into a corresponding LIBOR interest rate, will
always be at the prevailing foreign currency exchange rate (spot rate) and
prevailing interest rate at the time of the conversion. Furthermore, both the
Company and the bank did not ascribe value to the currency conversion options
as no consideration was sought by the bank and no value was paid by the
Company, as noted above.
As of December
31, 2010 and 2011 all loans were denominated in US Dollars.
The foregoing
loans and credit facilities are secured as follows:
|
|
|
|
|
First priority mortgages over the vessels owned by the respective borrowers;
|
|
|
|
|
|
First
priority assignment of all insurances and earnings of the mortgaged vessels;
|
|
|
|
|
|
Second
priority mortgage over the
Maritsa
as security for the Kerasies loan;
|
|
|
|
|
|
Second
priority mortgage over the
Pedhoulas
Merchant
as security for the Petra loan;
|
|
|
|
|
|
Second
priority mortgage over the
Pedhoulas
Trader
as security for the Pemer loan;
|
|
|
|
|
|
Second
priority mortgage over the
Eleni
as
security for the Marindou loan;
|
|
|
|
|
|
Second
priority mortgage over the
Eleni
as
security for the Pelea loan;
|
|
|
|
|
|
Cross
corporate guarantees issued by each of Maxdodeka, Pelea, Avstes, Marindou,
Eniaprohi and Eniadefhi as security for the credit facility of each
guarantor; and
|
F-17
|
|
|
|
|
Corporate
guarantee from Safe Bulkers.
|
The loan and
credit facility agreements, as amended, contain debt covenants including
restrictions as to changes in management and ownership of the vessels,
additional indebtedness and mortgaging of vessels without the respective
lenders prior consent, minimum vessel insurance cover ratio requirements, as
well as minimum fair vessel value ratio to outstanding loan principal
requirements; the fair vessel value being determined according to the
provisions of the individual loan or credit facility agreements with the
relevant bank (the Minimum Value Covenant). The borrowers are permitted to
pay dividends to their owners as long as no event of default under the
respective loan has occurred or has not been remedied.
Six of the
loan agreements require the respective borrower to maintain at all times a
minimum balance of $150 in the vessel operating account. In one of the loan and
credit facility agreements the borrower must maintain a cash collateral deposit
of $2,000 with the lender.
In addition,
the corporate guarantees, as amended, of Safe Bulkers include the following
financial covenants:
|
|
|
|
|
its total
consolidated liabilities divided by its total consolidated assets must not at
any time exceed 70% or 80% as the case may be (Consolidated Leverage
Covenant). The total consolidated assets are based on the fair market value
of its vessels and the book values of all other assets, on an adjusted basis
as set out in the relevant guarantee;
|
|
|
|
|
|
the ratio of
its aggregate debt to EBITDA must not at any time exceed 5.5:1 on a trailing
12 months basis (EBITDA Covenant);
|
|
|
|
|
|
its
consolidated net worth (total consolidated assets less total consolidated
liabilities) (Consolidated Net Worth Covenant) must not at any time be less
than $150,000, $175,000 or $200,000 (as the case may be) with the relevant
bank;
|
|
|
|
|
|
payment of
dividends is subject to no event of default having occurred;
|
|
|
|
|
|
maintenance
of minimum free liquidity of $500 is required on deposit with a relevant
lender on a per vessel basis for five vessels; and
|
|
|
|
|
|
a minimum of
51% of its shares shall remain directly or indirectly beneficially owned by
the Hajioannou family for the duration of the relevant credit facilities.
|
As of December
31, 2011, the Company was in compliance with all debt covenants with respect to
its loans and credit facilities.
During the
year ended December 31, 2009, the Company invested $50,000 in a five-year
Floating Rate Note issued by HSBC Bank Middle East Limited, which is recorded
in the consolidated balance sheet at amortized cost as the Company intends to
hold the investment until its maturity on October 14, 2014. The Company
receives interest on a quarterly basis, based on the three-month U.S. dollar
LIBOR plus a margin of 1.5%. The fair market value of the Floating Rate Note as
of December 31, 2011 was approximately $49,290 based on an indicative bid price
from the relevant bank. Subject to certain conditions, the Company may borrow
up to 80% of the Floating Rate Note amount.
