Safe Bulkers(SB) - 2022 Q4 - Annual Report

Identity of Directors, Senior Management and Advisers This section identifies the individuals serving as directors, senior management, and advisers to the company Offer Statistics and Expected Timetable This section provides statistics related to the offer and its expected timeline Key Information This section presents essential information about the company, including its capitalization, indebtedness, and significant risk factors Reserved This section is reserved and contains no applicable information Capitalization and Indebtedness This section states that the information regarding capitalization and indebtedness is not applicable Reasons for the Offer and Use of Proceeds This section states that the reasons for the offer and use of proceeds are not applicable Risk Factors This section outlines significant risks associated with investing in Safe Bulkers, Inc., covering industry-specific challenges, operational risks, and global economic conditions - The drybulk shipping industry is cyclical and volatile, with charter rates and vessel values fluctuating significantly, impacting earnings and cash flow. The Baltic Dry Index (BDI) showed extreme volatility, from a high of 11,793 in 2008 to a low of 290 in 2016, and continued volatility through 2023[33][34][35] - Global economic and regulatory conditions, particularly in Asia (China, Japan, India), can significantly impact drybulk trade and demand, leading to reduced charter rates and adverse effects on business operations[41][42] - An oversupply of drybulk vessel capacity, with approximately 8.3% for Panamax to Post-Panamax and 5.9% for Capesize vessels on order as of December 31, 2022, could lead to reduced charter rates and negatively impact results of operations[43] - The company is subject to complex and increasingly stringent environmental regulations (e.g., MARPOL Annex VI for SOx and NOx, GHG emissions, BWM Convention), requiring significant capital expenditures for compliance and potentially increasing operational costs or making older vessels obsolete[53][56][59][60] - Increasing scrutiny from investors and lenders regarding ESG policies may impose additional costs, hinder access to capital, or damage the company's reputation if it fails to meet evolving sustainability expectations[61][62][63] - The war between Russia and Ukraine has disrupted supply chains, caused global economic instability, and increased shipping costs, potentially affecting the company's ability to secure charters and financing[75][76][77] - The company's substantial indebtedness ($422.6 million outstanding as of December 31, 2022) includes restrictive covenants and cross-default provisions, where a breach could accelerate debt and lead to foreclosure on vessels[130][131][132][134] - Future dividend payments are discretionary and depend on earnings, financial condition, growth strategies, legal provisions, and debt covenants, with no guarantee of future declarations[135][136][138][139][140][141][142] - Polys Hajioannou, the CEO and largest shareholder (40.70% of common stock), has significant influence over corporate matters, which could create conflicts of interest with other shareholders[150][164] - The company's status as a foreign private issuer exempts it from certain SEC and NYSE corporate governance requirements, potentially offering fewer protections to shareholders compared to U.S. domestic issuers[165][166][167] - The company's shareholder rights plan and anti-takeover provisions in its organizational documents could make it more difficult for a third party to acquire the company without board approval, potentially affecting the market price of common stock[180][181][182][187] Risk Factor Summary This section provides a summary of material risk factors associated with investing in the company's securities, noting that not all risks are addressed - Investing in the company's securities involves a high degree of risk, with a summary of material factors provided, but not all risks are addressed[31] Risks Inherent in Our Industry and Our Business This section details risks specific to the drybulk shipping industry and the company's operations, including market volatility, regulatory changes, and global events - The drybulk shipping industry is cyclical and volatile, with charter rates and vessel values fluctuating significantly, impacting earnings and cash flow. The Baltic Dry Index (BDI) has shown extreme volatility, from a high of 11,793 in 2008 to a low of 290 in 2016, and continued volatility through 2023[33][34] - An oversupply of drybulk vessel capacity, with newbuild orders representing 8.3% for Panamax to Post-Panamax and 5.9% for Capesize vessels as of December 31, 2022, could lead to reduced charter rates and negatively affect fleet utilization and profitability[43] - The market value of drybulk vessels is highly volatile, and a significant decrease could lead to impairment losses, breach of credit covenants, and adverse effects on financial condition[44][45][46] - The company is subject to complex and increasingly stringent environmental regulations (e.g., MARPOL Annex VI for SOx and NOx, GHG emissions, BWM Convention), requiring significant capital expenditures for compliance and potentially increasing operational costs or making older vessels obsolete[53][56][59][60] - Global events such as terrorist attacks, international hostilities (e.g., Russia-Ukraine war), and epidemics (e.g., Covid-19) can disrupt shipping routes, increase costs, and negatively affect operations and financial condition[74][75][76][77][78] - The company relies on information technology systems, and cyber-attacks or service interruptions could disrupt operations, lead to data breaches, and