General Maritime Corporation Q1 2008 Earnings Call Transcript

General Maritime Corporation (GMR)

Q1 2008 Earnings Call Transcript

May 1, 2008 10:00 am ET

Executives

Brian Kerr – IR

John Tavlarios – President and CEO of General Maritime Management LLC

Jeff Pribor – CFO

Peter Bell – SVP and Head of Commercial of General Maritime Management LLC

Analysts

Doug Mavrinac – Jefferies & Co.

John Chappell – JPMorgan

Terese Fabian – Sidoti & Co.

Charles Rupinski – Maxim Group

Scott Burk – Bear Stearns

Presentation

Operator

Good morning everyone and welcome to the General Maritime Corporation conference call. Today's call is being recorded. We will conduct a question-and-answer session after the opening remarks, and instructions will follow at that time. A replay of the call will be accessible any time during the next two weeks by dialing 888-203-1112 for U.S. callers; and 719-457-0820 for non-U.S. callers. To access the replay, please enter the passcode 3023400.

At this time, I would like to turn the call over to Mr. Brian Kerr. Please go ahead, sir.

Brian Kerr

Welcome, ladies and gentlemen, to the General Maritime Corporation conference call to discuss the company's 2008 first quarter results. I would like to remind everyone that this conference call is now being webcast at the company's web site, www.generalmaritimecorp.com. There are also additional materials related to our earnings announcement including a slide presentation on our web site.

You should be aware that in today's conference call, we will be making certain forward-looking statements that discuss future events and performance. These statements are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements. For a discussion of factors that could cause results to differ, please see the company's press release that was issued yesterday and the company's filings with the Securities and Exchange Commission, including, without limitation, the company's Annual Report on Form 10-K for the year ended December 31, 2007, and in subsequent reports on Form 8-K.

Now I would like to introduce Mr. John Tavlarios, President and Chief Executive Officer of General Maritime Management LLC.

John Tavlarios

Thank you, Brian. Good morning, welcome to General Maritime's earnings conference call for the first quarter of 2008. With me today are Jeff Pribor, Chief Financial Officer, and John Georgiopoulos, Chief Administrative Officer.

As outlined on Slide 3 of the presentation, I will begin today's call by discussing the highlights of the quarter followed by Jeff's review for our financial results for the three months ended March 31, 2008. Following this, I will provide some remarks on our company's outlook and an overview of the industry. We'll then be happy to take your questions.

Following a year in which General Maritime grew its fleet and entered into a value-creating transaction, the company commenced 2008 by posting solid financial results and declaring its 13th consecutive quarterly dividend.

Turning to Page 4, in terms of our financial performance, we recorded net income of $13.4 million, or basic and diluted earnings per share of $0.46 and $0.45, respectively, which excludes $0.5 million of other expenses related to realized and unrealized gains and losses on freight, bunker, and currency derivatives.

During the first quarter, we also drew upon our significant time charter coverage to declare a $0.50 per share quarterly dividend, which positions the company to once again meet its fixed annual dividend target rate of $2 per share. I am pleased to report that in just over three years, General Maritime has declared cumulative quarterly dividends of $25.28 per share. Of note, we have accomplished this while maintaining significant financial flexibility, which we believe provides the company with potential for the creation of future shareholder value.

Before moving on to discuss our sizable contracted revenue stream on Slide 5, I would like to briefly address the agreement we recently entered into and amend our existing credit facility with a syndicate of commercial lenders and Nordea Bank Finland PLC as administrative agent and collateral agent. On March 28, 2008, amended our $900 million credit facility to, among other things, increased the company's flexibility as it relates to its ability to pay dividends, buy back stock and purchase the stock of other companies. We appreciate the strong support we continue to receive from leading banks.

Turning to Slide 5, I would now like to review our success in arranging for sizable contracted revenue and cash flow streams for our shareholders. General Maritime's flexible deployment strategy focused on effectively managing assets through the shipping cycles has continued to serve the company well. As of April 30, 2008, the company had 14 vessels or vessel equivalents fixed on three-year time charter representing 67% time charter coverage and $175.8 million in contracted revenue for 2008.

