-- The Company reported Net Income of $176.3 million or $4.61 per share, for the first quarter of 2008. Included in the first quarter results is a capital gain on the sale of one vessel of $24.4 million or $0.64 per share and a non-cash loss of $6.1 million or $0.16 per share associated with the valuation of interest rate swaps. Excluding these items Net Income would amount to $158.0 million or $4.13 per share. -- For the first quarter of 2008 the Company reported EBITDA(1), excluding vessel gains and non-cash items, of $201.4 million. -- In April 2008 the Company declared and paid its twelfth consecutive quarterly cash dividend of $0.20 per common share.George Economou, the Company's Chairman and Chief Executive Officer of DryShips Inc., commented: "I am pleased to report another quarter with very strong operational and financial results. We remain confident in the positive fundamentals of the dry bulk market. We have continued with our fleet renewal and expansion strategy aimed to replace older tonnage with younger and larger vessels, thereby expanding and enhancing the quality of earnings of our fleet for the longer term. Based on the sales and purchase activity we have concluded to date, by the end of the year our fleet will include 47 vessels, including 7 newbuildings, with an average age of 7 years, considerably lower than the industry average of 13 years. With our modern, large and versatile fleet, we believe we are strategically positioned to continue taking advantage of the strong freight rate environment. I am also particularly excited with the implementation of our strategic vision to create a leading presence in the ultra deep water drilling (UDW) market and to take advantage of the extremely positive fundamentals of that sector. The acquisition of Ocean Rig, which already operates two UDW rigs, and the agreement to construct two state of the art drillships create a significant platform for our foray into this sector. As we have mentioned before, we intend to spin off this business unit to our shareholders through a U.S. listing within the next 12 months. In the short period of about three years since we became public in February 2005, DryShips has come a long way creating significant value for our shareholders. Our stock price has risen from $18 dollars at the time of the IPO to $110.74 as of the closing of last Friday. We are the largest publicly listed Drybulk shipping company in the US and we are in the process of creating a premiere ultra deep water drilling company with significant market presence in that sector. We remain committed to enhancing shareholder value and deliver superior results." First Quarter 2008 Results For the first quarter ended March 31, 2008, Net Revenues (Voyage Revenues less Voyage Expenses) amounted to $217.9 million as compared to $81.4 million for the first quarter ended March 31, 2007. Operating Income was $194.5 million for the quarter ended March 31, 2008, as compared to $78.6 million for the quarter ended March 31, 2007. Net Income for the first quarter ended March 31, 2008 was $176.3 million or $4.61 Earnings Per Share (EPS) calculated on 38,213,975 weighted average basic and diluted shares outstanding as compared to $67.8 million or $1.91 Earnings Per Share (EPS) calculated on 35,490,097 million weighted average basic and diluted shares outstanding for the quarter ended March 31, 2007. EBITDA for the first quarter of 2008 was $219.7 million as compared to $94.6 million in the quarter ended March 31, 2007.(1) An average of 38.3 vessels were owned and operated during the first quarter of 2008, earning an average Time Charter Equivalent, or TCE, rate of $63,127 per day as compared to an average of 32.1 vessels owned and operated during the first quarter of 2007 earning an average TCE rate of $28,930 per day. Dry-dock related expenses During the first quarter of 2008, one vessel was drydocked for a cost of $0.3 million. During the first quarter of 2008, the Company changed the method of accounting for dry-docking costs from the deferral method to the direct expense method under which related costs are expensed as incurred. Capitalization On March 31, 2008, debt to total capitalization (debt, net of deferred financing fees and stockholders