negatively affect business and reputation[88][89] - Inflationary pressures and rising central bank interest rates could lead to subpar economic growth, reduced dry-bulk trade, and increased financing and operating costs, adversely affecting the company's financial performance[124][125][126][127][129] - Restrictive covenants in existing credit facilities and financing agreements impose financial and operational limitations, and any breach could result in debt acceleration and foreclosure on vessels[130][131][132][134] Risks Relating to Our Common Stock and Preferred Shares This section addresses risks specific to the company's common and preferred stock, including dividend policies, potential conflicts of interest, and corporate governance exemptions - The declaration and payment of dividends are at the discretion of the board of directors and depend on various factors, including earnings, financial condition, growth strategies, and debt covenants, with no guarantee of future payments[135][136][138][139][140][141][142] - As a holding company, the ability to pay dividends depends on subsidiaries distributing funds, which can be affected by third-party claims or laws of incorporation (Marshall Islands, Liberia, Cyprus)[143] - The CEO, Polys Hajioannou, controls the company's Managers and is the largest shareholder (40.70%), creating potential conflicts of interest in chartering, vessel transactions, and management decisions[150][151][164] - The company's status as a foreign private issuer exempts it from certain SEC and NYSE corporate governance requirements, potentially offering fewer protections to shareholders compared to U.S. domestic issuers[165][166][167] - Future sales of common stock, including through the ATM Program, or the perception of such sales, could depress the market price and dilute existing shareholders[169][172][175][176] - Anti-takeover provisions in organizational documents and the shareholder rights plan could make it difficult for shareholders to replace the board or benefit from a change in control, potentially affecting the stock price[180][181][182][187] - Preferred shares are perpetual equity interests, subordinate to debt, and their value could be diluted by future issuances of preferred shares or additional indebtedness[190][193] Tax Risks This section outlines potential tax risks, including U.S. federal income tax on shipping income and the possibility of being classified as a Passive Foreign Investment Company (PFIC) - The company may earn U.S. source shipping income subject to a 4% U.S. federal income tax, reducing cash available for distributions, especially if not reimbursed by charterers[198][199] - There is a risk that U.S. tax authorities could treat the company as a 'passive foreign investment company' (PFIC), which would have adverse U.S. federal income tax consequences for U.S. holders, including disadvantageous tax regimes on income, distributions, and gains[200][201][202][203] Information on the Company This section provides comprehensive information about the company, including its history, business operations, organizational structure, and property History and Development of the Company Safe Bulkers, Inc. was incorporated in the Marshall Islands in 2007, building on a long shipping legacy and expanding its fleet under current leadership - Safe Bulkers, Inc. was incorporated on December 11, 2007, in the Republic of the Marshall Islands[204] - The company's CEO, Polys Hajioannou, has led the company to expand its fleet from 887,900 dwt prior to its 2008 IPO to 4,455,600 dwt as of February 24, 2023, through strategic sales of 24 older vessels and acquisition of 61 newbuilds and 14 second-hand vessels[205][206] - The company's common stock began trading on the NYSE in June 2008[206] Business Overview Safe Bulkers is an international drybulk shipping company operating a fleet of 44 vessels, transporting major and minor bulk cargoes worldwide, with a focus on ESG and fleet renewal - As of February 24, 2023, Safe Bulkers operates a fleet of 44 drybulk vessels with an aggregate carrying capacity of 4,455,600 dwt and an average age of 10.5 years[208][220] - The company employs a mixed strategy of period time charters (for stable cash flow) and spot time charters (for market flexibility) with major drybulk transportation consumers[209][234] - Safe Bulkers has a strong ESG strategy, investing in 9 newbuilds compliant with IMO GHG Phase 3 - NOx Tier III regulations (4 for 2023, 3 for 2024, 2 for 2025 delivery) and environmental upgrades for existing vessels, including low friction paints and energy-saving devices[210][211][212][213][215] - The company has retrofitted its entire fleet with Ballast Water Treatment Systems (BWTS) and installed Scrubbers on 19 vessels, with plans for 4 more, to reduce SOx emissions and capitalize on fuel price differentials[217] - In 2022, two charterers, Viterra B.V. and Cargill International S.A., accounted for 33.52% of total revenues (15.81% and 17.71% respectively)[235] - The company's operations are managed by Safety Management Overseas S.A., Safe Bulkers Management Limited, and Safe Bulkers Management Monaco Inc., all controlled by Polys Hajioannou, under management agreements that include daily ship management fees (€875/vessel/day) and an annual fee (€3.5 million)[236][237] - The company maintains hull and machinery insurance, war risks insurance, and protection and indemnity (P&I) coverage, with pollution liability limited to $1.0 billion per vessel per incident[247][249][251][252][260] - All vessels are ISM Code-certified and comply with international (MARPOL, SOLAS, BWM Convention) and national (OPA 90, CERCLA, CWA, CAA) environmental and safety regulations, with ongoing investments