On Slide 6, we provide a chart that details our time charter coverage. We are pleased with the considerable success we have had increasing our contracted revenue and cash flow streams, which we believe benefit shareholders in a number of ways. First, placing a large portion of our fleet on time charters and what we believe to be attractive rates supports our fixed annual dividend target. Second, our approach enables the company to retain the ability to benefit from improved rate environments in the future so we can continue to best serve our shareholders. Going forward, we intend to continue to remain true to our proven approach of seeking opportunities to sign contracts with leading charterers when our strict return criteria is met.

Turning to Slide 7, I'll provide an overview of our fleet. As we mentioned on our fourth quarter conference call, as of February 2007, we have successfully taken the on-schedule and on-budget delivery of all four of our Suezmax newbuildings. The addition of these vessels has served to further solidify the company's reputation as an owner of high quality and modern double hull vessels. Notably, the average age of our fully double hull fleet is now approximately 8.7 years, down over 25% from 11.9 three years ago. Building upon our past success, we intend to continue to utilize our modern fleet and experienced high-caliber crew to meet stringent operational standards and exceed customer expectations.

I would now like to turn the call over to Jeff.

Jeff Pribor

Thank you, John, and good morning, everyone. Beginning on Slide 9, I would like to review our first quarter financial results.

For the first quarter of 2008, excluding $500,000 of other expense, we reported net income of $13.4 million, or $0.46 basic and $0.45 diluted earnings per share. Including other expense, net income was $12.9 million, or $0.45 basic and $0.43 diluted earnings per share, compared to a March 31, 2007 net income of $16.6 million, or $0.54 basic and $0.53 diluted earnings per share.

The decrease in net income from last year was principally the result of a rise in net interest expense compared with the prior-year period. Net interest expense was higher due to increased borrowings to fund our $15 special dividend paid in March 2007. Net income in the quarter was also impacted by lower utilization due to additional off hire.

To analyze revenue, we look at net voyage revenue per vessel day referred to as time charter equivalent, or TCE. TCE is calculated by dividing net voyage revenue by voyage days for the applicable time period. You will find, as always, the total number of voyage days used in this computation is in the appendix to our press release.

On Slide 10, we provide a first quarter 2008 TCE analysis. Full fleet TCE including time charters remain relatively flat at $34,918 for the quarter ended March 31, 2008, compared to $35,072 for the prior-year period. The TCE earned by our Suezmax vessels increased 2.8% to $36,730 from $35,729 in the prior-year period, and our Aframax vessels decreased by 5.3% to $32,705 for the quarter ended March 31, 2008, versus $34,518 for the prior-year period.

The company's total average daily spot rate decreased 6.4% to $35,191 compared to $37,588 in the prior-year period. The spot rates earned on the company's double hull Aframax and Suezmax vessels for Q1 2008 were $35,932 and $31,802, respectively.

For the quarter ended March 31, 2008, EBITDA was $33 million, compared to $29.1 million for the quarter ended March 31, 2007. Depreciation and amortization for the quarter ended March 31 was $13.2 million, compared to $11.9 million for the quarter ended March 31 last year. This increase is primarily attributable to delivery of two Suezmax vessels since the prior-year period.

Our net interest expense increased to $6.8 million during the quarter ended March 31, 2008, compared to a net interest expense of just $593,000 for the prior-year period. The increase in net interest expense is primarily due to our increased debt position from the additional leverage the company incurred in order to pay our $15 special dividend in the first quarter of last year.

I'd now like to discuss our balance sheet, which is detailed on Slide 11. As of March 31, 2008, our cash position was $61.1 million, and our debt was $635 million. With over $320 million in liquidity, we are very excited about our strong balance sheet and feel that our capital structure gives us the stability and flexibility we need to continue to find and execute future growth and consolidation opportunities.

Now, turning to Slide 12, we provide a first quarter 2008 operating expense analysis. To analyze expenses, we look at the cost per vessel day, which adjusts for changes in the size of our fleet. Per-vessel-day costs are calculated by dividing total expense by the aggregate number of calendar days that we owned each vessel during the period.