The Company
was incorporated on December 11, 2007 with authorized share capital of 500
shares of common stock with a par value of $0.001 per share. On May 9, 2008,
the Companys Articles of Incorporation were amended. Under the amended
Articles of Incorporation, the Companys authorized capital stock consists of
200,000,000 shares of common stock with a par value of $0.001 per share, of
which 54,500,000 shares were issued prior to the listing of the Companys
common stock on the NYSE, which was completed on June 3, 2008, and 20,000,000
shares
F-18
of preferred
stock with a par value of $0.01 per share, none of which has been issued and is
outstanding. In connection with the IPO process, Vorini Holdings sold
10,000,000 shares of common stock of the Company of a par value of $0.001 per
share at a price of $19 per share. No proceeds were paid to the Company.
In March 2010,
the Company successfully completed a public offering, whereby 10,350,000 shares
of common stock of Safe Bulkers were issued and sold, and a private placement,
whereby 1,000,000 shares of common stock of Safe Bulkers were issued and sold
to Vorini Holdings. The net proceeds of the public offering and the private
placement were $74,967, net of underwriting discount of $3,150 and offering
expenses of $861.
In April 2011, the Company successfully
completed a public offering, whereby 5,000,000 shares of common stock of Safe
Bulkers were issued and sold. The net proceeds of the public offering were
$39,637, net of underwriting discount of $2,100 and offering expenses of $263.
Pursuant to an
arrangement approved by the Companys shareholders and the corporate
governance, nominating and compensation committee effective July 1, 2008, the
audit committee chairman receives the equivalent of $15 every quarter, payable
in arrears in the form of newly issued common stock of the Company as part
compensation for services rendered as audit committee chairman. The number of
shares to be issued is determined based on the closing price of the Companys common
stock on the last trading day prior to the end of each quarter in which
services were provided and are issued as soon as practicable following the end
of the quarter. During the years ended December 31, 2010 and 2011, 7,644 shares
and 7,705 shares, respectively, were issued to the audit committee chairman.
Pursuant to an
arrangement approved by the Companys shareholders and the corporate
governance, nominating and compensation committee, effective January 1, 2010,
the independent directors of the Company other than the audit committee
chairman each receive the equivalent of $7.5 every quarter, payable in arrears
in the form of newly issued common stock of the Company as part compensation
for services rendered as independent directors. The number of shares to be
issued is determined as noted above. During the year ended December 31, 2010
and 2011, 5,932 shares and 7,704 shares, respectively were issued to the
independent directors of the Company other than the audit committee chairman.
|
|
10.
|
Commitments and Contingencies
|
|
|
(a)
|
Commitments under Shipbuilding Contracts
and Memorandums of Agreement (MoAs)
|
As of December
31, 2011 the Company had commitments under six shipbuilding contracts and four
MoAs for the acquisition of ten newbuilds. The Company expects to settle
these commitments as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
Due to
Shipyards/
Sellers
|
|
Due to
Manager
|
|
Total
|
|
|
|
|
|
|
|
|
|
2012
|
|
$
|
146,515
|
|
$
|
4,349
|
|
$
|
150,864
|
|
2013
|
|
|
37,026
|
|
|
1,180
|
|
|
38,206
|
|
2014
|
|
|
68,296
|
|
|
2,332
|
|
|
70,628
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
251,837
|
|
$
|
7,861
|
|
$
|
259,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
i.
|
In November
2010, the Company concluded the documentation of a loan facility for up to
$24,000, which will be used to refinance part of the purchase price paid for
the acquisition by Maxdekatria of the vessel
Panayiota K
(the
Maxdekatria loan). The Maxdekatria loan is available for drawing until June
30, 2012 and is repayable over eight years in 16 semi-annual consecutive
installments commencing six months after the loan drawdown and a balloon
payment payable with the final installment and will be secured by a first
priority mortgage over the vessel
Panayiota K
and other usual maritime
|
F-19
|
|
|
|
|
securities
and a corporate guarantee by Safe Bulkers, which provides for the financial
covenants described in Note 7.
|
|
|
|
|
ii.
|
In June
2011, the Company concluded the documentation for a loan facility for up to
$52,800, which will be used to refinance part of the purchase price paid for
the acquisition by Eptaprohi of the vessel
Pelopidas
(the Eptaprohi
credit facility). The Eptaprohi credit facility will be made available upon
commencement of the long-term contracted employment of the vessel
Pelopidas
.