for compliance[269][272][277][302][309][312] - The COVID-19 pandemic negatively impacted market rates in 2020 and increased crew costs, and while restrictions have eased, future developments remain uncertain and could affect operations and financial performance[344][346][347][348][349] - The company's vessels did not make any port calls to Iran or Syria in 2022, and charter party agreements restrict calls in violation of sanctions[351][352] Our ESG Strategy Safe Bulkers has integrated ESG into its corporate strategy, focusing on fleet renewal with environmentally advanced newbuilds, upgrades to existing vessels, and sustainability-linked financing - Safe Bulkers has integrated ESG into its corporate strategy to reduce environmental impact, enhance competitiveness, and maintain investor trust, driven by increasing GHG emission regulations and investor scrutiny[209][210][211] - The strategy includes a fleet renewal program with environmentally advanced newbuilds (IMO GHG Phase 3 - NOx Tier III compliant), acquisition of younger second-hand vessels, and sale of older, less efficient vessels[212][213][214] - Environmental upgrades on existing vessels, such as low friction paints and energy-saving devices, are ongoing, with 20 vessels scheduled for upgrade by end of 2023[215] - The entire fleet has been retrofitted with BWTS, and Scrubbers have been installed on 19 vessels, with 4 more planned, to reduce SOx emissions and benefit from fuel price differentials[217] - The company secured two sustainability-linked financings totaling $160.0 million for 11 vessels, incorporating interest rate incentives tied to independently verified emission targets[218] Our Fleet, Newbuilds and Employment Profile This section details the company's fleet composition, newbuild orderbook, and employment strategy, highlighting its focus on modern, environmentally advanced vessels - As of February 24, 2023, the fleet comprises 44 vessels (12 Panamax, 7 Kamsarmax, 17 Post-Panamax, 8 Capesize) with an aggregate capacity of 4,455,600 dwt and an average age of 10.5 years[220] - The orderbook includes nine environmentally advanced newbuilds (8 Kamsarmax, 1 Post-Panamax) compliant with IMO GHG-EEDI Phase 3 and NOx Tier III, scheduled for delivery between 2023 and H1 2025[221] - Upon delivery of all newbuilds by Q1 2025, the fleet will expand to 53 vessels with an aggregate capacity of 5,199,600 dwt[221] Current Fleet and Newbuild Orderbook (as of Feb 24, 2023) | Vessel Name | Dwt | Year Built | Country of Construction | Charter Type | Charter Rate (USD/day) | Commissions (%) | Charter Period | Sister Ship | |---|---|---|---|---|---|---|---|---| | CURRENT FLEET | | | | | | | | | | Katerina | 76,000 | 2004 | Japan | Period | $10,950 + 50% *101% BPI 74 4TC | 5.00 % | Sep 2022 - Aug 2023 | A | | Maritsa | 76,000 | 2005 | Japan | Spot | $8,250 | 5.00 % | Jan 2023 - Mar 2023 | A | | Paraskevi 2 | 75,000 | 2011 | Japan | Period | $15,250 | 5.00 % | Sep 2022 - Apr 2023 | B | | Efrossini | 75,000 | 2012 | Japan | Spot | $7,500 | 5.00 % | Feb 2023 - Mar 2023 | B | | Zoe | 75,000 | 2013 | Japan | Period | BPI 74 4TC * 104.25% | 5.00 % | Sep 2022 - Jul 2023 | B | | Koulitsa 2 | 78,100 | 2013 | Japan | Spot / Period | $11,750 / BPI 74 4TC * 114% | 3.75 % | Jan 2023 - Mar 2023 / Mar 2023 - Nov 2023 | | | Kypros Land | 77,100 | 2014 | Japan | Period | $13,800 / BPI 82 5TC * 97% - $2,150 | 3.75 % | Aug 2020 - Aug 2022 / Aug 2022 - Aug 2025 | H | | Kypros Sea | 77,100 | 2014 | Japan | Period | $24,123 / BPI 82 5TC * 97% - $2,150 | 3.75 % | Sep 2022 - Dec 2022 / Dec 2022 - Mar 2023 / Mar 2023 - Jun 2023 / Jun 2023 - Jul 2025 | H | | Kypros Bravery | 78,000 | 2015 | Japan | Period | $11,750 / BPI 82 5TC * 97% - $2,150 | 3.75 % | Aug 2020 - Aug 2022 / Aug 2022 - Aug 2025 | I | | Kypros Sky | 77,100 | 2015 | Japan | Period | $11,750 / BPI 82 5TC * 97% - $2,150 | 3.75 % | Aug 2020 - Aug 2022 / Aug 2022 - Aug 2025 | H | | Kypros Loyalty | 78,000 | 2015 | Japan | Period | $23,153 / BPI 82 5TC * 97% - $2,150 | 3.75 % | Sep 2022 - Dec 2022 / Dec 2022 - Mar 2023 / Mar 2023 - Jun 2023 / Jun 2023 - Jul 2025 | I | | Kypros Spirit | 78,000 | 2016 | Japan | Period | $13,800 / BPI 82 5TC * 97% - $2,150 | 3.75 % | Aug 2020 - Aug 2022 / Aug 2022 - Jul 2025 | I | | Pedhoulas Merchant | 82,300 | 2006 | Japan | Period | $25,900 | 3.75 % | Mar 2022 - Mar 2023 | C | | Pedhoulas Leader | 82,300 | 2007 | Japan | Period | BPI 82 5TC * 98% | 3.75 % | Jan 2023 - Oct 2023 | C | | Pedhoulas Commander | 83,700 | 2008 | Japan | Period | $7,000 + 50% * BPI 82 5TC | 5.00 % | Dec 2022 - Jun 2023 | | | Pedhoulas Cherry | 82,000 | 2015 | China | Period | $24,000 | 5.00 % | Jul 2022 - Aug 2023 | K | | Pedhoulas Rose | 82,000 | 2017 | China | Period | $10,500 + 50% * 104% BPI 82 5TC | 5.00 % | Nov 2022 - May 2023 | K | | Pedhoulas Cedrus | 81,800 | 2018 | Japan | Period | $21,000 | 5.00 % | Aug 2022 - Mar 2023 | | | Vassos | 82,000 | 2022 | Japan | Period | $21,500 | 5.00 % | Oct 2022 - Apr 2023 | | | Marina | 87,000 | 2006 | Japan | Spot | $8,250 | 4.50 % | Feb 2023 - Apr 2023 | E | | Xenia | 87,000 | 2006 | Japan | Spot | $7,000 | 3.75 % | Feb 2023 - Mar 2023 | E | | Sophia | 87,000 | 2007 | Japan | Spot | $13,900 | 5.00 % | Jan 2023 - Mar 2023 | E | | Eleni | 87,000 | 2008 | Japan | Spot | $7,000 | 5.00 % | Jan 2023 - Mar 2023 | E | | Martine | 87,000 | 2009 | Japan | Spot | $27,000 | 5.00 % | Feb 2023 - Apr 2023 | E | | Andreas K | 92,000 | 2009 | South Korea | Spot | $10,000 | 4.50 % | Mar 2023 - Apr 2023 | F | | Panayiota K | 92,000 | 2010 | South Korea | Spot | $12,000 | 5.00 % | Feb 2023 - Mar 2023 | F | | Agios Spyridonas | 92,000 | 2010 | South Korea | Spot | $29,000 | 5.00 % | Jan 2023 - Mar 2023 | F | | Venus Heritage | 95,800 | 2010 | Japan | Spot | $7,500 | 5.00 % | Jan 2023 - Mar 2023 | G | | Venus History | 95,800 | 2011 | Japan | Spot | $10,600 | 5.00 % | Feb 2023 - Mar 2023 | G | | Venus Horizon | 95,800 | 2012 | Japan | Period | $27,950 | 5.00 % | May 2022 - Mar 2023 | G | | Venus Harmony | 95,700 | 2013 | Japan | Spot | $7,900 | 5.00 % | Feb 2023 - Mar 2023 | | | Troodos Sun | 85,000 | 2016 | Japan | Period | BPI 82 5TC * 114% | 5.00 % | Jun 2021 - Apr 2023 | J | | Troodos Air | 85,000 | 2016 | Japan | Period | $28,000 | 5.00 % | May 2022 - Jun 2023 | J | | Troodos Oak | 85,000 | 2020 | Japan | Period | $15,500 | 3.75 % | Dec 2022 - Aug 2023 | | | Climate Respect | 87,000 | 2022 | Japan | Period | $18,500 | 5.00 % | Dec 2022 - Oct 2023 | L | | Climate Ethics | 87,000 | 2023 | Japan | Period | $18,500 | 5.00 % | Jan 2023 - Nov 2023 | L | | Mount Troodos | 181,400 | 2009 | Japan | Period | $34,500 / BCI 5TC * 106% | 3.75 % | Apr 2022 - Mar 2023 / Mar 2023 - Jan 2024 | | | Kanaris | 178,100 | 2010 | China | Period | $25,928 | 2.50 % | Sep 2011 - Sep 2031 | | | Pelopidas | 176,000 | 2011 | China | Period | $25,250 | 3.75 % | Jun 2022 - May 2025 | | | Aghia Sofia | 176,000 | 2012 | China | Spot / Period | BCI 5TC * 112% / BCI 5TC * 123% | 5.00 % | Dec 2022 - Mar 2023 / May 2023 - Apr 2024 | | | Stelios Y | 181,400 | 2012 | Japan | Period | $24,400 / BCI 5TC * 117% | 3.75 % | Nov 2021 - Nov 2024 / Nov 2024 - Feb 2027 | D | | Lake Despina | 181,400 | 2014 | Japan | Period | $25,200 | 5.00 % | Feb 2022 - Feb 2025 | | | Maria | 181,300 | 2014 | Japan | Period | BCI 5TC * 130% | 3.75 % | Jan 2023 - Jan 2024 | D | | Michalis H | 180,400 | 2012 | China | Period | $23,000 | 3.75 % | Sep 2022 - Jul 2025 | | | NEWBUILDS ORDERBOOK | | | | | | | | | | TBN | 87,000 | Q2 2023 | Japan | | | | | | | TBN | 82,000 | Q4 2023 | Japan | | | | | | | TBN | 82,000 | Q4 2023 | Japan | | | | | | | TBN | 82,000 | Q1 2024 | Japan | | | | | | | TBN | 82,000 | Q1 2024 | Japan | | | | | | | TBN | 82,000 | Q4 2023 | Japan | | | | | | | TBN | 82,500 | Q3 2024 | China | | | | | | | TBN | 82,500 | Q1 2025 | China | | | | | | | TBN | 82,000 | Q2 2025 | Japan | | | | | | Chartering of Our Fleet The company employs a mixed charter strategy, utilizing both period time charters for stable rates and spot time charters for market flexibility, with charterers typically covering voyage expenses - The company employs vessels in both period time charters (fixed duration, stable rates) and spot time charters (short-term, volatile rates) based on market conditions[231][234] - Under time charters, the charterer pays voyage expenses (e.g., fuel, port costs), while the company pays vessel operating expenses (e.g., crewing, insurance, maintenance)[232] - Voyage charters involve the company paying both operating and voyage expenses for carrying specific cargo from load to discharge port, which are infrequently used[233] - As of February 24, 2023, the average remaining duration of charters for the existing fleet was 1.0 year[234] Our Customers The company serves a diverse base of national and international drybulk transportation companies, with two major charterers accounting for a significant portion of 2022 revenues - Since 2005, the company has served over 30 national, regional, and international companies, including Bunge, Cargill, Glencore, and NYK[235] - In 2022, Viterra B.V. (ex-Glencore Agriculture B.V.) and Cargill International S.A. collectively accounted for 33.52% of total revenues, with each exceeding 10%[235] Management of Our Fleet Fleet operations are managed by related-party Managers controlled by Polys Hajioannou, providing comprehensive services for a daily fee per vessel and additional commissions - Operations are managed by Safety Management Overseas S.A., Safe Bulkers Management Limited, and Safe Bulkers Management Monaco Inc. (the 'Managers'), all controlled by Polys Hajioannou[236][239] - Managers provide technical, administrative, and commercial services, receiving a daily ship management fee of €875 per vessel and an annual fee of €3.50 million (increased from €3.0 million after May 2021)[237][238] - Managers also receive 1.0% commission on vessel purchase/sale contract prices and a $550,000 supervision fee per newbuild[238] - Management Agreements have a maximum expiration date in May 2027, with preferential treatment for the company's vessels in chartering opportunities[236][239] Competition The company operates in a highly competitive and fragmented drybulk market, differentiating itself through a modern fleet and strong customer relationships - The company operates in a highly competitive, capital-intensive, and fragmented drybulk market[241][242] - Competition is based on price, customer relationships, operating expertise, reputation, and vessel characteristics (size, age, location, condition)[242] - The company differentiates itself with a modern fleet (average age 10.5 years) and advanced designs, primarily built in Japanese shipyards, which helps attract established customers[241] Crewing and Shore Employees As of December 31, 2022, the Managers employed approximately 914 seafarers and 156 shore-based personnel responsible for crewing and operations - As of December 31, 2022, approximately 914 people served on board the fleet, and Managers employed about 156 shore-based personnel[243] - The Managers are responsible for recruiting and managing all crew members and senior officers[243] Permits and Authorizations The company obtains all necessary governmental and quasi-governmental permits, licenses, and certificates for its vessel operations, while acknowledging potential future cost increases from regulatory changes - The company is required to obtain various governmental and quasi-governmental