EAGLE BULK SHIPPING The following is a discussion of the Company's financial condition and results of operations for the three months endedMarch 31, 2022 and 2021. This section should be read in conjunction with the condensed consolidated financial statements included elsewhere in this report and the notes to those financial statements and the audited consolidated financial statements and the notes to those financial statements for the fiscal year endedDecember 31, 2021 , which were included in our Form 10-K, filed with theSEC onMarch 14, 2022 (the "Form 10-K"). For further discussion regarding our results of operations for the three months endedMarch 31, 2021 as compared to the three months endedMarch 31, 2020 please refer to Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Quarterly Report on Form 10-Q for the three months endedMarch 31, 2021 . The following discussion contains "forward-looking statements" that reflect our future plans, estimates, beliefs and expected performance. We caution that assumptions, expectations, projections, intentions or beliefs about future events may, and often do, vary from actual results and the differences can be material. Please see "Cautionary Statement Regarding Forward-Looking Statements."
Business Overview
Eagle Bulk Shipping Inc. ("Eagle" or the "Company") is aU.S. based fully integrated shipowner-operator providing global transportation solutions to a diverse group of customers including miners, producers, traders, and end users. Headquartered inStamford, Connecticut , with offices inSingapore andCopenhagen , Eagle focuses exclusively on the versatile mid-size drybulk vessel segment and owns one of the largest fleets of Supramax/Ultramax vessels in the world. The Company performs all management services in-house such as strategic, commercial, operational, technical, and administrative services, and employs an active management approach to fleet trading with the objective of optimizing revenue performance and maximizing earnings on a risk-managed basis. Typical cargoes we transport include both major bulk cargoes, such as iron ore, coal and grain, and minor bulk cargoes such as fertilizer, steel products, petcoke, cement, and forest products. As ofMarch 31, 2022 , we owned and operated a modern fleet of 53 Supramax/Ultramax dry bulk vessels. We chartered-in four Ultramax vessels which have a remaining lease term of approximately one year each. In addition, the Company charters in third-party vessels on a short to medium term basis.
Our owned fleet totals 53 vessels, with an aggregate carrying capacity of 3.19
million dwt and an average age of 9.5 years as of
We carry out the commercial and strategic management of our fleet through our indirectly wholly-owned subsidiary,Eagle Bulk Management LLC , aMarshall Islands limited liability company, which maintains its principal executive offices inStamford, Connecticut . We own each of our vessels through a separate wholly-ownedMarshall Islands limited liability company.
Corporate Information
We maintain our principal executive offices at300 First Stamford Place , 5th Floor,Stamford, Connecticut 06902. Our telephone number at that address is (203) 276-8100. Our website address is www.eagleships.com. Information contained on or accessible through our website does not constitute part of this Quarterly Report on Form 10-Q. Business Strategy We believe our balance sheet allows us the flexibility to opportunistically make investments in the drybulk segment that will drive shareholder growth. In order to accomplish this, we intend to: •Maintain a highly efficient and quality fleet in the drybulk segment. •Maintain a revenue strategy that takes advantage of a rising rate environment and at the same time mitigate risk in a declining rate environment. •Maintain a cost structure that allows us to be competitive in all economic cycles without sacrificing safety or maintenance. •Continue to grow our relationships with our charterers and vendors. •Continue to invest in our on-shore operations and development of processes. 1
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Our financial performance is based on the following key elements of our business strategy:
(1)Concentration in one vessel category: Supramax/Ultramax drybulk vessels, which we believe offer certain size, operational and geographical advantages relative to other classes of drybulk vessels, such as Handysize, Panamax and Capesize vessels.
(2)An active owner-operator model where we seek to operate our own fleet and develop contractual relationships directly with cargo interests. These relationships and the related cargo contracts have the dual benefit of providing greater operational efficiencies and act as a balance to the Company's naturally long position to the market. Notwithstanding the focus on voyage chartering, we consistently monitor the drybulk shipping market and, based on market conditions, will consider taking advantage of long-term time charters at higher rates when appropriate.
(3)Maintain high quality vessels and improve standards of operation through improved standards and procedures, crew training and repair and maintenance procedures.
We continuously evaluate potential transactions that we believe will be accretive to earnings, enhance shareholder value or are in the best interests of the Company, including without limitation, business combinations, the acquisition of vessels or related businesses, repayment or refinancing of existing debt, the issuance of new securities, share repurchases or other transactions.