The Eptaprohi credit facility is repayable over seven years in 14 semi-annual
consecutive installments commencing six months after the loan drawdown and a
balloon payment payable with the final installment and will be secured by a
first priority mortgage over the vessel
Pelopidas
and other usual maritime
securities and a corporate guarantee by Safe Bulkers, which provides for the
financial covenants described in Note 7.
|
|
|
|
|
iii.
|
In May 2011, the Company concluded the
documentation for a loan facility for up to $38,400, which will be used to
finance part of the purchase price of
Venus Horizon (ex. Hull 1594)
(the Maxenteka
credit facility). The Maxenteka credit facility will be made available
upon delivery by the sellers of
Venus Horizon (ex. Hull 1594)
. The Maxenteka credit
facility is repayable over twelve years in 24 semi-annual consecutive
installments commencing six months after scheduled delivery of the vessel by
the sellers and will be secured by a first priority mortgage over
Venus Horizon (ex. Hull 1594)
,
a first priority mortgage over the vessel
Venus
Heritage
, a first priority mortgage over the vessel
Venus
History
and other usual maritime securities and a corporate
guarantee by Safe Bulkers, which provides for the financial covenants
described in Note 7.
|
|
|
|
|
iv.
|
In September
2011, the Company accepted a commitment letter from a bank for a loan
facility for the lesser of $20,000, or 65% of the fair market value of
Hull 616
which
will be used to finance part of the purchase price of
Hull 616
(the Maxeikosi
credit facility). The Maxeikosi credit facility will be made available upon
delivery by the shipyard of
Hull 616
. The Maxeikosi credit facility
is repayable over two years in 4 semi-annual consecutive installments
commencing six months after loan drawdown and a balloon payment payable with
the final installment and will be secured by a first priority mortgage over
Hull 616
and other usual maritime securities and a corporate guarantee by Safe
Bulkers, which provides for the financial covenants described in Note 7. The
documentation was executed in February 2012.
|
|
|
(c)
|
Other contingent liabilities
|
The
Subsidiaries have not been involved in any legal proceedings that may have, or
have had, a significant effect on their business, financial position, results
of operations or liquidity, nor is the Company aware of any proceedings that are
pending or threatened that may have a significant effect on its business,
financial position, results of operations or liquidity. From time to time
various claims, suits and complaints, including those involving government
regulations and product liability, arise in the ordinary course of the shipping
business. In addition, losses may arise from disputes with charterers, agents,
shipyards, insurance providers and other claims relating to the operation of
the Companys vessels. Management is not aware of any material claims or
contingent liabilities which should be disclosed, or for which a provision
should be established in the accompanying consolidated financial statements.
The Company
accrues for the cost of environmental liabilities when management becomes aware
that a liability is probable and is able to reasonably estimate the probable
exposure. Management is not aware of any such claims or contingent liabilities
which should be disclosed, or for which a provision should be established in
the accompanying consolidated financial statements. A maximum of $1,000,000 of
the liabilities associated with the individual vessel actions, mainly for sea
pollution, is covered by P&I Club insurance.
F-20
Revenues are
comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2009
|
|
2010
|
|
2011
|
|
|
|
|
|
|
|
|
|
Time charter
revenue
|
|
$
|
165,604
|
|
$
|
157,663
|
|
$
|
167,759
|
|
Ballast
bonus
|
|
|
980
|
|
|
|
|
|
2,382
|
|
Other income
|
|
|
1,816
|
|
|
2,035
|
|
|
1,895
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
168,400
|
|
$
|
159,698
|
|
$
|
172,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.
