Star Bulk(SBLK) - 2024 Q3 - Quarterly Report

Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Star Bulk, a global dry bulk shipping company, completed an all-stock merger with Eagle Bulk Shipping Inc. on April 9, 2024 - The company operates as a global shipping provider in the dry bulk sector, transporting commodities like iron ore, coal, grain, bauxite, and fertilizers[2] - On April 9, 2024, Star Bulk completed its all-stock merger with Eagle Bulk Shipping Inc. ("Eagle"), issuing 2.6211 shares of Star Bulk for each Eagle share[2][3] Our Fleet As of November 18, 2024, Star Bulk's fleet comprises 156 vessels with 15.0 million dwt, expanded by the Eagle Merger and including five newbuilds Fleet Details and Changes The fleet expanded by 52 vessels from the Eagle Merger, reaching 156 operating vessels with 15.0 million dwt, and 97% scrubber-fitted - Acquired a fleet of 52 dry bulk Supramax/Ultramax vessels through the Eagle Merger[5] - Sold and delivered 12 vessels during the nine-month period ended September 30, 2024[4] Owned Fleet Summary (as of Nov 18, 2024) | Metric | Value | | :--- | :--- | | Operating Vessels | 156 | | Aggregate Capacity | ~15.0 million dwt | | Scrubber-Fitted | 97% | Chartered-in Vessels Star Bulk has seven vessels under long-term charter-in agreements, with periods extending from 2028 to 2031 - Star Bulk has seven vessels under long-term charter-in agreements, with a total capacity of 640,000 dwt[14][15] Vessels Under Construction Five 82,000 dwt Kamsarmax newbuilding vessels are under construction, with deliveries expected from November 2025 to August 2026 - The company has five 82,000 dwt Kamsarmax newbuilding vessels under construction, with expected deliveries from November 2025 to August 2026[16][17] Liquidity and Capital Resources As of November 18, 2024, Star Bulk had $432.5 million in cash and $1,295.9 million in borrowings, with sufficient liquidity for operations and newbuild financing Financial Position (as of Nov 18, 2024) | Metric | Amount (USD) | | :--- | :--- | | Total Cash | $432.5 million | | Outstanding Borrowings | $1,295.9 million | - Principal sources of funds include cash flow from operations, equity offerings, and various debt facilities, used for capital expenditures, working capital, debt payments, and dividends[18] - In October 2024, the company secured a committed term sheet for up to $130.0 million to finance the five Kamsarmax vessels currently under construction[24] Dividend Policy On November 19, 2024, the Board declared a quarterly cash dividend of $0.60 per share, subject to financial condition and market factors - On November 19, 2024, the Board declared a quarterly cash dividend of $0.60 per share, payable around December 18, 2024, to shareholders of record as of December 5, 2024[26] - Dividend payments are at the discretion of the Board of Directors and depend on earnings, market conditions, capital requirements, and limitations under debt agreements[27] Operating Results Operating results for the nine months ended September 30, 2024, improved with a TCE rate of $19,209, driven by stronger market conditions and fleet expansion Key Operating Metrics Key operating metrics for 9M 2024 showed significant growth, with average vessels increasing to 141.3 and TCE rate rising 27.8% to $19,209 Operating Data Comparison (Nine-month period ended Sep 30) | Metric | 2023 | 2024 | Change | | :--- | :--- | :--- | :--- | | Average number of vessels | 125.1 | 141.3 | +12.9% | | Ownership days | 34,159 | 38,708 | +13.3% | | Available days | 32,867 | 37,210 | +13.2% | | TCE rate (USD) | $15,035 | $19,209 | +27.8% | Factors Affecting Our Results of Operations Results are influenced by vessel count, charter rates, and charter mix, with key expenses including voyage, operating, and financing costs, and derivative impacts - Revenue is primarily driven by the number of vessels, charter rates, and the mix of spot versus time charters[34] - Key expenses include voyage expenses, vessel operating costs, dry docking, depreciation, G&A, and interest and finance costs[36][38][39][40][50] - The company uses Forward Freight Agreements (FFAs) and bunker swaps as economic hedges, with realized and unrealized gains/losses affecting earnings[43][44] Results of Operations Comparison (9M 2024 vs. 9M 2023) For 9M 2024, voyage revenues increased to $956.5 million and net income to $262.2 million, driven by fleet expansion and higher TCE rates Income Statement Highlights (Nine-month period ended Sep 30) | Line Item (in millions USD) | 2023 | 2024 | | :--- | :--- | :--- | | Voyage Revenues | $685.8 | $956.5 | | Vessel Operating Expenses | $167.2 | $202.2 | | General & Admin Expenses | $36.3 | $51.8 | | Interest & Finance Costs | $49.8 | $70.5 | | Net Income | $133.8 | $262.2 | Cash Flow Analysis Net cash from operations was $394.9 million in 9M 2024, investing provided $313.6 million, and financing used $497.7 million, ending with $472.5 million cash Cash Flow Summary (Nine-month period ended Sep 30) | Cash Flow Activity (in millions USD) | 2023 | 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $247.2 | $394.9 | | Net Cash from Investing Activities | $186.0 | $313.6 | | Net Cash used in Financing Activities | ($417.2) | ($497.7) | Unaudited Interim Condensed