equity) was 46.40% and net debt (total debt less cash and cash equivalents) to total capitalization (total debt less cash and cash equivalents and stockholders equity) was 30.12%. As of March 31, 2008, the Company had total cash and cash equivalents of $671.0 million. (1) Please see later in this release for a reconciliation of EBITDA to net cash provided by Operating activities. Financing activities On February 2008, the Company entered into supplemental agreement to amend its existing facility with HSH Nordbank. Pursuant to the supplemental agreement the lender released its security interest over and relating to certain of the Company's vessels participating in the loan and gave its consent to the borrower's incurrence of additional financial indebtedness with other financial institutions. On March 2008, the Company entered into a loan agreement in an amount of up to $130.0 million with Piraeus Bank. The vessels MV Lacerta, MV Menorca, MV Toro and MV Paragon were pledged as security for this new loan. The loan bears interest at LIBOR plus a margin and is repayable in twenty-eight variable quarterly installments through December 2014. In April 2008, the Company concluded a loan for $90.0 million with Dresdner Bank in order to partly finance the MV Mystic. The loan bears interest at LIBOR plus a margin is repayable in three consecutive semi annual installments of $10.0 million each and eleven consecutive semi annual installments of $3.0 million plus a balloon payment of $27.0 million payable together with the last installment. In May 2008, the Company concluded a loan for $125.0 million with Deutsche Schiffsbank in order to partly finance the acquisition cost of vessels MV Capri and MV Positano. The loan bears interest at LIBOR plus a margin is repayable in eight consecutive quarterly installments of $6.5 million followed by twenty four consecutive quarterly installments of $2.3 million plus a balloon payment of $19.0 million payable together with the last installment. On May 9, 2008, the Company concluded a loan agreement for $800.0 million with Nordea Bank in order to finance the acquisition cost of the Ocean Rig shares and to refinance prior debt obtained to finance the purchase price of the shares acquired as of December 31, 2007. As of March 31, 2008, the Company had a total of $1,344 million in debt outstanding under its credit facilities with several institutions. Fleet Developments Deliveries - New Vessels On January 29, 2008, the Company took delivery of the vessel MV Avoca, a 2004 built secondhand 76,500 dwt Panamax drybulk carrier which it had agreed to acquire on July 26, 2007 for $70.2 million. On April 8, 2008, the Company took delivery of the vessel MV Conquistador, a 2000 built secondhand 75,607 dwt Panamax drybulk carrier, which it had agreed to acquire on November 29, 2007, for a purchase price of $85.0 million. On May 15, 2008, the Company took delivery of the vessel MV Capri a 2001 built secondhand 172,579 dwt Capesize drybulk carrier which it had agreed to acquire on November 13, 2007, for a purchase price of $152.3 million. Deliveries - Sold Vessels On February 25, 2008, the MV Matira, a 1994 built 45,863 dwt Handymax drybulk carrier, was delivered to her new owners for a purchase price of $46.5 million. The Company realized a gain of $24.4 million which was recognized in the first quarter of 2008. On April 10, 2008, the MV Netadola, a 1993 built 149,475 dwt Capesize drybulk carrier, was delivered to her new owners for a purchase price of $93.9 million. The Company realized a gain of $63.5 million, which will be recognized in the second quarter of 2008. Acquisitions On March 12, 2008, the Company agreed to acquire the MV Positano, a 2000 built second-hand 73,288 dwt Panamax drybulk carrier, delivery of which is expected during the second quarter of 2008 for an aggregate price of approximately $72.0 million. On April 14, 2008, the Company agreed to acquire the MV Sorento, a 2004 built second-hand 76,500 dwt Panamax drybulk carrier, delivery of which is expected during the third quarter of 2008 for an aggregate price of approximately $86.7 million. On April 30, 2008, the Company agreed to acquire the MV Flecha, a 2004 built second-hand 170,012 dwt Capesize