Business Outlook COVID-19 InMarch 2020 , theWorld Health Organization (the "WHO") declared COVID-19, to be a pandemic. The COVID-19 pandemic has had, and continues to have, widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. Governments have implemented measures such as social distancing, mask and vaccine mandates, travel restrictions, COVID testing guidelines and quarantine regulations. The gross BSI continued to increase in the first quarter of 2022 and averaged$25,156 /day, up 51% as compared to the first quarter of 2021. Although rates were higher resulting in an improvement in profitability, some of our vessels experienced delays in drydocking as well as an increase in related drydocking costs as a result of protocols regarding COVID 19, as well as limitations in labor. We also experienced loss of revenues due to a number of off-hire days relating to crew changes and quarantine restrictions as a number of our crew members tested positive for COVID-19. Our vessel operating expenses specifically crew change costs, COVID testing and quarantine related costs continue to be negatively impacted by COVID-19. While the BSI is at$30,054 per day as ofMay 4, 2022 , the economic activity levels as well as the demand for dry bulk cargoes may be negatively impacted by COVID-19. We have instituted measures to reduce the risk of spread of COVID-19 for our crew members on our vessels as well as our onshore offices inStamford, Connecticut ,Singapore , andCopenhagen . However, if the COVID-19 pandemic continues to impact the global economy on a prolonged basis, or if the vaccine is not available on a widespread basis, the rate environment in the drybulk market and our vessel values may deteriorate and our operations and cash flows may be negatively impacted.
The impact of recent developments in
InFebruary 2022 , as a result of the invasion ofUkraine byRussia , economic sanctions were imposed bythe United States , theEuropean Union , theUnited Kingdom and a number of other countries on Russian financial institutions, businesses and individuals, as well as certain regions within the Donbas region ofUkraine . While it is difficult to estimate the impact of current or future sanctions on the Company's business and financial position, these sanctions could adversely impact the Company's operations. In the near term, we have seen, and expect to continue to see, increased volatility in the region due to these geopolitical events.The Black Sea region is a major export market for grains with theUkraine andRussia exporting a combined 15% of the global seaborne grain trade. While uncertainty remains with respect to the ultimate impact of the invasion ofUkraine byRussia , we have seen, and anticipate continuing to see, significant changes in trade flows. A reduction or stoppage of grain out of theBlack Sea or cargoes fromRussia has, and will continue to, negatively impact the markets in those areas. At the same time, it is possible for us to see an increase in ton miles as end users find alternative sources for cargo. For more information regarding the risks relating to economic sanctions as a result ofRussia's invasion ofUkraine as well as the impact on retaining and sourcing our crew, see Part I, Item 1A, "Risk Factors" of our Form 10-K. 2 --------------------------------------------------------------------------------
Fleet Management
The management of our fleet includes the following functions:
•Strategic management. We locate and obtain financing and insurance for the purchase and sale of vessels. •Commercial management. We obtain employment for our vessels and manage our relationships with charterers. •Technical management. We have established an in-house technical management function to perform day-to-day operations and maintenance of our vessels.
Commercial and Strategic Management
We carry out the commercial and strategic management of our fleet through our indirectly wholly-owned subsidiary,Eagle Bulk Management LLC , aMarshall Islands limited liability company, which maintains its principal executive offices inStamford, Connecticut . We also have offices inSingapore andCopenhagen, Denmark , through which we provide round the clock management services to our owned and chartered-in fleet. We currently have 91 shore-based personnel, including our senior management team and our office staff,who either directly or through these subsidiaries, provide the following services: •commercial operations and technical supervision; •safety monitoring; •vessel acquisition; and •financial, accounting and information technology services.
Technical Management
Technical management includes managing day-to-day vessel operations, performing general vessel maintenance, ensuring regulatory and classification society compliance, supervising the maintenance and general efficiency of vessels, arranging our hire of qualified officers and crew, arranging and supervising drydocking and repairs, purchasing supplies, spare parts and new equipment for vessels, appointing supervisors and technical consultants, and providing technical support.