Consolidated Financial Statements Financial Statements Overview Unaudited consolidated financial statements for 9M 2024 reflect the Eagle Merger's impact, with total assets at $4.16 billion and net income at $262.2 million Consolidated Balance Sheets As of September 30, 2024, total assets reached $4.16 billion, liabilities $1.65 billion, and equity $2.51 billion, largely due to the Eagle Merger Balance Sheet Summary (in thousands USD) | Account | Dec 31, 2023 | Sep 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $227,481 | $453,564 | | Vessels and other fixed assets, net | $2,539,743 | $3,287,229 | | Total Assets | $3,028,255 | $4,156,949 | | Long-term bank loans, net | $970,039 | $1,104,022 | | Total Liabilities | $1,368,185 | $1,645,255 | | Total Shareholders' Equity | $1,660,070 | $2,511,694 | Consolidated Income Statements For 9M 2024, voyage revenues were $956.5 million and net income $262.2 million, with diluted EPS at $2.48, significantly up from 2023 Income Statement Summary (Nine months ended Sep 30, in thousands USD) | Account | 2023 | 2024 | | :--- | :--- | :--- | | Voyage revenues | $685,808 | $956,542 | | Operating income | $179,222 | $320,771 | | Net income | $133,849 | $262,208 | | Earnings per share, diluted | $1.30 | $2.48 | Consolidated Statements of Cash Flows Net cash from operations was $394.9 million in 9M 2024, investing provided $313.6 million, and financing used $497.7 million, ending with $472.5 million cash Cash Flow Summary (Nine months ended Sep 30, in thousands USD) | Activity | 2023 | 2024 | | :--- | :--- | :--- | | Net cash provided by Operating Activities | $247,173 | $394,856 | | Net cash provided by Investing Activities | $185,962 | $313,594 | | Net cash used in Financing Activities | ($417,163) | ($497,663) | | Net increase in cash | $15,972 | $210,787 | | Cash and restricted cash at end of period | $302,316 | $472,537 | Notes to Financial Statements Notes detail the Eagle Merger's accounting, fleet changes, new debt facilities, share capital activities, and subsequent events like dividend declarations Note 1: Basis of Presentation and Eagle Merger Note 1 details the Eagle Merger, completed April 9, 2024, accounted for as an asset acquisition with $665.6 million consideration for $805.8 million fair value of net assets - The Eagle Merger was accounted for as an asset acquisition, with assets and liabilities recorded at cost based on their relative fair value[99] Eagle Merger Consideration (April 9, 2024) | Metric | Value | | :--- | :--- | | Total Star Bulk common stock issued | 28,082,319 shares | | Star Bulk closing price per share | $23.70 | | Consideration transferred | $665.6 million | - The fair value of net assets acquired ($805.8 million) exceeded the consideration transferred ($665.6 million) by $140.2 million, allocated to reduce acquired vessel value[103][104] Note 5: Vessels, Fixed Assets, and Construction Note 5 details fixed asset changes, including the 52-vessel Eagle fleet acquisition, $32.0 million gain from vessel sales, and $156.7 million in newbuild commitments - Acquired a fleet of 52 dry bulk vessels through the Eagle Merger[118] - Recognized a net gain of $32.0 million from the sale of vessels during the nine-month period ended September 30, 2024[121] - As of September 30, 2024, the remaining contracted price for five vessels under construction was $156.7 million, payable through August 2026[126] Note 8: Debt and Convertible Notes Note 8 details $388.1 million in new loans to refinance Eagle debt and the conversion of Eagle Convertible Notes into 5.97 million Star Bulk shares - Entered into new loan facilities totaling $388.1 million in April 2024 to refinance the debt assumed from Eagle[137][139][140][141][142] - The assumed Eagle Convertible Notes matured on August 1, 2024, and were converted into 5,971,284 shares of Star Bulk common stock[151] Note 9: Share Capital Note 9 outlines share capital changes, including 28.1 million shares issued for the Eagle Merger, $19.2 million in share repurchases, and $206.2 million in dividends paid - Issued 28,082,319 common shares as consideration for the Eagle Merger[83][95] - Repurchased 933,004 common shares for an aggregate consideration of $19.2 million[159] - Declared and paid cash dividends of $206.2 million, equivalent to $1.90 per common share[160] Note 12: Commitments and Contingencies As of September 30, 2024, future minimum charter revenues are $121.6 million, with commitments of $99.0 million for charter-in and vessel upgrades Future Commitments (as of Sep 30, 2024) | Commitment Type | Total Amount (USD) | | :--- | :--- | | Future Minimum Charter Revenues (Inflows) | $121.6 million | | Charter-in & Upgrade Expenses (Outflows) | ($99.0 million) | Note 15: Subsequent Events Subsequent events include delivery of two newbuild vessels, securing $130 million financing for Kamsarmax newbuilds, and a $0.60 per share quarterly dividend declaration - Took delivery of two newbuilding vessels, Star Illusion and Star Thetis, under long-term charter-in agreements[200] - Secured a committed term sheet for up to $130 million for post-delivery financing of five Kamsarmax vessels under construction[200] - On November 19, 2024, the Board declared a quarterly cash dividend of $0.60 per share[200]