permits, licenses, certificates, and financial assurances for its vessel operations, all of which have been obtained[244] - Future changes in laws and regulations, especially environmental ones, could increase costs or limit business operations[244] Risk of Loss and Liability Insurance Vessel operations inherently carry risks of loss and liability, which the company mitigates through comprehensive insurance coverage, including hull and machinery, war risks, and protection and indemnity - Vessel operations involve risks like mechanical failure, collision, cargo loss, personal injury, environmental damage, piracy, and terrorism[246][271] - The company maintains hull and machinery insurance, war risks insurance, and protection and indemnity (P&I) coverage, arranged by its Managers[247] - P&I insurance covers third-party liabilities, including crew injury/death, cargo damage, collisions, and pollution, with pollution coverage limited to $1.0 billion per vessel per incident[251][252] - The company generally does not carry loss of hire insurance, which covers revenue loss during extended off-hire periods[73] General Vessel operations are exposed to various risks, including mechanical failure, collisions, and environmental mishaps, with the U.S. Oil Pollution Act of 1990 (OPA 90) imposing significant liability - Vessel operations carry risks such as mechanical failure, collision, property loss, cargo damage, personal injury, and environmental mishaps, including oil spills[246] - The U.S. Oil Pollution Act of 1990 (OPA 90) imposes virtually unlimited liability for oil pollution in U.S. waters, increasing insurance costs[246] - Insurance coverage is arranged by Managers and includes hull and machinery, war risks, and protection and indemnity, with rates generally low due to a good incident rate and young fleet[247] Hull and machinery insurance Hull and machinery insurance covers physical damage to vessels from various perils up to their fair market value, with additional increased value coverage maintained - Hull and machinery insurance covers risks like collision, fire, grounding, and engine breakdown up to an agreed amount per vessel, typically its fair market value, after deductibles[249] - Increased value coverage is also maintained, allowing recovery of amounts exceeding the total loss amount under the primary hull and machinery policy[249] Protection and indemnity insurance Protection and indemnity (P&I) insurance provides mutual indemnity for third-party liabilities, including pollution, with coverage limits and pooling agreements for large claims - Protection and indemnity (P&I) insurance is mutual indemnity insurance from P&I Associations, covering third-party liabilities such as crew injury/death, cargo loss/damage, collisions, and pollution[250][251] - Pollution coverage is limited to $1.0 billion per vessel per incident, while coverage for passengers is $2.0 billion and for passengers and seamen is $3.0 billion per vessel per incident[252] - As a member of an International Group P&I Association, the company is subject to calls based on the group's and individual associations' claim records, with a pooling agreement for claims exceeding $10.0 million up to $8.9 billion[252][253] War Risks Insurance War risk insurance covers hull damage, detention, and P&I liabilities arising from acts of war, confiscation, or sabotage, with specific coverage limits - War risk insurance covers hull or freight damage, detention/diversion risks, and P&I liabilities (including crew) arising from confiscations, seizure, capture, vandalism, sabotage, and other war risks[256] - Coverage limits are set for hull and machinery value, and for war risks P&I liabilities up to $500.0 million per vessel per incident[260] Inspection by Classification Societies All vessels must be 'classed' by recognized classification societies to certify safety and seaworthiness, undergoing regular surveys and drydockings to maintain compliance - All oceangoing vessels must be 'classed' by a classification society (e.g., Lloyd's Register, American Bureau of Shipping, Bureau Veritas) to certify safety and seaworthiness[256][265][266] - Vessels undergo regular surveys: annual, intermediate (extended annual), and class renewal/special surveys (every five years, more extensive, including thickness-gauging)[258][261] - Drydocking is typically required during intermediate and special surveys for underwater repairs, though 'in water survey' notation can allow underwater inspection in lieu of drydocking under certain conditions[259] Scheduled Drydockings and Surveys (Next 3 Years) | Vessel Name | Drydocking | Scheduled Survey | |---|---|---| | Maria (2) (3) (4) | January 2023 | January 202 | | Michalis H (2) (3) | February 2023 | January 202 | | Marina (3) | March 2023 | January 202 | | Maritsa (3) | March 2023 | January 202 | | Koulitsa 2 (3) | March 2023 | March 202 | | Kanaris (3) | April 2023 | March 202 | | Aghia Sofia (2) (3) | May 2023 | January 202 | | Lake Despina (2) (3) | June 2023 | January 202 | | Pedhoulas Commander (3) | June 2023 | May 202 | | Pedhoulas Cedrus (3) | June 2023 | June 202 | | Andreas K (3) | June 2023 | August 202 | | Zoe (3) | July 2023 | July 202 | | Venus Harmony (3) | August 2023 | November 202 | | Xenia (3) | September 2023 | April 202 | | Eleni (3) | November 2023 | November 202 | | Kypros Bravery | January 2024 | January 202 | | Kypros Land | January 2024 | January 202 | | Kypros Sea | January 2024 | March 202 | | Agios Spyridonas (3) | January 2024 | January 202 | | Martine (3) | February 2024 | February 202 | | Kypros Sky | March 2024 | March 202 | | Stelios Y (2) (3) | March 2024 | March 202 | | Mount Troodos (3) | April 2024 | November 202 | | Troodos Oak | April 2024 | April 202 | | Panayiota K (3) | April 2024 | April 202 | | Katerina (3) | May 2024 | May 202 | | Pedhoulas Merchant (3) | May 2024 | March 202 | | Kypros Loyalty | July 2024 | June 202 | | Pedhoulas Cherry (3) | July 2024 | July 202 | | Venus Heritage (3) | October 2024 | December 202 | | Pedhoulas Leader (3) | November 2024 | February 202 | | Troodos Air | March 2025 | March, 202 | | Pedhoulas Rose | April 2025 | January 202 | | Paraskevi 2 | April 2025 | April 202 | | Troodos Sun | April 2025 | January 202 | | Pelopidas | June 2025 | November 202 | | Kypros Spirit | July 2025 | July 202 | | Venus History | September 2025 | September 202 | | Sophia | December 2025 | June 202 | Regulations: Safety and the Environment The company's vessels are subject to extensive international and national environmental and safety regulations, requiring significant ongoing investments for compliance and posing risks of increased costs and liabilities - Vessels are subject to international conventions (IMO MARPOL, SOLAS, BWM Convention) and national/local laws (OPA 90, CERCLA, CWA, CAA) governing environmental protection and safety[267][268] - The company incurred significant expenditures in 2019-2022 for BWTS and Scrubbers and plans additional expenditures for four more Scrubbers and environmental upgrades (low friction paints, energy-saving devices) on 20 existing vessels by end of 2023[269] - Compliance with environmental regulations is crucial, as failure can lead to substantial costs, liabilities, fines, operational suspensions, and reputational damage[271][272][276] General Vessels are subject to international and national environmental regulations, requiring significant compliance costs and ongoing modifications, with the company's Managers ensuring adherence - Vessels are subject to international and national laws and regulations concerning environmental protection, including hazardous substances, oil spills, air emissions, water discharges, and ballast water[267] - Compliance with these regulations has incurred significant costs for vessel modifications and operating procedures, with further expenditures anticipated for additional Scrubbers and environmental upgrades[269] - The company's Managers are responsible for technical management and regulatory compliance, and all vessels are certified in accordance with ISO 14001 and ISO 50001[270][272] Regulations by IMO and Other Related Bodies This section details regulations from the IMO and other bodies, including MARPOL Annex VI for emissions, GHG emission reduction measures, and the Ballast Water Management Convention - IMO's MARPOL Annex VI regulates sulfur oxide (SOx) and nitrogen oxide (NOx) emissions. A global 0.5% sulfur cap took effect in 2020, requiring vessels to use VLSFO or be fitted with Scrubbers for HSFO[277][279] - The company has installed Scrubbers on 19 vessels and plans four more, but the viability of these investments depends on the price differential between VLSFO and HSFO[280] - GHG emission regulations, including IMO DCS, EU-MRV, EEDI, EEXI, and CII, are increasing operational and financial restrictions, potentially imposing carbon taxes or emission trading systems on less efficient vessels[284][285][286][287][288][289][290][291][292][295] - The BWM Convention, effective September 2017, mandates ballast water treatment systems, with all company vessels equipped with U.S. Coast Guard approved BWTS, except four requiring upgrades[301][302] - The ISM Code requires a Safety Management System (SMS) for safe operation and environmental protection, with all company vessels currently ISM Code-certified[308][309] U.S. Regulations This section details U.S. regulations, including OPA 90 for oil spills, CERCLA for hazardous substances, the CWA for wastewater discharges, and U.S. Air Emission Requirements - OPA 90 imposes strict, joint, and several liability on vessel owners/operators for oil spills in U.S. waters, with liability limits adjusted to the greater of $1,300 per gross ton or $1,076,000 per non-tank vessel as of March 23, 2023[312][313][315] - The company maintains oil pollution liability coverage of $1.0 billion per incident and has U.S. Coast Guard-approved response plans for all vessels[319][321] - CERCLA applies to hazardous substance spills (non-petroleum), imposing liability generally limited to the greater of $300 per gross ton or $0.5 million for non-hazardous cargo vessels[323] - The CWA regulates ballast water and other wastewater discharges in U.S. waters, requiring NPDES VGP coverage and compliance with best management practices and reporting[324][325][327] - U.S. Air Emission Requirements, consistent with MARPOL Annex VI, mandate stricter standards for new marine diesel engines and state-level regulations for vessel loading/unloading operations[329][330] Other Environmental Initiatives This section covers additional environmental initiatives, including E.U. legislation on substandard vessels, China's regulations on ship energy consumption, and U.S. commitments to zero emissions - The E.U. has adopted legislation to refuse access to substandard vessels, increase inspections, and impose criminal sanctions for pollution events[331] - China's Maritime Safety Administration (MSA) issued regulations for data collection on ship energy consumption and carbon intensity, effective January 1, 2019, and further strengthened in December 2022[334][335] - The U.S. committed to working with the IMO to achieve zero emissions from international shipping by 2050[336] Inventory of Hazardous Materials This section discusses the Hong Kong Convention and E.U. Ship Recycling Regulation, both requiring an Inventory of Hazardous Materials (IHM) for vessels - The Hong Kong Convention (not yet in force) requires ships over 500 gross tonnes to maintain an Inventory of Hazardous Materials (IHM) in three parts: inherent materials, operational wastes, and stores[337][340] - The E.U. Ship Recycling Regulation, effective December 31, 2020, applies to non-E.U.