Daily direct vessel operating expenses increased by 15.6% to $8,049 per vessel day for the quarter ended March 31, 2008, compared to $6,963 for the prior-year period. The increase was attributable to higher crew costs and insurance as well as higher costs for lubricating oil and maintenance and repair.

General and administrative expenses decreased 14.6% to $11.7 million for the quarter ended March 31, 2008, compared to $13.7 million for the prior-year period. Two vessels were in drydocks for the first quarter for a total of 88 associated offhire days.

Our outlook for the rest of 2008 is detailed on Slide 13. We have not changed our estimates for daily direct vessel operating expense. Our guidance for the rest of the year remains at $7,255 per day for Aframax vessels and $7,225 per day for our Suezmax vessels. These amounts represent an increase over 2007 actual expenses attributable to increased costs experienced industry-wide for crewing, insurance and newbuilds.

We expect the remaining nine months of G&A 2008 to be $32.1 million. Of the total $32.1 million G&A, $23.8 million is a cash expense with the balance of $8.3 million being amortization of restricted stock, which is a noncash expense. We project approximately $41.5 million in depreciation and amortization for the remaining nine months of 2008.

Also, for the remaining nine months of the year, we have a total of one drydock remaining with approximately 68 associated offhire days. Total costs associated with our 2008 drydocking program are anticipated to be $6.5 million and costs of $3.5 million are budgeted for capital improvement of our fleet.

On Slide 14 and 15, we provide a description of our dividend policy and our dividend history. The company has a fixed target dividend of $0.50 per quarter or $2.00 annually. The company intends to declare these dividends in May, August, November, and February of each year. We are pleased to have been able to declare dividends of $25.78 since we first started paying dividends in May of '05, 2005, including a one-time special dividend of $15 and our recently declared $0.50 dividend relating to Q1 2008 payable on May 30, 2008 to shareholders of record as of May 16, 2008.

I'd like to conclude my remarks by going through an estimated 2008 breakeven summary on Page 16, which demonstrates General Maritime's strong financial position. With our substantial time charter coverage and approximately $176 million in 2008 contracted time charter revenue, General Maritime has a very favorable free cash flow and net income breakeven. Even including our projected quarterly dividend, the company's spot fleet would only need to earn approximately $6,600 per vessel for the year in order to break even.

That concludes my remarks. Now I'd like to turn the call back over to John Tavlarios.

John Tavlarios

Thank you, Jeff. As we enter our eighth year as a publicly traded company, we remain committed to effectively managing our assets through shipping cycles, achieve strong results for both customers and shareholders, and further our strong position of entering into value-creating transactions. Seeking to create future shareholder value, we intend to remain true to seeking opportunities in areas which have served the company and the shareholders well in the past.

Turning to Slide 18, I'll discuss our approach in more detail. First, we will seek opportunities to further consolidate the industry when a set of stringent financial criteria are met. We believe that our current liquidity of $300 million should provide us with sufficient equity to purchase vessels having up to approximately $1 billion in market value.

Complementing General Maritime's long-term growth strategy, we will also seek opportunity to buy back shares under the company's share repurchase program, which has $100 million remaining. Including the 711,300 we repurchased during the first quarter, we intend to remain opportunistic in the purchase of shares when we believe our stock to be undervalued.

Additionally, we intend to return value to our shareholders by distributing consistent dividends through our fixed annual dividend target, which remains at $2.00 per share.

Turning to Slide 19, I would like to briefly discuss current market conditions. 40% of our available spot days booked for our Aframax fleet, our vessels are averaging around $35,000 per day. With 53% of our available spot days booked for our Suezmax fleet, our vessels are averaging over $33,000 per day. Currently, rates for Suezmax tankers in the West African trades are around $65,000 per day with Aframax rates, particularly in the Caribbean, also around $25,000 per day.