|
Vessel Operating Expenses
|
Vessel operating expenses are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2009
|
|
2010
|
|
2011
|
|
|
|
|
|
|
|
|
|
Crew wages
and related costs
|
|
$
|
10,055
|
|
$
|
11,441
|
|
$
|
13,196
|
|
Insurance
|
|
|
2,112
|
|
|
1,880
|
|
|
2,260
|
|
Repairs,
maintenance and drydocking costs
|
|
|
994
|
|
|
1,764
|
|
|
2,108
|
|
Spares,
stores and provisions
|
|
|
2,845
|
|
|
3,947
|
|
|
4,055
|
|
Lubricants
|
|
|
2,451
|
|
|
2,808
|
|
|
3,059
|
|
Taxes
|
|
|
140
|
|
|
178
|
|
|
212
|
|
Miscellaneous
|
|
|
1,031
|
|
|
1,110
|
|
|
1,176
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,628
|
|
$
|
23,128
|
|
$
|
26,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.
|
Fair Value of Financial Instruments and Derivatives Instruments
|
Over-the-counter
foreign exchange forward contracts and interest rate derivatives are recorded
at fair value. The carrying values of the current financial assets and current
financial liabilities are reasonable estimates of their fair value due to the
short-term nature of these financial instruments. The fair values of the
variable interest long-term debt approximate the recorded values, due to their
variable interest rates. The fair value of the fixed interest long term debt is
estimated using prevailing market rates as of the period end. The fair values
of the long term debt and long term investment (the floating rate note) are
disclosed in Note 7 and 8, respectively.
Derivative instruments
The Company
enters into interest rate swap transactions to manage interest costs and the
risk associated with changing interest rates with respect to its variable
interest rate loans and credit facilities. The Company from time to time may
also enter into foreign exchange forward contracts to create economic hedges
for its exposure to currency exchange risk on payments relating to acquisition
of vessels and on certain loan obligations or for trading purposes. Foreign
exchange forward contracts are agreements entered into with a bank to exchange,
at a specified future date, currencies of different countries at a specific
rate. As of December 31, 2010 and 2011, the Company had no outstanding
derivative instruments relating to currency exchange contracts.
The Companys
interest rate swaps and foreign exchange forward contracts did not qualify for
hedge accounting. The Company marks to market the fair market value of the
interest rate swaps and foreign exchange forward contracts at the end of every
period and accordingly records the resulting unrealized loss/gain during the
period in the consolidated statement of income. Information on the location and
amounts of derivative fair values in the consolidated balance sheets and
derivative gains/losses in the consolidated statements of income are shown
below:
F-21
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
Fair Value
|
|
Liability Derivatives
Fair Values
|
|
|
|
|
|
|
|
|
|
Type of
Contract
|
|
Balance sheet location
|
|
December 31,
2010
|
|
December 31,
2011
|
|
December 31,
2010
|
|
December 31,
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
Derivative
assets / Non Current assets
|
|
$
|
4,485
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Interest
Rate
|
|
Derivative
liabilities / Current liabilities
|
|
|
|
|
|
|
|
|
6,802
|
|
|
2,237
|
|
Interest
Rate
|
|
Derivative
liabilities / Non-current liabilities
|
|
|
|
|
|
|
|
|
9,787
|
|
|
10,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Derivatives
|
|
$
|
4,485
|
|
$
|
|
|
$
|
16,589
|
|
$
|
12,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (Loss) Recognized on Derivatives
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
|
|
2010
|
|
2011
|
|
|
|
|
|
|
|
Foreign
Exchange Forward Contracts
|
|
$
|
(198
|
)
|
$
|
(155
|
)
|
Interest
Rate Contracts
|
|
|
(7,966
|
)
|
|
(12,336
|
)
|
|
|
|
|
|
|
|
|
Net (Loss) Recognized
|
|
$
|
(8,164
|
)
|
$
|
(12,491
|
)
|
|
|
|
|
|
|
|
|
The gain or
loss is recognized in the consolidated statement of income and is presented in
Other (Expense)/Income Loss on Derivatives.