Value of Assets and Cash Requirements
The replacement costs of comparable new vessels may be above or below the book value of our fleet. The market value of our fleet may be below book value when market conditions are weak and exceed book value when markets conditions are strong. Customary with industry practice, we may consider asset redeployment, which at times may include the sale of vessels at less than their book value. The Company's results of operations and cash flow may be significantly affected by future charter markets. Critical Accounting Policies The discussion and analysis of our financial condition and results of operations is based upon our interim unaudited condensed consolidated financial statements, which have been prepared in accordance withU.S. GAAP and the rules and regulations of theSEC , which apply to interim financial statements. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues, expenses and warrants and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions and conditions. Critical accounting policies are those that reflect significant judgments of uncertainties and potentially result in materially different results under different assumptions and conditions. As the discussion and analysis of our financial condition and results of operations are based upon our interim unaudited condensed consolidated financial statements, they do not include all of the information on critical accounting policies normally included in consolidated financial statements. Accordingly, a detailed description of these critical accounting policies should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed with theSEC onMarch 14, 2022 . There have been no material changes from the "Critical Accounting Policies" previously disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . Use of Estimates The preparation of the condensed consolidated financial statements in conformity withU.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at 3
-------------------------------------------------------------------------------- the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates and assumptions of the Company are the residual value of vessels, the useful lives of vessels, the value of stock-based compensation, the fair value of operating lease right-of-use assets, and the fair value of derivatives. Actual results could differ from those estimates.
Results of Operations for the three months ended
Fleet Data
We believe that the measures for analyzing future trends in our results of operations consist of the following:
Three Months Ended
March 31, 2022 March 31, 2021
Ownership Days 4,770 4,199
Chartered-in Days 960 658
Available Days 5,397 4,648
Operating Days 5,381 4,622
Fleet Utilization (%) 99.7 % 99.4 %
In order to understand our discussion of our results of operations, it is important to understand the meaning of the following terms used in our analysis and the factors that influence our results of operations.
•Ownership days: We define ownership days as the aggregate number of days in a period during which each vessel in our fleet has been owned by us. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period.
•Chartered-in days: We define chartered-in days as the aggregate number of days in a period during which the Company chartered-in vessels.
•Available days: We define available days as the number of our ownership days and chartered-in days less the aggregate number of days that our vessels are off-hire due to vessel familiarization upon acquisition, repairs, vessel upgrades or special surveys and other reasons which prevent the vessel from performing under the relevant charter party such as surveys, medical events, stowaway disembarkation, etc. The shipping industry uses available days to measure the number of days in a period during which vessels should be capable of generating revenues. During the three months endedMarch 31, 2022 , the Company completed drydock for four vessels and one vessel was in drydock as ofMarch 31, 2022 . •Operating days: We define operating days as the number of our available days in a period less the aggregate number of days that our vessels are off-hire due to any reason, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues. •Fleet utilization: We calculate fleet utilization by dividing the number of our operating days during a period by the number of our available days during the period. The shipping industry uses fleet utilization to measure a company's efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off-hire for reasons other than scheduled repairs or repairs under guarantee, vessel upgrades, special surveys or vessel positioning. Our fleet continues to perform at very high utilization rates.
Time Charter and Voyage Revenue
Shipping revenues are highly sensitive to patterns of supply and demand for
vessels of the size and design configurations owned and operated by a company
and the trades in which those vessels operate. In the drybulk sector of the
shipping industry, rates for the transportation of drybulk cargoes such as ores,
grains, steel, fertilizers, and similar commodities, are determined by market
forces such as the supply and demand for such commodities, the distance that
cargoes must be transported, and the number of vessels expected to be available
at the time such cargoes need to be transported. The demand for shipments is
significantly affected by the state of the global economy and the conditions of
certain geographical areas. The number of vessels is affected by newbuilding
deliveries and by the removal of existing vessels from service, principally
because of scrapping.
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The mix of charters between spot or voyage charters and mid-term time charters
also affects revenues. Because the mix between voyage charters and time charters
significantly affects shipping revenues and voyage expenses, vessel revenues are
benchmarked based on net charter hire income. Net charter hire income comprises
revenue from vessels operating on time charters, and voyage revenue less voyage
expenses from vessels operating on voyage charters in the spot market and
charter hire expenses. Net charter hire income serves as a measure of analyzing
fluctuations between financial periods and as a method of equating revenue
generated from a voyage charter to time charter revenue.