drybulk carrier, delivery of which is expected during the third quarter of 2008 for an aggregate price of approximately $158.0 million. On April 30, 2008, the Company agreed to acquire the MV Daytona, a 177,000 dwt Capesize drybulk carrier, delivery of which is expected during the fourth quarter of 2008 for an aggregate price of approximately $153.0 million. The vessel is currently under construction. Vessel Disposals On March 13, 2008 the Company entered into an agreement to sell the MV Lanzarote, a 1996 built, 73,008 dwt Panamax drybulk carrier, to unaffiliated third party for a price of $65.0 million. The Company expects to realize a gain of approximately $37.2 million which will be recognized in the second quarter of 2008. On March 15, 2008 the Company entered into an agreement to sell the MV Lacerta, a 1994 built, 71,862 dwt Panamax drybulk carrier, to unaffiliated third party for a price of $55.5 million. The Company expects to realize a gain of approximately $45.2 million which will be recognized in the fourth quarter of 2008. On April 14, 2008, the Company entered into an agreement to sell the MV Waikiki, a 1995 built second-hand 75,473 dwt Panamax drybulk carrier for a price of approximately $63.0 million. The Company expects to realize a gain of approximately $37.7 million which will be recognized in the third quarter of 2008. On April 14, 2008, the Company entered into an agreement to sell the MV Solana, a 1995 built 75,100 dwt Panamax drybulk carrier, for a price of approximately $63.0 million. The Company expects to realize a gain of approximately $29.9 million which will be recognized in the third quarter of 2008. Gains on Vessel Disposals In the first quarter of 2008 the Company recognized an aggregate gain on vessel disposals of $24.4 million or $0.64 per share. For the remainder of 2008 with known sales as of today the Company expects to recognize capital gain of $213.5 million. Dividend Payment In April 2008, DryShips declared and paid its twelfth consecutive quarterly cash dividend of $0.20 per common share. As of March 31, 2008, the Company has a total of 41,440,097 shares of common stock outstanding. Acquisition of Ocean Rig ASA On May 14, 2008, we submitted a mandatory offer for 100% of the remaining outstanding shares of Ocean Rig ASA which has been filed with the Oslo Stock Exchange. Through our subsidiary Primelead Limited we own 128,035,373 shares or 75.1% of the shares and votes in Ocean Rig. The mandatory offer period will end on June 11, 2008 and the terms of the offer are prescribed by the requirements of the Norwegian Securities Trading Act. Acquisition of two UDW drillships On April 24, 2008, DryShips announced that it will acquire two Ultra Deep Water (UDW) drillships. The drillships are to be constructed by Samsung Heavy Industries Co., Ltd. (SHI) and are expected to be delivered from the shipyard in the third quarter of 2011. The expected delivered cost of each drillship is approximately $800.0 million per unit. The company has received a firm commitment for the debt portion to finance construction and other payments. Drydocks The Company expects to incur the following expenditures associated with vessel drydockings:
Second Third Fourth quarter quarter quarter 2008 2008 2008 ---------- ---------- ---------- Number of vessels 1 - 3 ---------- ---------- ---------- Expected cost in USD million 1.5 - 3.5 ---------- ---------- ---------- Off-hire days 30 - 75 ---------- ---------- ----------Such costs are expensed as incurred. The actual days and expenses in connection with vessel drydockings will vary based on the shipyard schedule, weather, condition of the vessel and other factors. Fleet Data First Quarter 2008 Total TCE revenue increased during the first quarter of 2008 compared to the first quarter of 2007, primarily as a result of an increase in the average number of vessels operated, from an average of 32.1 vessels in the first quarter of 2007 to 38.3 vessels in the first quarter of 2008, and an increased daily average TCE rate in the first quarter of 2008 of $63,127 from $28,930 in the first quarter of 2007. Vessel operating expenses increased to $17.8 million for the first quarter of 2008 compared to $14.3 million for the first quarter of 