The Companys
interest rate derivative instruments are pay-fixed, receive-variable interest
rate swaps based on the USD LIBOR swap rate. The fair value of the interest
rate swaps is determined using a discounted cash flow approach based on
market-based LIBOR swap yield curves. LIBOR swap rates are observable at
commonly quoted intervals for the full terms of the swaps and therefore are
considered Level 2 items in accordance with the fair value hierarchy. The
following table summarizes the valuation of the Companys financial instruments
as of December 31, 2010 and 2011.
|
|
|
|
|
|
|
|
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2010
|
|
2011
|
|
|
|
|
|
|
|
Derivative
instruments asset position
|
|
$
|
4,485
|
|
$
|
|
|
Derivative
instruments liability position
|
|
|
16,589
|
|
|
12,367
|
|
As of December
31, 2010 and 2011, no fair value measurements for assets or liabilities under
Level 1 or Level 3 were recognized in the Companys consolidated balance sheet.
Interest Rate Derivatives
Details of
interest rate swap transactions entered into with certain banks in respect of
certain loans and credit facilities as of December 31, 2010 and 2011 are
presented in the table below:
F-22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount
|
|
|
|
|
|
|
|
|
|
|
|
Loan or Credit
Facility
|
|
Inception
|
|
Expiry
|
|
Fixed Rate
|
|
December 31,
2010
|
|
December 31,
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marindou
(1)
|
|
January 14,
2008
|
|
January 14,
2013
|
|
3.9500
|
%
|
$
|
28,000
|
|
$
|
27,253
|
|
Petra
(1)
|
|
February 19,
2008
|
|
January 18,
2013
|
|
2.8850
|
%
|
|
32,671
|
|
|
30,471
|
|
Pemer
(1)
|
|
March 07,
2008
|
|
March 07,
2013
|
|
2.7450
|
%
|
|
32,668
|
|
|
30,468
|
|
Marinouki
(1)
|
|
March 19,
2008
|
|
March 05,
2013
|
|
2.7300
|
%
|
|
29,229
|
|
|
27,695
|
|
Avstes
(1)
|
|
April 25,
2008
|
|
April 18,
2013
|
|
3.8900
|
%
|
|
29,000
|
|
|
27,342
|
|
Pelea
(1)
|
|
December 15,
2008
|
|
December 15,
2011
|
|
3.7000
|
%
|
|
36,000
|
|
|
|
|
Soffive
(1)
|
|
November 20,
2008
|
|
November 20,
2011
|
|
3.5500
|
%
|
|
39,600
|
|
|
|
|
Eniaprohi
(1)
|
|
November 13,
2008
|
|
November 14,
2011
|
|
3.1500
|
%
|
|
40,000
|
|
|
|
|
Staloudi
(1)
|
|
January 07,
2009
|
|
January 07,
2012
|
|
3.3850
|
%
|
|
49,320
|
|
|
45,680
|
|
Eniadefhi
(1)
|
|
April 01,
2009
|
|
February 12,
2014
|
|
3.3500
|
%
|
|
40,000
|
|
|
39,375
|
|
Marathassa
(2)
|
|
November 23,
2009
|
|
November 23,
2012
|
|
1.6500
|
%
|
|
18,195
|
|
|
16,565
|
|
Maxdodeka
(2)
|
|
February 01,
2010
|
|
February 01,
2013
|
|
3.9100
|
%
|
|
33,750
|
|
|
32,250
|
|
Kerasies
(2)
|
|
December 14,
2010
|
|
December 14,
2015
|
|
1.6500
|
%
|
|
35,200
|
|
|
33,066
|
|
Maxpente
(2)
|
|
January 31,
2011
|
|
January 31,
2015
|
|
1.2200
|
%
|
|
39,100
|
|
|
38,200
|
|
Eniaprohi
(2)
|
|
November 14,
2011
|
|
November 14,
2014
|
|
1.4000
|
%
|
|
37,776
|
|
|
37,776
|
|
Soffive
(2)
|
|
November 20,
2011
|
|
November 20,
2014
|
|
1.3500
|
%
|
|
37,200
|
|
|
37,200
|
|
Pelea
(2)
|
|
December 15,
2011
|
|
December 15,
2016
|
|
2.0500
|
%
|
|
36,461
|
|
|
36,461
|
|
Marathassa
(2)
|
|
November 23,
2012
|
|
November 21,
2015
|
|
1.9500
|
%
|
|
|
|
|
14,935
|
|
Staloudi
(2)
|
|
January 09,
2012
|
|
January 07,
2015
|
|
1.4500
|
%
|
|
43,860
|
|
|
43,860
|
|
Marindou
(2)
|
|
January 14,
2013
|
|
January 16,
2018
|
|
1.6000
|
%
|
|
|
|
|
28,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
$
|
638,030
|
|
$
|
547,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Under these
swap transactions, the bank effects semiannual floating-rate payments to the
Company for the relevant amount based on the six-month U.S. dollar LIBOR, and
the Company effects semiannual payments to the bank on the relevant amount at
the respective fixed rates.