The following table represents Net charter hire income (a non-GAAP measure) for
the three months ended
For the Three Months Ended
(In thousands) March 31, 2022 March 31, 2021
Revenues, net $ 184,398 $ 96,572
Less: Voyage expenses $ 43,627 $ 26,615
Less: Charter hire expenses $ 22,711 $ 8,480
Net charter hire income $ 118,060 $ 61,477
% Net charter hire income from
Time charters 53 % 46 %
Voyage charters 47 % 54 %
Net income
For the three months ended March 31, 2022 , the Company reported net income of
$53.1 million , or basic and diluted income of $4.09 per share and $3.27 per
share, respectively. In the comparable quarter of 2021, the Company reported net
income of $9.8 million , or basic and diluted income of $0.84 per share.
Revenues
Our revenues are derived from time and voyage charters. Net time and voyage charter revenues for the three months endedMarch 31, 2022 were$184.4 million compared with$96.6 million recorded in the comparable quarter in 2021. The increase in revenues was primarily attributable to higher charter rates as a result of the market recovery with increase in demand for drybulk products.
Voyage expenses
To the extent that we employ our vessels on voyage charters, we will incur expenses that include bunkers, port charges, canal tolls and cargo handling operations, as these expenses are borne by the vessel owner on voyage charters. As is common in the shipping industry, we pay commissions ranging from 1.25% to 5.50% to unaffiliated ship brokers associated with the charterers, depending on the number of brokers involved with arranging the charter. Bunkers, port charges, and canal tolls primarily increase in periods during which vessels are employed on voyage charters because these expenses are for the vessel owner's account. Voyage expenses for the three months endedMarch 31, 2022 and 2021 were$43.6 million and$26.6 million , respectively. The increase in voyage expenses was primarily due to an increase in bunker consumption expense as bunker fuel prices increased in the first quarter, as well as an increase in voyage charter business and an increase in broker commission expense as a result of the increase in revenues.
Vessel operating expenses
Vessel operating expenses for the three months endedMarch 31, 2022 were$27.9 million compared to$21.5 million in the comparable quarter in 2021. The increase in vessel operating expenses was primarily attributable to higher owned days and an increase in vessel upgrades as a result of an increase in repairs and upgrades performed while vessels were in drydock. The Company continues to incur higher costs related to the delivery of stores and spares, as well as crew changes as a result of the ongoing COVID-19 pandemic. The ownership days for the three months endedMarch 31, 2022 and 2021 were 4,770 and 4,199, respectively. 5 -------------------------------------------------------------------------------- Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores and related inventory, tonnage taxes, pre-operating costs associated with the delivery of acquired vessels, including providing the newly acquired vessels with initial provisions and stores, and other miscellaneous expenses.
Other factors beyond our control, some of which may affect the shipping industry in general, may cause the operating expenses of our vessels to increase, including, for instance, developments relating to market prices for crew, insurance and petroleum-based lubricants and supplies.
Charter hire expenses
The charter hire expenses for the three months endedMarch 31, 2022 were$22.7 million compared to$8.5 million in the comparable quarter in 2021. The increase in charter hire expenses was principally due to an increase in chartered-in days and an increase in charter hire rates due to improvement in the charter hire market. The total chartered-in days for the three months endedMarch 31, 2022 were 960 compared to 658 for the comparable quarter in the prior year. Between 2017 and 2021, the Company entered into a series of agreements to charter five Ultramax vessels on a long term basis. The minimum chartered-in periods ranged between one and four years with an option to extend the duration between three and 24 months. Four of those five vessels were chartered-in as ofMarch 31, 2022 . The remaining vessel will be delivered during the second quarter of 2022.
Depreciation and amortization
For the three months endedMarch 31, 2022 and 2021, total depreciation and amortization expense was$14.6 million and$12.5 million , respectively. Total depreciation and amortization expense for the three months endedMarch 31, 2022 includes$11.7 million of vessel and other fixed assets depreciation and$2.9 million relating to the amortization of deferred drydocking costs. Comparable amounts for the three months endedMarch 31, 2021 were$10.5 million of vessel and other fixed assets depreciation and$2.0 million of amortization of deferred drydocking costs. The increase in depreciation expense is due to the acquisition of nine Ultramax vessels in 2021, offset by the sale of one vessel in the third quarter of 2021. The increase in amortization of deferred drydock costs is related to completing eleven drydocks since the first quarter of 2021. Depreciation is based on the cost of the vessel less its estimated residual value. We estimate the useful life of our vessels to be 25 years from the date of initial delivery from the shipyard to the original owner. Furthermore, we estimate the residual values of our vessels to be$300 per lightweight ton, which we believe is common in the drybulk shipping industry. Drydocking relates to our regularly scheduled maintenance program necessary to preserve the quality of our vessels as well as to comply with international shipping standards and environmental laws and regulations. Management anticipates that vessels are to be drydocked every two and a half years for vessels older than 15 years and every five years for vessels younger than 15 years, accordingly, these expenses are deferred and amortized over these respective periods.