2007. The increase is mainly attributable to the increase in the number of vessels operated from an average of 32.1 vessels for the first quarter of 2007 to 38.3 vessels for the first quarter of 2008. Depreciation increased to $24.4 million in the first quarter of 2008 compared to $16.0 million in the first quarter of 2007. This was a direct result of the increase in the Company's fleet from an average of 32.1 vessels in the first quarter of 2007 to an average of 38.3 vessels in the first quarter of 2008. General and administrative expenses (including management fees) increased to $5.7 million in the first quarter of 2008 from $4.1 million in the first quarter of 2007 as a direct result of the increase in the number of fleet calendar days from 2,887 in the first quarter of 2007 to 3,485 in the first quarter of 2008 due to the growth of the fleet and the significant increase in the exchange rate between the USD and Euro. First Quarter 2008
(Dollars in thousands, except Average Daily Results - unaudited) Three Months Three Months Ended Ended March 31, March 31, 2008 2007 ------------- ------------- Average number of vessels (1) 38.3 32.1 Total voyage days for fleet (2) 3,452 2,813 Total calendar days for fleet (3) 3,485 2,887 Fleet Utilization (4) 99.1% 97.4% Time charter equivalent (5) 63,127 28,930 Capesize 112,151 39,605 Panamax 57,383 27,825 Handymax 40,462 21,605 Vessel operating expenses (daily) (6) 5,100 4,956 Management fees (daily) 800 760 General and administrative expenses (daily) (7) 837 654 Total vessel operating expenses (daily) (8) 6,737 6,370 (1) Average number of vessels is the number of vessels that constituted our fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of our fleet during the period divided by the number of calendar days in that period. (2) Total voyage days for fleet are the total days the vessels were in our possession for the relevant period net of off hire days. (3) Calendar days are the total days the vessels were in our possession for the relevant period including off hire days. (4) Fleet utilization is the percentage of time that our vessels were available for revenue generating voyage days, and is determined by dividing voyage days by fleet calendar days for the relevant period. (5) Time charter equivalent, or TCE, is a measure of the average daily revenue performance of a vessel on a per voyage basis. Our method of calculating TCE is consistent with industry standards and is determined by dividing voyage revenues (net of voyage expenses) by voyage days for the relevant time period. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by the charterer under a time charter contract, as well as commissions. TCE is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company's performance despite changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed between the periods. (6) Daily vessel operating expenses, which includes crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs is calculated by dividing vessel operating expenses by fleet calendar days for the relevant time period. (7) Daily general and administrative expense is calculated by dividing general and administrative expense by fleet calendar days for the relevant time period. (8) Total vessel operating expenses, or TVOE is a measurement of our total expenses associated with operating our vessels. TVOE is the sum of vessel operating expenses, management fees and general and administrative expenses. Daily TVOE is calculated by dividing TVOE by fleet calendar days for the relevant time period.TCE Rates: The following table reflects the calculation of our TCE rates for the three month periods ended March 31, 2008 and 2007:
Three Months Three Months (Dollars in thousands) Ended Ended March 31, March 31, 2008 2007 ------------- ------------- Voyage revenues 232,063 86,650 Voyage expenses (14,150) (5,270) ------------- ------------- Time Charter equivalent revenues 217,913 81,380 ============= ============= Total voyage days for fleet 3,452 2,813 Time charter equivalent (TCE) rate 63,127 28,930Financial Statements Income Statements The following are DryShips Inc.'s Unaudited Interim consolidated condensed Income Statements for the three month periods ended March 31, 2007 and 2008:
(Expressed in thousands of U.S. Dollars - except for share and per share data) Three Months Ended March 31, 2007 2008 ---------- ---------- REVENUES: Voyage revenues $ 86,650 $ 232,063 ---------- ---------- EXPENSES: Voyage expenses 5,270 14,150 Vessels' operating expenses 14,309 17,773 Depreciation 16,045 24,418 Gain on sale of vessels (31,609) (24,443) General and administrative expenses 4,084 5,705 ---------- ---------- Operating income 78,551 194,460 ---------- ---------- OTHER INCOME (EXPENSES): Interest and finance costs, net (10,588) (12,892) Loss on interest rate swap valuation (160) (6,074) Other, net (1) (19) ---------- ---------- Total other income (expenses), net (10,749) (18,985) ---------- ---------- Net Income before equity in income of investee 67,802 175,475 ---------- ---------- Equity in income of investee - 857 Net Income $ 67,802 $ 176,332 ========== ========== Earnings per common share, basic and diluted $ 1.91 $ 4.61 ========== ========== Weighted average number of common shares, basic and diluted 35,490,097 38,213,975 ========== ==========Balance Sheet The following are DryShips Inc.'s unaudited Interim Condensed Consolidated Balance Sheets as at December 31, 2007 and March 31, 2008:
(Expressed in thousands of U.S. Dollars - except for share and per share data) December 31, March 31, 2007 2008 -------------- -------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 111,068 $ 624,515 Restricted cash 6,791 6,453 Other current assets 35,176 35,413 -------------- -------------- Total current assets 153,035 666,381 -------------- -------------- FIXED ASSETS, NET: Advances for vessels under construction and acquisitions 118,652 162,423 Vessels, net 1,643,867 1,668,578 -------------- -------------- Total fixed assets, net 1,762,519 1,831,001 -------------- -------------- OTHER NON-CURRENT ASSETS: Long-term investments 405,725 406,582 Restricted cash 20,000 40,000 Other 3,153 2,155 -------------- -------------- Total non-current assets 428,878 448,737 -------------- -------------- Total assets $ 2,344,432 $ 2,946,119 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 194,999 $ 191,830 Other current liabilities 44,305 33,266 -------------- -------------- Total current liabilities 239,304 225,096 -------------- -------------- NON-CURRENT LIABILITIES Long-term debt, net of current portion 1,048,779 1,144,283 Other non-current liabilities 34,620 33,421 -------------- -------------- Total non-current liabilities 1,083,399 1,177,704 -------------- -------------- COMMITMENTS AND CONTINGENCIES - - STOCKHOLDERS' EQUITY 1,021,729 1,543,319 Total liabilities and stockholders' equity $ 2,344,432 $ 2,946,119 ============== ==============EBITDA Reconciliation DryShips Inc. considers EBITDA to represent net income before interest, taxes, depreciation and amortization. EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations, as determined by United States generally accepted accounting principles, or U.S. GAAP, and our calculation of EBITDA may not be comparable to that reported by other companies. EBITDA is included herein because it is a basis upon which the Company assesses its liquidity position, it is used by our lenders as a measure of our compliance with certain loan covenants and because the Company believes that it presents useful information to investors regarding a company's ability to service and/or incur indebtedness. The following table reconciles net cash provided by operating activities to EBITDA:
Dollars in thousands Three Months ended March 31, March 31, 2007 2008 Net cash provided by operating activities 42,590 164,900 Net increase (decrease) in current assets 5,789 (647) Net decrease in current liabilities, excluding current portion of long-term debt 1,860 13,409 Gain on sale of vessels 31,609 24,443 Amortization of fair value of acquired time charter agreements 1,299 4,658 Amortization of free lubricants benefit 33 24 Change in fair value of derivatives 1,106 (6,074) Equity in income of investee - 857 Net interest expense 10,588 12,892 Other expenses, net 161 6,093 Amortization of deferred financing costs included in net interest expense (439) (820) ---------- ---------- EBITDA 94,596 219,735 ========== ==========Fleet List The table below describes in detail our fleet development and current employment profile as of May 16, 2008:
Year Built DWT Type Capesize: Manasota 2004 171,061 Capesize Alameda 2001 170,269 Capesize Capri 2001 172,579 Capesize Samsara 1996 150,393 Capesize Brisbane 1995 151,066 Capesize 0.0 815,368 5 Panamax: Catalina 2005 74,432 Panamax Majorca 2005 74,364 Panamax Padre 2004 73,601 Panamax Saldahna 2004 75,500 Panamax Avoca 2004 76,500 Panamax Ligari 2004 75,583 Panamax Oregon 2002 74,204 Panamax Mendocino 2002 76,623 Panamax Bargara 2002 74,832 Panamax Heinrich Oldendorff 2001 73,931 Panamax Maganari 2001 75,941 Panamax Sonoma 2001 74,786 Panamax Capitola 2001 74,832 Panamax Samatan 2001 74,823 Panamax Ecola 2001 73,931 Panamax Coronado 2000 75,706 Panamax Marbella 2000 72,561 Panamax Redondo 2000 74,716 Panamax Conquistador 2001 75,607 Panamax Ocean Crystal 1999 73,688 Panamax Xanadu 1999 72,270 Panamax Primera 1998 72,495 Panamax La Jolla 1997 72,126 Panamax Menorca 1997 71,662 Panamax Iguana 1996 70,349 Panamax Lanzarote 1996 73,008 Panamax Waikiki 1995 75,473 Panamax Toro 1995 73,034 Panamax Solana 1995 75,100 Panamax Paragon 1995 71,259 Panamax Lacerta 1994 71,862 Panamax Tonga 1984 66,798 Panamax 0.0 2,361,597 32 Supramax Clipper Gemini 2003 51,201 Supramax VOC Galaxy 2002 51,201 Supramax 0 102,402 2 Newbuildings: TBN 2008 170,000 Capesize TBN 2008 177,000 Capesize TBN 2009 180,000 Capesize TBN 2009 180,000 Capesize TBN 2010 180,000 Capesize TBN 2010 82,000 Kamsrmax TBN 2010 82,000 Kamsrmax TBN 2009 75,000 Panamax TBN 2010 75,000 Panamax 1,201,000 9 Total Fleet 0.0 4,480,367 48Conference Call and Webcast: Tuesday May 20, 2008, at 9:30 a.m. EDT As announced, DryShips' management team will host a conference call on Tuesday, May 20, 2008, at 9:30 a.m. Eastern Daylight Saving Time to discuss the Company's financial results. Conference Call details Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1(866) 819-7111 (from the US), 0(800) 953-0329 (from the UK) or +(44) 1452 542 301 (from outside the US). Please quote "DryShips" In case of any problem with the above numbers, please dial 1(866) 223 0615 (from the US), 0(800) 694-1503 (from the UK) or +(44) 1452 586-513 (from outside the US). Quote "DryShips" A replay of the conference call will be available until May 28, 2008. The United States replay number is 1(866) 247 4222; the international replay number is 0(800) 953-1533; from the UK or (+44) 1452-550 000 and access code required for the replay is: 2133051# Slides and audio webcast There will also be a simultaneous live webcast over the Internet, through the DryShips Inc. website (www.dryships.com). Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast. About DryShips, Inc. DryShips Inc., based in Greece, is an owner and operator of drybulk carriers that operate worldwide. As of the day of this release, DryShips owns a fleet of 48 drybulk carriers comprising 5 Capesize, 32 Panamax, 2 Supramax, 9 newbuilding drybulk vessels, with a combined deadweight tonnage of over 4.5 million tons. DryShips Inc.'s common stock is listed on the NASDAQ Global Market where it trades under the symbol "DRYS." Visit our website at www.dryships.com Forward-Looking Statement Matters discussed in this release may constitute forward-looking statements. Forward-looking statements reflect our current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although DryShips Inc. believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, DryShips Inc. cannot assure you that it will achieve or accomplish these expectations, beliefs or projections. Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including changes in charterhire rates and vessel values, changes in demand that may affect attitudes of time charterers to scheduled and unscheduled drydocking, changes in DryShips Inc.'s operating expenses, including bunker prices, dry-docking and insurance costs, or actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents and political events or acts by terrorists. Risks and uncertainties are further described in reports filed by DryShips Inc. with the US Securities and Exchange Commission.
Contact Information: Investor Relations / Media: Nicolas Bornozis Capital Link, Inc. (New York) Tel. 212-661-7566 E-mail: nbornozis@capitallink.com