|
(2)
|
Under these
swap transactions, the bank effects quarterly floating-rate payments to the
Company for the relevant amount based on the three-month U.S. dollar LIBOR,
and the Company effects quarterly payments to the bank on the relevant amount
at the respective fixed rates.
|
The notional
amounts of the above transactions are reduced during the term of the swap
transactions based on the expected principal outstanding under the respective
facility. In the Petra, Pemer and Marinouki transactions, the respective bank
has the right to cancel each swap on January 18, 2011, March 5, 2011 and March
7, 2011, respectively, and at six-month intervals thereafter, which
cancellation rights have not been exercised to date.
Accrued liabilities are comprised of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2010
|
|
2011
|
|
|
|
|
|
|
|
Interest on
long-term debt
|
|
$
|
1,014
|
|
$
|
1,214
|
|
Vessels
operating and voyage expenses
|
|
|
1,245
|
|
|
1,365
|
|
Commissions
|
|
|
35
|
|
|
65
|
|
Interest on
derivatives and other finance expenses
|
|
|
3,345
|
|
|
3,571
|
|
General and
administrative expenses
|
|
|
264
|
|
|
341
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,903
|
|
$
|
6,556
|
|
|
|
|
|
|
|
|
|
|
|
15.
|
Early Redelivery Income, Net
|
From time to
time, the Company enters into arrangements for early redelivery of its vessels
from charterers and may continue to do so in the future, depending on market
conditions. Early redelivery costs are incurred where the contracted daily
fixed charter rates are substantially lower than the daily charter rates the vessels
could potentially earn in the current market. Income is recognized in
connection with early termination of a period time charter, resulting from a
request of the respective vessel charterers for early redelivery and agreement
to compensate the Company. Early redelivery costs for the periods presented
represent costs incurred in connection with early termination of charters for
which no replacement charter contract for the relevant vessel has been secured
at the time of concluding the charter termination agreement, and are recognized
at the time the charter termination agreement is concluded. Early redelivery
income is recognized when a charter termination agreement exists, the vessel is
redelivered to the Company and collection of the related compensation is
reasonably assured.
F-23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
|
Company
|
|
|
Date
|
|
2009
|
|
2010
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Efragel
|
(a)
|
|
March 15, 2009
|
|
$
|
29,096
|
|
$
|
|
|
$
|
|
|
Kerasies
|
(b)
|
|
June 26, 2009
|
|
|
22,331
|
|
|
|
|
|
|
|
Marindou
|
(c)
|
|
June 28, 2009
|
|
|
20,046
|
|
|
|
|
|
|
|
Pelea
|
(d)
|
|
July 19, 2009
|
|
|
2,653
|
|
|
|
|
|
|
|
Kerasies
|
(e)
|
|
March 25, 2010
|
|
|
|
|
|
(1,520
|
)
|
|
|
|
Pemer
|
(f)
|
|
April 13, 2010
|
|
|
|
|
|
3,581
|
|
|
|
|
Pelea
|
(g)
|
|
April 28, 2010
|
|
|
|
|
|
(1,765
|
)
|
|
|
|
Other minor
early redeliveries
|
|
|
Various
|
|
|
825
|
|
|
(164
|
)
|
|
207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
$
|
74,951
|
|
$
|
132
|
|
$
|
207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Details of
the transactions presented in the above table are as follows:
|
(a)
|
On March 15,
2009, Efragel took early redelivery of the
Old
Efrossini
, instead of on January 8, 2011. The respective charterer
paid cash compensation of $25,480, net of commissions. An amount of $3,616
representing the unearned revenue from the terminated period time charter
contract was recorded as additional early redelivery income.