General and administrative expenses
Our general and administrative expenses include onshore vessel administration related expenses, such as legal and professional expenses, administrative and other expenses including payroll and expenses relating to our executive officers and office staff, office rent and expenses, directors' fees, and directors and officers insurance. General and administrative expenses also include stock-based compensation expenses.
General and administrative expenses for the three months ended
Other operating expense
Other operating expense for the three months endedMarch 31, 2022 and 2021 was$0.1 million and$1.0 million , respectively. InMarch 2021 , theU.S. government began investigating an allegation that one of our vessels may have improperly disposed of ballast water that entered the engine room bilges during a repair. The Company posted a surety bond as security for any fines and penalties. Other operating expense consists of expenses incurred relating to this incident, which include legal fees, surety bond expenses, vessel offhire, crew changes and travel costs. 6 --------------------------------------------------------------------------------
Interest expense
Our interest expense for the three months endedMarch 31, 2022 and 2021 was$4.4 million and$8.3 million , respectively. The decrease in interest expense is primarily due to a decrease in outstanding debt and lower interest rates due to the refinancing of the Company's debt in the fourth quarter of 2021. Amortization of debt issuance costs is included in interest expense. These financing costs relate to costs associated with our various outstanding debt facilities. For the three months endedMarch 31, 2022 and 2021, the amortization of debt issuance costs was$0.6 million and$1.6 million , respectively. The interest expense for the three months endedMarch 31, 2021 includes$1.0 million of interest expense representing the amortization of the equity component of the Convertible Bond Debt. The Company adopted ASU 2020-06 as ofJanuary 1, 2022 under the modified retrospective approach. The Convertible Bond Debt will no longer require bifurcation and separate accounting of the equity component. Please refer to Note 2, Recent Accounting Pronouncements, to the condensed consolidated financial statements for further information.
Realized and unrealized loss on derivative instruments, net
Realized and unrealized loss on derivative instruments, net for the three months endedMarch 31, 2022 and 2021 was$7.9 million and$0.7 million , respectively. The increase in realized and unrealized losses is primarily related to$12.5 million in losses incurred on our freight forward agreements as a result of the increase in charter hire rates, partially offset by$4.6 million in bunker swap gains. Please refer to Note 5, Derivative Instruments, to the condensed consolidated financial statements for further information.
Effects of Inflation
We do not believe that inflation has had or is likely, in the foreseeable future, to have a significant impact on vessel operating expenses, drydocking expenses or general and administrative expenses.
Liquidity and Capital Resources
Three Months Ended
(In thousands) March 31, 2022 March 31, 2021
Net cash provided by operating activities $ 42,254 $ 14,333
Net cash used in investing activities (3,937) (53,385)
Net cash (used in)/provided by financing activities (40,862) 30,916
Net decrease in cash, cash equivalents and restricted cash (2,545)
(8,136)
Cash, cash equivalents and restricted cash at beginning of period
86,222 88,849
Cash, cash equivalents and restricted cash at end of period
$ 83,677
Net cash provided by operating activities during the three months endedMarch 31, 2022 and 2021 was$42.3 million and$14.3 million , respectively. The increase in cash flows provided by operating activities resulted primarily from the increase in revenues due to higher charter hire rates. Net cash used in investing activities during the three months endedMarch 31, 2022 and 2021 was$3.9 million and$53.4 million , respectively. During the three months endedMarch 31, 2022 , the Company paid$3.5 million for the purchase of ballast water treatment systems on our fleet. Additionally, the Company paid$0.3 million for vessel improvements and$0.2 million for other fixed assets. Please refer to Note 3, Vessels, to the condensed consolidated financial statements for further information. Net cash used in financing activities during the three months endedMarch 31, 2022 was$40.9 million compared to net cash provided by financing activities of$30.9 million for the three months endedMarch 31, 2021 . During the three months endedMarch 31, 2022 , the Company repaid$12.5 million of the Global Ultraco Debt Facility. The Company also paid$26.8 million in dividends and$1.9 million to settle net share equity awards. Our principal sources of funds are operating cash flows, long-term bank borrowings and borrowings under our revolving credit facility. Our principal use of funds is capital expenditures to establish and grow our fleet, maintain the quality of our vessels, 7
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comply with international shipping standards and environmental laws and regulations, fund working capital requirements and repay interest and principal on our outstanding loan facilities.