Turning to Slide 20, we give a brief industry outlook. Tanker rates were particularly volatile in the first three months of 2008, although ultimately the figures show that the Suezmax and Aframax segments averaged about the same as last year for the period. The late season spike in 2007 carried over into January, and the quarter began at strong levels. However, rates quickly moderated from those highs but, overall, remain at healthy levels. Though the fluctuations on a week-to-week basis were often severe, particularly in the Caribbean and Mediterranean markets.

So far in 2008, the negative impact of somewhat lower demand for oil in the North American market resulting from the economic downturn in the U.S. has been offset by continued strong demand from China and increased demand from India with significant new refinery capacity that's come online. Tanker ton-mile demand has been augmented by increasing shipments on certain long haul routes such as West Africa, East and North Africa, East. On the supply side, newbuilding additions were partially offset by removals, especially in the VLCC segment of single hull vessels late in 2007 and 2008, year-to-date.

Looking ahead to the balance of 2008, we note little surprise that the IEA has once again lowered its forecast of global oil demand for the year to 1.2 million barrels a day, or 1.4% above 2007. We think that it is quite possible that this forecast will be revised downward yet again before the year is through depending upon how much the slowdown in the U.S. economy spreads to the rest of the world. Even allowing for some ton-mile expansion such as we noted above, our base case expectation remains that demand for tankers will grow in the 2% to 3% range below the top-line increase in tanker capacity of 8%.

As we note on every call, the wildcard is removals from the fleet, and it appears that so far this year to date, they have been sufficient to keep rates on average at levels about as high, or higher than 2007. Whether this can be sustained for the remainder of the year, especially with the somewhat back-end loaded order book, is difficult to predict. Ultimately, rates in the second half of the year may depend less on macro factors, which are reasonably well known and more on the marginal supply of vessels which, in turn, will depend on decisions by individual owners of older single hull tonnage whether to continue to operate the vessel or sell them for scrap or conversions.

That's not a factor we can model, so we remain satisfied with the commercial positioning of our fleet, with substantial time charter coverage through to 2010. This coverage provides very low breakeven costs on our remaining spot employed vessels to cover all operating financial costs as well as our expected dividend. At the same time, we have enough spot exposure to profit the positive rate developments such as we have seen in the first four months of this year.

We would now like to open up the call to questions.

Question-and-Answer Session

Operator

(Operator instructions) We will take our first question from the site of Doug Mavrinac with Jefferies. You line is open, please go ahead.

Doug Mavrinac – Jefferies & Co.

Great, thank you, good morning guys.

John Tavlarios

Good morning, Doug.

Doug Mavrinac – Jefferies & Co.

I just had a few questions for you all and, John, following up on the final point you made about the outlook for the markets for 2008, and my question more pertains to after 2008. We have the IMO phase-out deadline approaching. Deliveries should begin slowing in about 18 months. The industry should be coming to a crossroads here at some point in the next 18 months. But you guys have been always been very disciplined when it comes to capital allocation and also having always been one of the leading consolidators in the industry, is there a particular event that you are looking forward to that could trigger General Maritime's next growth phase, or does it really depend on the calendar as far as events unfolding?

John Tavlarios

I don't want to put a date on it, Doug. I mean what we really look at is we look at opportunity. I mean maybe there is not the same returns that have been here in the past. We've been selective of what we've done, but we do have a certain criteria that we try to uphold as far as investments that we make and – what that timeline is, I don't know, but that's what we look for.

Doug Mavrinac – Jefferies & Co.

Okay, okay, great. And then just kind of following up with that, John, in your mind, is there a vision for what you say General Maritime could become in a few years? Is it similar to as large of a company as it was a few years ago and a big presence in the mid-sized tanker market if not bigger? Or do you just kind of want to wait to see how the market develops and take what opportunities are presented to you without a particular fleet size or goal in mind?

John Tavlarios

Yes, we are not obsessed with fleet size. What we are looking for is opportunity and wherever that takes us, it does. But, that's our focus is to give the best return possible.

Doug Mavrinac – Jefferies & Co.

Got you, got you. Okay, and so in the meantime, as you mentioned, General Maritime's exposure is in the Aframax spot market. That's where your upside could come from. Are there any particular factors better at place in that market over the next year or so that could influence the Aframax market more so than some of the other tanker asset classes? And is there anything that could cause you to change your strategy of maintaining spot market exposure in the Aframax market given that – and we could be in for a better market environment in the not-too-distant future?