|
(b)
|
On June 26,
2009, Kerasies took early redelivery of the
Katerina
,
instead of on November 26, 2010. The respective charterer paid cash
compensation of $21,463, net of commissions. An amount of $868 representing
the unearned revenue from the terminated period time charter contract was recorded
as additional early redelivery income.
|
(c)
|
On June 28,
2009, Marindou took early redelivery of the
Maria,
instead of on January 2, 2011. The respective charterer paid cash
compensation of $15,516, net of commissions. An amount of $4,530 representing
the unearned revenue from the terminated period time charter contract was
recorded as additional early redelivery income.
|
(d)
|
On July 19,
2009, Pelea took early redelivery of the
Pedhoulas
Leader,
instead of on November 22, 2009. The respective charterer
paid cash compensation of $2,653, net of commissions.
|
(e)
|
On March 25,
2010, Kerasies agreed with the charterers of the
Katerina
to terminate the $15.5 daily fixed rate time
charter which had commenced on June 26, 2009, and was due to expire by September
15, 2011. As compensation for early redelivery, Kerasies agreed to pay the
charterers $1,520, net of commissions.
|
(f)
|
On April 13,
2010, Pemer took early redelivery of the
Pedhoulas
Merchant,
instead of on November 5, 2010. In connection with this early redelivery,
we recognized early redelivery income of $3,581, comprising cash compensation
paid by the relevant charterer of $4,799, net of commissions, less accrued
revenue of $1,218.
|
(g)
|
On April 28,
2010, Pelea agreed with the charterers of the
Pedhoulas Leader
to terminate the $18.50 daily fixed rate
time charter which had commenced on July 19, 2009, and was due to expire by
September 30, 2011. As compensation for early redelivery, Pelea agreed to pay
the charterers an amount of $1,765, net of commissions.
|
In all the
cases presented above, no replacement charter contract had been secured at the
time of the conclusion of the respective early redelivery agreement.
|
|
16.
|
Loss on Asset Purchase Cancellations
|
In April 2009, each of Maxdeka and Maxenteka
signed an agreement with a third party seller, whereby each agreed to cancel
its contract for the acquisition of
Hull 2054
and
Hull 2055
, respectively, and
each agreed to forfeit the advance deposit paid of $7,212 per newbuild.
In June 2009,
Maxpente entered into an agreement pursuant to which the shipbuilding contract
for the acquisition of
Hull 1075
was canceled, at a cancellation
cost of $5,950, excluding commissions, which was forfeited from an advance
payment. The remaining balance of the advance payment of $10,050 was used to
settle the second advance payment for the acquisition of
Pelopidas
.
F-24
Loss on asset
purchase cancellations during the year ended December 31, 2009 represents
losses incurred on cancellation of the contracts discussed above, consisting of
advances forfeited totaling $20,395 plus expenses net of interest earned of
$304 related to the cancellations, and comprise the following:
|
|
|
|
|
Loss on
cancellation of acquisition of
Hull 2054
of $6,849, net of interest earned on the advance deposits;
|
|
|
|
|
|
Loss on
cancellation of acquisition of
Hull 2055
of $6,850, net of interest earned on the advance deposits; and
|
|
|
|
|
|
Loss on
cancellation of acquisition of
Hull 1075
of
$7,000, inclusive of brokerage commissions, of which $5,950 represented the
forfeiture of advance deposits.
|
No
cancellations were concluded during the years ended December 31, 2010 and 2011.
|
|
17.