Summary of Liquidity and Capital Resources
As ofMarch 31, 2022 , our cash and cash equivalents including restricted cash was$83.7 million , compared to$86.2 million atDecember 31, 2021 . The Company had restricted cash of$0.1 million and$0.1 million as ofMarch 31, 2022 andDecember 31, 2021 , respectively.
In addition, as of
As ofMarch 31, 2022 , the Company's debt consisted of the Global Ultraco Debt Facility of$275.1 million , net of$8.1 million of debt issuance costs, and the Convertible Bond Debt of$114.1 million , net of$1.0 million of debt discount and issuance costs. We believe that our current financial resources, improved charter hire rates for the balance of the year and cash generated from operations will be sufficient to meet our ongoing business needs and other obligations over the next twelve months. However, our ability to generate sufficient cash depends on many factors beyond our control including, among other things, the general charter rate environment.
Capital Expenditures
Our capital expenditures relate to the purchase of vessels and capital improvements to our vessels, which are expected to enhance the revenue earning capabilities and safety of the vessels.
In addition to acquisitions that we may undertake in future periods, the other major capital expenditures include funding the Company's program of regularly scheduled drydocking, which is necessary to comply with international shipping standards and environmental laws and regulations. Although the Company has some flexibility regarding the timing of its drydocking, the costs are relatively predictable. The Company anticipates that vessels will be drydocked every five years for vessels younger than 15 years and every two and a half years for vessels older than 15 years. We anticipate that we will fund these costs with cash from operations and that these drydocks will require us to reposition these vessels from a discharge port to shipyard facilities, which will reduce our available days and operating days during that period. Drydocking costs incurred are deferred and amortized to expense on a straight-line basis over the period through the date of the next scheduled drydocking for those vessels. During the three months endedMarch 31, 2022 , four of our vessels completed drydock and one vessel was in drydock as ofMarch 31, 2022 , and we incurred drydocking expenditures of$10.8 million . In the three months endedMarch 31, 2021 , four of our vessels completed drydock and we incurred drydocking expenditures of$4.8 million . The following table represents certain information about the estimated costs for anticipated vessel drydockings, ballast water treatment systems, and scrubber installations in the next four quarters, along with the anticipated off-hire days: Projected Costs (1) (in millions) Quarter Ending Off-hire Days(2) BWTS Drydocks Vessel Upgrades(3) June 30, 2022 213 $ 0.5 $ 3.1 $ 0.6 September 30, 2022 139 $ 0.3 $ 2.7 $ 0.2 December 31, 2022 118 $ 0.6 $ 2.1 $ 0.2 March 31, 2023 120 $ 0.1 $ 2.6 $ 0.4 (1) Actual costs will vary based on various factors, including where the drydockings are actually performed. (2) Actual duration of off-hire days will vary based on the age and condition of the vessel, yard schedules and other factors. (3) Vessel upgrades represents capex relating to items such as high-spec low friction hull paint which improves fuel efficiency and reduces fuel costs,NeoPanama Canal chock fittings enabling vessels to carry additional cargo through the newPanama Canal locks, as well as other retrofitted fuel-saving devices. Vessel upgrades are discretionary in nature and evaluated on a business case-by-case basis. 8 --------------------------------------------------------------------------------
Off-balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Other Contingencies
We refer you to Note 7, Commitments and Contingencies, to our condensed
consolidated financial statements for a discussion of our contingencies. If an
unfavorable ruling were to occur in these matters, there exists the possibility
of a material adverse impact on our business, liquidity, results of operations,
financial position and cash flows in the period in which the ruling occurs. The
potential impact from legal proceedings on our business, liquidity, results of
operations, financial position and cash flows could change in the future.
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