John Tavlarios

Well, no, I mean we've always look at the one thing that we've always – which we started with, with Aframax, is the fact that the utilization has always been high on those vessels, even in down markets. So we opportunistically trade the Aframaxes because they've always been a strength of ours in a market that we know very well. But then, again, having said that, if the time comes when we see substantial opportunities to put them away on a time charter, you don't – want to look at that opportunistically.

Doug Mavrinac – Jefferies & Co.

Yes, yes, okay. Actually, that’s great. Thank you very much, John.

John Tavlarios

Thank you, Doug.

Operator

Thank you. And our next question will come from the site of John Chappell with JPMorgan. Your line is open, please go ahead.

John Chappell – JPMorgan

Thank you. Good morning guys.

John Tavlarios

Good morning, John.

John Chappell – JPMorgan

John, digging deeper on the Afra market, I was hoping maybe you or Peter Bell can give a little bit of an explanation as to the divergence in the Afra markets over the last couple of months, really, with the North Sea and the Med significantly outperforming the Caribbean market. And then, also, as it pertains to General Maritime, how nimble are you to be able to put your fleet in some of those areas where the markets may be stronger for short periods of time? I know you have historically been a Caribbean-based operator, but given some of these wide rate divergences, have you been able to benefit from that at all?

Peter Bell

Hey, John, it's Peter Bell here. I guess there's two things here. First of all, it's really difficult to chase these markets. By the time you reposition the ships, often the opportunities are gone. So we tend to stay in the Caribbean where we know that market very well, and we actually have – we feel quite a bit of success there.

One of the things that's making the Caribbean market a little bit more unusual these days, and we are seeing more volatility than ever is the fact that a lot of cargo is under contract in that market. It's tied up with the bigger operators in the pools; you don't see them on the market as much. So what's actually happening is the market is actually becoming thin in terms of what gets fixed. So it doesn't take very much there to have fairly wide rate swings, and we've been taking advantages of that volatility as we go along here. So we are comfortable in that market, we are one of the bigger players in that market, and we feel we do – our purposes are best served by staying there, staying close to home and serving our customers in that market. And just, finally, it's very difficult to reposition these ships into the Med or into the North Sea and then back. It's hard to get those voyages, and oftentimes, by the time you do it, the opportunity is gone.

John Chappell – JPMorgan

And, Peter, the strike in France, it looks like it's going to start up again. Obviously, that's having a beneficial impact over on the other side of the Atlantic, but does anything start to flow? Any beneficial impact on the Caribbean market from that just the way the trade flows go when the French refineries can't take the cargoes?

Peter Bell

I haven't seen it yet, although, actually, in the last few days we've seen the Aframax market weakening a bit in the Caribbean. We haven't seen the impact of that yet. The impact of the strike in Nigeria did have an effect on the Suezmax market, actually, a positive effect because it deterred people from co-freighting on VLCCs, but we have not seen any effect of the French situation yet.

John Chappell – JPMorgan

Okay, and then, finally, one for Peter – I almost feel that I have to ask this question – has anything changed in the last couple of months from the return perspective, newbuild prices, secondhand prices versus charter rates that would make General Maritime stay more opportunistic in the near term?

John Tavlarios

This is John. John, you know, we look at some opportunities. I mean, we have looked at newbuildings, we haven't done anything even though it's been written up that deals were done. We just don't see the return level there, but on vessels on the water, we continue to monitor vessels in our sector that make financial sense, and, again, if it does, we'll do them. I mean we do monitor that continuously.

John Chappell – JPMorgan

Okay, thanks John. Thanks Peter.

Operator

Thank you. (Operator instructions) Our next question comes from the site of Terese Fabian with Sidoti. Your line is open, please go ahead.

Terese Fabian – Sidoti & Co.

Thank you. I don't know if I missed it, but could you address the first quarter direct vessel expense number? It's higher than one would think.