|
Lease ArrangementsCharters-out
|
The future
minimum time charter revenue, net of commissions, based on vessels committed to
non-cancelable time charter contracts (including fixture recaps) as of December
31, 2011, is as follows:
|
|
|
|
|
December
31,
|
|
|
|
|
|
|
|
|
|
2012
|
|
$
|
136,001
|
|
2013
|
|
|
134,169
|
|
2014
|
|
|
70,057
|
|
2015
|
|
|
31,978
|
|
2016
|
|
|
22,958
|
|
Thereafter
|
|
|
202,361
|
|
|
|
|
|
|
Total
|
|
$
|
597,524
|
|
|
|
|
|
|
Future minimum
time charter revenue excludes the future acquisitions of the vessels discussed
in Note 10, since estimated delivery dates are not confirmed. Revenues from
time charters are not generally received when a vessel is off-hire, including
time required for normal periodic maintenance of the vessel. In arriving at the
minimum future charter revenues, an estimated off-hire time of 12 days to
perform any scheduled drydocking on each vessel has been deducted, and it has
been assumed that no additional off-hire time is incurred, although such
estimate may not be reflective of the actual off-hire in the future.
|
|
18.
|
General and Administrative Expenses
|
General and
administrative expenses for the years ended December 31, 2009, 2010 and 2011
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2009
|
|
2010
|
|
2011
|
|
|
|
|
|
|
|
|
|
Management fees - related
party
|
|
$
|
4,436
|
|
$
|
4,880
|
|
$
|
6,026
|
|
Professional fees (legal
and accounting)
|
|
|
1,586
|
|
|
810
|
|
|
839
|
|
Director fees
|
|
|
180
|
|
|
240
|
|
|
240
|
|
Listing fees and expenses
|
|
|
69
|
|
|
63
|
|
|
58
|
|
Miscellaneous
|
|
|
775
|
|
|
1,025
|
|
|
1,326
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,046
|
|
$
|
7,018
|
|
$
|
8,489
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned
Revenue represents cash received in advance of it being earned. Revenue is
recognized as earned on a straight-line basis at their average rates where
charter agreements provide for varying annual charter rates over their term.
Total Unearned Revenue during the periods presented is as follows:
F-25
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2010
|
|
2011
|
|
|
|
|
|
|
|
Unearned Revenue
|
|
|
|
|
|
|
|
Revenue received in advance of service provided Current liability
|
|
$
|
4,675
|
|
$
|
4,131
|
|
Deferred revenue resulting from varying charter rates
|
|
|
|
|
|
|
|
Current liability
|
|
|
6,010
|
|
|
19,080
|
|
Non-current liability
|
|
|
31,399
|
|
|
17,821
|
|
|
|
|
|
|
|
|
|
Total Unearned Revenue
|
|
$
|
42,084
|
|
$
|
41,032
|
|
|
|
|
|
|
|
|
|
|
|
20.
|
Gain on Sale of Assets
|
During the
year ended December 31, 2010, the Company concluded the sale of the vessel
Old
Efrossini
to an unrelated third
party for gross consideration of $33,000. The sale realized a net gain of
$15,199 after taking into account commissions and other directly related
expenses amounting to $832 for the vessel.
No sales of
vessels were concluded during the other periods presented.
During 2011,
the Company declared and paid four consecutive quarterly dividends of $0.15 per
share, totaling $41,782.
The
computation of basic earnings per share is based on the weighted average number
of common shares outstanding during the year and includes the shares issuable
to the audit committee chairman and the independent directors at the end of the
year for services rendered. Diluted earnings per share are the same as basic
earnings per share. There are no other potentially dilutive shares.
(a) Dividend
declaration:
On February
14, 2012, the Board of Directors declared a dividend of $0.15 per common share,
totaling $10,635, payable to all shareholders of record as of February 24,
2012, on February 29, 2012.
(b) Credit facility:
In February
2012, the Company accepted a commitment letter from a bank for a reducing
revolving credit facility for up to
$18,000, which will be used to finance part of the purchase price of
Hull 631
(the Maxeikositria credit facility). The Maxeikositria credit facility will be
made available upon delivery by the shipyard of
Hull 631
. The Maxeikositria
credit facility is repayable over seven years in 14 semi-annual consecutive installments
commencing six months after loan drawdown and a balloon payment payable with
the final installment and will be secured by a first priority mortgage over
Hull 631
and other usual maritime securities and a corporate guarantee by Safe Bulkers,
which provides for the financial covenants described in Note 7.
(c) Shipbuilding
contract:
In February 2012, Shikokuepta
entered into a shipbuilding contract for the acquisition of a Post-Panamax
class newbuild vessel, scheduled to be delivered in the second half of 2014.
F-26
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