-flagged vessels calling at E.U. ports, requiring an IHM compliant with its rules[338] Vessel Security Regulations This section outlines security requirements imposed by the MTSA and ISPS Code, which mandate security measures for vessels, all of which the company's vessels comply with - The Maritime Transportation Security Act of 2002 (MTSA) and SOLAS amendments (ISPS Code) impose security requirements on vessels, including automatic information systems, ship security alert systems, and vessel security plans[339] - Non-U.S. vessels are exempt from MTSA security measures if they hold a valid International Ship Security Certificate, which all company vessels possess[341] Cyber Security The company has addressed IMO's cyber risk guidelines by performing assessments, implementing firewalls, and integrating cyber risk management into its Safety Management System - IMO's Maritime Safety Committee Resolution MSC.428(98) encourages addressing cyber risks in safety management systems by January 1, 2021[342] - The company performed a cyber security risk assessment, implemented next-generation firewalls and incident reporting for most vessels, and incorporated cyber risk management into its SMS[342] Regulations on the Economic Substance Situation of the Marshall Islands Marshall Islands Economic Substance Regulations (ESRs) apply to shipping and holding entities, requiring demonstration of local administration, business activity, and qualified employees to avoid penalties - Marshall Islands Economic Substance Regulations (ESRs), effective January 1, 2019, apply to non-resident and foreign shipping entities deriving income from 'related activity' like shipping or holding business[343] - Relevant entities must demonstrate administration, main business activity, sufficient expenditure, physical presence, and qualified employees in the Marshall Islands, or face penalties[343] Coronavirus Outbreak The COVID-19 pandemic caused market disruptions, reduced drybulk rates, and operational challenges, leading to increased costs, with future developments remaining uncertain - The COVID-19 pandemic led to reduced industrial activity, lower drybulk rates in 2020, and trade disruptions due to quarantines and travel restrictions, particularly in Chinese ports[344][346] - Operational challenges included increased crew costs, delays in crew changes, port delays, and disruptions to dry-dockings and repairs[346][347] - In Q4 2022, the pandemic negatively impacted results by $0.5 million due to crew repatriation and related costs[347] - Future developments of the pandemic, despite easing restrictions, remain uncertain and could materially affect business, financial condition, and dividend payments[348][349] Disclosure of Activities Pursuant to Section 13(r) of the U.S. Securities Exchange Act of 1934 This section confirms that the company's vessels made no port calls to Iran in 2022 and that charter party agreements restrict activities violating sanctions - Section 13(r) of the Exchange Act requires disclosure of activities related to Iran, even if compliant with law[350] - In 2022, the company's vessels made no port calls to Iran[351] - Charter party agreements restrict calls in Iran in violation of E.U., U.S., or U.N. sanctions, and the company intends to comply with all applicable sanctions[352][354] Seasonality The drybulk market experiences seasonal variations in demand and charter rates, leading to quarter-to-quarter volatility in the company's financial results - The drybulk market exhibits seasonal variations in demand and charter rates, leading to quarter-to-quarter volatility in results[355] - Demand is typically stronger in fall (coal consumption, North American grain exports) and spring (South American grain, Asian coal imports), and weaker at the beginning of the calendar year and during summer[355] Organizational Structure Safe Bulkers, Inc. operates as a holding company with 65 wholly-owned subsidiaries, primarily incorporated in Liberia, the Marshall Islands, and Cyprus, which own and operate its vessels - Safe Bulkers, Inc. is a holding company with 65 wholly-owned subsidiaries as of February 24, 2023[356] - Subsidiaries are incorporated in Liberia (23), the Republic of the Marshall Islands (41), and the Republic of Cyprus (1)[356] Property, Plant and Equipment The company's primary material property consists of its vessels, with certain vessels subject to priority mortgages securing credit facilities - The company's material property consists primarily of its vessels[357] - Office spaces are leased in Monaco (principal executive office) and Geneva (representation office)[357] - Certain vessels are subject to priority mortgages to secure obligations under various credit facilities[357] Unresolved Staff Comments This section is reserved for any unresolved comments from the SEC staff regarding the company's filings Operating and Financial Review and Prospects This section provides an overview of the company's operating performance, financial condition, and future prospects, including key financial data and critical accounting estimates Overview Safe Bulkers provides international marine drybulk transportation services, employing a mixed charter strategy to balance stable cash flow with market flexibility and focusing on high-quality vessels - The company's business is international marine drybulk transportation, using a mix of period time and spot time charters[360] - This charter mix allows for stable cash flow from period