Jeff Pribor

Yes, well, I'll start. This is Jeff, Terese, how are you?

Terese Fabian – Sidoti & Co.

Good morning.

Jeff Pribor

Yes. The vessel expense for the first quarter was higher primarily the result of two vessels. If we exclude those two vessels, the overall expense for the quarter on a daily basis was on target. So while it's regrettable, that's why we were specific in our comments just a little while ago that we are reiterating our guidance for the budget rate for the rest of the year. So while there are upward pressures on costs that all of us experience, we are managing to that rate for the rest of the year still.

Terese Fabian – Sidoti & Co.

Okay, I noticed you didn't say what those costs were, but are they expected to recur again or is this not going to happen again?

Jeff Pribor

No, they were – as opposed to just sort of crew costs or something vague, they were specific nonrecurring costs related to maintenance and repair, and so we don't expect them to recur again.

Terese Fabian – Sidoti & Co.

Okay, and then moving on to the utilization rate, is that due to the – to that same issue?

Jeff Pribor

Well, as you see in the slide, we mentioned that there was one drydock from '07 that carried over into '08. So that number wasn't in our previous guidance because we guided you to the '08 budget of two drydocks at about 100 days, and you had a 55-day overrun on one drydock. So that was an unexpected utilization decrease. So that – and that is done. That ship is back on the water in service.

Terese Fabian – Sidoti & Co.

Okay, and the guidance for the second quarter drydock, is that for the 68 days or is that related to the remainder of the year for drydocking?

Jeff Pribor

Well, the remainder of the year is one more drydock that is commencing soon, so we expect it to be done in the second quarter, and that's an approximate number of days for the drydocking and positioning of the ship.

Terese Fabian – Sidoti & Co.

Okay, thank you, that's helpful. Now, I have a question on bunker fuel. I mean, there are soundings that are coming out on issues that the IMO wants to deal with maybe or some of the organizations on converting some of the bunker fuel usage to other types of fuel. How would this affect your operations or that of other tanker companies?

John Tavlarios

This is John Tavlarios. I mean right now, that solution or those ideas that are being sort of bounced around in the market aren't enough to satisfy the industry's needs, so – and I don't think that's going to be in the immediate future. We follow all the IMO regulations, and I guess as best as possible do what we can do within the industry, but there hasn't been any changes made that could satisfy the industry's needs.

Terese Fabian – Sidoti & Co.

Okay, and if they introduce piecemeal changes, regulations, we just have to go ahead and do that, right?

John Tavlarios

Of course.

Terese Fabian – Sidoti & Co.

Okay. Thank you.

John Tavlarios

Yes.

Operator

Thank you. (Operator instructions) We will take our next question from the site of Charles Rupinski with Maxim Group. You line is open, please go ahead.

Charles Rupinski – Maxim Group

Good morning gentlemen.

John Tavlarios

Good morning, Charles.

Charles Rupinski – Maxim Group

How are you? I just have one quick question as sort of a follow-up to a previous question but I just wanted to get a little more – maybe a view of your strategic thinking. Over the next 18 months or so, what would it take or what kind of circumstances might it take for you to consider perhaps moving into the larger vessel sizes or larger vessel size, VLCC, ULCC, and is this something that you feel you can do despite your stated strategy as a consolidator in the Afra/Suezmax segments?

John Tavlarios

Charles, this is John Tavlarios. Again, it comes down to returns. I mean, if we see the opportunity there, it's something that we would look at. Yes, our focus has always been Aframaxes and Suezmaxes. We've looked at other sectors, but it's something that we have to feel comfortable with. So we'll continue to look at them. It's, again, all return-driven.

Charles Rupinski – Maxim Group

Okay, great. And one other question on costs – you've given us good guidance for costs, going forward, but my question is, over the next couple of years as far as repair work – steel prices are up, clearly, we're hearing a lot on crewing. How comfortable are you, say, beyond 2008 on the cost side as far as what should we think about as far as cost inflation is concerned?

John Tavlarios

Well, listen, the two big factors on – I assume you are talking about DVOE here, is that correct?

Charles Rupinski – Maxim Group

Yes.

John Tavlarios

I mean, it’s two big factors that we don't have any control over, but it’s – they are industry-wide, is – number one is crewing. That has been continuing to climb, and the other issues – lube oils. I mean it's a big number and as oil goes up, unfortunately, so do they. But, that's the entire sector.

Charles Rupinski – Maxim Group

Okay. Well, thank you very much.

John Tavlarios

Thank you.

Operator

Thank you. And we have a follow-up from the site of Terese Fabian with Sidoti. You line is open, please go ahead.

Terese Fabian – Sidoti & Co.

If I could just follow-up on that question, what percentage of your DVOE is crewing, approximately?

John Tavlarios

Crewing is roughly, 30% to 35%.

Terese Fabian – Sidoti & Co.

Okay, and then I have another question on the credit facility that was amended. Was the main thinking behind that to allow greater share buyback or is there an acquisition sort of brewing that you wanted to get prepared for?

Jeff Pribor

Well, I certainly couldn't comment on an acquisition brewing, Terese, but I think, as you can see, it does two things for us. It allows us to do more share buybacks and to act opportunistically to do that, and it allows us to buy shares of other companies.

Terese Fabian – Sidoti & Co.

Okay. Thank you.

John Tavlarios

I just wanted to jump in. That's more closer to 50%, the crewing expenses.

Terese Fabian – Sidoti & Co.

Okay. Thank you very much. Appreciate that.

Operator

Thank you. And our next question comes from the site of Scott Burk with Bear Stearns. Your line is open, please go ahead.

Scott Burk – Bear Stearns

Hi, just a follow-up question on the G&A expense. I noticed in the presentation you talked about some nonrecurring severance costs during the first quarter, and just wondering how significant were those severance. We didn't see any impact on G&A. I'm just wondering why.

John Tavlarios

Well, the number is about $900,000, which will be in our Q. So that is the deviance from forecasted and budget G&A is exactly that.

Scott Burk – Bear Stearns

I mean in the going-forward G&A I didn't see any changes is what I was thinking of – in the guidance for 2008.

John Tavlarios

Yes. Well, I mean we're eventually going to have a benefit of lower costs from people taking early retirement and leaving the company, et cetera, but for the time being – it takes a little while to have effects. For the time being, we are leaving our guidance the same. When we have some more news to tell you. But we may also have some additional early retirement one-time costs in Q2.

Scott Burk – Bear Stearns

Okay. And then also in terms of the share count–

John Tavlarios

So just to be clear, we take that and weigh it against the benefits, it kind of evens out for this year. That should be a benefit for next year.

Scott Burk – Bear Stearns

I see. And then on the share count – the share count is up to 31,000 shares, and that, I assume, is just due to stock awards. Should we assume an essentially flat share count for the rest of the year, or should we see some additional expansion to that?

John Tavlarios

Well, the amount that's in the press release reflects – you see different – that number reflects all the restricted shares, so that obviously reflects any restricted shares given to employees by the end of last year. Whether that share count goes down from here is simply a matter of how much opportunistic share repurchasing we do. So that level or lower for the rest of the year.

Scott Burk – Bear Stearns

Okay, very good. Alright, thanks.

John Tavlarios

Sure.

Operator

Thank you. And it appears that we have no further questions in the queue at this time. I'd like to turn the call back over to Mr. Tavlarios for closing remarks.

John Tavlarios

Thank you. The success that we experienced during the first quarter is directly related to our significant time charter coverage. With 67% time charter coverage, representing $175.8 million in contracted revenue for 2008, we are in a strong position to continue to provide dividends to shareholders under our $2.00 per share annual fixed dividend target. Complementing our approach of distributing dividends to shareholders, we remain focused on seeking additional opportunities to create shareholder value. In meeting this important objective, we will continue to explore areas that have served the company well, including consolidating the industry and repurchasing shares. I'd like to thank everyone for listening and we look forward to providing an update in the future.

Operator

This does conclude today's teleconference. Thank you for your participation. You may disconnect at any time and have a wonderful day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: [e-mail]. Thank you!