charters and flexibility to capitalize on strong spot market conditions[360] - Customer relationships are built on the quality of modern vessels and a record of safe and efficient operations[360] Our Managers Safe Bulkers' operations are managed by related-party Managers controlled by CEO Polys Hajioannou, providing executive, technical, administrative, and commercial services under board supervision - Operations are managed by Safety Management, Safe Bulkers Management Ltd., and Safe Bulkers Management Monaco, all controlled by Polys Hajioannou[361][362] - Managers provide technical, administrative, commercial services, and executive management under the supervision of the company's executive officers and board[362] Selected Financial Data This section summarizes the company's consolidated financial data for the five-year period ended December 31, 2022, prepared in accordance with U.S. GAAP Selected Consolidated Statement of Operations Data (2018-2022) | | 2018 (in thousands) | 2019 (in thousands) | 2020 (in thousands) | 2021 (in thousands) | 2022 (in thousands) | |:---|:---|:---|:---|:---|:---|\ | Revenues | $201,548 | $206,682 | $206,035 | $343,475 | $364,050 | | Commissions | (8,357) | (8,921) | (7,877) | (14,444) | (14,332) | | Net revenues | 193,191 | 197,761 | 198,158 | 329,031 | 349,718 | | Voyage expenses | (6,378) | (13,715) | (41,582) | (9,753) | (9,969) | | Vessel operating expenses | (63,512) | (68,569) | (70,086) | (72,049) | (80,211) | | Depreciation and amortization | (48,067) | (50,310) | (54,269) | (52,364) | (49,518) | | Management fee to related parties | (16,536) | (18,050) | (18,884) | (19,221) | (17,723) | | Company administration expenses | (2,706) | (2,589) | (2,618) | (3,277) | (4,079) | | Early redelivery (cost)/gain, net | (105) | (63) | — | 7,470 | — | | Other operating costs | — | (414) | (241) | — | (3,570) | | Gain on sale of assets | — | — | — | 11,579 | — | | Operating income | 55,887 | 44,051 | 10,478 | 191,416 | 184,648 | | Interest expense | (25,713) | (26,815) | (21,233) | (14,719) | (17,138) | | Other finance costs | (973) | (714) | (641) | (798) | (1,353) | | Interest income | 929 | 1,558 | 604 | 69 | 783 | | Gain/(loss) on derivatives | 18 | (121) | (1,303) | 2,188 | 8,723 | | Foreign currency (loss)/gain | (670) | (76) | 916 | (910) | (1,101) | | Amortization and write-off of deferred finance charges | (1,794) | (1,845) | (1,726) | (2,898) | (2,008) | | Net income/(loss) | $27,684 | $16,038 | $(12,905) | $174,348 | $172,554 | | Earnings/(loss) per share of Common Stock, basic and diluted | $0.16 | $0.04 | $(0.25) | $1.44 | $1.36 | | Cash dividends declared per share of Common Stock | $— | $— | $— | $— | $0.20 | | Cash dividends declared per share of Preferred C Shares | $2.00 | $2.00 | $2.00 | $2.00 | $2.00 | | Cash dividends declared per share of Preferred D Shares | $2.00 | $2.00 | $2.00 | $2.00 | $2.00 | | Weighted average number of shares of Common Stock outstanding, basic and diluted | 101,604,339 | 101,686,312 | 102,617,944 | 113,716,354 | 120,653,507 | Selected Consolidated Cash Flow Data (2018-2022) | | 2018 (in thousands) | 2019 (in thousands) | 2020 (in thousands) | 2021 (in thousands) | 2022 (in thousands) | |:---|:---|:---|:---|:---|:---|\ | Net cash provided by operating activities | $85,449 | $58,284 | $63,376 | $217,208 | $218,046 | | Net cash (used in)/provided by investing activities | (63,670) | (36,785) | (34,784) | 8,554 | (229,404) | | Net cash (used in)/provided by financing activities | (15,580) | 8,540 | (9,293) | (225,906) | (40,101) | | Net increase/(decrease) in cash and cash equivalents and restricted cash | 6,199 | 30,039 | 19,299 | (144) | (51,459) | Selected Consolidated Balance Sheet Data (2018-2022) | | 2018 (in thousands) | 2019 (in thousands) | 2020 (in thousands) | 2021 (in thousands) | 2022 (in thousands) | |:---|:---|:---|:---|:---|:---|\ | Total current assets | 101,262 | 135,989 | 134,734 | 124,116 | 157,701 | | Total fixed assets | 963,887 | 964,000 | 951,290 | 952,813 | 1,077,400 | | Other non-current assets | 11,050 | 14,654 | 19,605 | 17,391 | 10,817 | | Total assets | 1,076,199 | 1,114,643 | 1,105,629 | 1,094,320 | 1,245,918 | | Total current liabilities | 54,606 | 86,784 | 104,715 | 88,692 | 91,317 | | Long-term debt, net of current portion and of deferred finance charges | 538,508 | 536,995 | 531,883 | 315,796 | 370,806 | | Total liabilities | 593,367 | 624,701 | 642,770 | 415,080 | 474,002 | | Mezzanine equity | 16,998 | 17,200 | 18,112 | — | — | | Common stock, $0.001 par value | 103 | 104 | 102 | 122 | 119 | | Total shareholders' equity | 465,834 | 472,742 | 444,747 | 679,240 | 771,916 | | Total liabilities and shareholders' equity | 1,076,199 | 1,114,643 | 1,105,629 | 1,094,320 | 1,245,918 | ITEM 5.A. Operating Results The company's operating results are primarily influenced by fleet size, operating days, and daily charter rates, with revenues increasing by 6.0% in 2022 and vessel operating expenses rising by 11.4% - Revenues increased by 6.0% ($20.6 million) to $364.1 million in 2022 from $343.5 million in 2021, primarily due to prevailing market rates and additional revenues from scrubber-fitted vessels[396] - Time charter equivalent (TCE) rates increased by 4.4% to $22,712 in 2022 from $21,752 in 2021, reflecting increased exposure to prevailing spot market conditions[372][447] - Vessel operating expenses increased by 11.4% to $80.2 million in 2022 from $72.0 million in 2021, with daily operating expenses rising 8.4% to $5,235[399] - Key drivers for increased operating expenses in 2022 include: crew wages (+3.5% to $38.1 million), spares/stores/provisions (+7.1% to $16.6 million), repairs/maintenance/drydocking (+37.5% to $12.1 million), lubricant costs (**+3